posted on December 20, 2012 11:15
Two years ago as businesses were struggling through the recession, a family business in eastern North Carolina that cares for shut-ins and older people in their homes received a letter from PCG Corporation of Boston saying, We’re coming to audit the payments you’ve received from Medicaid.
Earlier, PCG (the ‘Public Consulting Group’) had told the Perdue Administration it had a way to save state government millions of dollars by rooting out Medicaid ‘overpayments’ – and all the state had to do to in return was pay a fee of $250,000 (monthly), plus a bonus based on how many millions of dollars in overpayments PCG identified.
Now, that word identified turned out to be a problem. Because back in 2010 PCG’s bonus was based on the amount in overpayments it identified – and not on the actual cash the state received in refunds for the 'overpayments.’ It was a prescription for a train wreck but the Perdue Administration bought it 'hook, line and sinker' and set the gears in motion that led PCG to the family business’s doorstep.
Right off, it was clear PCG had an unusual definition of ‘overpayments’ – for instance, when the family business had provided all the healthcare and all the services it was paid for by Medicaid, if it failed to check a box correctly on a government form – that was identified as an ‘overpayment.’ And the business had to repay the money.
In addition, PCG didn’t audit all the Medicaid payments the business received – instead it audited a fraction of the payments then extrapolated to estimate how much the business owed for all the payments. In other words, PCG may have audited, say, 100 payments – then extrapolated to determine how much was owed for all of its payments. It sounded reasonable but didn't turn out that way.
Two years after the business received the first letter from PCG it received another letter saying, Our audit is complete. We identified $650 in ‘overpayments.’ By extrapolation you owe the state $133,000 in refunds.
The business had landed in a fight for its life.
It appealed PCG’s findings, hired lawyers, had a hearing, and here’s the result:
It didn’t owe $650.
It didn’t owe $133,000.
It owed $7.50.
Another business PCG audited and extrapolated received a letter saying it owed $500,000 – it appealed and paid $0. PCG said still another business owed the state $3 million for overpayments – that business appealed too and paid $700.
And the Perdue Administration is still paying PCG $250,000 a month.