Legislature(1993 - 1994)
02/24/1993 03:00 PM House HES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
STANDING COMMITTEE
February 24, 1993
3:00 p.m.
MEMBERS PRESENT
Rep. Cynthia Toohey, Co-Chair
Rep. Con Bunde, Co-Chair
Rep. Gary Davis, Vice Chair
Rep. Al Vezey
Rep. Pete Kott
Rep. Bettye Davis, arrived later
Rep. Irene Nicholia, arrived later
MEMBERS ABSENT
Rep. Harley Olberg
Rep. Tom Brice
COMMITTEE CALENDAR
HB 66: "An Act relating to municipal property tax
exemptions for certain residences and to property
tax equivalency payments for certain residents;
and providing for an effective date."
PASSED OUT OF COMMITTEE
*HB 155: "An Act relating to audits of health facilities."
HEARD AND HELD
(* First public hearing.)
WITNESS REGISTER
GARREY PESKA, Vice President for Finance
Alaska State Hospital & Nursing Home Association
P.O. Box 240185
Douglas, Alaska 99824
Phone: (907) 364-2244
Position Statement: Supported HB 155
ELMER LINDSTROM, Special Assistant to the Commissioner
Department of Health and Social Services
P.O. Box 110601
Juneau, Alaska 99811-0601
Phone: (907) 465-3030
Position Statement: Opposed HB 155
KARL GARBER, Finance Director
Our Lady of Compassion Care Center
4900 Eagle St.
Anchorage, Alaska 99503
Phone: (907) 762-0237
Position Statement: Supported HB 85
GARTH HAMBLIN, Controller
Bartlett Memorial Hospital
3260 Hospital Drive
Juneau, Alaska 99801
Phone: (907) 586-2611
Position Statement: Supported HB 85
DONNA HERBERT
Financial Consultants of Alaska
105 Municipal Way #304
Juneau, Alaska 99801
Phone: (907) 586-9565
Position Statement: Supported HB 85
GRANT ASAY, Administrator
St. Ann's Nursing Home
415 Sixth St.
Juneau, Alaska 99801
Phone: (907) Phone: (907) 586-3883
Position Statement: Supported HB 85
MIKE SANDERS, Audit manager
Department of Health & Social Services
P.O. Box 110602
Juneau, Alaska 99811-0602
Phone: (907) 465-3120
Position Statement: Opposed HB 85
JACK NIELSON, Executive Director
Medicaid Rate Advisory Commission
4792 Business Park Blvd., #1 Bldg. F
Anchorage, Alaska 99503-7124
Phone: (907) 562-1996 work
Phone: (907) 344-9250 home
Position Statement: Explained MRAC functions
PREVIOUS ACTION
BILL: HB 66
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS
BILL VERSION:
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
TITLE: "An Act relating to municipal property tax exemptions
for certain residences and to property tax equivalency
payments for certain residents; and providing for an
effective date."
JRN-DATE JRN-PG ACTION
01/15/93 84 (H) READ THE FIRST TIME/REFERRAL(S)
01/15/93 84 (H) CRA, HEALTH,EDUCATION&SS,
FINANCE
01/15/93 84 (H) -3 ZERO FNS (2-DCRA, ADM)
1/15/93
01/15/93 84 (H) GOVERNOR'S TRANSMITTAL LETTER
02/09/93 (H) CRA AT 01:00 PM CAPITOL 124
02/09/93 (H) MINUTE(CRA)
02/10/93 286 (H) CRA RPT CS(CRA) 3DP 3DNP 1NR
02/10/93 286 (H) DP: OLBERG, BUNDE, TOOHEY
02/10/93 286 (H) DNP: DAVIES, WILLIAMS, WILLIS
02/10/93 286 (H) NR: SANDERS
02/10/93 286 (H) -3 PREVIOUS ZERO
FNS(DCRA,DCRA,ADM) 1/15
02/22/93 (H) HES AT 03:00 PM CAPITOL 106
02/23/93 (H) HES AT 03:00 PM CAPITOL 106
02/23/93 (H) MINUTE(HES)
BILL: HB 155
SHORT TITLE: MEDICAID RATE AUDIT PROCEDURES
BILL VERSION:
SPONSOR(S): REPRESENTATIVE(S) G.DAVIS,Brice,Olberg,
Nordlund,Hudson,Sitton
TITLE: "An Act relating to audits of health facilities."
