Review of Virginia's Contingency Fee Payments for Maximizing Federal Revenues Claimed by Its Medicaid Managed Care Program

EXECUTIVE SUMMARY:

The objective of this audit was to determine whether Virginia improperly claimed, as Medicaid administrative costs, contingency fees paid to a consulting firm for Federal revenue maximization services. Between October 2001 and April 2003, Virginia claimed $677,964 in unallowable contingency fee payments made to a consulting firm for providing Federal revenue maximization services.  The Federal share of these payments totaled $338,982.  The consulting firm increased Federal revenues for Virginia by identifying expenditures eligible for 90 percent Federal financial participation.  Virginia stated that it had improperly claimed these fees as Medicaid administrative costs and intended to submit the corrective adjustment.  We recommended that Virginia refund $338,982 ($202,821 for Federal fiscal year 2002 and $136,161 for Federal fiscal year 2003) for the Federal share of improperly claimed contingency fees.  Virginia concurred with our finding and recommendation.