DHS abruptly delayed all payments to providers of 14 Medicaid services in fraud prevention effort

ST. PAUL, Minn. (Minnesota Reformer) — Melissa Berg is a paid personal care assistant for her friend, a disabled person who needs 24/7 care. In December, Berg received a memo from AM Home Healthcare, the St. Paul-based agency she works under, saying that it won’t be able to cover payroll because the state’s late making payments.

Without the promise of pay, some PCAs in the agency haven’t been showing up for work, Berg said.

“It just enrages me because disabled people are so devalued and, again, you see the most vulnerable among us suffering first,” Berg said.

The Minnesota Department of Human Services delayed all payments to providers of 14 Medicaid services in the first weeks of a new system — called “prepayment review” — designed to prevent fraud. Providers of Medicaid services said the delay caught them by surprise and interrupted payrolls, leaving older and disabled Minnesotans without care.

The anti-fraud measure that seems to have ensnared legitimate providers and their vulnerable clients was introduced last year amid an ongoing scandal enveloping the administration of Gov. Tim Walz, who at the time was running for a third term before dropping out this month.

DHS suspended all payments for the 14 “high-risk” Medicaid programs on December 30, suddenly leaving many providers to operate without money they have come to expect to get every two weeks. Payments have started to be resumed this week, though many are still missing.

DHS put out a memo that payments would resume this week, but on Wednesday, the department told the Residential Providers Association of Minnesota that claims submitted on December 24 and 25 were not included in those payments due to an early deadline not communicated to providers, said Rebecca Johnston, the executive director of RPAMN.

DHS is now figuring out whether it can pay those remaining 40% or so claims from December sooner, Johnston said; if not, some providers will be left without payments for two more weeks, which could leave them at risk of closing their doors.

A spokesperson for DHS said the department does not yet have information on unpaid claims. At a Wednesday press conference, state Medicaid director John Connolly said the next payment for claims is in two weeks.

Zak Mohamed, who runs AM Home Health Care, said that he’s been trying to take care of clients in the place of employees who are — understandably, he said — not working because he can’t guarantee them payment. AM Home Health Care has yet to receive payments since December for services included in the new prepayment review process, which comprise more than half of what the agency gets from the state. Mohamed said the company paid one payroll from its reserves, but, without DHS payments, will be unable to pay its employees.

Many of AM Home Health Care’s 45 clients depend on their caregivers to survive, Mohamed said.

“If people don’t get their medications in time or if people can’t get out of their bed… You know, I do the best I can,” Mohamed said.

Hailey Grattan, the director of operations of Golden Heart Home Health Services, said the Brainerd agency also has yet to receive reimbursements for services included in the prepayment review process. The agency is still missing over $200,000 in state payments that it expected at the end of December — nearly its entire reimbursement amount.

Grattan said Golden Heart is currently continuing to meet payroll, though she worries that future disruption could leave staff without pay and individuals without care.

DHS is “not providing us with any help or any clear timelines,” Grattan said.

A fragile industry

Prepayment review has been touted by Walz and DHS officials as one of several administration’s efforts to stop fraud in Minnesota human service programs. The 14 high-risk services in the review process include Housing Stabilization Services, a program so riddled with fraud it was shut down.

Communication around the prepayment review system has disoriented providers ever since it was publicly unveiled by Walz’s office in October.

After an initial bout of confusion, providers were under the impression that only claims deemed suspicious would be delayed or held, though under state law, the state can take up to 30 days to pay “clean claims” without complications and 90 days to pay all other legitimate claims.

Then, at the end of December, a few days before they expected to be paid, providers found out that all payments in the 14 high-risk programs were suspended, not just payments for suspicious claims.

Connolly acknowledged that his department has gotten feedback from providers on the new review program.

We “want to make sure that we’re as clear as we can be in terms of setting expectations about what’s coming and hearing feedback about the hardships that providers are experiencing,” Connolly said.

Josh Berg, a service director at Accessible Space, an assisted independent living provider, said that he supports DHS reviewing claims before they’re paid, but is frustrated with DHS’ implementation and “not thinking through the consequences.”

Had they been warned that all payments would be suspended for two or more weeks, Berg said, providers would be more prepared. Berg said Medicaid waiver service providers often operate on thin margins. Accessible Space has other streams of revenue and received most of its delayed payments this week, allowing it to remain stable despite the delay. Other providers are less financially secure; Berg said he spoke to a provider who took out a second mortgage on their home to make payroll.

“We’re in a much more fragile position than I think anybody ever contemplated,” Berg said.

Political pressure to prevent fraud

Fraud in Minnesota’s human services has drawn significant attention from President Donald Trump, who has used the issue to attack Minnesota’s Somali-American community and justify sending thousands of immigration agents to the state. Announcements of federal actions that claim to address fraud in Minnesota, but threaten Minnesota’s social programs, ticked up following a viral video by influencer Nick Shirley claiming to uncover new fraud in Minnesota daycares.

The Trump administration has said it intends to withhold $2 billion of Medicaid funding from Minnesota, a decision which Minnesota officials said they are appealing. In response to a directive from the federal Center for Medicare and Medicaid Services, the state announced last week that it will stop allowing new providers in the 14 high-risk Medicaid programs for six months at some point in the future.

Former Assistant U.S. Attorney Joe Thompson, who has prosecuted several social services fraud cases in Minnesota, said in December that he suspects at least $9 billion paid to the 14 high-risk Medicaid programs since 2018 have been fraudulent.

In a press conference Wednesday, however, Connolly said that very few claims — twenty or so — were rejected in the first round of prepayment review.

On Tuesday, Connolly said that the review process was implemented with a “compressed timeline” relative to similar past projects “because of the urgency of the situation.”

Sen. Jim Abeler, R-Anoka, said the implementation was rushed, and that the department should have known that creating the system would take more time and consideration. He said he had advised DHS to put the review system on hold until it brought on legitimate providers to strategize.

“Maybe it’s a great idea to set up a really good algorithm with rubrics and pre-screen things that are way out of the norm,” Abeler said. “But you can’t start those up on a dime.”

Abeler, whose party has long criticized Walz for not being tough enough on fraud, said that prominent Republicans might be reticent to speak about prepayment review system problems because they would be seen as “pro-fraud if they criticized the governor’s program here.”

In an email to Connolly, Sen. John Hoffman, DFL-Champlin, said that he plans to convene hearings about the design of the prepayment review system when he returns to work following his attempted assassination in June.

The prepayment review process’s “implementation raises serious and immediate concerns — not about the goal of program integrity, which I fully support — but about the lack of concrete assurances that Minnesotans who rely on these services will not be harmed in the process,” Hoffman wrote.

(Story written by Alyssa Chen – Minnesota Reformer)