JRN-DATE JRN-PG ACTION
02/15/93 346 (H) READ THE FIRST TIME/REFERRAL(S)
02/15/93 346 (H) HES, FINANCE
02/17/93 373 (H) COSPONSOR(S): HUDSON,SITTON
02/24/93 (H) HES AT 03:00 PM CAPITOL 106
ACTION NARRATIVE
TAPE 93-22, SIDE A
Number 000
CHAIR TOOHEY called the meeting to order at 3:06 p.m. and
noted members present. She also noted artwork on the
committee room walls provided by the second through fifth
grade students at Turnagain Elementary School in District
13, which she represents. She brought HB 66 to the table
and asked for committee discussion, noting that the meeting
was being teleconferenced.
HB 66: MUNICIPAL PROPERTY TAX EXEMPTIONS
Number 028
REP. CON BUNDE said the only change in HB 66 from the
version discussed at the meeting on February 23 was a change
in the effective date to January 1, 1993, for the
convenience of municipalities. He moved passage of HB 66
from the committee with individual recommendations.
CHAIR TOOHEY, hearing no objections, declared HB 66 passed
from committee with individual recommendations.
Number 056
HB 155: MEDICAID RATE AUDIT PROCEDURES
CHAIR TOOHEY brought HB 155 to the table and announced the
hearing would be teleconferenced, listen-only.
(Rep. Nicholia arrived at 3:11 p.m.)
Number 073
REP. GARY DAVIS testified as PRIME SPONSOR OF HB 155, saying
he had been approached by a constituent connected with a
health facility with concerns about audits. He said the
bill attempts to simplify a complicated and technical
process. Rep. G. Davis then read his sponsor statement,
which is on file in the committee room. In the statement,
he said the bill proposes to add elements of clarity,
consistency and timeliness now lacking in the Medicaid audit
process. The appeals process established when the Medicaid
Rate Advisory Commission (MRAC) was created has broken down
due to the lack of a well-defined audit process, to the
point that 40 rate appeals are outstanding, he said. The
bill is designed to establish a schedule for the audits to
be competed in a timely fashion, and to address unacceptable
departmental delays that lead to situations in which the
health care facility's costs have risen while increases in
rates remain under question, he said.
Number 120
REP. G. DAVIS said he has tried to keep all parties informed
about the bill's provisions, to ensure proper debate and
agreement. He said he had received a lot of input from the
Alaska State Hospital & Nursing Home Association, and
invited a representative of the association to testify.
Number 125
GARREY PESKA, VICE PRESIDENT FOR FINANCE FOR THE ALASKA
STATE HOSPITAL & NURSING HOME ASSOCIATION, testified in
Juneau supporting HB 155. He read a statement, which is on
file in the committee room, outlining the main features of
HB 155. In summary, he said HB 155 would define the
department's authority to audit health facility records;
determine the accuracy of information used to set Medicaid
rates and assure compliance with the law; set deadlines for
facilities to file year-end reports; set deadlines for the
department to complete preliminary reviews of year-end
reports, desk audit reports, field audit reports and
preliminary and final audit reports; allow facilities to
submit written responses before final audit reports are
finalized; specify minimum information to be included in
audit reports; allow facilities to request formal
administrative hearings on disputed rates; prevent
implementation of disputed adjustments before final
administrative or judicial hearing is issued; set deadlines
for completion of final audit reports; define the process
for MRAC staff use of audit reports and rate setting; allow
facilities to report errors in rates and provide for
resulting adjustments; and specify the process for late
audit report adjustments to affect future rates.
Number 200
REP. BUNDE asked Mr. Peska and Rep. G. Davis a clarifying
question, whether the current auditing process was taking
place or not.
MR. PESKA answered, saying the audit process was taking
place, but that the delays had left most facilities with
outstanding audits from at least five years ago. He said
facilities feel exposed to risks for those past years for
which audits have not been completed.
REP. BUNDE asked why the audits have not been completed and
why HB 155 requires additional auditors to be hired when
there should already be enough auditors to do the work.
Number 220
REP. G. DAVIS said each facility must have an independent
audit. He said the issue was the additional audits the
state must perform under federal Medicaid requirements, for
which there are significant backlogs. As the facilities
charge fees based on their established rates, which may
increase after an audit, any delay in the state audit can
mean the facilities cannot charge higher rates. He said the
departmental position paper explains the delays in an
admittedly complex and intricate audit procedure.
