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State lawmakers were unsparing in their criticism of the Maryland Department of Health on Tuesday, accusing the agency of failing to pursue financial compensation against a vendor that has acknowledged serious shortcomings.
One after another, members of the General Assembly鈥檚 Joint Audit and Evaluation Committee expressed astonishment that the agency decided 鈥� as a matter of policy 鈥� not to seek liquidated damages from Optum, a health claims-processing company whose shortcomings of a harsh audit last month.
The Minnesota-based firm processes billions of dollars in behavioral health claims each year. The review of Optum鈥檚 performance, which was conducted by the Office of Legislative Audits (OLA), uncovered numerous problems.
Auditors discovered more than $220 million in payments for behavioral health services that lacked proper documentation or haven鈥檛 been recovered, lapses that prevented the state from receiving nearly $30 million in federal reimbursement for which it was eligible. In addition, mental health providers, who have been stretched thin and subject to burnout since the pandemic began, have been forced to spend long hours reconciling payment errors.
Agency officials gamely sought to reassure lawmakers that they have penalized and withheld payments from Optum, but they acknowledged that they decided not to seek liquidated damages for fear of harming their relationship with the firm. The admission appeared to stun members of the panel.
鈥淚 think it sends the wrong message to contractors that work with the state 鈥� and makes a laughingstock of our contracting process,鈥� said Sen. Clarence Lam (D-Howard), a committee co-chair. 鈥淚f we enter into contracts with vendors who are unable to deliver, and yet do not pursue damages when those contractors are costing the state millions of dollars鈥� it鈥檚 an example of what鈥檚 broken with our state procurement process.鈥�
Del. Kirill Reznik (D-Montgomery) called the agency鈥檚 decision 鈥渦nconscionable鈥� and a dangerous precedent.
Although auditors calculated that the state has suffered hundreds of millions in losses due to Optum鈥檚 struggles 鈥� through claims that were improperly denied, duplicate payments, overpayments and uncollected federal funds 鈥� the firm was treated gently, auditor Josh Adler said.
鈥淚t鈥檚 almost, in my mind, it鈥檚 like [they were] too big to fail,鈥� he told the panel. 鈥淭he department鈥檚 position was just 鈥榳e can鈥檛 do anything.鈥欌��
Lam suggested it will fall to the incoming administration of Gov.-elect Wes Moore (D) to chart a new course, though another auditor, Brian Tanen, cautioned against delay. 鈥淭he findings are not static,鈥� he said. 鈥淭he potential losses increase every day that goes by.鈥�
Health Secretary Dennis Schrader, who skipped lawmakers convened, was absent on Tuesday as well. His absence frustrated lawmakers who wanted to know who set the policy not to sanction Optum more harshly.
The agency officials who spoke on Schrader鈥檚 behalf rejected the claim that the contractor鈥檚 failures hurt the state financially.
鈥淚t is our contention that the state has not lost money,鈥� said Assistant Secretary Webster Ye, pointing to unspecified payment withholdings and penalties. His comments elicited sounds of disbelief from Del. Andrea Harrison (D-Prince George鈥檚) that were audible during the online meeting.
鈥淚 don鈥檛 believe that there have been losses,鈥� said Deputy Secretary Steve Schuh. He said the decision not to seek liquidated damages 鈥� what he called 鈥渢he nuclear option鈥� 鈥� should not be interpreted as a sign the agency is satisfied with poor performance.
Lam called Schuh鈥檚 comments 鈥渘on-sensical.鈥� He said the department鈥檚 defense of its actions represented 鈥渟uch a contortion of the truth that it puts Cirque du Soleil to shame.鈥�
Problems with 鈥榲irtually every aspect of the contract鈥�
Lawmakers from both parties signaled their unhappiness with the agency鈥檚 oversight and the amount of time it takes to get information. 鈥淲e鈥檙e not getting the answers that we think we should be getting,鈥� said Del. Steven Arentz (R-Upper Shore). 鈥淚 think it鈥檚 important, because we鈥檙e dealing with a lot of money here. A lot of taxpayer dollars.鈥�
Although nearly all OLA audits of government agencies uncover some areas where improvement is needed, chief auditor Greg Hook said the MDH鈥檚 performance in this instance was notable. 鈥淒ue to the financial significance and repeat nature of many findings, we determined that MDH鈥檚 accountability and compliance level was 鈥榰nsatisfactory.鈥欌�� That designation triggers a formal 鈥渇ollow-up review鈥� within the next 12 months.
Adler told lawmakers that auditors 鈥渋dentified problems with virtually aspect of the contract鈥� 鈥� including gaps in the initial procurement, a failure to vet Optum鈥檚 many subcontractors, a failure to test Optum鈥檚 system before it went live, shortcomings in the system itself, and the agency鈥檚 unwillingness to impose stiffer penalties.
He said the agency feared that if it went after the vendor more aggressively, 鈥渋t would discourage [the company] from resolving the many problems it has.鈥� Another fear, he said, was that Optum might file suit against the state in response. Adler called the health department鈥檚 stance 鈥渃ontrary to the intent of state law.鈥�
Although the company has two years remaining on a five-year contract, the agency has signaled it is moving on. Earlier this month officials acknowledged they are nearing completion on a revamped procurement process will be used in the search for a replacement.
