After a major provider agreed to stay in Iowa's troubled Medicaid program, a top aide to Gov. Kim Reynolds quietly signed a deal letting its hospitals and clinics keep $2.4 million in mistaken overpayments, according to records released Thursday.
UnityPoint Health threatened to quit Iowa's Medicaid program a year ago, saying it was at an impasse in contract negotiations with the managed care organization AmeriGroup. Its departure would have disrupted care for 54,000 Medicaid recipients statewide beginning April 1. But UnityPoint and AmeriGroup reached a last-minute agreement to keep the provider network in the program, a political victory for Reynolds.
Weeks later, Iowa Department of Human Services Director Jerry Foxhoven cut UnityPoint a break that allowed it to keep more than half of the overpayments that had been identified by a Medicaid audit, according to records obtained by The Associated Press.
The payments in question were incentives for using electronic health records that Iowa Medicaid had awarded to providers using federal funding earmarked for that purpose. Medicaid awarded UnityPoint hospitals and clinics $19.2 million between 2011 and 2015, but auditors last year found that was an overpayment of nearly $4.4 million due to miscalculations relating to the number of services provided.
The program sent letters to UnityPoint's affiliates demanding repayment in full, including from hospitals in Des Moines, Waterloo, Cedar Rapids and Rock Island, Illinois.
But the settlement, signed April 25 by Foxhoven, said UnityPoint would only have to refund half of the overpayments after appeals, up to a maximum of $2 million. DHS acknowledged in the agreement that the overpayments weren't due to any "intentional misconduct" by UnityPoint.
UnityPoint argued the overpayments resulted from Iowa Medicaid's failure to verify and calculate the amounts it was owed under the incentives program, a charge that state officials denied. The agreement said the two sides were settling "for economic reasons, to buy peace, and to avoid the time, cost and uncertainties of contesting the matter."
A whistleblower alleged in a letter to Democratic state Sen. Joe Bolkcom that the agreement was payback for UnityPoint's continued participation in Medicaid.
In an interview Thursday, Bolkcom said administration officials never informed lawmakers "that they made a $2.4 million decision to benefit one provider network" and questioned whether they had the authority to waive the collection of documented overpayments. He suggested the incoming state auditor, Democrat Rob Sand, should investigate the deal as part of his promised review of Medicaid.
"This just looks really fishy that this deal would be struck," Bolkcom said. "It would appear this was done to alleviate this political problem of a big provider literally dropping out of the managed care network."
UnityPoint spokeswoman Heather Nahas said the deal was unrelated to its decision to stay in Iowa's program, which has faced turmoil since its administration was turned over to for-profit managed care companies.
The agreement came as other hospitals and clinics were complaining that they weren't being paid in a timely manner and as some severely disabled residents and other patients reported having their services cut or denied. Despite the cuts, the privatization hasn't saved as much money as anticipated.
The AP requested a copy of the settlement agreement from DHS in early October. At the time, Medicaid was a central issue in the governor's campaign against Democrat Fred Hubbell, who had accused her of mismanaging the program and ran television ads highlighting the impact on the disabled.
DHS released a copy on Nov. 9, days after Reynolds narrowly defeated Hubbell to win a four-year term. Additional records were released Thursday confirming UnityPoint's affiliates paid back $2 million earlier this year but an additional $2.4 million was waived.