Number 250
REP. BUNDE asked whether passage of the bill would simplify
the audit procedure or whether additional auditors would
resolve the problem.
REP. G. DAVIS said the bill attempts to streamline the
process.
REP. VEZEY said the fiscal notes show staggering costs for
the bill and asked for an explanation.
MR. PESKA deferred such an explanation to the department,
but said the association also found the fiscal notes
staggering. He said he did not see how the bill would lead
to $4 million in embezzlement or fraudulent costs from the
facilities. He said he believed the department's 11
auditors and budget analysts were sufficient to perform
audits on 27 facilities.
REP. VEZEY asked Mr. Peska whether he believed the bill
would allow the audits to be completed quicker.
MR. PESKA answered yes.
Number 287
ELMER LINDSTROM, SPECIAL ASSISTANT TO THE COMMISSIONER OF
THE DEPARTMENT OF HEALTH AND SOCIAL SERVICES (HSS),
testified in Juneau supporting HB 155. He presented written
comments, which are on file in the committee room. In
summary, his testimony indicated that the department
adamantly opposes the bill, saying it would impede its
ability to perform effective audits of facilities, leading
to increased Medicaid facility costs and possible loss of
some federal funds for Medicaid programs. He said the issue
was a classic conflict between a regulatory agency which
must help the state exercise fiscal prudence in purchasing
health care for Medicaid clients, and the interests of those
being regulated. He said opposition to the bill does not
mean hospitals and nursing homes are violating the law.
The FY94 budget calls for HSS to pay $114.4 million to
health care facilities, a sum exceeding many other
government expenditures. Medicaid facility expenditures
have risen sharply in the past, and will rise an estimated
5.9 percent in FY94, he said. In the face of such expenses
and the need to provide necessary care, the department must
contain costs and it needs a credible audit process to do
so.
(Rep. Bunde left at 3:20 p.m. and returned at 3:25 p.m.)
MR. LINDSTROM continued his testimony, saying HB 155 puts
all the responsibility for timeliness on the department and
none on the facilities; it does not take into account the
quality of a facility's response; it sharply limits the time
to perform audits; it limits the scope of field audits by
requiring notification of the areas to be reviewed; it would
require the MRAC to calculate rates twice; it shifts the
burden of correct reporting from the facility to the
department; and it requires the inclusion into statute of
excessively precise provisions, which would not permit
enough flexibility to respond to future changes in the
regulatory environment. He added that time limitations
would bar verification of home office costs for facilities
headquartered out of state, and the MRAC would be precluded
from performing analysis beyond items noted in an audit
exception.
MR. LINDSTROM said the Division of Legislative Audit
recommends statutory revisions to ensure the department can
use audits to identify and recoup inappropriate payments to
health care facilities. He said the state may not now
recover overpayments to facilities, but must reimburse the
federal government for the federal governments's share of
the overpayment. He acknowledged concerns with audit
delays, but said the department is making progress and
anticipates becoming current by the end of FY94. However,
HSS does support legislation to streamline audits to help
bring the current backlog up to date and to keep them up to
date, none of which goals would be accomplished through
HB 155, he said. He concluded, repeating the department's
opposition to HB 155 and inclination to recommend a
gubernatorial veto should the legislature pass it.
REP. VEZEY asked for clarification as to the budgetary
impact of the bill.
MR. LINDSTROM said the state plans to pay $114.4 million
under its facilities budget classification, it's half share
of Medicaid payments. There is another classification for
Medicaid payments, the non-facilities classification, he
said.
Number 448
REP. VEZEY asked Mr. Lindstrom to comment on the fiscal note
showing the expense of $4.5 million to audit expenditures of
$114.4 million, which he considered staggering.
MR. LINDSTROM said the fiscal note on medical facilities
assumes the state would pay out an extra $4 million to
medical facilities in the absence of a credible audit
process. He said the department can prove audits have saved
money in the past, and the lack of an audit process might
affect how facilities report expenses. He denied alleging
fraud, but said human nature being what it is, charges to
the state would probably increase in the absence of thorough
audits. The second fiscal note, on the department's audit
component, contains the cost for five additional auditors
and a data processing technician to do the work required by
HB 155.
