Lawmakers hear of millions potentially lost on state health care contract, and a plan for a new contract

Published on: November 15, 2022 3:43 PM EST|Updated on: November 16, 2022 8:24 AM EST

Construction on the Maryland State House in Annapolis began in 1772 and it's the oldest state capital building in the nation still in continuous legislative use. The building's dome is undergoing a rehabilitation project.

State health officials were so remiss in overseeing a vendor crucial to ensuring Marylanders were able to obtain mental health and addiction treatment that state auditors say it may cost the state hundreds of millions of dollars.

Behavioral health providers have been complaining about the system since its launch in January 2020, when Minnesota-based Optum — a subsidiary of the managed care giant UnitedHealth Group — won a five-year, $198.2 million contract.

An audit released last month outlined some of the problems, from a lack of initial vetting of the vendor and its subcontractors to ensuring proper operations.

But the staggering sum of potential losses was brought into the spotlight by auditors who pointedly noted the Maryland Department of Health officials refused to assess damages afforded by the contract for a system that did not properly work.

This is contrary to state law, and drew some of the harshest rebukes from lawmakers at a hearing Tuesday.

“This makes a laughingstock of our procurement process,” said Sen. Clarence Lam, a co-chair of the Joint Audit and Evaluation Committee where the audit was presented.

The losses also were due to possible overpayments to providers and from failure to collect all the federal funds available, as well as damages due the state. These funds were all “gone,” said Joshua Adler, an auditor, “we’re not getting it.”

Health department officials defended the state’s oversight, including Webster Ye, an assistant secretary for health policy, and Steven Schuh, a deputy secretary for health care financing and Medicaid director. They said much of the troubles are now largely resolved, with officials working out the last of about $1 billion in estimated payments made to providers when the system wasn’t working properly.

Schuh said assessing the damages was the “nuclear option” because it could have led to litigation by the vendor and a further degradation of services.

When the officials also insisted the state in the end will not lose funds on the contract, Lam said that was “nonsensical” and a “contortion of facts that puts Cirque du Soleil to shame.”

Optum officials, who were not questioned during the hearing, did not respond to a request for comment.

The hearing was an opportunity for lawmakers to question state health officials about the substantial due diligence that Secretary of Health Dennis Schrader claimed the state health department had done prior to awarding the contract.

Schrader frustrated the lawmakers by not attending the hearing, but his deputies said there were new procurement procedures and a plan to solicit new bids to run the behavioral health claims system by year’s end. Optum has two more years on the contract, but a key issue Ye cited was the lack of time to ensure a new claims processing system was working before its launch date.

The system failure came at a particularly difficult time, as the coronavirus pandemic increased demand for behavioral health services. The Optum system paid providers in the Medicaid system, the federal-state health program for low-income residents.

These vulnerable people had no other options for getting care, said Lori Doyle, public policy director for the Community Behavioral Health Association of Maryland, which represents 100 mental health and addiction treatment providers.

She said providers had to divert staff at a time when the workforce was already strained, to deal with back-office duties, exacerbating delays in services. Many providers are still working to determine if they owe money awarded to them as estimated payments.

Doyle said the system still has “glitches,” but she hoped new officials beginning in January with the administration of Gov.-elect Wes Moore would bring relief. She also said she expects the next vendor contracted to provide the services would be properly vetted, and would have ample time to test and launch its system.

“I hope the new administration exercises oversight of the next company and actually does the due diligence necessary to award such a contract,” she said. “The last thing we need is a repeat of 2020.”