Texas Did Not Report Excess Contractor Profits in Accordance With Federal Regulations

A Medicaid Management Information System (MMIS) is a system of software and hardware used to process Medicaid claims and manage information about Medicaid beneficiaries, services, and providers. The Texas Health and Human Services Commission (State agency) contracts with a fiscal agent, Affiliated Computer Services/Texas Medicaid Health Partnership (ACS/TMHP), to process claims through the MMIS. The contract between the State agency and ACS/TMHP requires a prospective price redetermination (PPR) audit to establish whether ACS/TMHP earned profit in excess of the 11 percent allowed by the contract.

We found that the State agency did not refund $2.6 million (Federal share) of the $26.7 million in excess profits identified through the PPR audit in accordance with Federal requirements. During fiscal year 2009, the State agency claimed expenditures for 20 MMIS projects with total costs of $71.3 million. All of these expenditures were allowable and claimed at the appropriate reimbursement rate; however, the State agency did not obtain prior approval for 2 of the 20 projects. Also, the State agency did not obtain prior approval for 16 additional projects. The total budgets for the 18 projects for which the State agency did not obtain prior approval totaled $59 million ($32.9 million Federal share).

We recommended that the State agency (1) refund to the Federal Government $2.6 million for excess profits related to the PPR audit, (2) ensure that prior approval is obtained on future projects as required by Federal regulations, and (3) obtain retroactive approval for the 18 projects that did not have the required prior approval from the Centers for Medicare & Medicaid Services (CMS). The State agency agreed with our first and third recommendations and described corrective actions it had taken or planned to take. Regarding our second recommendation, the State agency described the process by which it seeks CMS approval for certain projects.