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Auditors say HISD should repay millions
Feb. 13, 2004, 11:45PM

Auditors say HISD should repay millions
Medicaid records filled with 'errors'
By BILL MURPHY
Copyright 2004 Houston Chronicle
Federal auditors have recommended that the Houston Independent School District return $2.79 million it received for school-related Medicaid administrative expenses four years ago.

In a report released last month, U.S. inspector general auditors recommended disallowing the full $2.79 million award given to HISD that year, not just part of it, because they found the district's paperwork supporting the reimbursement "sloppy" and filled with "volumes of errors."

Meanwhile, the state inspector general's office, which handles Medicaid fraud probes, and the U.S. attorney's office in Houston are investigating activities related to HISD's reimbursements for Medicaid work, said Russell Smith, spokesman for the state Health and Human Services Commission. Those probes are independent of the U.S. inspector general's audit.

"It's largely a (Department of Justice) thing from the federal end," Smith said. "We're pretty much sitting and waiting and seeing if charges are filed."

HISD spokesman Terry Abbott said in an e-mail that the district strongly disagrees with the audit's finding and will appeal it.

"HISD has billed for Medicaid reimbursement strictly in accordance with the guidelines that were set out by the Texas Department of Health and approved by the regional office of federal Centers for Medicare & Medicaid Services," Abbott said.

HISD's Medicaid finance department, which calculates Medicaid reimbursements, generates revenue by performing the same accounting for 141 Texas school districts, including Dallas, San Antonio, Aldine and Humble.

For its services, HISD receives about 7 percent of the federal Medicaid reimbursements granted to the other school districts, said HISD deputy spokeswoman Adriana Villareal. Last year, the district brought in $12.5 million in federal reimbursements for client districts and was paid $1.1 million for each of the past two years.

The U.S. inspector general's audit did not focus on HISD's work for client districts but on HISD's accounting for its own reimbursement for administrative expenses in 2000.

Federal Medicaid officials approved HISD's way of calculating Medicaid expenses as long ago as 1995 but now are applying -- retroactively -- new regulations that require different calculations, Abbott said.

Medicaid is a federal-state health insurance program for the poor and disabled. Allowable administrative expenses for schools include the cost of transporting students for treatment, program advertising, scheduling and some paperwork.

The audit did not examine HISD's reimbursement for health-related services provided to students, including fees charged by speech pathologists, physical and occupational therapists, doctors, and nurses. According to HISD, many special education students receive Medicaid services.

In 2000, HISD says, it received $7.4 million in Medicaid reimbursements for health services provided to students.

HISD doled out $2.5 million of its own money in 2000 for administrative expenses. It received the $2.79 million from the federal government because Medicaid regulations require the federal government to provide funds that match or better local/state contributions.

A school district's reimbursement is based on complicated calculations that take into account some of the district's salary and operating costs. HISD helped inflate its reimbursement by including some unallowable costs and salaries, said Judy Holtz, spokeswoman for the U.S. Department of Health and Human Services.

Viewed as an unallowable operating expense was $3.5 million for spaghetti, cheese, milk and other foods the district received free from the U.S. Department of Agriculture.

Unallowable salaries included those of employees who had nothing to do with Medicaid administration, such as food service coordinators, housekeeping supervisors, crafts trainers, construction project managers and bilingual teachers.

"Their records were pretty sloppy," Holtz said. "That's why we ultimately stated the HISD didn't support its claim."

HISD is not the only school district to get audited. The U.S. inspector general's office has audited or will audit school district reimbursement programs -- health services and administrative expenses -- in 20 to 25 states, Holtz said.

School districts elsewhere are challenging the audits and raising the issue that the federal government is withholding Medicaid money owed to schools, Abbott said.

The state Health and Human Services Commission, which oversees state Medicaid programs and disbursed both the federal and state money to HISD, declined to comment on the specifics of the U.S. inspector general's audit.

The federal Centers for Medicare & Medicaid Services will decide whether to accept the auditor's recommendation that HISD repay the $2.79 million. The state Health and Human Services commission would have the task of collecting the money.

HISD, already facing a $30 million budget deficit, could negotiate with the commission and try to lower the amount it has to repay or ask that the $2.79 million be deducted from future awards.

Problems with HISD's Medicaid reimbursements have surfaced before.

Bernetta Jo Young, an accountant in HISD's Medicaid finance department, filed a grievance against her supervisors in part because she says employees were asked to increase client school districts' federal Medicaid reimbursements through illegal accounting.

At a grievance hearing in June, she testified, "Management has asked us -- and when I say `us,' I'm referencing the accountants -- to perform what we feel are unlawful accounting practices."

She and Kawana Bowie, a former HISD employee in the Medicaid finance department, testified that federal Medicaid reimbursements were based in part on surveys of how much time a sample number of school district employees spent on Medicaid-related duties.

HISD obtained more federal money by eliminating from surveys some employees that did little or no Medicaid-related work, Bowie testified.

Bowie said she and another employee resigned from HISD in part because they had been asked to perform what they considered illegal accounting.

Abbott said HISD never asked employees to perform illegal accounting.

HISD's internal review of Medicaid reimbursement procedures, begun in November 2002, concluded that "two staff members used procedures outside of approved HISD and state guidelines. During the course of that internal review, those two employees resigned, and all other employees were directed to strictly follow state and HISD established procedures."

In August 2003, HISD retained auditors at McConnell, Jones, Lanier and Murphy to perform an independent investigation of Young's allegations. With that investigation about 90 percent complete, Abbott said, HISD has made improvements in "internal controls" based on the auditor's preliminary recommendations.

— By BILL MURPHY

2004-02-13
www.chron.com/cs/CDA/ssistory.mpl/metropolitan/24025


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