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Georgia Inspector General Report, Revenue Maximization, Dec 2005

Georgia Inspector General Report, Revenue Maximization, Dec 2005

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Published by Rick Thoma
In 1999, the State of Georgia initiated a project to maximize revenues from Federal Medicaid programs through the use of highly specialized contract consultants. The project involved several state agencies including the Department of Community Health (DCH), Department of Juvenile Justice, Department of Human Resources, Office of School Readiness, and other agencies to a lesser degree. In 2003, a series of articles appeared in The Atlanta Journal Constitution newspaper that questioned the validity of a contract settlement with the primary vendor as well as the success of the vendor’s performance. Based on the issues raised in these articles, the Office of Inspector General (OIG) initiated an investigation into the allegations presented.
In 1999, the State of Georgia initiated a project to maximize revenues from Federal Medicaid programs through the use of highly specialized contract consultants. The project involved several state agencies including the Department of Community Health (DCH), Department of Juvenile Justice, Department of Human Resources, Office of School Readiness, and other agencies to a lesser degree. In 2003, a series of articles appeared in The Atlanta Journal Constitution newspaper that questioned the validity of a contract settlement with the primary vendor as well as the success of the vendor’s performance. Based on the issues raised in these articles, the Office of Inspector General (OIG) initiated an investigation into the allegations presented.

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Published by: Rick Thoma on Jul 28, 2012
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R E P O R T O F I N V E S T I G A T I O N
File Number: 04-058Agency: Office of the GovernorBasis for Investigation: Newspaper ArticlesAllegations: Contract Irregularities in Revenue MaximizationProjectDate Opened: October 2, 2003Investigated By: Deputy Inspector General Jeff DeLanceyDeputy Inspector General Dominick CreaDate of Report: December 14, 2005
James E. Sehorn, Inspector General
 
OFFICE OF THE INSPECTOR GENERALFile Number: 04-058
EXECUTIVE SUMMARY
 In 1999, the State of Georgia initiated a project to maximize revenues fromFederal Medicaid programs through the use of highly specialized contractconsultants. The project involved several state agencies including theDepartment of Community Health (DCH), Department of Juvenile Justice,Department of Human Resources, Office of School Readiness, and otheragencies to a lesser degree. In 2003, a series of articles appeared in TheAtlanta Journal Constitution newspaper that questioned the validity of a contractsettlement with the primary vendor as well as the success of the vendor’sperformance. Based on the issues raised in these articles, the Office ofInspector General (OIG) initiated an investigation into the allegations presented.The OIG investigation involved reviewing available documents related to theproject and conducting numerous interviews with those associated with theproject. The results of the investigation indicated the following:
The Department of Administrative Services (DOAS) with theDepartment of Community Health (DCH) developed the Request forProposal (RFP) for vendor selection. The DOAS contracting officerbelieved the contract award was in compliance with DOAS rules andguidelines. There is no significant information to indicate any fraud orcorruption in the contract award;
The Office of Planning and Budget of the former Governor’s Officeparticipated in the bid process negotiations, vendor compensationpercentage, and the final vendor selections. While such participationby the Governor’s Office is not prohibited and may have beenwarranted in this fast-track, high dollar value procurement, suchparticipation was unusual. There is no significant evidence to showpartiality on the part of Governor Barnes’ office to any of thecontractors;
The DCH senior administrators did not establish benchmarks (criteriaused to determine the amount of vendor compensation). The failure toestablish benchmarks and the lack of effective communicationbetween senior DCH staff and the main contractor led to the eventualtermination of the contract and settlement negotiations. In general,DCH staff were of the opinion that the contractor had few new ideasand the contractor was seeking credit for implementation of
 
methodologies that DCH staff already had under consideration or wasin the process of implementing;
On behalf of the DCH, the Georgia Department of Law (AttorneyGeneral’s Office), in coordination with the Governor’s ExecutiveCounsel, negotiated a final settlement. A key factor in the settlementwas the absence of any formal rebuttal to the benchmarks proposed bythe contractor or any proposed benchmarks by DCH. The settlementamount was not unreasonable under the circumstances. While thedollar amount of more than eighty million dollars ($80,000,000.00) is alarge sum of money, it is only approximately eight percent (8%) of theone billion dollars ($1,000,000,000.00) in additional revenues the GAOreport attributed to the vendor’s maximization efforts that werereceived by the state during the time of the contract. There is nosubstantive evidence to show that the settlement amount wasunreasonable.
An independent investigation by the federal government’s GeneralAccounting Office (GAO) completed on June 20, 2005, found that theclaims made under the contract were permissible under plans that hadbeen approved by the responsible federal agency. The GAOacknowledged that contingency fee contracts are allowed underexisting law but added that the contracts are problematic. The GAOreport GAO-05-748 can be found at:www.gao.gov/atext/d05748.txt.The OIG offers the following recommendations. They are global in nature andshould be considered throughout state government in contract considerations.1. State agencies should be reminded of the importance of contract monitoring.Consideration should be given to a mandatory requirement for formal contractmonitoring for high dollar contracts. The Department of Audits and Accounts hasissued an excellent report entitled “Components of an Effective ContractMonitoring System.” It can be viewed at:www.audits.state.ga.usunder thereports tab. The importance of documentation of issues of contract performanceand nonperformance, both to satisfy contract requirements and supportpayments cannot be over emphasized.2. The use of contingent fees for contractors should be avoided. Their use toincrease Medicaid reimbursement remains controversial despite the fact theFederal government still allows the states to do it.

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