Tighter Audits Due for Oregon Health Plan

The managed care plans want to double check state actuaries, which could come with greater administrative cost scrutiny
The Lund Report
May 25, 2011 -- As lawmakers finalize a bill to make sweeping changes to the Oregon Health Plan, a battle is brewing behind the scenes with the managed care organizations that currently administer the Medicaid program’s benefits.
The vast majority of OHP enrollees, nearly 600,000 low-income Oregonians, are currently served by more than 40 managed care organizations throughout the state covering plans for physical, mental and oral healthcare. The plans, which pay the doctors and other providers, are ultimately reimbursed by the state.
State officials want to consolidate the number of plans, though they don’t say by how many, in order to coordinate care and eliminate as much red tape as possible from the state Medicaid program. They also want the remaining plans to integrate physical, mental and oral healthcare with a unified administrative system that will hopefully improve outcomes and cooperation among providers.
Companies that administer the Oregon Health Plan beginning next year will also be operating under global budgets that attempt to pay for overall health rather than individual services, while at the same time coping with overall budget reductions.
Gov. John Kitzhaber wants to cut the state’s medical assistance programs by $1.9 billion over the next biennium leaving a total budget of $5.2 billion.
It’s a lot to ask at a time of diminished resources, but doing nothing looks worse, say even the most optimistic supporters.
In attempt to protect the status quo, a group of managed care plans lobbied for a bill (SB 880) that would have retained the current 17 plans managing physical health benefits today, in effect putting up somewhat of a roadblock to transformation.
That provision of the bill eventually was removed before reaching the Ways and Means Committee where it stands now. Another aspect of the bill, which will remain and likely pass, is to strengthen the independent auditing of Medicaid costs by the state.
Haggling over rates
The health plans have historically been in ongoing disagreement with auditors at the Department of Medical Assistance Programs about determining how much doctors should be reimbursed for services. Capitation rates have gone up just 6 percent in 10 years. Low payments lead to fewer doctors willing to accept OHP.
Jeff Heatherington, president of FamilyCare and legislative director for the Coalition for a Healthy Oregon – which represents several managed care organizations – argued the way the state has set rates is unfair.
“We’re not talking about increasing the rates to plans,” Heatherington said. “We’re saying if we don’t have accurate figures, you can’t determine the services the state is going to pay for. The state is basically using figures that are inaccurate.”
Sen. Alan Bates (D-Ashland) said the bill was important to getting the OHP transformation process right.
“Having a robust ability to look at actuarial rates is going to be extremely important in developing global budgets for the CCOs,” Bates said. “If we don’t get those accurate, we could get into real trouble with CCOs going under or being overpaid.”

Administrative costs differ

If the plans want a better accounting of the dollars, they might also face tighter accounting of their administrative costs too.

Looking at the financial summaries of the plans reveals widely divergent administrative expenses. In 2009, for example the ODS Companies spent 22 percent of the $20 million they received from the state for administering OHP services while a physician group in Coos County only spent 4.7 percent on $30 million.
Chris Bouneff, executive director of NAMI Oregon had asked for the numbers out of curiosity. “It was interesting to begin looking at how much of the public dollar actually gets down to the service area,” Bouneff said.
Dr. Robert Dannenhoffer, CEO of Douglas County IPA – which spent 18 percent on administrative costs in 2009 – said the difference had to do with accounting. In Douglas County, for instance, the health plan spends money on a childhood immunity program, which counts as an administrative expense. Other health plans contract such programs with the county, which counts as a medical expense.
“We wind up doing a lot of things that look like health expenses that count as administrative expenses,” Dannenhoffer said.
Such discrepancies will have to be resolved as the pennies get tighter.
“In a new system we should do a good job of accounting for that and making sure we maximum the number of dollars going to direct care,” Bouneff said.
For More Information
For a copy of the financial summary referenced in the article click here.
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Good for Chris Bouneff for asking for clear accountability on the money the state spends on Medicaid. With Medicaid health plans owning buildings in downtown Portland, and sitting on hundreds of millions in reserves, obviously a lot of money is not getting to the Medicaid patient....

Intelligent transparency will be good. I'd like to see Medicaid/Medicaid take a deep, retrospective look at the books and associations of our private OHP contractors. Having financial reserves and real estate in the portfolio of a transparent, community-integrated organization like a 501(c)3 is vastly different than having those same reserves and real estate in the portfolios of private health plan leaders. A health plan's Portland properties and reserves are fine if they are effectively assets to ensure future public use, value, and sustainability. An interesting study would be to pull an asset listing for all of our OHP health plan executives, lobbyists, and spouses or other cronies. That list would be shocking and less about Portland and more about sunny destinations elsewhere... Certainly not the Medicaid patient...

Look to the Medi-Cal program for administrative versus medical (sectin 1300.78 of the Welfare and Institution Code) - this would be a good start to create consistency in accounting for expenditures. Also, as far as the budgeting for cap rates, have the plans submit their rates to the state (which I already believe they do) in a consistent format which allows the actuaries to utilize their rate manuals (also, make the rate manual public). The state could put a risk corridor in place or develop a risk adjuster (some states use the pharmacy run out because of the 2 week versus 90 day lag for diagnostic codes but that penalizes those managed care companies who pass some of the Rx cost through the claims area - such as cancer drugs or therapy). Also, a maternity kicker would be a good use of dollars. Just some thoughts.

Original, documented investigation, “Kaiser Permanente-KPMG Independent Auditor Bid Rigging,” is posted at http://www.hmohardball.com/sox.html and www.hmohardball.com Robert D. Finney, Ph.D.