The Agency of Human Services often fails to ensure that social-service contractors are providing the services they’re being paid for, according to a report released Wednesday by State Auditor Doug Hoffer.
In fiscal year 2013, AHS departments paid $246 million to 11 organizations, known as Designated Agencies, to provide a range of services to adults with mental illness, young people with severe emotional disturbances, and people with developmental disabilities.
Half of the payments were based on inclusive rates, or payments for a group of services over a set period. The performance audit found that while the state monitors “many facets of the agencies’ performance, they don’t generally compare the services budgeted to those actually performed” as part of inclusive rate contracts.
“Without making these comparisons, the State cannot ensure that Vermont clients are receiving the budgeted services they need and that the public is paying for,” Hoffer said in a statement, “The state has a responsibility to confirm that these payments fairly represent the services actually provided.”
Dr. Harry Chen, Human Services Secretary, says some of the reforms recommended by Hoffer are already underway. And a representative of the Designated Agencies says the underlying problem is payment rates that don’t cover the full cost of providing contracted services.
As an example of AHS’ failings, the Hoffer report cites the Department of Aging and Independent Living (DAIL), which has “a central repository” of approved services and budgets for its $128 million home- and community-based developmental disability services. The Designated Agencies are paid a daily inclusive rate for each client and submit monthly data to the state on the actual services provided. But, the report says, DAIL doesn’t compare this actual data to clients’ approved services.
The Department of Mental Health (DMH), the other department included in the audit, did conduct such a comparison and found striking results, the report says.
DMH asked Designated Agencies participating in a child mental health program to self-audit the services provided versus what was budgeted. In the second half of 2013 the self-audits showed that for 74 percent of clients, DMH paid for more services than were rendered.
As a result, DMH was able to recoup $181,000 from the agencies participating in the program.
The performance audit also found that in some instances the state makes duplicate payments to designated agencies.
“The problems that the auditors identified are not insurmountable, and our office has provided the departments with a number of recommendations,” Hoffer said, “The state owes it to all Vermonters to ensure that public dollars are being spent appropriately for these important services.”
His office recommends that AHS find a way to determine whether clients are receiving services that are paid for using an inclusive rate, and establish procedures that check whether designated agencies’ claims meet their billing requirements and limitations.
Responses to the audit
“Our own analysis confirms the findings in the Auditor’s report,” said AHS Secretary Chen in an email.
Chen said the state is taking steps to address those shortcomings by requiring self-audits across programs at the end of the current fiscal year, and adding compliance reviews to the DMH and DAIL quality assurance programs. They will also clarify contractual expectations before granting funds, Chen said.
DAIL will also begin regular audits of its home and community based services for the developmentally disabled.
In the long term, he said, an updated Medicaid IT system will help follow the money to its end use. That project is to begin next year.
“It’s sometimes hard to track each dollar, so the state needs to make sure there are systems in place for that,” said Julie Tessler, executive director of the Vermont Council of Developmental and Mental Health Services, a trade group for designated agencies.
“I don’t think anything the auditor is going to ask the state to do will change our administrative costs,” Tessler said, adding that they are already low at 10 percent.
Tessler asserts that the inclusive rate payments, sometimes called bundled payments, are paid through the state’s Medicaid program, which reimburses at a rate that doesn’t cover the agencies’ costs.
“They’re still using rates that are inadequate,” Tessler said. “The bundled payments help with flexibility, but they’re based on rates that are inadequate.”
Unlike hospitals and physician practices, which shift the burden of Medicaid underpayments to the privately insured, designated agencies have nowhere to recoup those losses.
Cutting services isn’t an option because they’re spelled out in state contracts, so the agencies have cut staff salaries. Workers at Designated Agencies make $15,000 to $20,000 less than the industry standard, according to Tessler.
That leads to high turnover and ultimately hurts the clients they serve, she said.