HHS Commissioner Smith addresses contract management criticism

Texas Health and Human Services Commissioner Charles Smith addressed criticism he received from House Speaker Joe Straus over mishandled contracts in his keynote address at our recent Texas State of Reform Conference.

According to a report from the State Auditor’s Office, HHSC made three high-priority errors in fiscal year 2016 in its Medicaid managed care contract with Superior HealthPlan:

  1. HHSC allowed Superior to report over $29.5 million in bonus and incentive payments to affiliate employees, which was not allowed under the state’s contract.
  2. HHSC weakened its ability to effectively oversee managed care contracts buy not requiring Superior to follow the approved process for reporting affiliate profits.
  3. HHSC cited a federal regulation that includes a limitation on executive compensation for cost-based contracts, which was not applicable to its Superior contract as a fixed-price contract.

The report also found that Superior did not consistently report accurate expenditures and denied medical claims, but did not consistently respond to appeals.

In response, House Speaker Joe Straus issued a statement criticizing HHSC and calling for an investigation by the legislature:

This audit highlights serious weaknesses in HHSC’s oversight of its own contracts. Taxpayers have a right to expect that the Commission will hold providers to contract requirements. Unfortunately, this isn’t the first example of HHSC failing to properly enforce requirements in taxpayer-funded contracts. This audit shows that there is a lot of room for improvement at HHSC. It would be appropriate for the House Appropriations Committee or the General Investigating and Ethics Committee to look more closely at HHSC’s contract oversight and the agency’s stewardship of taxpayer dollars. This agency receives billions of taxpayer dollars, and taxpayers need to know that their money is being properly managed.

In his keynote address, Commissioner Smith touted the cost-effectiveness of the managed care model when properly incentivized which also bettering health outcomes.

So there’s a way we can begin to focus on positive health outcomes for people to actually help transform them into a place where while we’re treating them holistically and we’re treating them as an individual, and we’re having patient-centered treatment, it also by the way begins to save us money and save us income. And so that’s the part that we need to really focus on. What can we do through improved health and individual patient-centered care that will help through prevention and help people recover so that we can then have cost avoidance over time? And we’ll have to figure out how best to communicate and build and show the analytics and the metrics behind this so that we can then working with the legislature they’ll see exactly where we’re going and why and that we’ll be able to get buy-in, holistically.

I also want to say that managed care, the managed care model that we have is a more cost-effective delivery model that can provide a high level of quality if properly incentivized and overseen. Managed care, the delivery model that we have, is a more cost-effective model, but it has to be properly incentivized, and we heard people talking about that throughout the day, and it has to be properly overseen. And that is where my agency comes in ensuring that we are exercising proper contract management and oversight, because what I’m going to try to do is to focus our agency not on processes but to focus on outcomes.

And so, we want to make sure that when we’re looking at people and care coordination, we want to eliminate silos, we want to have better metrics which will give us the opportunity to really see where more emphasis needs to be placed, where we can ask those critical questions of the managed care organizations. We want to make sure that people who are supposed to be getting, whether it’s durable medical equipment or supplies or those type of things, that it’s actually happening. Because if that care coordinator has said this is what’s necessary then for that person to either have a greater independence, better health, and better health outcomes, then we want to make sure that that’s happening. But we want to make sure that we’re also supporting the whole process.

Commissioner Smith then directly addressed the issue of contract mismanagement and promised that the HHSC will continue to improve. He also welcomed both internal and external audits.

Contract management is another one of these areas that has to be considered. It’s our responsibility as the agency that oversees Medicaid and the managed care model to make sure that we’re providing proper oversight of our contracts. We’re not perfect, haven’t been perfect, probably aren’t going to be perfect going forward in the future. But what we’re going to do is we’re going to continually get better. We’ll get better internally from our own processes of our staff looking at us and trying to figure out where the weaknesses and where the linkages are, where are there opportunities to collaborate and improve.

We’ll be responding to audits from our own internal people, the Inspector General’s Office, the State Auditor’s Office, anybody else that wants to come in and audit and say “Hey, here’s an issue that you need to resolve.” We’re going to look at it, take it, incorporate it, and if it requires us and needs us to make a change, we’re going to make a change, because we’re going to be content and focused on doing the right thing for the right reason. We’re going to make sure that as a state agency we’re responsive to the taxpayer funds that we have.

You can watch Commissioner Smith’s entire keynote here.