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An Audit Report On The Health and Human Services Commission’s Management of Its Medicaid Managed Care Contract with Superior HealthPlan, Inc. and Superior HealthPlan Network, and Superior’s Compliance with Reporting Requirements

January 2018

Summary Analysis

Superior HealthPlan, Inc. and Superior HealthPlan Network (Superior) accurately reported the approximately $1.9 billion in medical (fee-for-service) claims and prescription drug claims it paid for the Medicaid STAR+PLUS managed care program in its financial statistical reports for fiscal year 2016. It should improve its compliance with reporting requirements to ensure that it reports only allowable costs.

However, the Health and Human Services Commission (Commission) did not ensure that its business practices aligned with its managed care contract requirements. For example, the Commission allowed Superior to report bonus and incentive payments paid to affiliate employees in its financial statistical report, which are unallowable costs under its contract with Superior. The disparities between the Commission’s actual business practices and the written contract requirements weakens the Commission’s ability to consistently oversee all of the contracts the Commission has with its other Medicaid Managed Care Organizations (MCOs).

 Jump to Overall Conclusion

The cost principles in the Commission’s contract with Superior state that “bonuses paid or payable to affiliates are unallowable.” However, the Commission allowed Superior to report bonus and incentive payments paid to its affiliates’ employees as costs to deliver Texas Medicaid programs. In its financial statistical report for fiscal year 2016, Superior reported $29,574,454 of bonus and incentive payments paid to employees of affiliate companies.

Jump to Chapter 1-A 

The Commission did not require Superior to follow the approval process outlined in its cost principles for reporting affiliate profits even though it was aware that Superior included affiliate profits in its financial statistical reports. By not enforcing the written requirements related to reporting affiliate profits, the Commission weakens its ability to effectively oversee its managed care contracts.

Jump to Chapter 1-B 

The Commission’s Uniform Managed Care Manual incorporates a federal acquisition regulation that includes a limitation on executive compensation. However, that federal acquisition regulation (Title 48, Code of Federal Regulations, Part 31) related to the executive compensation limitation is applicable only to cost-based contracts. In its cost principles, which are part of its contract with Superior, the Commission explicitly defined its contract with Superior as a fixed-price contract. As a result, the Commission’s limitation for reporting the cost of executive compensation may not be enforceable.

Jump to Chapter 1-C 

Auditors reconciled the reported $1.6 billion in paid medical expenses to Superior’s claims processing system and matched the amount to within less than 1 percent. Auditors also reconciled the $362.7 million in paid prescription expenses to Superior’s pharmacy claims data and matched the amount to within less than 1 percent.

In addition, auditors compared medical and prescription claims for the STAR+PLUS program that Superior paid in fiscal year 2016 to eligibility data from the Commission and determined that Superior paid medical and prescription claims to eligible members.

Jump to Chapter 2-A 

Auditors tested random samples of expenditures that Superior reported in its fiscal year 2016 financial statistical report. That expenditure testing identified $331,123 in unallowable costs and $433,909 in questioned costs. The inaccuracies identified may affect the calculation of Superior’s net income, which the Commission uses to determine whether Superior owes money to the Commission under the experience rebate profit-sharing requirement.

Jump to Chapter 2-B 

Superior paid prescription claims for the STAR+PLUS program for drugs covered by the Commission’s Vendor Drug Program’s drug formulary. Of the approximately 3.3 million prescription claims for $362.7 million paid during fiscal year 2016 that auditors reviewed, more than 99 percent were for drugs covered by the drug formulary. In addition, Superior ensured that medical claims for the STAR+PLUS program were adjudicated within the required time frames.

Jump to Chapter 3-A 

Graphics, Media, Supporting documents

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