The Minnesota Department of Human Services has overpaid more than $40 million to medical providers, such as nursing homes, through its Medicaid program and has not attempted to recover the debts, according to a report released Tuesday by the nonpartisan Office of the Legislative Auditor.
These and other findings come from an audit that focused on payments in Minnesota’s Medicaid program from October 2006 to June 2023, and the debt figure is a conservative estimate, the Office of the Legislative Auditor said. The first documentation in which DHS sent collection notices for these debts dates from February 2015.
“The Department of Human Services did not meet the key financial regulatory requirements we tested and generally had inadequate internal controls,” OLA concluded in its report.
Minnesota’s Human Services Department pays billions annually in claims to medical providers such as nursing homes, hospitals and intermediate care facilities for people with developmental disabilities. If the state pays too much, it must reclaim the extra money from the providers.
That’s where OLA found the biggest deficiencies in its audit, according to the report, which also found DHS failed to accurately report to state budget officials the amounts owed by providers to the agency since 2019.
Response from DHS
In a written response to the audit, Jodi Harpstead, commissioner of the Department of Human Services, said her agency agreed with most of the audit’s findings but disputed OLA’s conclusion that they did not maintain outstanding debt in accordance with state law completed.
She also pointed out the difficulties in recovering money from nursing homes that have closed in recent years.
“The complexity of collecting provider funds is significant,” she wrote in a letter accompanying the audit report. “The majority of these balances represent organizations that are no longer in business and we have achieved very low returns on remediation work.”
To illustrate the low recovery rate, Harpstead pointed to her agency’s work with a Medicaid Recovery Audit Contractor, which was only able to recover $125,000 between 2018 and 2022. The contractor, who was paid a percentage of what he got back, stopped work because of the low returns, she said.
Since then, their contractor has recovered more money, Harpstead said. In 2023, they started a project that helped DHS recover about $74,000 from long-term care facilities.
The bulk of the debt came from long-term care facilities or nursing homes, which owed about $32 million. Like much of the country, Minnesota has seen many nursing homes close in recent decades, meaning less care for its aging population.
Between 2005 and 2024, the state lost 90 facilities that provided nursing beds, according to analysis of state data by the Center for Rural Policy and Development — a 22% drop from 415.
Recommendations
Tuesday’s audit report recommended DHS improve its internal controls to ensure this happens more regularly and that the agency work with the Legislature to clarify its authority to do so.
DHS has already taken “significant steps” to resolve the issues the audit revealed through two actions, Harpstead said.
These include assessing outstanding debts, prioritizing debts with the greatest likelihood of collection and creating a “process for monitoring and collection actions” going forward.
