Alaska Medicaid Payment Crisis, Mental Health Trust Fund, May 2014

1. Health Enterprise
Medicaid Payment Crisis
Information
Prepared by the Alaska Association on Developmental
Disabilities for the Mental Health Trust Board (May 2014)
The Department of Health and Social Services new Medicaid Management Information System
(MMIS) went live on October 1, 2013. The MMIS is the system that the department relies on
for processing Medicaid fee for service claims received from Alaska providers and trading
partners enrolled in the Alaska Medical Assistance program, and for issuing Alaska Medicaid
claims payments. The new system is called Alaska Medicaid Health Enterprise, also referred to
as Health Enterprise. The new system is implemented, maintained and operated by Xerox, the
current Department of Health and Social Services (DHSS) fiscal agent. The existing legacy
Alaska Medicaid claims system, implemented more than 20 years ago, was retired in
September 2013. The department assured a positive transition with minimum disruption to
Alaska Medical Assistance program stakeholders. However, eight months after the conversion
many providers are experiencing payment levels well below pre-conversion levels and are
being overwhelmed by a system containing numerous defects with slow resolution to payment
errors. This report provides information from provider perspectives on the business impact of
reduced and unstable Medicaid cash flow.
Author: Michael Bailey, AADD Vice President

2. Health Enterprise Medicaid Payment Crisis Information
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Health Enterprise
Medicaid Payment
Crisis Information
Prepared by the Alaska Association on
Developmental Disabilities for the Mental
Health Trust Board (May 2014)
The Alaska Association on Developmental Disabilities
(AADD) was founded over 30 years ago, to unify the voice
of providers to share, develop and advocate for
individualized community based services for people who
experience developmental disabilities. AADD is the largest
network of agencies serving the community members who
experience developmental disabilities in Alaska. We have
formed strategic alliances between providers, national
associations, the State of Alaska, the Governor’s Council on
Disabilities and Special Education, the people we serve and
their communities.
A seemingly innocuous letter from Commissioner Streur
issued on July 15, 2013,contained all the assurances
providers hope for in a transition to an improved Medicaid
payment system. Providers are generally very patient and
understanding of the need to move with change which
produces efficiencies. Many have endured system changes
in the past so they braced themselves for a few challenging
months as inevitable flaws would be worked out. The
Department of Health Care Services was gracious in offering
temporary advances to cover unforeseen cash flow
disruption.
Other tangible
impacts
  
Banking Relationships
Providers with long-standing
banking relationships are
experiencing longer and more
costly line of credit renewal
processes. Balance Sheet ratios
comparisons against prior
years are skewed by very high
accounts receivable balances,
affecting credit applications
and generating requirements
for more supporting
documentation or collateral.
Fiscal Audit Complications
As the fiscal year closes,
accounts receivable balances
and allowances for doubtful
accounts are expected to
initiate more extensive
examination of these elements
in annual financial audits.
Increased risk of audit findings
due to unresolved claims
balances are likely and
providers will have to work
hard to defend negative
impressions derived from
uncharacteristic trends evident
in audited financials.

3. Health Enterprise Medicaid Payment Crisis Information
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October 1, 2013 came, and providers experienced an immediate drop in claim payments as a plethora
of claim processing issues surfaced. Service Authorizations were not visible or available, and the
format changed without fore-warning. Remittance Advices did not reconcile with payments nor were
formatted to allow electronic application of payments. Claims needed rebilling several times as
untested denial codes provided new barriers to payments. During the AADD face-to-face meetings in
late October 2013, members verbalized concerns about early signs of larger problems with the Director
of Senior and Disability Services, and the Director of the Office of Rate Review. The Department of
Senior and Disability Services responded by hosting webinars to facilitate informational updates.
Thanksgiving, Christmas and New Year holidays all passed. No mention of the serious nature of the
Health Enterprise issues appeared in the November, December 2013 or January 2014 publications of the
Alaska Medical Assistance Newsletter. AADD issued a letter of concern to Margaret Brodie, the
Director of Health Care Services on January 14, 2014 aboutthe slow resolution to these issues and
requested a letter from the Commissioner providing exemption from timely filing appeals, and future
audit protection. Finally, on January 30, 2014, after many provider pleas for information, Xerox
published the first Update: MMIS Status on their website.
During an MMIS update webinar in February, Margaret Brodie stated that over 80 known defects were
presented to Xerox for remedy, of which Xerox expected to be able to work on less than 40 over the
next 90 days. At an AADD teleconference on May 15, 2014,Margaret Brodie stated that 64 defect
resolutions had been submitted by Xerox issues requiring correction has now escalated to over 400.
Providers who consistently received 90% to 99% of claims paid on first submittal prior to the
conversion are only at 50% to 80% of claims paid, eight months after conversion. Medicaid Accounts
Receivable balances range from 103% to 489% compared to Accounts Receivable balances one year ago.
A sampling of larger providers in the following table demonstrates the current status:
Claims
submitted
Oct - May
Claims paid
Oct - May
% Claims Paid Advances &
Date received
Reserves/ Line
of Credit also
used
Provider A $5,063,319 $4,987,634 92% $704,200 09/23
$125,000 03/17
$470,000
Provider B $5,040,162 $2,837,436 56% $810,845 11/07
$543,979 01/14
$850,000
Provider C $29,804,640 $16,219,811 54% $1,535,800 9/26
$732,000 10/07
$350,000 in bad
debts
Provider D $37,310,154 $32,141,747 86% $6,345,900 9/20
$1,750,000 12/4
Regular use of
Line of Credit
up to
$1,430,000
Provider E $4,331,639 $3,801,685 87% None $1,250,000

