New Center's services are generally funded through the board by federal, State, local, and private funds. New Center is responsible for setting reimbursement rates and billing. New Center collects reimbursements from first parties (clients) and third parties (Medicaid, Medicare, and private insurers). Mental health service delivery costs not reimbursed by first and third parties are paid by the State and local funding.

For fiscal year 1992-93, New Center expended over $9.9 million and Medicaid honored claims totaling approximately $6.9 million of which New Center received approximately $3.8 million and the board received approximately $3.1 million.

As of June 30, 1994, New Center had the equivalent of 230.56 full-time employees and delivered services to 5,513 clients since the beginning of fiscal year 1993-94.

Conclusion: New Center's rate setting practices resulted in reimbursement rates that did not accurately reflect the costs to deliver services in accordance with the Michigan Administrative Code. We found the following material deficiencies:

 New Center overbilled Medicaid approximately $4.1 million, of which it received approximately $2.3 million and the board received $1.8 million, for the four fiscal years ended September 30, 1994 by understating service units when calculating the cost of services (Finding 1).

New Center agreed with the corresponding recommendations and indicated that it is utilizing its computer to identify service unit information. New Center also indicated that for fiscal year 1994-95 it is reviewing and documenting reimbursement rates on a quarterly basis. However, New Center disagreed with amounts reported as Medicaid overbillings and indicated that it will make settlements to Medicaid if deemed appropriate.  New Center did not appropriately allocate program costs when calculating its reimbursement rates. We identified $185,634 of Medicaid overbillings for partial day services resulting from excessive costs, of which New Center received $104,642 and the board received $80,992 (Finding 2a(1)). We also questioned the reasonableness of New Center's methodology which allocated clinical direct service cost to the case management program. New Center increased the case management rate in fiscal year 1993-94 by $42.46 per contact and resulted in Medicaid billings of $365,981 through March 9, 1994, using this methodology (Finding 2a(2)). In addition, New Center did not calculate most of its reimbursement rates for fiscal years 1992-93 and 1991-92. As a result, rates billed to Medicaid did not reflect actual planned or expected costs (Finding 2b).

New Center agreed with the corresponding recommendations and indicated that it has developed a methodology to appropriately allocate program cost. However, New Center disagreed with the amounts reported as Medicaid overbillings and indicated that it will make settlements to Medicaid if deemed appropriate.

 New Center's rate setting methodology did not consider the differences in time required to perform various clinical services. New Center misstated 36 clinical reimbursement rates and overbilled Medicaid by $33,763 using this methodology, of which New Center received $18,935 and the board received $14,828. (Finding 3)

New Center agreed with the corresponding recommendations. New Center indicated that it is currently utilizing its computer system to document time used in each clinical activity. However, New Center indicated that it only bills for 24 clinical services. New Center also disagreed with the amounts reported as Medicaid overbillings and indicated that it will make settlements to Medicaid if deemed appropriate.

We also found other deficiencies related to reimbursement rates (Finding 4).

Audit Objective: To assess the propriety of New Center's Medicaid billing practices.

Conclusion: New Center generally billed Medicaid properly for various services. However, we found deficiencies related to documentation within client case files for services provided (Finding 5).

We examined New Center's rate setting methodology and related rate calculation work sheets for compliance with applicable statutes, rules, policies, and procedures. We reviewed financial and other records to verify the estimated units of service and actual planned and expected costs used in the reimbursement rate calculations.

Subsequent to our audit, New Center recalculated its reimbursement rates for fiscal years 1992-93, 1991-92, and 1990-91. New Center used a different rate setting methodology which included the use of actual service units provided and actual costs incurred in those years. Using this new rate setting methodology, New Center informed us that it overbilled Medicaid by approximately $1.6 million, of which New Center received $.9 million and the board received $.7 million.

Subsequent to our audit conference, we evaluated New Center's revised rate setting methodology, related rate calculation work sheets, and financial and other records to verify the propriety of the methodology and the accuracy of the revised reimbursement rates and related calculation of Medicaid overbillings.

Again, we determined that New Center's rate setting practices resulted in reimbursement rates that did not accurately reflect the costs to deliver services. Consequently, we determined that Medicaid overbillings calculated by New Center were misstated because it used these reimbursement rates to calculate the overbillings. In addition, New Center reported revised Medicaid overbillings for only services noted in Finding 1 of the audit report. New Center determined that reimbursement rates for other services were misstated, some of which resulted in Medicaid overbillings. However, New Center did not calculate overbillings for those services because findings related to those services were not included in our audit report.

To assess the propriety of New Center's billing practices, we reviewed service activity reports, progress notes documented in client files, and related Medicaid billings.

The agency preliminary response which follows each recommendation in our report was taken from the agency's written comments and oral discussion subsequent to our audit fieldwork.