Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE

December 16, 2013

Department of Health and Hospitals - Baton Rouge Main Office Operations

The Department of Health and Hospitals failed to get an independent assessment of the performance of the contractor who has been operating the privatized Louisiana Behavioral Health partnership since 2012, according to a report released Monday by Legislative Auditor Daryl Purpera.

The 11-page management letter said DHH has relied on the performance of Magellan Health Services Inc. “without externally monitoring that performance. Failure to obtain the external quality review report increases the risk that procedures and controls are not being applied in accordance with program intentions and regulations, which could result in errors and federal disallowances” of funds.

Magellan is now working under a two-year, $362.9 million contract that expires Feb. 28, 2014. The private company oversees the supervision of services for Medicaid-eligible patients with addictive disorders and the developmentally disabled.

The management letter from the state auditor said DHH has allowed Magellan to operate without an independent assessment of quality, timeliness and access to services by Medicaid beneficiaries for more than 18 months.

As of October 28, the report said auditors had not received a signed contract for the independent assessment so “it is possible that DHH will not have a completed external quality review before the Magellan contract expires on February 28, 2014. DHH will have allowed the program to operate the entire two-year period without independent verification that Magellan has substantially complied with Medicaid regulations, state regulations and contract requirements.”

The letter said that since no new requests for proposals have been issued for selection of a new state manager of the program, “the Magellan contract could be extended for one more year before DHH can fully assess Magellan’s compliance with all regulations and contract requirements through an external quality review report.”

The letter contained a total of nine findings, including some that have persisted for years. One of those points out that for the second year in a row DHH paid claims for New Opportunity Waiver services that were not properly documented.
The auditors found $16,217 not properly documented in this audit, but the finding has been raised in 11 of DHH’s last 14 audits with “improper payments” totaling $564,365, according to the report.

The department paid waiver service claims even though the provider failed to follow established DHH policies and federal regulations for providing services such as not having time sheets or documenting whether a service was provided to a developmentally disabled client or not.

In another finding, the report said DHH also failed to comply with an executive order from the governor to confect an agreement with three other state agencies to provide a coordinated network of services for Louisiana’s at-risk children and youth with “significant behavioral health challenges or related disorders.”

By failing to work out the agreement with the Departments of Education, Children and Family Services and the Office of Juvenile Justice, DHH’s Coordinated System of Care Governance Board, with DHH as the managing agency for the program, received less than $345,000 in the fiscal year that ended in June, compared to almost $5.6 million the previous year when an agreement was in place.

Failing to sign the agreement meant that the responsibilities of the various agencies were not defined “increasing the risk of inadequate funding and program oversight.”

The management letter from the state auditor also cited DHH for paying claims totaling almost $13,000 in the last fiscal year to non-emergency medical transportation providers for “services billed to Medicaid that were not provided in accordance with established policies.”

The report said federal Medicaid officials may question those costs and require the state to repay the money. The finding on the non-emergency transportation is the sixth year in a row the state auditor has pointed out the problem to DHH.

DHH was cited for the third consecutive year for not having “an effective internal audit function to examine, evaluate and report on its internal controls.” Although the department has hired a chief compliance officer-inspector general, no internal audits on controls were issued last fiscal year, the report said.

Other report findings include:



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