4. Health Enterprise Medicaid Payment Crisis Information
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Letters of advance payment recoupment/repaymentissued by the Division of Health Care Services
(DHCS) on May 9, 2014 were received by providers during the week of May 12th to May 16th, 2014. The
letter stated that DHCS had “determined that your claims processing payments are stable. It is now
time to start the repayment process.” A provider was directed to either send payment in full by May
31, 2014, or to have the full amount recouped from claims processing by June 30, 2014. Subsequent
communication with Margaret Brodie has softened these demands with providers now able to
negotiate repayment terms with DHCS staff. DHCS has reportedly issued over $130 million in
advances from the state’s general fund which is now facing a shortage as the new fiscal year
approaches. AADD members wonder why the State of Alaska is not pursuing Xerox to bridge this
funding gap instead of making demands upon the providers to whom full restitution has not been
made.
Providers, subjected to cost containment measures in the form of rate freezes and minimal rate
increases for the past ten years, have not kept pace with escalating insurance costs and other
mandatory compliance expenses (for example, increased audit frequency by CMS and the State of
Alaska through PERM, MIG, RAC and Myers and Stauffer audits). This has severely limited the ability
of providers to develop adequate financial reserves to mitigate the effect of prolonged changes such as
the MMIS conversion. Providers with a larger national base are able to buffer the effect of extra cost
more than small providers. Even so, cost containment measures such as reducing travel, deferring
maintenance projects, freezing vacant positions have been implemented to minimize expenses in the
short term until cash flow recovers. Providers with reserves report having depleted them, and utilize
line of credit borrowing to supplement the advances from DHCS. Banking relationships have become
strained as balance sheets indicate unhealthy trends from a fiscal perspective, resulting in additional
costs and lengthy approval processes in line of credit renewals (3 months instead of 3 weeks). The
accounts receivable balance is no longer accepted by banks as sole collateral for a line of credit due to
the uncertainty of Medicaid AR content, so real property is required to be added to the loan package,
with additional fees incurred. Additional audits of the accounts receivable by bank auditors at
customer expense also incurs more provider staff time. Providers are experiencing bank fee increases
between $2,000 and $10,000 related to these processes. Future applications for grant funding are also
expected to become more arduous as grantors view provider financial statements with askance.
Additional pressures on existing staff risk burnout, compromised work quality and increased staff
turnover. Recruitmentis extremely difficult, especially among Medicaid billing specialists, so speedy
resolution to the Health Enterprise issues is imperative to retaining qualified staff. Assessing staffing
costs related to MMIS errors is multi-faceted. At least two agencies currently have CFO vacancies
which are unlikely to be filled soon. One CFO left for a job with less stress and better compensation.
Billing staff are constantly overwhelmed and unable to stay on top of their regular duties related to
accounts receivable management because each week new issues surfaces without fore-warning or

