RALEIGH — North Carolina officials who oversee Medicaid may have allowed millions of taxpayer dollars to be misspent by failing to notice when doctors, dentists and other health care providers lost their licenses, lacked credentials or had other problems, a new audit has found.
The audit released Thursday morning by State Auditor Beth Wood, a Democrat, identified tens of millions of dollars over the last few years that have gone to health care providers who she said possibly should have never been allowed to receive them.
The list included two dentists whose patients died during surgery. It also included a doctor who had been banned from taking any female patients, due to complaints about improper breast examinations, and another doctor who was required to have a chaperone present at work "because of multiple past sexual and professional misconduct allegations."
Those four weren't named in the audit, so it's unclear if they were ever charged with or cleared of any crimes. The audit instead focused on the fact that they continued receiving Medicaid payments from the N.C. Department of Health and Human Services, despite state licensing boards having taken disciplinary action against them.
"DHHS should've stepped back and said, 'They had somebody die on their chair; do we want them practicing on our patients at all?'" Wood said in an interview.
Medicaid is the way that around one in every five North Carolinians — over 2 million people, mostly low-income families — receive health care coverage. It's funded by the state and federal governments and overseen by DHHS, a part of Democratic Gov. Roy Cooper's administration.
Joseph Kyzer, a spokesman for Republican N.C. House Speaker Tim Moore, pointed out that last year the General Assembly passed a law that will completely change the way Medicaid is funded, starting this summer. He said that should improve accountability — although some Democrats have questioned that, the News & Observer has previously reported — and in the meantime, Kyzer said, the legislature will look into whether there's more to be done to address the problems Wood found at DHHS.
"Lawmakers will closely monitor these concerns raised by the State Auditor to ensure they are adequately addressed by the department," Kyzer wrote in an email.
Wood told The News & Observer that many of the problems stemmed from problems that DHHS could have found and fixed on its own, before an embarrassing outside audit like this became public, but didn't.
For instance, she said, they missed nearly every provider who had his or her license revoked over the last several years. There was a single worker who supposed to be getting email notifications from state licensing boards about those disciplinary actions, she said. But for unknown reasons, those emails stopped coming and the worker didn't do anything about it.
"And the person for — I don't know, five or six years? — wasn't getting any emails," Wood said. "But he was just telling management everything's OK. He never thought to ask why he wasn't getting any emails."
Similarly, she said, there's a tool called a web crawler that automatically searches for news and updates about potential problems with providers in the system. It was broken for years, but nobody noticed until Wood's team pointed it out.
"That web crawler has not worked since 2017, and nobody at the upper level apparently was aware," she said.
Not all of the direct blame falls on DHHS, however. State government has outsourced parts of its work overseeing Medicaid to a private contractor, General Dynamics Information Technology, according to the audit. That's the IT side of the massive defense contractor most famous for developing the F-16 fighter jet.
But the state bears ultimate responsibility for ensuring public dollars aren't wasted, Wood noted in her audit.
Republican Sen. Joyce Krawiec of Forsyth County, co-chair of the Senate Health Committee, said Wood's audit underscores her opposition to Medicaid expansion.
"Medicaid is a very large government-run program and it's not realistic to expect there to never be problems," Krawiec said in a press release. "But the oversight failures identified by the auditor seem so basic and so problematic that it raises serious questions about DHHS's ability to administer the program. Worse, the very people responsible for these failures advocate for adding 500,000 people to its rolls."
Millions potentially misspent
In 2018, the federal government estimated that nationwide there was about $36.3 billion in improper Medicaid payments, and the federal report blamed about a third of that waste on state governments failing to make sure that ineligible providers weren't being allowed to bill Medicaid.
Wood's audit identified four separate ways in which North Carolina has been contributing to that, including failure to remove providers who had their licenses limited, suspended or terminated, or who lacked the proper credentials for the type of care they claimed to provide.
"As a result, there was an increased risk that providers whose actions posed a threat to patient safety were enrolled in Medicaid and could receive millions of dollars in improper payments from the State," the audit found.
DHHS Secretary Mandy Cohen responded to the audit in a four-page letter, laying out various things she said DHHS will do to address the problems, and promising another update in three months.
"We take every instance of an unqualified provider seriously and any overpayment is unacceptable," Cohen wrote to Wood.
Cohen further said the audit identified $13.4 million in improper payments, and DHHS "is pursuing recoupment of all confirmed overpayments."
However, the audit identified significantly more than $13.4 million in potential overpayments. In the audit, which was released after Cohen sent that letter, Wood criticized Cohen for citing that number, saying it "could mislead the reader and minimize the importance of the auditor findings" by not acknowledging the true extent of what the audit found.
Various parts of the audit's findings add up to more than $120 million. And Wood said there is almost certainly more that was potentially misspent.
For example, every five years providers have their credentials re-verified by the state. Just over 27,000 went through that process in 2019, and Wood's office investigated a sample of only 191 of those 27,000.
It turns out that nobody had verified the credentials for 185 out of those 191, the audit said. And among those 185, the audit found 21 that appeared to lack credentials. The state had paid those 21 providers nearly $75 million during parts of 2019 and 2020.
So what might DHHS find if they investigate the rest of those 27,000 cases?
"I have no idea how big that number is," Wood said.