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An Audit Report on The Health and Human Services Commission’s Use of Remedies in Managed Care Contracts

November 2019

Summary Analysis

The Health and Human Services Commission (Commission) has made significant improvements in its process for applying contract remedies, including liquidated damages, and it should continue to address its backlog of liquidated damage assessments. Specifically, the Commission developed:

  • An agency-wide process to coordinate identified noncompliance for the assessment of contract remedies.
  • A documented methodology for calculating liquidated damages.
  • A process to require MCOs to complete corrective action plans.

However, the Commission was unable to apply contract remedies for certain contract requirements because it did not have a process to identify MCO noncompliance for those requirements. Auditors also identified areas in which the Commission should improve its access controls. Auditors communicated details about the identified weaknesses related to access controls and other sensitive information technology issues separately to the Commission in writing.

 Jump to Overall Conclusion

The Commission has implemented processes and controls to address identified MCO noncompliance with contract requirements primarily through the assessment and collection of liquidated damages, and the development and implementation of corrective action plans. Specifically, the Commission had (1) assessed and collected 1,455 liquidated damages totaling $28 million for noncompliance identified in fiscal year 2017 and (2) tracked the status of 321 corrective action plans for noncompliance identified from September 2016 through May 2019.

While the Commission established processes for applying corrective action plans and liquidated damages, it did not have a process to determine under what circumstances it would consider initiating other remedies available in its contract.

Jump to Chapter 1-A 

The Commission had a significant backlog of unassessed liquidated damages. Liquidated damages are important to address and resolve MCOs’ contractual noncompliance. Continued backlogs (1) prevent the Commission from providing adequate notice to MCOs and (2) limit its ability to compel MCOs to meet contractual requirements and prevent continued or worsening noncompliance.

For noncompliance it had identified since September 2017, the Commission had not finalized its calculations of liquidated damages as of July 2019. For example, at that time, the Commission had not finalized liquidated damages for noncompliance it identified 20 months previously during the first quarter of fiscal year 2018.

Jump to Chapter 1-B 

The Commission followed its process for calculating liquidated damages. While the Commission made several errors in its individual calculations, those errors did not significantly affect the total amount of liquidated damages calculated.

Jump to Chapter 1-C 

The Commission performed monitoring for several types of significant contract deliverables, and it applied contract remedies based on the results of that monitoring. However, the Commission was unable to apply contract remedies for certain contract requirements because it did not have processes to identify MCO noncompliance for those requirements. That included not performing utilization reviews for most Medicaid programs and not monitoring to identify MCO noncompliance related to specific pharmacy performance standards.

In addition, for some other areas, the Commission did not incorporate the results of its monitoring into its contract remedies process, and it did not consistently ensure that it applied contract remedies for MCO noncompliance related to certain access-to-care requirements.

Jump to Chapter 2 

The Commission established a process to require MCOs to complete corrective action plans to address identified noncompliance and it promptly requested MCOs to complete those plans. Specifically, the Commission opened corrective action plans within four months for noncompliance tested. In addition, the Commission consistently verified MCOs’ implementation of corrective action prior to closing each of the 18 closed corrective action plans tested.

Jump to Chapter 3 

Auditors identified significant weaknesses in the Commission’s controls over access to its information systems used to manage liquidated damages and corrective action plans. Auditors communicated details about the identified weaknesses separately to the Commission in writing.

Jump to Chapter 4 

Graphics, Media, Supporting documents

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