(Rep. B. Davis arrived at 3:35 p.m.)
REP. VEZEY asked a clarifying question.
MR. LINDSTROM answered that the $400,000 on one fiscal note
was for additional state workers, and the $4 million in
facilities payments was extra payment to facilities.
REP. VEZEY asked why the state would need to add more staff
for a reduction in audit control and effectiveness.
MR. LINDSTROM said that, while the department would add
staff to try to comply with HB 155, ultimately there would
not be an effective audit process.
REP. VEZEY repeated his question.
Number 485
MR. LINDSTROM said the state would have to go through a more
elaborate and expensive audit process requiring extra staff,
but it would result in a series of audits that were on
appeal, incomplete or ineffective, with a decrease in audit
control effectiveness and a $4 million increase in
facilities costs.
Number 500
REP. VEZEY asked if the department was predicting that
passage of the bill would bring about an inefficiency in the
system.
MR. LINDSTROM answered yes.
(Rep. Nicholia left at 3:40 p.m.)
Number 510
CHAIR TOOHEY asked whether the $4 million would represent
overcharges from the facilities.
MR. LINDSTROM answered that the fiscal note indicated that.
Number 515
REP. G. DAVIS asked whether the current law set a 165-day
limit.
MR. LINDSTROM said it might be best to have other
departmental staffers answer more detailed questions on the
current law and its provisions.
Number 528
KARL GARBER, FINANCE DIRECTOR, OUR LADY OF COMPASSION CARE
CENTER in Anchorage, and CHAIR of the ASHNHA COMMITTEE that
developed HB 155, testified in Juneau supporting HB 155. He
said the bill is aimed at requiring timely auditing and
developing a clear methodology of incorporating audit
findings into reimbursement rates. Within four months of
the end of a fiscal year, he said, facilities must submit
year-end reports including a cost report and an audited
financial statement, or independent audit. The cost report
identifies allowable costs and allocates them to revenue
producing cost centers, and divides the allocations between
Medicaid and Medicare. Mr. Garber said the state audits
those two components of the year-end report to make sure the
two agree, and then performs its own compliance audit in
accordance with state statutes and regulations.
Number 557
MR. GARBER said HB 155 would require the department to issue
its final audit report five months after the facility issued
its year-end report, which he described as a fair
requirement. He disputed the department's claim that the
bill would result in $4 million in additional state expense.
He said it takes the department much longer than five months
to complete its final audit reports, and he distributed a
chart (on file in the committee room) showing how long it
has taken the state to complete its audits of Our Lady of
Compassion, which shows some audit appeals from 1986 are
still outstanding. Mr. Garber said even the state testified
that the audits need to be done quickly, as the state cannot
recoup costs retroactively. He read from his chart on the
past-due status of audits from past years and noted some of
the problems those delays pose.
TAPE 93-22, SIDE B
Number 000
MR. GARBER said he believed other facilities have the same
problems with audits as does Our Lady of Compassion. But,
he believed the current audit chief inherited the problem
with late audits, and the auditors were digging themselves
out of their hole and they are on the verge of becoming
current without having to add extra staff. He said,
therefore, that HB 155 did not require extra staff.
CHAIR TOOHEY asked Mr. Garber to conclude his remarks as
time was limited.
(Rep. Nicholia returned at 3:50 p.m)
MR. GARBER said HB 155 would also allow the facilities to
challenge the department when it incorporated preliminary
audit findings into prospective rates without affording the
facilities the opportunity to challenge the rates.
REP. G. DAVIS said Mr. Garber's testimony demonstrated the
need for more timely audits, and referred to a situation in
which changes in the way the HSS department classified costs
left a particular facility with a projected $390,000
deficiency for 1993 budgeted Medicaid reimbursement.
MR. GARBER said that situation was a complicated technical
matter concerning how rates are set. He said the current,
1993 rates are set not only on 1991 year costs but also on
the costs of other years. It was not that the department
disallowed costs, he said, but rather that the department
had classified the costs in question as ancillary costs
instead of routine costs, as they had previously done.
While Mr. Garber said he believed the problem would be
resolved once the reclassification was retroactively applied
to prior years, he said the discrepancy and the problems it
raised demonstrate the need for the remedies contained in
HB 155.
