An ailing software system is bleeding tens of millions of dollars from Maricopa County’s health care system, forcing officials to dip into county coffers until the problem is fixed.
The computer system was supposed to be a money-saver when Maricopa Integrated Health System decided to do its own medical claims processing for three health plans instead of paying an outside firm for the service. But since October 2002, the system has had trouble paying claims and verifying their accuracy for a provider network that includes about 700 doctors and 230 health care facilities.
Hospitals, doctors offices and nursing homes went months without payment, then physicians refused to see patients. Health care providers complained to the County Board of Supervisors about not getting paid.
To stem the outcry and keep providers from leaving the network, the health system began paying providers without knowing how much was owed, a move that has created a financial quagmire for the county, officials say.
"We have been patient with MIHS but we’ve come to the conclusion we really are in big trouble," said Shawn Nau, the county’s director of health care mandates. "We don’t know if MIHS as a whole is making money or losing money. There could be a $25 million swing in either direction."
Financial problems have gotten so bad that the health system had to take $5 million from the county’s General Fund at the beginning of January because the system didn’t have the required two-weeks-worth of cash to operate. Shortfalls are likely to continue if problems with medical claims processing aren’t fixed, forcing the health system dip into the General Fund again, Nau said.
Earlier this month, a significant number of claims were kicked out of the system because of errors, Nau said. Todd Ricotta, the health system’s interim chief health plan officer, said new claims are now being processed. A full review of the software and payment system is in progress to make longterm fixes.
But the bigger immediate challenge will be rectifying old claims received when the software system wasn’t working.
The board on Jan. 21 increased the maximum amount the county can loan the health system from $5 million to $10 m illion to cover future shortages.
"At this point in time, losses are going to be supported with taxpayer dollars. That’s another reason why we need to turn the system around now," Nau said. "It’s gotten to the point of no return."
Fixing the billing system is one of many steps being taken to transition the county health system to a special taxing district, approved by voters last November. Property owners agreed to a tax that will support the health system with about $40 million a year. But completing the transition to a separate legal entity, with its own board of directors, will be an enormous task, according to county officials.
Contracts have to be amended, employees need to be assured that their time off and benefits will transfer, and the county’s assets need to be valued for a potential lease arrangement between the county and the new district, said Tom Manos, the county’s chief financial officer. One of the county’s biggest priorities, however, is fixing the health plan billing system, Manos said.
"I don’t think we’ve had an understanding of the profitability of the health system for the last 15 months," he said. "We need to get it cleaned up before the transfer occurs and not hand off a mess to the district."
So far, the health plans — which manage benefits for the Arizona Health Care Cost Containment System, the state’s Medicaid program; the Arizona Long Term Care System and Senior Select, a Medicare product — have made the following payments:
• $56.4 million paid based on medical claims from providers, but without verifying benefits or making sure a provider was authorized to treat a patient. Many of these payments have been re-evaluated and reconciled.
• $14.8 million in advances paid based on past bills from providers, not recent medical claims because of processing problems.
• $4.5 million in settlements with Scottsdale Healthcare, Banner Health, Vanguard Health Systems and Renal Care Group without doing a claim-byclaim review.
Banner Health went eight months without being paid.
"The bulk of our business is Medicare and private payers . . . so there was no hardship," said Dan Green, a spokesman for Banner Health, which settled with the county for $1.7 million. "But that said, services provided deserve to be reimbursed."
The guesswork in payments, however, could end up costing the health system more money as claims are reprocessed. In many cases, it’s likely providers were overpaid, making it difficult for the county to recoup its losses, Nau said. And the $4.5 million in settlements is binding, preventing further negotiations or collections efforts.