Review of New Jersey Medicaid Contingency Fee Contract Payments for the Period April 1, 1996, Through June 30, 2001

New Jersey awarded contingency fee contracts to Deloitte Consulting LLP (Deloitte) and Health Care Resources, Inc. (HCR), to generate increased Federal reimbursement by identifying and submitting to the Federal Government unclaimed State expenses. According to the terms of the contracts, Deloitte and HCR were paid fees contingent on additional Federal funds recovered. As a result of work performed, the State paid $21,017,894 of contingency fees to Deloitte ($19,681,538) and HCR ($1,336,356). The State improperly claimed $15,956,556 ($7,978,278 Federal share) in contingency fees. Pursuant to Office of Management and Budget Circular A-87, States may charge contingency fees when reasonable in relation to the services provided and when not contingent on recovery of the costs from the Federal Government. We recommended that the State refund $7,978,278 to the Federal Government. The State disagreed.