Medicaid MCO overstated medical expenses by more than $930,000

A recently released OIG inspection found that a Medicaid managed care organization (MCO) misclassified 4,797 of the 6,152 client encounters included in the review of case-by-case services provided in fiscal year 2022. Inspectors found the error in Community Health Choice Texas’ financial statistical reports, which play a part in determining how much MCOs receive to cover each Medicaid client, known as the capitation rate.

Case-by-case benefits are health care services not found on the state Medicaid plan that MCOs can provide to improve a client’s overall health. These services do not require approval from Texas Health and Human Services and should not be included as medical expenses on financial statistical reports.

Inspectors found the error occurred when Community miscoded encounters as covered benefits, allowing more than $934,772 in medical expenses to process through the MCO’s claims system. To assess whether Community was maintaining required documentation, 50 client encounters were randomly selected for review, 39 of which were found to be misclassified and lacking the proper explanation of why the case-by-case service was provided.

During the inspection period, Community provided medical coverage to more than 370,000 Texans, receiving $1.8 billion in funding from the state’s Medicaid program. OIG inspectors provided the MCO with four recommendations to resolve the discovered errors:

  • Implement controls to correctly classify non-covered services it provides as case-by-case services.
  • Code non-covered services as case-by-case services using financial arrangement code 21 and report the benefits as “Total Case-by Case Services” on part 5 of the FSR, “Medical Expenses by Service Type,” in the “Not Included in Total Medical Above” section.
  • Consult HHSC Financial Reporting and Audit Coordination to determine how to correct the misreported medical expenses.
  • Develop and implement a process to document the reason for providing non-covered services as case-by-case services.
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