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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of the Commonwealth of Pennsylvania's Medicaid Behavioral HealthChoices Program for State Fiscal Years Ending June 30, 2001 and June 30, 2002," (A-03-03-00200)

November 26, 2003

Complete Text of Report is available in PDF format (751 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Pennsylvania contracts with its counties to provide behavioral health services through the Medicaid managed care program, HealthChoices.  The Centers for Medicare and Medicaid Services (CMS) approved the HealthChoices program under a waiver granted under section 1915(b) of the Social Security Act and allows counties the right of first opportunity to provide behavioral health services without a competitive bid process.  For the State fiscal year ending June 30, 2001, there were 15 counties in the program.  The following year, the program expanded to 25 counties (of 67) and includes most of Pennsylvania’s major population centers.  While aggregate profits were reasonable, we found that several counties realized profits that appeared unreasonable, some as high as 38 percent.  We also found that Pennsylvania was not including these profits in its base year administrative costs as now required by CMS when submitting its rate requests.  We recommended that CMS require the inclusion of county-specific profit and/or losses into its base year administrative costs to allow them to compare the proposed rates to the base year data to assure that the rates are reasonable.