NC knew for years it needed to stop paying problem doctors. Why did it continue?
One health professional had two felony convictions for possession of controlled substances. Another had been suspended from the federal Medicare program. A third had a revoked license, later restored, stemming from a fraudulent billing case.
But the state Department of Health and Human Services provided little justification for reapproving those health professionals to continue to see Medicaid patients. It was a problem State Auditor Beth Wood pointed out in an audit nearly seven years ago.
That’s what makes a different audit she released last month even more troubling.
Her staff revisited DHHS to see if it had fixed its systems to weed out doctors, dentists and other health professionals who had lost their licenses, faced restrictions or lacked needed credentials. The auditors discovered the fixes that DHHS put in place after the 2014 audit had failed.
As a result, in February her office found DHHS allowed 18 medical providers with suspended or terminated licenses to remain on the list of providers eligible to receive taxpayer-backed Medicaid funding. Officials in charge of the state’s $14 billion Medicaid program had missed that those providers were disciplined for issues ranging from substance abuse to sexual misconduct and inappropriate behavior with female patients. One had a terminated license due to a felony conviction for health care fraud.
At least two unlicensed providers saw Medicaid patients and received payments. They saw around 2,400 patients and were paid a combined $1.64 million from Medicaid while their licenses were suspended.
“They did put something in place to respond to our findings back in 2014, but nobody went back and sort of did a walk through or a test to see if it was working,” Wood said in an interview last week.
Dave Richard, the DHHS deputy secretary in charge of Medicaid, said DHHS accepts responsibility for the audit’s critical findings and is now working on getting back any money that the agency shouldn’t have paid out. There also could be criminal charges for providers, he said, now that their actions have come to light from Wood’s audit.
“You’re breaking the law by practicing without a license, so it goes beyond the payment issue,” he said.
Who’s watching for problems?
Wood, who has been state auditor for 12 years, said the problem wasn’t just that DHHS’ fixes after 2014 didn’t work, allowing these issues to go unnoticed. The department’s internal auditors also didn’t spot the failures, she said.
“This is where your internal audit shop would catch things before I do, if it was working,” Wood said.
The News & Observer’s database of state government salaries shows DHHS has 45 auditors on staff. It’s unclear how many of them work on Medicaid.
Many state agencies have internal auditors who are tasked with identifying fraud, waste and abuse. DHHS internal auditors, for example, first caught misspending at Four-County Community Services, a nonprofit serving several counties at or near the state’s southern border, in 2013. The following year, Wood’s office weighed in with a more extensive probe.
But more recently, Wood said her office has identified major misspending at the state Department of Transportation and academically deficient courses within the Department of Public Instruction’s Virtual Public School.
The state DOT had overspent its payroll budget by $39 million, the state audit found, and provided double-digit raises as high as 65% to several thousand employees. A review of a dozen of DPI’s virtual public school courses showed most didn’t meet curriculum content standards. Teachers weren’t regularly evaluated.
“If you follow the dots, DOT, DPI, now DHHS, the internal audit shops could have found everything that I’ve just found over the last six months,” Wood said. “They didn’t, so that makes my case that the internal audit shops aren’t working like they should.”
State lawmakers went back and forth for much of spring 2019 about the DOT raises, and ultimately let them stand. So far there has not been similar urgency at the General Assembly to deal with the new Medicaid audit.
Republican Sen. Joyce Krawiec of Forsyth County, who co-chairs the Senate Health Committee, issued a scathing press release when the audit first came out. But when asked for an interview on it later, her assistant said she was too busy, and that her health committee had no immediate plans to conduct any hearings.
As for internal reckonings, Richard said DHHS did have “a lack of a quality assurance process,” but he added that he doesn’t think the problems were due to malice.
“The people who do this work, they are dedicated state employees,” he said.
DHHS officials said the audit last month exposed about $13.4 million in potential Medicaid overpayments. Wood cautioned that the number might actually be significantly higher because some parts of her review only looked at a small sample of the 90,000 Medicaid providers DHHS has authorized in North Carolina.
The audit also flagged 21 providers who DHHS had re-verified, and then paid nearly $75 million, despite having no evidence that the providers had the credentials they needed. But Richard said after the audit, DHHS found that only one of those providers lacked proper credentials. The state is now working on getting back the $184,000 that shouldn’t have been paid to that provider, he said.
Problems under Cooper and McCrory
DHHS Secretary Mandy Cohen, in confirming the issues the audit raised, said her department is trying to recoup overpayments. Richard said DHHS is already working on fixes that could be in place within just a couple months, and that the agency will be giving updates on its progress to Wood.
Cohen’s predecessor, Aldona Wos, also pledged to fix the verification issues the auditor found in 2014. Wos worked for then-Gov. Pat McCrory, a Charlotte Republican who lost his reelection bid to Democrat Roy Cooper. A year after the audit, DHHS had set up a system with licensing boards that would notify the department by email when a Medicaid provider’s license was terminated or suspended.
It never worked, last month’s audit found. But the employee tasked with checking for emails didn’t suspect a problem as no notifications arrived. The employee assumed no Medicaid providers had gotten into trouble; supervisors also didn’t ask.
The 2014 audit also pointed to a problem with an employee tasked with provider approvals. The Medicaid division fired that employee, who had been approving “higher-risk provider applications” for roughly eight months “without any research or review to support the approval,” the audit said.
“However, the situation only came to the Division’s attention because a provider complained to the Division about the time it took to approve an application,” the 2014 audit said. “The Division did not discover the problem on its own.”
Another repeat issue, identified in the 2014 audit and again last month: not enough accountability required from the outside contractor hired by the state to handle much of the provider verification.
Wood last week declined to identify the employee who assumed there were no issues with providers, or the Medicaid providers who should have been removed from the program.
Richard said he could not discuss whether any disciplinary action is happening. A department spokesperson also declined to identify providers cited in last month’s audit. But in general, Richard said he wants to focus less on punishment and more on retraining people to make sure they don’t have similar problems in the future.
“What we want to do is make sure we put a system in place where if they see a problem, they raise it up,” he said. “That’s the balancing act you want, between disciplinary action and making sure you’re training people properly.”
Internal improvements for all agencies?
Wood gave DHHS credit for trying to fix the problems her staff identified seven years ago. They just didn’t follow up to see if those fixes worked. That’s where internal auditors should step in.
Wood said she sees other issues with internal auditing. She said some internal auditors aren’t targeting the areas within their agencies that carry the biggest risk for problems.
“One of the most critical pieces is a thorough risk assessment of your agency, understanding every part of your agency, understanding your risk,” she said.
Wood said she is trying to work with the state’s Council of Internal Auditing to come up with better standards and practices. Wood is a nonvoting member of the council.
In 2007, the General Assembly formed the council, which meets quarterly. Among its responsibilities, according to its website, is producing guidelines for the “uniformity and quality of state agency internal audit activities.”
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