The state Department of Health and Human Services hired a company in a no-bid contract to oversee Medicaid finances in an emergency, agency Secretary Aldona Wos said Tuesday.
DHHS didn’t have enough people or personnel with skills to oversee financial operations in the $13 billion health insurance program for the poor, elderly and disabled, Wos told legislators as she defended hiring Alvarez & Marsal, a Washington, D.C.-area firm.
“The only way to produce the work was to ask for outside help,” she said. Twenty-two percent of positions in the Medicaid office are vacant, according to DHHS.
But agency officials came under sharp questioning from Sen. Floyd McKissick, a Durham Democrat, about how DHHS ended up picking the company and whether any other firms were considered.
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In February, DHHS signed Alvarez & Marsal to a $3.2 million no-bid contract to reorganize the Medicaid office. Despite criticism about not putting the job up for competitive bidding, DHHS expanded the company’s duties and upped the maximum payment to $6.8 million a few months later.
The company is essentially running the Medicaid finance office, rewriting policies and procedures, writing reports, helping recruit new staff, and laying the foundation for what it says will be better forecasting of the Medicaid budget.
The company’s three principals are billing $473 an hour, five directors are billing $394 an hour, and nine analysts cost $242 an hour.
Rudy Dimmling of Alvarez & Marsal helped present the Medicaid budget to legislators at Tuesday’s oversight committee meeting on DHHS.
McKissick estimated Dimmling’s time on the job will cost the state $800,000 a year, much more than the state would pay an employee to be chief financial officer.
David Oglesby, senior adviser for contracts, grants and compliance at DHHS, said Alvarez & Marsal is a turnaround company with a practice focused on government that is “unique within the nation.” The Medicaid office had a pressing need to hire the firm, Oglesby said, and Alvarez & Marsal had worked under a consultant that’s done extensive work for the DHHS, giving it some experience in the state.
McKissick was not satisfied with the explanation. “They needed to evaluate other firms,” he said in an interview.
DHHS came to the meeting excited to show that Medicaid finances were improving. After years of Medicaid cost overruns that bedeviled the department and frustrated legislators, the agency reported that it had been able to give about $64 million of the Medicaid appropriation for fiscal year 2013-2014 back to the state treasury.
“The Medicaid budget has finished the year in the best shape it has been in the last five years,” Wos said. “We’re bringing better predictability to the Medicaid program.”
Still, the new state budget, for fiscal year 2014-2015, anticipates that not all of last year’s Medicaid expenses have been covered. This year’s budget includes $136.5 million to cover last year’s unpaid claims and enrollment backlog.