Jennifer Vermeer
Director of Iowa Medicaid Enterprise

(Des Moines, IA) Gov. Terry E. Branstad announced today that an Iowa Medicaid initiative saved taxpayers $41 million in fiscal year 2013. That brings the total three-year savings of the program integrity effort to more than $86 million.

“The savings are six times greater than the overall cost of the program integrity contract, and $18.5 million above the savings target. That’s very good news for taxpayers,” said Branstad. “These savings help us provide better care for 400,000 Iowans in need, without reducing provider rates or trimming services.”

The savings were achieved through a three-year, $14 million program integrity contract awarded to Optum of Eden Prairie, Minn. Optum, which manages most of the program integrity work for Iowa Medicaid Enterprise, will continue its program integrity efforts for FY 2014 in the first of two performance-based option years under the contract.

Iowa Medicaid Enterprise Director Jennifer Vermeer said savings under the program integrity contract include both “cost avoidance,” which is money not spent because claims errors or fraudulent activities are caught in advance, and “recoveries,” which refers to funds inappropriately billed to Medicaid that providers must repay.

A strong emphasis on avoidance is especially beneficial to Medicaid programs, since it is less costly than “chasing” inappropriately paid claims in an effort to recover funds.  Optum discovered inappropriate behavior by both providers and beneficiaries.

“We are pleased with the innovative approaches Optum has instituted,” Vermeer said. “We’ve put those who deliberately seek to defraud the system on notice that we’re using some very sophisticated techniques to thwart their efforts. For those who make mistakes or are misinformed, there’s an educational component to the program that our Medicaid providers have found helpful.”

The majority of the approximately 20,000 Medicaid providers bill appropriately and understand how the program works. But, Vermeer said the few who are fraudulent can cost taxpayers millions.

Some examples of potential fraud or inappropriate claims and payments that Optum analysts found include:

  • Questionable In-home Respite Care Claims: Iowa Medicaid pays for some in-home non-medical services to families with disabled children, who can’t be left alone, to give parents an opportunity to shop or run errands. Program integrity analysts found that some of these companies were billing for services not provided, submitting bills that show they were at two different households at the same time, or inflating the time they were at a household. In addition, parents sometimes had siblings or other relatives establish a “storefront day care center,” and would bill Medicaid for in-home respite care through the company. Optum’s work has resulted in a change in the law that now prevents billing through a day care center.
  • Questionable Chore Claims: People who are eligible for Medicaid-paid nursing home care can sometimes remain in their homes with the help of various services, including chores such as lawn mowing and snow removal. Program integrity analysts found that some chore providers billed for snow removal on days it did not snow, or billed excessively for mild snowfall. In addition, analysts compared plot plans with lawn-mowing claims and discovered that often, providers would bill for far more hours than it would take to mow a small lawn. In one case, analysts found that one provider was submitting bills of $700 per month for lawn care at one single-family address.
  • Questionable Durable Medical Equipment Claims: Generally, durable medical equipment, which includes items such as oxygen tank dispensers, home hospital beds, wheelchairs, etc. – are either purchased outright or rented by Medicaid, whichever is more cost-effective. In some cases, for example, a patient may require a wheelchair or a nebulizer for only a short period of time, and renting is more cost-effective than buying. Program integrity analysts found many instances of companies submitting rental claims long past when purchasing the item would be less expensive. In other cases, companies would submit rental claims even after Medicaid had already purchased the item from them, meaning they were receiving double payments.
  • Questionable “Swing Bed” Claims: Critical access hospitals – defined as smaller, rural hospitals – at times keep injured or very sick patients in more expensive “swing bed” units, which can cost $4,000 per day, rather than moving them to lesser expensive care settings in the same hospital or to different facilities. For example, in several rehab cases, the level of care required could have been handled just as well in a nursing home setting, which costs Medicaid about $250 per day. Program integrity analysts focused on cases where patients were kept in “swing beds” for more than a year – generating up to $1.5 million in Medicaid bills – and found many cases of inappropriate billing by hospitals. The program’s efforts resulted in a legislative change that now requires some prior authorization before patients are placed in swing beds.

In addition, Vermeer said there were other Medicaid fraud areas in which IME is collaborating with law enforcement officials, who are investigating based on information from Optum analysts. Steve Larsen, executive vice president of Optum Government Solutions, said Iowa’s Medicaid program has become a national model in program integrity.

“The state shares our philosophy about payment accuracy – every taxpayer dollar must be properly spent, and every provider must be properly paid for the critical work they do,” Larsen said.

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