(Updated to included comment from UnitedHealth)
A new audit reveals potential conflicts of interest in how the state’s Medicaid program is administered, pointing to the use of vendors with ties back to the one of the managed care companies that oversee health care for less affluent Kansans.
The audit questions how an administrator of the state’s Medicaid program – known as KanCare – makes prior authorization decisions for medical services or treatments and how claims are reviewed for accuracy by two subsidiaries of the company.
Medicaid Inspector General Steven Anderson reported that UnitedHealthcare – one of the three companies that manage the state’s Medicaid program – was using its own clinical criteria screening tool to make prior authorization decisions.
Prior authorization is the approval that health insurance companies require to cover the cost of medical services, treatments or prescriptions.
Anderson said that giving the managed care company control of the design, logic or algorithms associated with the prior authorization criteria opens the door to abusing cost containment strategies to maximize profits and boost performance metrics.
The audit also found a potential for a conflict of interest when hospitals use claims review services offered by two vendors that are subsidiaries of UnitedHealthcare.
Those vendors are Optum and Change Healthcare.
The vendors are responsible for verifying compliance with standards set by the state’s Medicaid program such as inputting the correct codes for the medical services provided.
The conflict arises because UnitedHealth has subsidiaries responsible for verifying the coding accuracies that United is being paid for.
The relationship, the audit said, introduces “a self-monitoring dynamic that can compromise neutrality in claims validation.”
“Basically, they’re judging their own claims,” Anderson told the Senate committee on government efficiency Tuesday.
“I think most people would see that is not a good look for the state of Kansas, and it’s not a good look overall for the health care program,” Anderson said.
The audit was taken up for the second time Tuesday by the Senate Committee on Government Efficiency.
It also was considered last week by the joint committee that oversees the state’s Medicaid program.
Republican state Sen. Renee Erickson of Wichita, chair of the government efficiency committee, said the Legislature may not be able to do much to address the issue immediately.
She said the state might have to wait until it awards the next round of KanCare contacts when the current ones are up for renewal.
“I know contractually they’re not doing anything wrong, but I just think from best practice we need to address that,” she said.
“I would feel more comfortable if we just took that issue off the table, put it in the contract that you can’t use an internal product for those assessment of claims.”
The audit said the circumstances involving the conflicts of interest stem from limited restrictions on vendor selection and ownership disclosure requirements within the KanCare program.
“Current policies do not explicitly prohibit MCOs from owning decision-making tools or claim review vendors, nor do they mandate external audits of affiliated systems,” the audit said.
In statement on Wednesday morning, the company said it remained “committed to transparency and accountability” and will address the audit recommendations with the state health department.
United said it’s separate from the two companies that verify the accuracy of submitted claims – Optum and that Change Healthcare.
The company said UnitedHealthcare and Optum are separate and Change Healthcare is a division of Optum.
The company said UnitedHealthcare and Optum are subsidiaries of UnitedHealth Group, which “maintains strict governance policies and compliance standards to ensure that each subsidiary operates independently…”
The audit recommended that the managed care companies administering the Medicaid program be restricted from using or owning proprietary tools that make prior authorization determinations.
“Prior authorization determinations,” the audit said, “must rely on independently validated clinical criteria to ensure fairness, transparency, and consistency across payers and providers.”
The state health department acknowledged there could be a “perceived” conflict of interest with UnitedHealthcare using its own screening tool to make prior authorization decisions as well as using two of its subsidiaries to verify the accuracy of claims.
“The health care industry is changing quickly with health plans now acquiring billing, health screening and other such companies creating new dynamics not only for Medicaid but all payors,” the state health department said in response to the audit.
The health department said that the federal Centers for Medicare and Medicaid Services has a protocol for addressing conflicts of interest but said that UnitedHealthcare is not in conflict under the current standards.
Further, the health department said that those tools are used by all three managed care companies, making it hard to keep one contractor from using them while allowing them to be used by the other two companies.
“These tools are widely used and accepted by healthcare providers across the nation to
make medical decisions and validate claims,” the health department said.
The inspector general said the state should mandate the use of independent, unaffiliated organizations for reviewing claims for all the managed care companies.
He said that would protect objectivity in validating the coding of medical services and ensure compliance with KanCare standards without the influence of the financial interest of the managed care companies.
The state health department agreed with that recommendation.
The agency said the managed care companies are required to follow specific policies and the Medicaid National Correct Coding Initiative structured by the federal government when utilizing their own tool.
The state said that United Healthcare is a large company that acquired one of its subsidiaries that provides claims review services.
As a result, United Healthcare has a large portion of the national market in claims and coding, the state said in response to the audit.
“It would be difficult to convince United Healthcare to agree to moving away from the use of this vendor.”
The inspector general also recommended enhanced disclosure requirements for the managed care companies.
The inspector general recommended that the managed care companies divulge ownership ties to any vendors involved in clinical or billing operations, with mandatory reporting on algorithmic logic and outcomes for prior authorization decisions and coding edits.
He also urged the state health department and other oversight bodies to regularly audit prior authorization tools and claim review platforms, especially those with ties to the managed care companies.
The state health department agreed with the audit that the managed care companies should disclose ownership ties to any vendors or subsidiaries involved in clinical or billing operation with the mandatory reporting that was suggested.
The health department said the managed care companies have full responsibility and oversight of their own claims.
The agency said it will be notified by the providers of claim denials that should normally be covered by Medicaid.
The state health department said it would need more full-time employees if that reporting was supplied to the state.
