Comptroller: State overpaid $166,666, cites Horizon NJ Health weaknesses

TRENTON – An audit by state Comptroller Matthew Boxer released this morning found the state’s largest Medicaid health maintenance organization (HMO) has done a poor job of reporting fraud and abuse and pursuing recoveries, causing the state to overpay $166,666 in insurance costs.

Horizon NJ Health (HNJH) recovered only $188,207 in improper Medicaid payments to its network providers and enrollees in 2009 and 2010, the audit stated. Those recoveries represent less than one-tenth of 1 percent of the $1.3 billion HNJH receives annually from the state.

“Horizon NJ Health needs to step up its efforts in investigating Medicaid fraud and abuse and recovering misspent Medicaid dollars,” Boxer said in a statement. “As the state now transitions its Medicaid program to a managed care system, it is becoming even more crucial for Horizon to meet its obligations as the state’s partner in the fight against Medicaid fraud.”

Horizon was not immediately available for comment.

But in the written report, Horizon strongly disagreed with the Comptroller’s various findings.

For example, Horizon disputed that $166,000 was overpaid. “There is not a dollar for dollar reduction in premium amounts based on the amount of recoveries,” it stated in response to the audit.

HNJH’s contract with the state requires it to maintain a special investigations unit dedicated solely to the detection of fraud and abuse by providers and enrollees within its network. All recoveries of improper payments are required to be reported to the state Department of Human Services and result in lower premium payments the state must pay to its four Medicaid health maintenance organizations (HMOs).

The OSC Medicaid Fraud Division audit found HNJH actively investigated only nine health care providers during the two-year period reviewed and made a total of five recoveries of improper Medicaid payments. It also found that even with the small amount of recoveries, only 14.1 percent of those recoveries were actually reported to the state as required.

As a result of the underreporting, the state overpaid to the four Medicaid HMOs, according to the audit. OSC recommends the state seek to recover the overpayments.

In its written response, HNJH also said it strongly disagreed with the state’s finding that it worked only on nine provider investigations. “OSC is assuming, incorrectly, that because certain cases require less work than other cases, they should not be reported,’’ HNJH replied.

Further HNJH disagreed with the Comptroller findings on oversight. “Fraud, waste and abuse is just one aspect of our oversight on our vendors,’’ Horizon stated. “HNJH prides itself on its diligent oversight of its vendors.’’

The audit further found HNJH did not consistently coordinate its efforts with the OSC, often failing to obtain required approvals for both its investigations and its recoveries. The approval process, which is dictated by HNJH’s contract with the state, was designed to enable OSC to ensure that HNJH is maximizing its recoveries in the cases it pursues.

Insufficient staffing of HNJH’s investigations unit raises further concerns about HNJH’s dedication to addressing fraud and abuse within its network, the audit found. HNJH’s contract with the state requires it to have at least one full-time investigator for every 60,000 of its New Jersey Medicaid enrollees.

OSC could not determine precise HNJH investigative staffing levels because the information HNJH provided to OSC lacked sufficient detail.

Even based on HNJH’s own summary calculations, however, the staffing levels fell below the minimum required for three of the eight quarters covered in the audit.

“The bottom line is we pay a lot of money as a state to Horizon and the state is getting less than what it bargained for in its contract,” OSC Medicaid Fraud Division Director Mark Anderson said.

A review of HNJH’s pharmacy network raised further questions about HNJH’s degree of oversight in fighting fraud and waste within its network. OSC reviewed 22 audits of HNJH network pharmacies conducted by an outside vendor. Of the 22 audits, OSC identified 19 in which the audit vendor documented deficiency patterns that should have resulted in a referral to HNJH’s investigations unit from HNJH’s pharmacy network manager, yet no referral was made.

One audit found, for example, that a healthcare provider who the federal government had excluded from the Medicaid program was still writing prescriptions for Medicaid recipients.

Other audits identified pharmacies at which prescriptions had been altered or where original prescriptions were missing.

Horizon also defended its pharmacy department, calling it the only Medicaid-managed care plan with an in-house pharmacy program. Horizon said it is the only such program able to work effectively in “promptly providing data and generating leads for potential fraud, waste and abuse.’’

Horizon also opposed the report’s call for monetary sanctions over staffing requirements.

“The state contract is a generic document for all managed care plans in New Jersey and not specific to an individual plan,’’ Horizon stated.

Going forward, Horizon said that it would strengthen its monitoring process to ensure all investigators are properly trained.

HNJH serves more than 470,000 Medicaid customers in all 21 New Jersey counties. HNJH is a wholly owned subsidiary of Horizon Blue Cross Blue Shield.

Comptroller: State overpaid $166,666, cites Horizon NJ Health weaknesses