The Department of Health and Human Services may have overpaid some Medicaid providers by as much as $51 million because its new computerized billing system still isn’t working – an error that could mean the state will run out of money before the start of the new fiscal year.

The overpayment problem, which is just an estimate, is more bad news for the department already being criticized for not paying providers enough because of its computer meltdown.

“No providers will get paid by the end of the fiscal year unless recovery is done,” said Rebecca Wyke, the governor’s commissioner of financial services, about the need to get some of the money back in order to pay those that are still owed.

Wyke and a team of officials from DHHS and the governor’s office of Administrative and Financial Services told the Appropriations Committee about the growing estimate of the overpayment problem last week.

“We are budgeting extremely tight,” she said, meaning every dollar needs to go to the right place. Unless the money that has been overpaid is recovered, Wyke said, “we definitely will miss the last few (billing) cycles, and no one will get paid.” The new fiscal year starts July 1.

The problem started in January when the DHHS threw the switch on a new billing system designed to help the state comply with federal privacy rules and changes in eligible expenses under Medicaid. The system – paid for with 90 percent federal funds – started rejecting vendor bills from the 7,000 providers that treat Medicaid patients in the state.

Because virtually no vendors were getting paid, the state started sending out interim payments based on what was paid in November and December of last year. In some cases, however, those payments have turned out to be too high – with as much as $51 million in potential overpayments out there, according to State Controller Ed Karass.

The problem was compounded because interim payments have continued for so long as DHHS tries to get its billing system to work properly. The interim payments were intended to be a short-term fix, but have been being sent out since January.

Karass came up with the estimate by looking at what vendors in the state’s Medicaid program – known as MaineCare – were paid this fiscal year, through the end of March, as compared to the same time frame in the last fiscal year. If they’ve been paid a lot more this year than last, they could be getting excessive interim payments, Karass said.

To complicate matters, some vendors say they still aren’t getting paid enough to cover the bills they’ve submitted, with a doctor from Belfast estimating he is owed $100,000.

Chris Gianopoulos, acting director of the MaineCare program, said that doctor was “an example of the reverse problem.” The state based his interim payments on the sample billing period from last year, and he told Gianopoulos Monday, “my practice has exploded since the beginning of the year,” meaning the interim payments were far too low.

Gianopoulos said she doesn’t believe the overpayment problem is as bad as $51 million.

“There are not a lot of providers getting paid a lot more than they need,” she said. “I do not think there’s a big problem with thousands of providers getting overpaid.”

But then just being off a little could make a huge difference in a system that pays out, on average, $30 million a week to providers.

Karass said the only way the department knows what is still owed is “basically thorough anecdotal questions raised from providers. The department does not have a quantifiable document that reflects what is underpayment.”

He admitted that calculating overpayments was an imperfect science, but it’s all the state can do right now until it sits down with each of its vendors and figure out the books.

That’s no easy task given there are currently 311,000 “suspended” bills that were rejected by the computer system.

The plan is to contact those vendors who appeared to be overpaid, come to some agreement and then stop paying them, with the goal of making up the deficit before July 1.

“We need to have a better understanding of what the overpayments are, make recoveries and recycle that money back out the door to providers that may have been under paid or are just owed money,” Karass said.

The state will also start meeting with each of its vendors, using the accounting firm of Deloitte and Touche as third-party arbiters, to clean up its ledger and get the system back on track.

The auditing process has to be finished by the end of September because that’s the end of the federal fiscal year. The federal government requires a reconciliation of the books as a condition of providing Medicaid matching funds.

Committee reaction

Rep. Darlene Curley, R-Scarborough, a member of the Appropriations Committee, said the overpayment problem is “one more indication of the continual incompetence,” in the department – a problem she said ultimately is the governor’s responsibility.

DHHS has been beset with accounting problems, many that date back to the previous administration, including more than $50 million in “accounting errors” and a bogus rate increase used to trigger more federal matching funds – a scheme that led to an investigation by the federal Office of the Inspector General.

Curley said DHHS Commissioner Jack Nicholas was hired to fix the problems with the system, but they apparently continue.

“My main concern is with the families that might not be receiving all the services they need because the state isn’t paying the bills,” she said.

Committee member, Rep. Arthur Lerman, D-Augusta, who operates an agency that serves Medicaid clients, said he was concerned about the state’s latest plan to recover money. Lerman blew the whistle on the department’s billing problems in January when it came to light vendors weren’t being paid.

“You’re going to be comparing numbers that are not accurate,” Lerman said of Karass’s plan to use last year’s billing records to determine this year’s payments. “There may have been significant changes in terms of the volume of service they provide,” he said.

Karass didn’t disagree, but said, “there’s only so much data available,” to his office right now. “All we can see right now are the dollars flowing out the door.”

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