AHCCCS to Grind

Federal officials investigating the Arizona Health Care Cost Containment System are questioning billions of dollars in payments and the eligibility of thousands of clients in the system.

The federal inquiry into the state Medicaid agency has mushroomed into a massive probe since questions were first raised about the agency two years ago, correspondence between the state and the U.S. government shows.

AHCCCS officials have spent hundreds of hours responding to the inquiry, which staffers say has been frustrating. They admit some errors have been uncovered, but say that many of the investigators' questions are based on "misunderstandings" which have since been addressed. And they say they have created new safeguards in response to some of the concerns identified in the investigation.

Federal officials won't comment, but the correspondence, released by AHCCCS in response to a New Times public-records request, shows for the first time the broad scope of the inquiry into Arizona's health-care system. The documents also confirm some of the problems at the agency first detailed in New Times almost two years ago.

Federal investigators have found duplicate billings by health-care providers. And they are concerned that AHCCCS has failed to pass on to the federal government some money that is recovered from health-care providers who have committed fraud. AHCCCS has also been asked to reexamine many of its files for fraud and waste.

Several AHCCCS officials were subpoenaed recently to appear before a federal grand jury in the ongoing investigation. No one has yet been identified as a target of the probe.

Since 1995, federal agents under U.S. Attorney Janet Napolitano and the Department of Health and Human Services' Office of the Inspector General have questioned billions of dollars in payments made by the state agency to health-care providers. The state is reimbursed by the federal government for the payments, called "capitation fees," based on the number of enrollees in the program.

However, a federal auditor questioned the eligibility of thousands of recipients on AHCCCS rolls, the documents show--including hundreds of recipients who were actually dead or incarcerated. (Prisoners lose their eligibility for AHCCCS since their health care is covered while they're in jail.)

A May 15, 1996, federal report found thousands of discrepancies in AHCCCS' payment system. The auditor, who tracked recipients by their social security numbers, found more than 4,000 cases where AHCCCS clients had a state identification number but no social security number. In hundreds of other cases, payments were claimed for the same person under multiple AHCCCS ID numbers, and, in more than 600 cases, AHCCCS clients were either dead or jailed.

AHCCCS tells New Times it answered the questions raised in the audit--even the longtime concern over dead people on the system's rolls.

Diane Ross, a deputy director at the agency, and Michael Fett, a staffer in the finance division, say AHCCCS explained the apparent discrepancies to the federal auditor.

AHCCCS has more than 75 different categories of eligibility, Ross says, and the auditor didn't understand that recipients can move from one category to another.

According to Ross, recipients can be bumped from some federal programs and still be eligible for Medicaid. Some federal regulations require AHCCCS to keep some recipients on its rolls for a limited time even after eligibility has been terminated. Ross says almost all the cases involving a missing social security number turned out to be newborns who are automatically covered for 12 months if they're found eligible at birth.

And yes, there are dead people listed as patients in the system, Ross says. There is often a time lag between a person's death and when AHCCCS terminates payments for that individual, she explains. AHCCCS' computer system now automatically calculates the amount of refund owed to the state. Dead people's names can also be found in the system when providers enter claims for treatment provided when the person was alive.

AHCCCS personnel concede, however, that the inquiry did turn up recipients in jail. A new system, established in January by AHCCCS and the Arizona Department of Corrections, now identifies AHCCCS recipients who enter state prisons, Ross says. AHCCCS still has no way of catching those recipients who go into the county jails around the state.

The Department of Justice also questioned AHCCCS about fraud--specifically, why Uncle Sam isn't getting a refund when AHCCCS does. Investigators discovered AHCCCS hadn't told the federal government about all of its fraud investigations and recoveries. Since the inquiry began, AHCCCS has reimbursed the federal government $45,000 it was owed from fraud recoveries.

The investigation has also uncovered duplicate payments to health-care providers which went unnoticed by AHCCCS. In January, a sampling done by federal auditors found 25 possible instances of double-billing, totaling $18,473. AHCCCS confirmed double-billing in eight of the cases, but disputed the rest.

AHCCCS hasn't answered all the feds' questions, either, the correspondence shows. The federal government still wants to know why AHCCCS continues to make some payments even when it knows it's dealing with duplicate IDs for the same person and why the program doesn't always catch duplicate records on its system, assistant U.S. attorney Suzanne Chynoweth says in a letter. And one question, repeated over and over like a litany from the investigators: Why doesn't AHCCCS catch these problems on its own?

AHCCCS says it's doing the best it can.
"There'll always be mistakes," Ross says, "but I think we always are looking to try to close as many of the loopholes, correct as many of the errors and set up as many safeguards as we can."

It's a balancing act for the agency, Fett adds--providing health care or catching fraud.

"It comes down to, do you spend three to four thousand dollars to save $200?" he says.

For all the details the records provide, they don't shed much light on the main question surrounding the investigation: Who's to blame? U.S. Attorney Napolitano praises AHCCCS for its cooperation in the letters.

Questions have been raised about some specific AHCCCS personnel. Barbera Bridgewater, a former AHCCCS supervisor, resigned after it came out that her private company billed the state for services to the same division she ran as a state employee. Federal agents also reviewed the contract of Logan Johnston, AHCCCS' outside counsel, who was hired despite entering the highest of several bids. But since inspecting those records, the feds haven't raised the subject again.

Still, the inquiry does not appear to be winding down anytime soon. Investigators have asked for copies of all of AHCCCS' records of recoveries from fraud. And on April 3, the government requested electronic files on all of AHCCCS' fee-for-service claims for the last six years--a huge chunk of raw data for investigators to digest.

"They're doing literally a 100 percent scope of everything," Fett says. "They're just taking it all and trying to piece it all together.

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Chris Farnsworth