Contingency-fee consultants in the  two states we reviewed—Georgia and Massachusetts—have developed  reimbursement-maximizing projects in each of the five categories of  claims that we reviewed, generating more than $2 billion during state fiscal  years 2000 through 2004 in additional federal Medicaid reimbursements,  mainly in Georgia. CMS Surveys Found Increasing Use of Contingency-Fee Consultants for Reimbursement- Maximizing Projects

CMS surveyed its regional offices in fiscal years 2002 and 2004 and found  that an increasing number of states were using consultants on a  contingency-fee basis for projects to maximize federal reimbursements. This survey identified 34 states involved  in contingency-fee contracts to help them maximize federal Medicaid  reimbursements in a variety of categories. CMS does not identify the extent to  which states’ Medicaid claims stem from projects using contingency-fee  consultants to maximize federal reimbursements. After UPL projects generated for Georgia more than $1.2 billion in  additional federal Medicaid reimbursements for state fiscal years 2001  through 2003, and a dispute developed between the state and the  consultant about the extent to which the additional reimbursements were  attributable to the consultant’s project, the state and the consultant agreed  upon an additional $28 million in fees to be paid over 2 years. Claims from Contingency-Fee Projects Are Not Always Consistent with Law or Current Policy and Can Undermine Medicaid’s Fiscal Integrity

We and others have identified claims from contingency-fee consultant  projects that appeared to be inconsistent with current CMS policy and  claims that were inconsistent with federal law. One factor involved federal requirements that  were inconsistently applied, evolving, or not specific; the second involved  Medicaid payments to government units, which can facilitate the  inappropriate shifting of state costs to the federal government. Contingency-Fee Projects in Selected States Resulted in Problematic Federal Reimbursements in Five Categories of Claims

In the five categories of Medicaid services we reviewed, we identified  claims that were problematic in Georgia, Massachusetts, or both. Specifically, the consultant  recommended that the two state agencies claim Medicaid reimbursement  on the basis of the facilities’ estimated costs for rehabilitation services,  rather than on the state agencies’ actual per diem payment. Limited State and CMS Oversight of Claims from Contingency-Fee Projects Raises Concerns about Medicaid Financial Management

Georgia, Massachusetts, and CMS provided limited oversight of claims  associated with projects developed with the aid of contingency-fee  consultants to ensure that they were consistent with Medicaid  requirements. For example, CMS had listed these two  categories on a financial tracking sheet of high-risk areas as of 2000. Conclusions

Because of its size, complexity, and federal-state structure, the Medicaid  program has been subject to waste, abuse, and exploitation. Although CMS has taken steps in recent years to minimize  the federal financial risk involved in inappropriate financing schemes, the  agency must also ensure that its policies are clear and consistently applied  across states. States are required to make DSH payments to hospitals that care for a  disproportionate number of low-income patients. 3. 5. 10.
Why GAO Did This Study

Medicaid--the federal-state health care financing program covering nearly 54 million low-income people at a cost of $276 billion in fiscal year 2003--is by its size and structure at risk of waste and exploitation. Because of challenges inherent in overseeing the program, administered federally by the Centers for Medicare & Medicaid Services (CMS), GAO in 2003 added Medicaid to its list of high-risk federal programs. To help administer the program, states may employ consultants in a number of roles, sometimes under contracts whereby payment is contingent upon the consultant's performance. GAO was asked to report on states' use of contingency-fee consultants. GAO examined the extent to which (1) states are using contingency-fee consultants for projects to maximize federal Medicaid reimbursements, (2) claims from contingency-fee projects in selected states are consistent with federal law and policy, and (3) states and CMS are overseeing claims from such projects.

What GAO Found

As of 2004, 34 states--up from 10 states in 2002--used contingency-fee consultants to implement projects to maximize federal Medicaid reimbursements. Projects varied widely, and because of certain risk factors--including a nationwide growth in dollars--GAO focused on claims in five categories. Contingency-fee consultants in the 2 states GAO reviewed, Georgia and Massachusetts, have developed projects in all five categories. From these and other projects, for state fiscal years 2000 through 2004, Georgia obtained an estimated $1.5 billion in additional federal reimbursements and Massachusetts obtained an estimated $570 million. These states paid contingency fees of more than $90 million. In Georgia, Massachusetts, or both states, GAO identified claims from contingency-fee projects in the five categories reviewed that were problematic because they appeared to be inconsistent with current policy or were inconsistent with federal law; others undermined Medicaid's fiscal integrity. For example, for services provided to children in state custody residing in private facilities, a Georgia project claimed increased federal Medicaid reimbursements on the basis of the facilities' estimated costs, which were often higher than the state's actual payments to the facilities. Problematic projects often involved categories of claims where federal law and policy were inconsistently applied, evolving, or not specific. Problematic projects also involved Medicaid payments to government entities, which can facilitate the inappropriate shifting of state costs to the federal government. The states and CMS have provided limited oversight of claims associated with contingency-fee projects. CMS has not routinely collected information enabling it to identify claims or projects developed by contingency-fee consultants to maximize federal reimbursements, despite long-standing recognition that such claims are at risk of being inconsistent with federal requirements. Problems GAO identified illustrate the urgent need to address broader issues in oversight and financial management. CMS has taken steps to strengthen its financial oversight of Medicaid, but the agency can do more to reduce the risk of current and emerging financing schemes, including responding to prior GAO recommendations.