Number 093
CHAIR TOOHEY asked a clarifying question. She said that
Medicaid will pay a certain amount of money for a certain
service, which will include the facility's overhead costs.
She said it appeared to her that the department believed Our
Lady of Compassion was improperly inflating the charges
allowable, and thus collecting more than its due from
Medicaid.
(Rep. Nicholia departed at 3:54 p.m.)
MR. GARBER answered Rep. Toohey, saying that was not the
case, but the scenario she described was one of a multitude
of possibilities.
CHAIR TOOHEY said the committee needed to understand the
issue if it is to properly consider a bill. She created a
hypothetical situation in which the facilities were to
include the cost of snowplowing in the overhead element of
the cost for a bed bath. She then asked Mr. Garber what
would prevent the facility from trying to add that charge
in, even if the state found out about it once and disallowed
the cost. She asked if there was a list of what elements
could properly be included in an allowable charge.
(Rep. Nicholia returned at 3:56 p.m.)
Number 130
MR. GARBER addressed the hypothetical situation. He said
that if the facility had thought it was acting properly by
including the cost of snowplowing in the charge for a bed
bath, and continued to do so after the charge was disallowed
by the state, then such an action would be fraudulent
according to federal regulations.
CHAIR TOOHEY asked whether there was a list of allowable
expenses.
MR. GARBER answered that the regulations are not quite so
specific on every issue and there is room for interpretation
of regulations. He said the audit bill would allow for the
state to take notice, through audits, of such possible
fraud.
Number 153
REP. VEZEY expressed concern that the bill would require new
staff, as he felt the government should not be expanding its
work force. He asked how much it would cost the facilities
to have a private auditing or accounting firm perform the
audits required under state regulations.
MR. GARBER answered that the cost would depend on the
facility and on the scope and rigor of the audit. With the
experience of eight years as a certified public accountant,
and assuming an auditor relied on audited financial
statements provided to him, Mr. Garber made a very rough
guess that such audits could be performed for $20,000.
REP. VEZEY asked how that figure compared to the current
cost of performing such audits.
MR. GARBER said the facility now pays $27,000 per year for
full audits by outside auditors as required by state
regulations and statutes.
REP. VEZEY asked if such audits were acceptable for the
other audit purpose.
MR. GARBER said no, because the audits do not study
allowable costs in detail. The federal government requires
states to have an additional audit of the cost report, a
document different from the financial statement. The
validity and reasonability of costs are explained by the
financial statement. The financial statement is then tied
to the cost report to have a common starting point, he said.
Then the auditors must audit how costs are classified on the
cost report, he said.
Number 213
REP. VEZEY asked why timeliness of audits is important.
MR. GARBER responded, "Well, I do believe that the Cordova
case (the 1990 Alaska Supreme Court decision in Cordova v.
State of Alaska) has established that if the department
continues to audit retroactively and so late, that they will
never be able to recoup dollars back. They could take those
and put 'em into future years' rates. I believe that it is
therefore in, in the department's best interest to audit
timely. This bill would require that timely audit. It
would also, some of the things that would happen, wouldn't
be coming in right at the end of the year. They would have
to come in within five months. And I could plan on that,
that they were going to be here in that time. I could then
respond to their questions timely. Knowing what the ground
rules are, we can then manage to those. But right now there
aren't any ground rules, and it's more hit and miss."
REP. VEZEY asked if he would be willing to pay the $20,000
to have a timely audit.
MR. GARBER answered that it would depend on what he would
get for the money, which was just an estimated cost.
REP. VEZEY asked what was the value of the audit.
Number 224
MR. GARBER said the value of the audit is that it helps
protect public funds and ensures they are being spent in
accordance with statutes and regulations. Timely audits,
such as are provided for in HB 155, would allow the
department to collect all due them, he said.
Number 255
REP. VEZEY asked if Mr. Garber advocated the additional
expenditure of $400,000 for more auditors.
MR. GARBER answered no, he did not believe the state needed
more auditors to remain current. He said he believed the
state auditors have progressed in cleaning up the backlog of
work, and that, once they have, would be able to remain
current.
Number 285
GARTH HAMBLIN, CONTROLLER FOR BARTLETT MEMORIAL HOSPITAL in
Juneau, testified in Juneau supporting HB 155. He supported
establishing procedures to ensure timely audits. He said
having audits outstanding is frustrating. He noted he has
spent lots of his time answering questions on past years'
audits. He said he is dealing with cost reports written
years ago by long-gone staffers. He said his hospital is
subject to independent audits, and to audits for Medicaid
and Medicare. Though Medicaid pays for only 10 percent of
his business, he spends a tremendous amount of time dealing
with past audits, he said.
