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Maryland health department leaders deny audit’s finding that mismanaged contract cost state millions

The Maryland Department of Health offices in Baltimore.
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The Maryland Department of Health offices in Baltimore.

State lawmakers grilled Maryland Department of Health leaders during a hearing Tuesday about its mismanagement of the contractor responsible for processing behavioral health provider payments. According to an audit released last month, issues with the contract cost the state hundreds of millions of dollars — a point department leaders dispute. Because of problems with the payment system, the health department overpaid providers by more than $220 million, most of which the state has still not recovered.

But health department leaders said the state will ultimately save money on the contract with Optum, a subsidiary of UnitedHealth Group.

“The contract was budgeted and will end up costing the state $5.2 million less than budgeted because we are exacting significant penalties and withholding payment from the company because of all the issues we're discussing today,” said Steve Schuh, deputy health secretary for health care financing and Medicaid.

Schuh said he expects the state will recover the rest of the provider overpayments by next summer.

However, by not complying with the terms of the contract, the contractor also cost the state more than $28 million in federal funds, plus another $106.7 million in claims that were not reimbursed by the federal government due to contractor errors, according to the audit.

“I find it nonsensical that the department still contends that money was saved out of this entire escapade,” said state Sen. Clarence Lam, co-chair of the legislature’s Joint Audit and Evaluation Committee, which hosted Tuesday’s hearing. “The answer that was provided from the department is insufficient, and it’s such a contortion of the truth that it really puts Cirque du Soleil to shame.” 

Rachel Baye is a senior reporter and editor in WYPR's newsroom. @RachelBaye
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