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NC Auditor: Flawed Medicaid contracts show need for more oversight

Posted August 15, 2012
Updated August 16, 2012

— The head of North Carolina's Medicaid's office says he's confident contracts with outside companies to help detect fraud and abuse will reap significant savings in the long run. But NC Auditor Beth Wood says the flawed contracts illustrate the need for more oversight.

State Medicaid chief Michael Watson  told a legislative oversight committee Wednesday the agency agreed with the recommendations in State Auditor Beth Wood's review related to contract language and meeting goals.

The audit found the state recovered over-payments at a rate much lower than initially projected for contracts with IBM and SAS Institute and another firm.

Watson said the IBM software alone had helped identify close to $200 million in questionable billings. There's no guarantee the state will recover much if any of that money.

Legislators said they were surprised by contract language that allowed firms to get paid even if funds weren't recouped. North Carolina has paid more than $23 million for fraud detection software and services, and the results have not met projections.

"These contracts just have poor clauses in them that are recognizable by the average layperson," Wood said.

One example is the contract with Public Consulting Group. The state pays PCG a percentage of any potential Medicaid fraud it identifies, whether or not any actual fraud was committed. Wood says that's an incentive to PCG to inflate its findings.

"We've had some complaints from providers that they're about to be put out of business because of all the time they've had to spend to prove that they really haven't committed fraud," Wood said.

Wood said one Medicaid vendor had been accused by PCG of submitting $1.34 million in questionable claims. A secondary DHHS review found the company was only liable for $22,000 in repayments. NC Auditor: Medicaid contracts illustrate need for more oversight NC Auditor: Flawed Medicaid contracts illustrate need for greater state oversight

Still, Wood says, the consultant was paid a percentage of its inflated estimate of $1.34 million. "There was no evidence that an adjustment was made to the payment made to PCG," she added.  

Watson says he is addressing the problems with PCG and has made changes to other contracts, too. PCG did not respond to WRAL's request for a comment.

Watson says the upfront investment will pay off in the long run. North Carolina is the first state to try the fraud detection partnership.

"You've got to figure out, how do you create the right incentives when you're doing these kind of public-private partnerships to get the outcomes you're looking for?" Watson said.

Wood says the state needs better oversight over contracts. Most contracts are signed by agency heads with very little outside review, she said. 

"We’ve got state agency heads who enter into contracts all day long, and the bottom line is, it’s no skin off their back if the contract goes bad and there's fraudulent spending as a result of the contract," Wood said. "It falls back on the citizens of North Carolina."

Lawmakers could introduce stricter guidelines for oversight of state contracts in the next session.

32 Comments

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  • HadEnough Aug 17, 12:46 p.m.

    I agree she is doing a good job , but nothing EVER happens to these people.

  • YippiYiyoKiYay Aug 17, 11:23 a.m.

    Beth Wood, you do a fantastic job of shining the light on the roaches. Too bad nobody else in power wants to stop the insanity. Are you sure you're not an honest old school Republican?

  • lolly Aug 16, 6:54 p.m.

    "Watson says the upfront investment will pay off in the long run. North Carolina is the first state to try the fraud detection partnership."

    The obvious problem in this scenario is that the person who signs the contract, may be working for the company 18 months later.

    I am not saying this is the case with Watson, but more oversight on the language of the contracts is necessary. And the person who signs the contract, should also sign a contract stating that they will not work in the fraud detection industry for the next 10 years.

  • signify6644 Aug 16, 6:06 p.m.

    Crabbit Cratur is worried people are tired of his scam. He might actually have to work instead of collect money from the government. Shocking I know.

  • jeffjohnson123 Aug 16, 5:21 p.m.

    PACs are Politians best friends !!

    Obviously some investigation needs to be done on the parties involved in drawing up these contracts. Get the firing squad ready before gun control kicks in.

    As a TAX PAYING US CITIZEN, I'm getting very perturbed at the incompetence in our government.

  • Nancy Aug 16, 2:30 p.m.

    The state has paid these firms $23 million and yet, how much has been recovered on the fraud they detected (or didn't detect)??

  • Nancy Aug 16, 2:29 p.m.

    WHO is responsible for these pathetic contracts that they have with these fraud detection systems???

    And why haven't they been fired?

  • Crabbit Cratur Aug 16, 1:29 p.m.

    "more oversight, why don't we get rid of the people that are suppose to do oversight now.."

    Wouldn't you need to first show that they had been funded enough to be able to do the job?...........

    If you have 6000 hen-houses and 6000 foxes, one farmer with a shotgun is going to make very little difference. One farmer with a small stick, even less.

  • Crabbit Cratur Aug 16, 1:26 p.m.

    "imagine that. Another gov't program that is broke and has fraud running rampant. Kinda like,welfare,medicare,us postal service ,freddie and fannie,hud,military,dhs, oh well this could go on forever. Less gov't is the answer!!!!!!!!!!!!!!!!!!!"

    How would that fix things when most of the fraud is by Private companies?

  • pbjbeach Aug 16, 1:14 p.m.

    THIS IS ALL DUE TO THE REPUBLICAN RUNNING EVERY PHASE OF STATE GOVERNMENT AN THE CURRENT GOVERNOR I BELEIVE IS AN HAS BEEN A TOTAL SELL OUT TO THESE BUSINESS AN EXECTIVES WITH HER DEMANDS OF FOR THE PEOPLE WITH ANY FORM OF OVERSIGHT AUTHORITY WITHIN STATE GOVERNMENT FOR THERE EXIST SUCH A PRO-BUSINESS ATMOSPHERE THAT THET TAXPAYERS ARE BEING TOTAL SCREWED OVER . I PERSONNALY FEEL THAT THE AUDITORS OFFICE NEEDS TO INSURE THAT THERE IS CONSTANT OVERSIGHT OF THE SPENDING OF TAXPAYERS FUNDING WITHIN EVERY STATE AGENCY SO AS TO PROTECT THE FUNDING THATIS SUPPLIED BY THE TAXPAYERS OF THIS STATE AN MOST ESPECIALLY OF THE FUNDING WITH THE REALM OF THE NCDOT AN THE OVERSIGHT OF CONSTRUCTION PROJECT FUNDING TAXPAYERS DOLLARS WHER I FEEL CERTAIN THAT THERE EXIST WIDE SPREAD WASTE FRAUD AN ABUSIVE PRACTICES WITH REGARD TO THE STATE GETTING THE BIGGEST BANG FOR THE TAXPAYERS DOLLARS . SO I PERSONALY SAY TO THE AUDITORS OFFICE GO GET THEM AN IT IS ABOUT TIME THAT SOME ONE OR SOME AGENCY WITHIN THE S

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