Alabama Strengthens Medicaid Payment Accuracy With Innovative Contingency Contract

Alabama awards a performance-based contract to review its Medicaid claims and help recover funds owed.

by / June 30, 2010
Dollar sign and stethoscope Photo by iStockphoto

With the hurting economy and an influx of new Medicaid recipients on the horizon, state governments can't afford to squander public dollars. But across the country, budget constraints have hampered aggressive efforts to improve payment accuracy, leaving more room for costly mistakes and abuse in Medicaid programs.

On the front lines of efforts to fight fraud and abuse stands the Alabama Medicaid Agency, which just awarded a two-year contract to Ingenix, a subsidiary of UnitedHealth Group, to review claims and identify funds owed to the state.

But here's the twist: Alabama had no up-front costs. As part of the contract, Eden Prairie, Minn.-based Ingenix will conduct post-payment reviews of Medicaid claims filed for the past two years by all Alabama providers: hospitals, physicians, dentists, pharmacies, durable medical equipment companies and home health-care providers. Instead of the state paying a standard flat fee, Ingenix will receive a percentage of any incorrect payments identified and recovered.

"Alabama is a poor state, and this contract was designed to go beyond our current efforts to achieve any possible savings," said Robin Rawls, director of communications for the Alabama Medicaid Agency. "The contingency nature of the contract is designed to ensure that monies are only paid for legitimate, verified savings. Providers also have the opportunity to appeal any findings."

The efforts in Alabama represent part of a broader push to crack down on Medicaid abuse. Established by the Deficit Reduction Act of 2005, the Medicaid Integrity Program (MIP) is the first national strategy in Medicaid's 45-year history that promotes fiscal integrity, and detects and prevents provider fraud, waste and abuse. (The Alabama contract is separate from MIP.)

Through innovative tactics to track taxpayer dollars, officials said, the Alabama Medicaid Agency has made payment accuracy a priority. As a player in health IT development and quality improvement initiatives, the agency assists nearly 1 million eligible recipients annually and seeks to improve patient health outcomes, manage costs and streamline Medicaid.

Targeting Fraud, Waste and Abuse

In fiscal 2009, Alabama Medicaid recovered about $1.3 million and avoided nearly $4 million in costs after reviewing 77 medical providers and 413 pharmacies. More than 100 beneficiaries were suspended from Medicaid for program abuse or misuse, and nearly 700 were restricted to one doctor and one pharmacy to prevent potential abuse.

Alabama's quality-control rate, which measures the accuracy of the Medicaid agency's eligibility determination process, consistently outperforms the national average error rate of 3 percent, the state claims. The agency's most recent error rate was only 0.5 percent for the year, Alabama officials said.

The new contract bolsters the Alabama program that has been "nationally recognized for very low rates of fraud and abuse," Rawls said. Under terms of the agreement, Ingenix will provide a full range of tools and services, including data mining, analytics and detection algorithms. The company also will provide the agency with experts in Medicaid policies and procedures, claims processing, reimbursement policy analysis and provider relations.

"States are really under the gun financially," said Steve Puleo, director of communications for Ingenix payer and government solutions. "Medicaid programs are going to expand, so it's important that every public dollar is spent to go to beneficiaries on the plans."

The deal, Puleo said, marks the company's first contingent contract with a state. Currently Ingenix has six contracts with state Medicaid programs for fraud, waste and abuse identification services or related support, and subcontracts, through partners, with 13 states. In addition, Ingenix has Medicaid/Health and Human Services data warehouse and analytics contracts with several large states, including Michigan, Illinois, New Jersey and California.

Puleo said Alabama's contingency approach may appeal to states looking to strengthen program integrity and prevent fraud and abuse without forking over big dollars at the beginning.

"The goal of this agency is to make sure every public dollar is properly spent to improve the health of the people of Alabama, and to achieve that we need to continuously seek ways to strengthen our program integrity and fraud-and-abuse prevention efforts," said Alabama Medicaid Commissioner Carol Steckel, who also serves as chairperson of the National Association of State Medicaid Directors, in a release. "A contingency-based contract ensures that Alabama taxpayers are only paying for results."


Russell Nichols Staff Writer
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