A Three-Pronged Probe

For the first time, a federal official has publicly confirmed that the Arizona Health Care Cost Containment System is under investigation by at least two agencies.

Vicki Shepard, the regional inspector general for investigations at Health and Human Services in Santa Ana, California, said that for several months, her office and the U.S. Department of Justice have been investigating allegations of fraud and waste atAHCCCS.

A source at the Health Care Financing Administration in San Francisco says the feds are examining allegations that go back years and may amount to $200 million--money the state could be on the hook for if the allegations are found to be true.

Meanwhile, the General Accounting Office, the investigative arm of the U.S. Congress, has also apparently joined the investigation. Sources in Phoenix and Washington, D.C., say the GAO is investigating--despite a glowing report on AHCCCS issued by the GAO just last month. That report came on the heels of another, issued by HCFA in September, that also reflected positively on AHCCCS. Both reports praised AHCCCS and dismissed allegations that there is widespread fraud or waste at the agency.

A source at GAO in Washington, D.C., says that one investigator and one auditor from the agency were scheduled to visit Phoenix this week.

Bill Scanlon, associate director of health financing issues at GAO, says he knows of no current investigation into AHCCCS by his agency.

Richard Chambers, the assistant regional administrator for Medicaid in HCFA's San Francisco office, says he is aware of the ongoing Office of the Inspector General/Justice probe, but he stands behind his September report.

"We have had numerous conversations with OIG," Chambers says, "but our position is that [our] report was accurate, and we stand behind it 100percent."

Frank Lopez, AHCCCS spokesman, declined to comment on any investigations Friday.

AHCCCS, the state's alternative to Medicaid, is a capitated health-care system. Health plans contract with the agency and receive monthly payments for each member on their rolls, regardless of whether that member uses care.

In a series of stories beginning lastApril, New Times documented instances in which payments were made to health plans for members' care--long after the members had died.

The stories also examined AHCCCS' contracting procedures and the agency's dismissal of employees who made allegations of fraud and waste.

OIG and the Justice Department have interviewed several AHCCCS employees and ex-employees in the past few weeks. Some of those interviewed say the questions focused on auditing procedures at the agency, but also touched on complaints of provider fraud and possible contract irregularities.

Farrell Janssen, who was dismissed from AHCCCS in April, says he was questioned for several hours last month by officials from the local U.S. Attorney's Office and the local OIG office.

Janssen says the investigators queried him intensely about payments made to providers for dead AHCCCS members, and whether his termination was related to his bringing attention to them.

He says the investigators also asked whether it would be possible to reconstruct member and payment data from years past, apparently to trace any payments to ineligible recipients. Janssen says the investigators were "excited" when he told them they could easily do so.

"They were happy to hear that," Janssen says. "One of them said, 'Oh, that's great.'"

Janssen says the investigators also wanted to know whether the same member information would be available at the Health Care Financing Administration, the agency in charge of disbursements of federal money to state Medicaid plans. Janssen told them he thought HCFA had the data as well.

Other sources interviewed by the Justice Department and OIG say they were questioned along similar lines--including theavailability of member data from years past.

Queries about such a mountain of information--AHCCCS has more than 400,000 enrollees at any one time--would appear to indicate that the feds are looking for fraud and/or waste on a fairly large scale. It may also lend credence to the $200 million figure cited by the HCFA source.

Shepard would not confirm any specific dollar amounts.
At least one of the investigators from the U.S. Attorney's Office told interviewees that she specializes in recovering improperly used federal money from states.

"She said that was what she did," Janssen says. Attempts to contact that investigator were unsuccessful.