5. Health Enterprise Medicaid Payment Crisis Information
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explanation of the cause. Billing staff may spend 15-20 hours per week researching and reporting claim
processing errors instead of focusing on routine tasks which maintain current accounts receivable. The
average days in Medicaid AR has almost doubled for most providers since the conversion. One
provider with 22 day prior average now averages 42 days, while another provider increased from 47
day average to 83 day average. Several providers have had staff work overtime regularly or have
added temporary positions of 15-20 hours per week. Adding these resources, providers estimate
additional cost between $15,000 and $27,000 per agency since the Health Enterprise conversion.
Prior to the Health Enterprise conversion, providers report experiencing between 1% and 9% rejection
rates on Medicaid billing. Since the conversion, rejection rates range from 75% to 11%. Significant
numbers of claims have not yet been submitted to Xerox due to lack of availability of Service
Authorizations. Several providers report being only able to bill 60% to 85% of valid claims due to lack
of Service Authorization, effectively worsening the reported claim payment rate because these claims
are not included in claim submittal data. The claim value of these services would add between
$250,000 and $950,000 to claims depending on the provider. To research a Service Authorization, a
provider must start with the Plan of Care approval letter issued by Senior and Disability Services
(SDS),contactXerox provider inquiry (15 to 20 minute wait time per call) and then may often need to
call Senior and Disability Services to verify the Service Authorization has been entered. Due to the
volume of issues being handled, one example took until May 2014 to discover that a Plan of Care
approved by SDS on November 21, 2013 did not have an active Service Authorization in MMIS. SDS
staff verbally told the provider the Service Authorization number which allowed billing to be
submitted.
Adjustment claim submittal has provided another serious burden on provider cash flow. Adjustment
claims occur when a previous claim has been submitted but additional hours are billable for the same
date of service. At least three providers have experienced unacceptable levels of claim voids as the
result of submitting an adjustment claim. Claims processing should void the original payment and pay
the new amount in full. In some cases, the historical claims for the recipient are also voided (for prior
2-3 years) but fail to compute in the new amount, due to timely filing barriers. The voided claims are
then deducted from the providers’ already diminished payment. Current outstanding amounts range
from $74,000 to $350,000 per provider, without any promise of immediate resolution by Xerox.
New denial codes constantly emerge, with the latest widespread impact of denial code 4418 (Procedure
code conflict with provider specialty) affecting 90% to 100% of Home and Community Based Services
in the May 22, 2014 processing cycle. However, Xerox was notified on April 21, 2014 by Hope
Community Resources Inc.of this denial code which is now only being researched once the effect has
become viral. Examples of needing to bill multiple times to clear denial codes abound. One such claim
(Adult Family Habilitation S5140) was billed in April 2014 and denied for 5020 code because the
Service Authorization contained an error. Once the Xerox representative fixed the service

6. Health Enterprise Medicaid Payment Crisis Information
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authorization, the provider was told to rebill the claim so that it could be denied again for 3832 denial
code “Ineligible for service CCMC waiver receiving S5140 – Adult Fam Hab”. CCMC waiver recipients
are eligible for this waiver until 22 years of age. Adult Family Habilitation S5140 must be billed from a
recipients 18th birthday. These claims must be manually reviewed and reprocessed by Xerox in an
unspecified timeframe. As of May 8, 2014 over 6,000 claims are impacted by this code per Xerox MMIS
update. Another denial which commonly stops Adult Family Hab S5140 is code 9379 ‘suspended for
further review’ (which has taken over 6 months for Xerox to review) may further affect this claim
payment.
Other examples of “nonsensical rejections” include:
204 “Provider Not Eligible on Dates of Service” when the Provider Certification is current
3832 “Medicaid Coverage – Waiver Claim excluded”
4418 “Procedure/provider type mismatch”
4645 “Out of State service requires manual price” for residential service provided within the State
8040 “Service Authorization Units Fully Exceeded” although there are ample available units on the
Service Authorization
8050 “ Service Authorization Unit of Measure Mismatch” although providers are using the same
software and set up to generate claims as before the conversion
8930 “Residential Habilitation not on same DOS (Date of Service), subsequently denied with 8904 “In
Home habilitation vs Personal Care”
9050 “Number of exceptions posted on claim exceeds parameter C4-5028”
9090 “No fund code assigned for To Be Paid Claim”
Alaska joins a growing list of States experiencing serious issues with Medicaid payments as the result
of selecting Xerox as their fiscal agent: Texas, New Hampshire, Montana, Nevada, Wyoming,
Minnesota, Idaho, Utah, Louisiana, and North Dakota (http://www.adn.com/2014/05/17/3474190).
AADD members greatly appreciate the support of the Mental Health Trust Board in expediting
solutions to these destabilizing factors on a vital service delivery system. As providers who are proud
of individualized community based services for people who experience developmental disabilities, we
are very concerned about the threats to the durability of providers under prolonged periods of
unreliable payment patterns. The effects may unintentionally manifest in decreased quantity and
quality of services and support to Trust beneficiaries, as employees of provider agencies experience
burnout or undue stress resulting from fiscal uncertainty, and reserves depletion.