Home > Uncategorized > MassHealth audit casts doubt on claimed savings in privatizing state services

MassHealth audit casts doubt on claimed savings in privatizing state services

Last year, State Auditor Suzanne Bump approved a proposal to privatize mental health services in southeastern Massachusetts after the for-profit Massachusetts Behavioral Health Partnership (MBHP) claimed it could save $7 million in doing so.

The auditor’s review under the Pacheco Law required Bump’s office to compare the proposed costs of privatizing the services with continuing to carry them out with state employees in the Department of Mental Health.

In a report released yesterday, the auditor maintains that MassHealth, the state’s Medicaid administration agency, made questionable, improper, or duplicate payments to MBHP totaling $193 million between July 2010 and 2015. Those allegedly improper payments appear to have been made under the same contract with MBHP that served as the vehicle for privatizing the mental health services last year.

Under that umbrella contract, known as the Primary Care Clinician Plan, MassHealth paid MBHP more than $2.6 billion between 2010 and 2015.

Given the finding that MassHealth’s total payments to MBHP include $193 million in questionable, improper, or duplicate payments, it would seem it has just gotten harder to argue that privatization of human services has been a great deal for the state.

In fact, it seems possible that one of the reasons MBHP was able to offer bids from two providers for privatizing the mental health services that were $7 million lower than what the state employees could offer was that the company knew it could more than make the money back in duplicate payments from MassHealth.

A description of the MBHP billing arrangement by the state auditor paints a picture of the company as a middle-man between MassHealth and providers of actual services under the Primary Care Clinician Plan (PCCP) contract.

According to the audit, the Commonwealth pays MBHP a fixed monthly fee under the PCCP contract for each member enrolled in MBHP.  MBHP then “recruits and oversees networks of third-party direct care providers who assume responsibility for providing a range of covered behavioral-health care.” MBHP subsequently “pays the providers using the monthly…premiums received from the Commonwealth.”

MBHP’s real role here appears to be as a pass-through of state funds. What MBHP really seems to add to the process is an apparently large layer of bureaucracy.

We have noted that MBHP is a politically connected company whose parent companies manage the behavioral health benefits of  70 percent of MassHealth members.  In April 2015, Scott Taberner, previously the chief financial officer at MBHP, was named Chief of Behavioral Health and Supportive Care in MassHealth.

As we pointed out, Taberner was put in a position to manage the contract with the company he used to work for.

State employee unions, including the Service Employees International Local 509, the Massachusetts Nurses Association,  and the American Federation of State, County, and Municipal Employees Council 93 did challenge Bump’s initial approval of the privatization arrangement with MBHP last year for the southeastern Massachusetts mental health services.

The unions maintained that the lower bids submitted for the privatization contract assumed major cuts in staffing at mental health facilities in southeastern Massachusetts, which would be likely to result in lower-quality services. They argued that the Pacheco Law requires that service quality not be affected.

The Pacheco Law requires a state agency seeking to privatize services to submit to the state auditor a comparison of a bid or bids from outside contractors with a bid from existing employees based on the cost of providing the services in-house “in the most cost-efficient manner.”  If the state auditor concurs that the outside bidder’s proposed contract is less expensive and equal or better in quality than what existing employees have proposed, the privatization plan will be likely to be approved.  If not, the auditor is likely to rule that the service must stay in-house.

In December, the state Supreme Judicial Court upheld Bump’s Pacheco Law review.

An SEIU official said to us yesterday the union is reviewing the auditor’s latest audit. We think that at the very least, the audit calls into question the savings claim in privatizing the southeastern Massachusetts mental health services.

More broadly, the audit of the MassHealth-MBHP contract calls into question MassHealth’s system of internal controls in managing state’s $13 billion Medicaid program.

It appears the MassHealth internal control system is so inadequate that the administration was unaware that hundreds of millions of dollars in improper payments were being made to its major contractor. Yet the administration was eager to reward MBHP’s efforts to eliminate state employees and cut staffing for mental health services in order to save a reported $7 million.

The MassHealth-MBHP debacle should serve as a warning to legislators and others that privatizing state services is not an automatic panacea to problems in service delivery and to high costs. Privatization comes with potentially high costs of its own, particularly when the state forsakes its role, as it appears to have done in this case, of adequately managing and overseeing its contracts with service providers.

 

 

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  1. Irene Tanzman
    April 4, 2017 at 11:19 pm

    Very interesting. I went to the MassHealth seminar for stakeholders several months ago, and MassHealth explained that the healthcare needs to be managed through accountable care organizations because costs were too high, and MassHealth was unsustainable. Of course it is unsustainable because they were paying twice!

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