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The state’s Health Care Authority did not have enough oversight and control over its Medicaid managed-care program in 2010, according to a state audit of the program, which may have racked up an estimated $17.5 million in overpayments by contracted managed-care organizations to doctors, hospitals and other care providers.

Overpayments are important, because total payments reported by the managed-care organizations are used to calculate future premiums paid by the state to the organizations, notes the report, which was released Monday.

“Because overpayments by the organizations inflate those figures, they put the state at risk of paying unnecessarily high premium rates in the future,” the report said.

But the auditors said because their limited sample did not let them calculate whether there were “net overpayments” in the entire system, “we cannot conclude that 2013 premiums paid by the state were higher or lower than they should have been.”

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The audit noted that premium rates will become more significant as the state continues shifting away from fee-for-service care, where it pays doctors and hospitals directly. Instead, it now increasingly contracts with managed-care organizations (MCOs) to arrange medical care for a set monthly per-person rate.

Dorothy Teeter, director of the Health Care Authority (HCA), said the agency has already begun work to incorporate the audit’s suggestions that it tighten contracts and monitor the organizations more closely to make sure claims are properly coded, documented and reported.

Cathie Ott, director of HCA’s program and payment-integrity division, said current contracts already include more requirements that organizations check and verify claims. HCA is also in the process of building up its capacity to do additional monitoring, she said.

“We certainly will step up those efforts, and begin to utilize the data in different ways,” she said.

Melissa Wade, senior performance auditor for the state Auditor’s Office, said HCA has done “a lot of work” on monitoring fee-for-service payments, but the managed-care side needed more oversight.

“They should be monitoring the MCOs to make sure they have a good system in place to prevent overpayments.”

The area has been in dispute for many years. HCA contracts with an outside agency, Milliman, to set premium rates. In the past, claims information has gone directly to Milliman, which checks its accuracy.

But the auditor believes the claims data should have first gone to HCA, which could verify its accuracy, Wade said. “They could have done something a while back, but they didn’t.”

Despite disagreeing with the Auditor’s Office in the past, Teeter said, “we’re going to strengthen the program.”

Thuy Hua-Ly, HCA’s chief financial officer, said for 2012 and 2013, claims data has come directly to HCA, which reviews the data with the health plans. “Going forward, we have a plan that will satisfy the auditor’s concerns.”

The audit calculated the potential overpayments by looking at records in eight specific areas most likely to have problems, and singled out the two largest managed-care organizations, Molina Healthcare of Washington and Community Health Plan of Washington.

Sampling records in the eight areas, the audit found $96,860 of overpayments by the organizations to providers. It also found one significant underpayment of $21,169, but the audit was not designed to consider underpayments.

While the amounts themselves are small, the auditors estimated that if those results were extrapolated to all the claims in the problem areas, the two managed-care organizations could have overpaid the medical providers $17.5 million in 2010.

In its response to the audit, HCA said that in most cases
it had begun to adopt the recommendations or would adopt them for 2015 contracts. “The HCA, like any self-respecting business, is always going to welcome an external audit,” Teeter said.

Carol M. Ostrom: or 206-464-2249. On Twitter @costrom

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