Perry: Trusted providers are being unfairly swept up in Minnesota’s fraud crackdown

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In 2004, Jennifer Larson decided to open an autism center in Excelsior. She’s the mom of a nonspeaking son (now 25) with autism, saw a need for more services and got to work. In the past decade, her organization, the Holland Center, has expanded to include multiple pediatric locations, an adult program, speech and occupation therapy, and as of early December, a new location in Mankato. “Twenty years of audits, crossing T’s and dotting I’s, it’s a tough business to run,” she told me.

On the last Monday in December, as Minnesota’s new anti-fraud prepayment screening system for certain Medicaid programs went into effect, the Holland Center expected to receive about $212,000 in payments from the state for the claims submitted over the past two weeks, but instead received only about $22,000. If something doesn’t change soon, they’ll have to shut down, she said. And if they shut down, they won’t be able to reopen.

It could be up to 90 days before it gets paid. The business just doesn’t have the capital to operate without revenue for that long, Larson said. “Who’s going to lose are all the kids with autism. Where are they going to go? All the staff are going to lose their jobs.”

She added that maybe some of the private equity firms moving into disability services might be able to handle the cashflow disaster, but “I’m a mom who started a center for our kid. It was a labor of love. If I didn’t lose money, I was happy.”

Now — thanks to the fraud, but also thanks to what she calls a “knee-jerk reaction” from the Walz administration — it could all fall apart.

One of the Walz administration’s responses to the fraud has been to roll out this new screening service by Optum in order to more carefully audit payments in a variety of arenas, including early intervention, medical transport, adult day services, housing for disabled Minnesotans and more.

Before the rollout, I spoke to Sen. Jim Abeler, R-Anoka, a longtime supporter of causes related to disability in the state of Minnesota. Abeler is as critical of the Walz administration as any Republican, and wants to see the fraud stopped and the criminals held accountable, but doesn’t think this contract with Optum is the way to do it. “They’re not good at this,” he said. “They flag too many things, and it takes forever to fix it — things that weren’t even wrong in the first place.”

Now, over email, Abeler confirms that he’s hearing from providers across his district and beyond about these problems, and while it may take a while to figure out the scope, he said, “[I] warned that this prepayment review would be a disaster. It is.”

Sara Grafstrom, a senior director at ARRM, an Eagan-based nonprofit that connects providers of housing services to disabled Minnesotans (including in-home support, group homes, etc.), told me she and many others initially thought that Optum would screen individual claims for red flags and pause those claims, but allow the vast bulk to go through. Instead, it seems the Minnesota Department of Human Services is just putting blanket holds on everything, creating huge cashflow crises, she said.

ARRM represents providers all over the state, big and small, and is just starting to collect information about the scale of the problem. “But what we’re hearing about the rollout is really alarming,” Grafstrom said. One provider told her that they had over $200,000 in claims go into review (i.e. not paid out), leaving them $170,000 short of making payroll. The provider reached out to their bank, but were told that the quickest a loan could be arranged was three weeks. “If nothing is done by Friday,” she said, “they’ll go out of business.”

I’ve been focusing on the providers because they are already seeing the crisis to come. They have to make payroll at the end of the week and can see the other expenses around the corner. They have to pay bills, keep the lights on, the heat going, provide food and other basics. Meanwhile, their employees certainly can’t miss paychecks, as most of these jobs are not well compensated (rates did increase last year, thanks to the efforts of the previous Legislature, but that was the first time in over a decade).

And as these programs shut down, disabled Minnesotans will need housing, school, job support, medical care and all the other services that they require to live their lives. Where are they supposed to go? What happens when group homes close for disabled adults? For young children receiving early intervention, a few months of disruption can have cascading impacts for years to come.

And there’s already nowhere near enough capacity in the state. Larson told me that she has five-year waiting lists. She wants her business to “grow, build careers for people, and help more children.” She also talked about the years it took her to figure out to how properly bill the state, all the audits and site visits she’s been through. She just hopes that the state might differentiate between trusted providers like Holland Center with longstanding good records and new providers, which might need more rigorous screening in order to prevent the kinds of fraud we’re seeing.

I wish we could depoliticize this issue. The ideal situation would be for Republicans and Democrats to come together, carefully examine the systems that allowed previous bad behavior to go undetected, and then build better systems. Instead, we’re going to have an election fight about it.