CHAIR TOOHEY asked who sets limits on allowable costs.
MR. HAMBLIN said there is no list, but Medicare sets
allowable costs for specific services, and tradition and
practice also help determine allowable costs. Medicare does
not consider televisions allowable costs.
CHAIR TOOHEY asked whether much confusion could be
alleviated by the presence of such a list.
MR. HAMBLIN said such a list would help, and there was work
being done on the reimbursement system, possibly to link it
more closely to the Medicare system.
Number 330
REP. VEZEY asked what would happen if HB 155 did not pass,
if the state hired no additional auditors, and the auditors
could not meet the required audit schedules and deadlines.
MR. HAMBLIN answered that he believed most audits have been
done in a timely manner; the problem lies more in the
department's inherited backlog of work, and the existing
staff could keep up with its current work. But, he said, if
the auditors cannot keep up, then the facilities would
continue to face contingent liabilities in the form of
uncompleted audits.
REP. VEZEY asked the reason for HB 155, if the health care
facilities felt the current auditing staff could keep up
with its work, excluding the backlog.
MR. HAMBLIN said the backlogs remain and there is a need to
have timely audits.
REP. VEZEY commented that it is the backlogged audits, not
the current audits, that are the problem.
MR. HAMBLIN agreed.
REP. VEZEY said that addressing the backlogs would eliminate
the problem.
Number 350
MR. HAMBLIN said it was important to establish timeliness in
regulation to prevent or warn of future backlogs.
REP. VEZEY repeated his earlier question of what would
happen if the department put a new schedule into law but did
not fund extra staffers.
MR. HAMBLIN said that was a tough question, but it would
lead to backlogs.
REP. VEZEY asked if that would create the same situation as
currently exists.
MR. HAMBLIN said audits in recent years have been handled in
a more timely manner.
Number 369
DONNA HERBERT, OF FINANCIAL CONSULTANTS OF ALASKA, testified
in Juneau supporting HB 155. She read a statement, a copy
of which is on file in the committee room. In summary, the
statement said the facilities she represents want the audit
procedure set in statute, as Medicaid regulations concerning
reimbursement are vague, and interpreted differently each
year. Many facilities' current Medicaid reimbursement rates
were cut based on audits they had never seen, which they
believe is illegal, she said. Adjustments need to be made
before rates are reduced, she said, to avoid lengthy appeals
and the difficulty of correcting simple human errors. Each
of the 11 facilities she represents has five or six years of
outstanding audits, none on appeals, she said. Even if the
department gets caught up in the next year, there are no
bars to the auditors again falling behind, she said. The
facilities face penalties for being late, but the department
does not. The facilities believe a new statute must
establish deadlines, define audit process and protocol,
allow adequate response to audit adjustments, outline the
financial impact of adjustments, establish time lines for
proper notification and response time, and limit adjustment
of rates until after final audits are completed.
Number 421
REP. VEZEY said it seemed to him that most of Ms. Herbert's
testimony did not concern this bill.
MS. HERBERT disagreed, saying her testimony addressed the
audit procedures, including audit deadlines, notification
and response deadlines, the requirement for published audit
protocol, and the bar on rate reductions before completion
of final audits, which she called the most important
provision of HB 155.
Number 437
REP. VEZEY asked what the consequences of the bill would be
if the state did not have the resources to comply with the
time lines.
MS. HERBERT said it is necessary to consider how many
auditors the state needs to deal with 27 facilities, some of
them quite small facilities. Once the audit staff overcame
its backlog, she said, they should be able to keep up with
their workload. If they could not do the work, they would
need more auditors.
Number 458
REP. VEZEY asked what happens if the state did not have the
money to hire more auditors. Testimony had indicated the
auditors were behind but were making progress, and he
questioned whether a little more money for staff would solve
the problem.
MS. HERBERT said HB 155 would bind both the state auditors
and the facilities to clear timelines, which would clarify
and simplify the procedure. She said the current
regulations require an audit but set no deadline, leading
inevitably to backlogs.
