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OIG Discovers $4.4 Million Overpayment in State Claims

OIG Discovers $4.4 Million Overpayment in State Claims

A recent audit on Arkansas MMIS private contractor costs reveals millions in incorrect claims and inappropriate payments.

Last month the Office of Inspector General (OIG) conducted an audit to determine whether Arkansas followed applicable federal and state requirements related to procuring private Medicaid Management Information System (MMIS) contractor services and claiming federal Medicaid reimbursement. They found that almost 15 percent of Arkansas’ private contractor costs were either unallowable or incorrectly claimed at higher federal matching rates, resulting in inappropriate claims of $4.4 million in federal Medicaid funds.

MMIS Background

MMIS is a computerized informational, procedural, and operational system used by states to process medical claims and manage Medicaid activities. The Medicaid program is managed by the United States Department of Health and Human Services through the Centers for Medicare & Medicaid Services (CMS). Each state is responsible for implementing their own Medicaid program; however, CMS and the MMIS establish universal requirements which are monitored for adherence. The federal government uses the MMIS for audits and to check for fraudulent activity.

Why was Arkansas Chosen?

States report costs related to private MMIS contract services as administrative costs. Generally, the federal government reimburses states 50 percent of their administrative costs; however, for certain approved MMIS costs, the federal government reimburses 90 percent or 75 percent. States are required to obtain prior approval in an Advanced Planning Document (APD) to receive the higher reimbursement rates. Arkansas was one of 10 states approved to claim more than 50 percent of the total costs related to private MMIS contract services for federal fiscal years 2013-2017. As the 8th highest ranked state, they were chosen for a full audit.

The Procedure

The OIG reviewed $84.5 million ($74 million federal share) in claimed MMIS private contractor costs. This included a review of Arkansas’ APDs, supporting invoices, and select contract procurement documents.

The Findings

Arkansas followed applicable federal and state requirements related to procuring private MMIS contractor services and correctly claimed $72.1 million ($69.6 million federal share) in private MMIS contractor costs. However, Arkansas incorrectly claimed the remaining $12.4 million, or almost 15 percent of its costs. For those costs, Arkansas inappropriately received $4.4 million in federal funds. The state exceeded approved cost limits in some cases and claimed funds for unapproved contractors and programs other than Medicaid in other cases. The OIG determined that this was due to a lack of policies and procedures that would ensure MMIS private contractor costs were tracked to the correct APDs. Without these policies and procedures in place, the OIG found that Arkansas was not able to prevent or detect when it claimed costs inappropriately.

Cost breakdown:

  • $5.2 million ($2.1 million federal share) for costs that exceeded limits CMS had approved at the 90 percent rate
  • $2.6 million ($979,831 federal share) for costs associated with contractors that were not approved in the APDs
  • $793,456 ($714,110 federal share) for costs that supported programs other than Medicaid
  • $3.8 million ($570,909 federal share) for costs that CMS approved for the 75 percent rate but the state agency claimed at the 90 percent rate

OIG Recommendations

The OIG recommend that the Arkansas Department of Human Services refund the $4,361,850 federal share to the federal government and establish policies and procedures to track its private MMIS contractor costs to APDs and to ensure that it adheres to the funding and time period limits established in those APDs. Arkansas agreed to comply with both recommendations.



Lee Fifield
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Lee Fifield has a Bachelor of Science in communications from Ithaca College, Ithaca, New York, and has worked as a writer and editor for more than 15 years.

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