Looking at Minnesota’s managed care audit legislation

Two years after Saint Paul attorney David Feinwachs made his initial calls for greater transparency in Minnesota’s public health programs, the state legislature passed legislation that introduced third-party auditing into Minnesota’s managed care plans. Governor Mark Dayton signed the bill into law on April 30th. The first audits will apply to managed care contracts that take effect after January 1, 2014.

We have covered the history of this issue over the course of the last few months, and have featured commentary from audit proponents on our affiliated program, Capitol Conversations. Now that the legislature has acted, it is worth examining the final bill to see what it delivers.

Audit language in HHS omnibus legislation

First introduced in various stand-alone bills, managed care audit requirements were folded into the 2012 Health and Human Services Omnibus bill, which emerged from conference committee on April 23rd.

The audit provisions alter Minnesota Statutes section 256B.69, by adding another subdivision, labeled (9d.). This subdivision allows that:

• The legislative auditor will contract with an outside audit firm to conduct a bi-annual, “independent, third-party financial audit” of managed care financial data.

• Audits will focus on data that HMOs and county-based purchasers already submit to DHS - including information on administrative expenses, revenues, reserves, reinsurance, and more.

• Audits will be conducted “in accordance with generally accepted government auditing standards issued by the United States Government Accountability Office.”

• The audits will determine if managed care programs are compliant with state and federal laws, as well as with the federal Medicaid rate certification process.

• Firms retained for the audit cannot have provided services to managed care or county-based purchasers during the time period for which the audit is being conducted.

• Future managed care contracts must include provisions that allow auditors access to relevant information, and stipulate cooperation with such auditors. Contracted firms will have the same powers as those of the legislative auditor, for the purposes of completing managed care audits.

• Managed care organizations must provide DHS with bi-weekly “encounter” and “claims” data on public health care programs.

• Audit results will be circulated to the Commissioner of DHS, the state auditor, the attorney general, and various members of the legislative leadership.

In summary

The end result of these changes is one long-sought by transparency advocates. The bill adds an additional layer of oversight to the state’s managed care programs, by inserting an external auditor who is empowered by (and answerable to) Minnesota’s legislative auditor.

Previously, the oversight of managed care programs fell to DHS, and to a lesser extent, to MDH and the Department of Commerce. The underlying premise of the audit legislation clearly appears to be that an outside observer can find new perspectives on the efficacy of public health care plans, even though they will be using the same underlying data set as state agencies.

The legislation omits a key provision sought by Senator John Marty, in that audits will only extend to contracts beginning in 2014, and will not be retroactive to prior years. Senator Marty has contended that understanding what occurred in the past will be critical to managing public programs going forward – as well as discovering the scope and scale of any past improprieties.

To shed light on past practices, PRM is continuing to seek MCO contracts and data from prior program years. We expect to receive a new batch of contracts from DHS soon.