Number 477
GRANT ASAY, ADMINISTRATOR AT ST. ANN'S NURSING HOME in
Juneau, testified in Juneau supporting HB 155. He read a
prepared statement, which is on file at the committee room.
In summary, the statement said that the facility, which
receives 90 percent of its funding through Medicaid,
received its last finalized Medicaid audit for FY85, and all
subsequent audits are preliminary. He said the current
backlog interferes with his facility's ability to set
budgets and rates in a fair and timely manner. He said the
bill establishes fair, workable timelines to allow
appropriate responses to prevent long delays in audits and
the problems they bring.
Number 516
CHAIR TOOHEY asked several clarifying questions concerning
the process of rate adjustment or cost disallowance in a
specific case.
MR. ASAY answered that in the specific case, the facility
was given a rate of $208 per day. After the audit
adjustments were sent to the rate-setting agency, the daily
rate was lowered to $168 per day. He attempted to answer
the question Rep. Vezey had put to several other witnesses,
which was, what would happen if the legislature passed
HB 155 but did not fund extra positions. Mr. Asay said he
would then recommend the auditors devote more of their time
to larger facilities and to those facilities which depended
more on Medicaid for funding.
REP. VEZEY asked why representatives of the health care
industry brought forth HB 155 in the face of vigorous
opposition from the Department of Health and Social
Services, with which they operate in partnership and which
has the power of veto.
MR. ASAY answered that he was not on the technical committee
that produced the proposal that led to HB 155, but said the
industry believed there had to be some improvement in the
audit procedure and came up with the bill as a means to that
end.
(Rep. Bunde left at 4:32 p.m.)
TAPE 93-23, SIDE A
Number 000
MR. LINDSTROM said much of the testimony referred to the
backlog of work on audits. He stated several witnesses said
the backlog itself was the problem and suggested that if he
could convince the committee that the department was
addressing the backlog, then the need for HB 155 might be
obviated.
Number 034
MIKE SANDERS, AUDIT MANAGER FOR THE DEPARTMENT OF HEALTH &
SOCIAL SERVICES, testified in Juneau and gave background
information on the backlog in audit work and answered
questions. He said there were no audits at all under the
prospective payment system, which started in the mid-1980s.
He said the federal government later began requiring such
audits, and the state has not yet caught up. A few years
ago, the state began contracting some audits out, and now
employs Peat Marwick, KPMG, as a contract auditor, though
the state is still reviewing most of the audits and cannot
yet issue them to the providers. The Cordova case bars the
state from recovering funds from facilities based on audits
that were not done prospectively, and the facilities should
suffer no fiscal impacts for the back audits, he said.
However, the federal government requires that it be
compensated for overcharges revealed by late audits.
Answering Rep. Vezey's earlier question about what would
happen if the state could not get its audits up to date, MR.
SANDERS said the federal government would demand the return
of its 50 percent contribution to Medicaid for any audit
findings that were not done on a current basis, according to
the Cordova case. He said the department would encourage
legislation to address that problem.
Number 089
MR. SANDERS acknowledged the complexity of the issue. He
referred to the $4 million fiscal note and said he has never
seen evidence of fraud or abuse in cost reports from
facilities, though there are differences of interpretation.
He stated the $4 million represents money the state could
not collect from facilities if the state did not get the
audits done in time and the federal government demanded
money back. The $4 million would all come from state
general funds, he said. Mr. Sanders said two of his five
current auditors work full time on the HSS grant program,
and three work only on Medicaid audits. He said the staff
can perform its work without the extra burdens imposed
HB 155, but would need five additional audit staffers if the
bill became law.
REP. G. DAVIS asked the total amount of the state contract
with Peat Marwick, and asked the per-audit charge.
Number 140
MR. SANDERS answered that the total contract was
approximately $180,000, and the company had performed 55
audits, most of them desk audits. He said the state had not
yet received the last 10 audits dealing with years before
1989.
REP. G. DAVIS asked Mr. Sanders if the auditors would be
able to remain current with their audit work once they
achieved their stated goal of getting current in the next
year, and whether the department would need the five extra
staffers to remain current.
MR. SANDERS answered that the department expected to be
current within a year, and to remain current thereafter with
its current staff, though it would take a lot of effort. He
defined currency as having audited the base periods to be
used in the next rate-setting cycle. For example, they
would be current if they had audited FY92, necessary to
establish a base period for the FY94 rate-setting cycle.
