Recommendations offered to collect outstanding Medical Assistance overpayments

The Office of Legislative Auditor has recommendations for the Department of Human Services after an audit of outstanding provider debt in the state’s Medicaid program.

Office leaders presented their findings to the House Human Services Finance and Policy Committee Wednesday, although it released the performance audit report Dec. 10.

Legislative Auditor Judy Randall said office staff didn’t go looking for this outstanding provider debt, but it was found when they were doing last year’s audit on the state’s financial statements.

“Because the amount in question, between $40 and $50 million, is not material for the state's financial statements, we didn't report on it as part of that financial statement work,” Randall said. “Instead, we then launched this additional performance audit to look into it more deeply.”

The performance audit found the department had a provider debt balance of $51.7 million across approximately 2,500 providers as of 2023.

In response, Commissioner Jodi Harpstead wrote, in part, “The complexities in collecting the provider credit balances are substantial. The majority of these balances represent organizations no longer doing business and we have had a very low return on any recovery work.”

Deputy Legislative Auditor Lori Leysen said the audit concluded the Department of Human Services did not comply with legal requirements and it generally had inadequate internal controls. It also showed the department:

• did not attempt to recover $40 million in outstanding overpayments to Medical Assistance providers accounts;
• is planning to forgo recovery of outstanding debt that may be recoverable such as balances under $1,000; balances over six years old; balances for providers that have filed bankruptcy or are deceased;
• has not accurately reported its accounts receivable balance to Minnesota Management and Budget for inclusion in the state’s financial statements since 2019;
• was unable to provide adequate dates to confirm the outstanding provider balances.

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Leysen said report recommendations are to try to recover some of the debt, improve internal controls, make sure staff is aware of its responsibilities in collecting payments, work with the Legislature to clarify its authority to recover outstanding debt, accurately report its accounts receivable, maintain documentation and ensure balances are accurate.

“I guess a point to make, as long as I'm understanding this right, is that this isn't so much a fraud piece that you're looking at,” said Rep. Joe Schomacker (R-Luverne), the committee chair. “It's the way that the state collects on that debt.”