A new auditing system that has hit dentists who serve MaineCare patients with fines as large as $200,000 will spread to the state’s hospitals and potentially other Medicaid services, such as mental health counseling, nursing homes and substance abuse treatment.
State contracts for audits of MaineCare providers give financial incentives for auditors to find minor errors, paying the auditors for all problems they discover. For Maine dentists, the fines totaled nearly $800,000 for errors made in 2012.
Maine may be a “bellwether” for a problem that could explode across the country, a Medicaid audit expert said Wednesday, because the audits are required under the federal Affordable Care Act. But states have wide latitude to design the audits to be more or less punitive to health care providers, experts say.
Next up in Maine are the hospitals.
“We are wary of the rollout,” said Jeff Austin, vice president of government affairs for the Maine Hospital Association. “We don’t know much about it, except that it’s coming.”
Auditors are pulling information from the hospitals, and “audit findings” will be sent to them in the coming months, according to the Maine Department of Health and Human Services.
“This has the potential to really get ugly,” said state Rep. Richard Farnsworth, D-Portland, co-chair of the Legislature’s Health and Human Services Committee.
Although health care providers have been audited previously, the new, more extensive audits are part of the implementation of the new health care law and are designed to root out fraud and abuse.
Dentists say the fines – some more than $200,000 per practice – are unfair because the auditors did not find fraud, but instead charged them for minor clerical errors.
Dentists have told the Portland Press Herald that they may have to close as a result, or reduce the number of patients they serve through MaineCare, the state’s Medicaid program.
DHHS officials said Wednesday that they are listening to the complaints.
“It is important to note that we are working with the providers to better understand their concerns,” John Martins, a DHHS spokesman, wrote in an email response to questions. “All providers have the opportunity to submit any additional information that may refute any of the audit findings.”
Martins wrote that the dentists aren’t being fined, but money must be returned to the state for “audit findings” of errors.
Michael Dowling, a dentist in Falmouth who faces a “substantial” payment to the state, said he fails to see a distinction.
“When we have done nothing wrong and are being financially penalized for it, it seems like a fine to me,” he said. “They can call it what they want to call it, but it’s still a fine.”
Dentists are appealing fines levied by Maine’s contractor, New York-based HMS, which operates in many states. Martins said the state will release the contract to the Press Herald this week, but he was unable to do so Wednesday.
Experts say similar audits are now being done in many states. Whether they will produce large fines is unclear, said J. Paul Spencer, director of coding and regulatory compliance for Providence Health Services in Washington, D.C. Spencer has been following the new Medicaid audits closely for the past three years.
“It’s going to depend on each state’s contract,” he said. “Perhaps this will start in the extreme northeast part of the country and spread across the states.”
Dowling and other Maine dentists are complaining about an auditing method that takes a small sample – 100 patient records – flags errors and extrapolates them to all of a practice’s MaineCare patients.
Based on the files pulled from his office, Dowling said, the sample wasn’t random so the extrapolation was unfair and inaccurate.
He said the errors were minor problems that had no bearing on service or payment, such as one dentist being on the bill while a different dentist did the cleaning.
Spencer said such methods are highly questionable and don’t hold up in court.
“In many cases, when challenged in court, the extrapolation methods are found to be faulty, don’t hold up to mathematical scrutiny, and the dollar amounts originally levied plummet to a small percentage of the original fine,” Spencer said.
He said states can limit or prohibit extrapolation, and if that’s not done, contractors have an opening to gouge health care providers for minor errors. HMS is paid 10.85 percent of the cost of service for every error it finds.
Spencer said states have a financial incentive to give contractors as much leeway as possible to find errors, because any money returned goes back into government accounts. Medicaid is funded with a mix of federal and state money.
“It looks great in a budget line,” Spencer said.
Similar auditing practices have been used for Medicare since 2008, but the process is controlled entirely by the federal government, Spencer said. Because hospitals have deeper pockets and staffs that specialize in Medicare and Medicaid compliance, they may be better able to handle the audits, he said.
Also, Spencer said, the Medicare audits are more transparent, so hospitals have the opportunity to better prepare for the scrutiny.
He said a system with contingency audits, in which auditors are paid based on errors found, is flawed because auditors make more money when problems persist.
Austin, with the hospital association, said the fines under the Medicare audits have been manageable, but the process has been burdensome and auditors disclose little when hospitals try to find out how to correct the problems.
“They’re making money by catching errors. They don’t make money by helping us to correct the errors,” Austin said.
Medicare and Medicaid mandate contingency contracts, but states that have laws forbidding such contracts can get waivers from the federal government and instead pay auditors flat fees. Austin said flat fees would be a fair way to pay auditors.
But he said state law was changed in 2011 to allow for the contingency audits, and he doesn’t know if it can be changed back and still qualify for a federal waiver.
The auditing contracts can be structured to ensure that health care providers aren’t unnecessarily punished for minor errors, Spencer said. For instance, extrapolation could be forbidden or limited, or the state could permit substantial fines only for major errors. A small error could be fined at a much lower percentage, he said.
Rep. Farnsworth said lawmakers will examine all possible remedies to ensure that health care providers are protected from unnecessary fines.
“As it stands now, this is not a fair way of doing business,” he said.
Dowling said the dentists don’t mind being audited, but they are asking for the state to be reasonable in the way fines are assessed.
“The truth is, the state has a lot of discretion,” he said.
Joe Lawlor can be contacted at 791-6376 or at: