New DHHS Leadership Uncovers Budget Errors

March 10, 2011

Augusta, Maine – Maine Department of Health and Human Services Commissioner Mary Mayhew briefed legislators today on financial management deficiencies her new leadership team has discovered as they have transitioned into their positions with Maine’s largest state agency. Work is on-going to determine the total scope of the problem and to make reforms needed to better administer department programs.

The three issues discussed today are as follows:

$66 Million in over-budget payments to Maine Hospitals:
DHHS moved to a new claims processing system in September 2010 – the Maine Integrated Health Management Solution (MIHMS) -- and many acute hospitals were transitioned to Diagnosis Related Grouping (DRG) payments.

At that time, the department failed to make corresponding changes to the hospital weekly Prospective Interim Payments (PIP) to account for what was being paid out through the new processing system. Consequently, DHHS is on pace to overpay the hospitals by $119 Million by this fiscal year’s end.

Corrective Steps: DHHS is sending a letter to hospital administrators today announcing immediate changes to stay within budget for the fiscal year. Beginning March 19, 2011, claims will be processed with payments withheld for hospital based physicians’ claims, crossover claims and DRG claims.

PIPs and some claims payments will be adjusted to reflect payments over the budgeted amount of $378.6 million back to each hospital. If payments to a hospital exceed its budgeted amount, the settlement payments authorized by the Supplemental Budget enacted earlier in the year will be adjusted. The full letter to hospital administrators will be released later today.

$10 million spike in weekly claims to MaineCare providers:
In the last six weeks the weekly payments made to MaineCare providers have jumped from an average of $39 million per week for the first 24 weekly payment cycles to $49 million. If the trend continues, MaineCare will exceed its annual budget in this fiscal year by $30 million or more.

Corrective Steps: The department has notified the Legislature of the increase in MaineCare Cycle Expenditures and is analyzing the potential contributing factors and determining the potential impact on the current fiscal year’s budget.

Once Commissioner Mayhew’s new leadership team has finished its analysis, a supplemental budget submission will likely be required to bridge the pending shortfall in the MaineCare program. Changes may also be required in Governor LePage’s 2012-2013 biennial budget submission to account for the higher trend in payments to MaineCare providers.

$29.7 Million Targeted Case management Law Suit: DHHS recently lost an appeal of disallowance by the U.S. Department of Health and Human Services for certain Medicaid expenses in federal fiscal years 2002 and 2003 which would require the state to pay back $29.7 million in federal reimbursement received for case management services to children in foster care and in the child protective system. A briefing memo from DHHS Commissioner Mary Mayhew is available to the media.

Corrective Steps: DHHS is considering whether to file an appeal in the First Circuit Court of Appeals in Boston and working with the Centers for Medicare and Medicaid Services (CMS) on changes to its Targeted Case Management policy.

“We knew we faced many challenges with the Department of Health and Human Services when we took office,” said Maine Governor Paul LePage. “Commissioner Mayhew and her new leadership team are finding a disturbing number of problems at the department that we have to address. Additional audits and reviews are being conducted and we will promptly disclose new information as it is developed.”

“We are still assessing the problems, but we wanted to let the public and lawmakers know right away what we are facing. We inherited a big mess, but we are going to get it fixed and find solutions that work for consumers, providers and the taxpayers,” added the Governor.

“The mess we are finding at DHHS is another reason the Legislature should move the start of our biennium to the second year of each Legislature,” said Governor LePage. “New Governors and lawmakers need time to truly assess the operations of state government before having to prepare new budget submissions. I urge quick action on Representative Ayotte’s bill, LD 381 - An Act to Establish a New Method of Determining the State Budget.”