Number 182
REP. G. DAVIS asked Mr. Sanders to differentiate between a
desk audit and a field audit.
MR. SANDERS said a desk audit is a less thorough audit which
relies on information provided from the facility, and which
the auditors use to generate questions to the facility to
make sure the costs are properly allocated. A field audit
is a more thorough audit, done less frequently, which
requires a physical visit to the site of the facility and
more thorough examinations.
Number 209
REP. VEZEY asked if the department's operating schedule was
stated in the Code of Federal Regulations.
MR. SANDERS answered that this is basically correct, but the
schedule is also influenced by the Cordova case. He said he
did not know how other states operated, but said a statute
of limitations is built into the statutes; that, along with
the Cordova decision, means that if adjustments are not
proposed by the time of rate calculation, the state cannot
recover costs based on those adjustments.
(Rep. Bunde departed at 4:45 p.m.)
(Rep. Bunde returned at 4:46 p.m.)
REP. VEZEY asked about the different schedules. He said
there is the seven-year schedule set by the federal
government. He then asked about the schedule set under the
Cordova decision.
MR. SANDERS replied that this decision gives the state
auditors until the prospective rate is calculated for the
forthcoming year, which occurs about 30 days before the
start of the year. That is, when FY94 starts, the state
must have audited adjustments on the table before the rate
calculation is done. If the audited adjustments are not
done by that time, and it is determined that the state
overpaid the facility, the federal government requires it be
repaid their half-share of the overpayment. Because the
Cordova case requires that the facility be held harmless for
such adjustments, the state must make up the payment to the
federal government, he said.
Number 245
REP. VEZEY asked whether the Cordova case gave the state
until 11 months after the end of a fiscal year to conduct an
audit and have its reports done.
MR. SANDERS said yes.
REP. VEZEY stated he had difficulty following the schedules
in HB 155, and he asked Mr. Sanders to explain how the bill
would change the timeliness.
MR. SANDERS said he did not like the bill because it had so
many schedules and trip wires. He expressed fear that the
bill's complexity would make it difficult to discuss in the
committee meeting. He said some elements of the bill could
become decent regulation with a lot of work. The department
might not necessarily support legislation allowing recovery
of these costs and establishment of a reasonable statute of
limitations to address the concerns raised by the Cordova
case, he noted.
Number 266
REP. G. DAVIS asked Mr. Sanders whether HB 155 would
restrict the HSS department to such a strict audit schedule
that it would miss some costs that would otherwise have been
disallowed.
MR. SANDERS answered yes.
REP. G. DAVIS asked about the role of the Medicaid Rate
Advisory Commission (MRAC).
CHAIR TOOHEY announced the committee meeting would continue
past 5:00 p.m.
REP. B. DAVIS announced she had to leave at 5:00 p.m.
CHAIR TOOHEY asked when the prospective payment program
started.
MR. SANDERS answered that the program started in 1983, and
was phased in over a few years, taking full effect in 1985.
Number 292
CHAIR TOOHEY asked whether one year would be sufficient to
clear up the backlog. She said spending $4 million to clean
up a mess that could have been alleviated from the beginning
is a waste of money. She asked if it was possible to give
the department a year to eliminate the backlog and then
consider the bill again in a year if the backlog was not
eliminated.
MR. SANDERS said he was committed to cleaning up the backlog
in a year, and the cleanup process and the long delays had
generated problems on its own.
Number 325
REP. G. DAVIS asked a rhetorical question on the need for
HB 155, if the problem with the backlogs was being solved.
He answered that the bill is needed to prevent or warn of
such backlogs, so that a contract auditor could be hired to
help prevent the backlog.
Number 335
JACK NIELSON, EXECUTIVE DIRECTOR OF THE MEDICAID RATE
ADVISORY COMMISSION, testified in Juneau, explaining the
MRAC's role in the rate-setting process. He gave a detailed
presentation on the MRAC, background information on which is
on file in the committee room.
(Rep. B. Davis departed at 4:54 p.m.)
(Rep. Vezey departed at 4:59 p.m.)
Number 438
CHAIR TOOHEY announced that, since the meeting was running
late, and since several members of the committee had left,
the committee would take up HB 155 again at the next
available day. She then ADJOURNED the meeting at
approximately 5:05 p.m.
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