Auditors say HISD should repay millions

[Carol Holst <kceh@airmail.net>]

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HoustonChronicle.com -- http://www.HoustonChronicle.com ;| Section: 
Local & State


Feb. 13, 2004, 11:45PM

Auditors say HISD should repay millions

Medicaid records filled with 'errors'
By BILL MURPHY
Copyright 2004 Houston Chronicle


Federal auditors have recommended that the Houston Independent School 
District return $2.79 million it received for school-related Medicaid 
administrative expenses four years ago.

In a report released last month, U.S. inspector general auditors 
recommended disallowing the full $2.79 million award given to HISD that 
year, not just part of it, because they found the district's paperwork 
supporting the reimbursement "sloppy" and filled with "volumes of 
errors."

Meanwhile, the state inspector general's office, which handles Medicaid 
fraud probes, and the U.S. attorney's office in Houston are 
investigating activities related to HISD's reimbursements for Medicaid 
work, said Russell Smith, spokesman for the state Health and Human 
Services Commission. Those probes are independent of the U.S. inspector 
general's audit.

"It's largely a (Department of Justice) thing from the federal end," 
Smith said. "We're pretty much sitting and waiting and seeing if charges 
are filed."

HISD spokesman Terry Abbott said in an e-mail that the district strongly 
disagrees with the audit's finding and will appeal it.

"HISD has billed for Medicaid reimbursement strictly in accordance with 
the guidelines that were set out by the Texas Department of Health and 
approved by the regional office of federal Centers for Medicare & 
Medicaid Services," Abbott said.

HISD's Medicaid finance department, which calculates Medicaid 
reimbursements, generates revenue by performing the same accounting for 
141 Texas school districts, including Dallas, San Antonio, Aldine and 
Humble.

For its services, HISD receives about 7 percent of the federal Medicaid 
reimbursements granted to the other school districts, said HISD deputy 
spokeswoman Adriana Villareal. Last year, the district brought in $12.5 
million in federal reimbursements for client districts and was paid $1.1 
million for each of the past two years.

The U.S. inspector general's audit did not focus on HISD's work for 
client districts but on HISD's accounting for its own reimbursement for 
administrative expenses in 2000.

Federal Medicaid officials approved HISD's way of calculating Medicaid 
expenses as long ago as 1995 but now are applying -- retroactively -- 
new regulations that require different calculations, Abbott said.

Medicaid is a federal-state health insurance program for the poor and 
disabled. Allowable administrative expenses for schools include the cost 
of transporting students for treatment, program advertising, scheduling 
and some paperwork.

The audit did not examine HISD's reimbursement for health-related 
services provided to students, including fees charged by speech 
pathologists, physical and occupational therapists, doctors, and nurses. 
According to HISD, many special education students receive Medicaid 
services.

In 2000, HISD says, it received $7.4 million in Medicaid reimbursements 
for health services provided to students.

HISD doled out $2.5 million of its own money in 2000 for administrative 
expenses. It received the $2.79 million from the federal government 
because Medicaid regulations require the federal government to provide 
funds that match or better local/state contributions.

A school district's reimbursement is based on complicated calculations 
that take into account some of the district's salary and operating 
costs. HISD helped inflate its reimbursement by including some 
unallowable costs and salaries, said Judy Holtz, spokeswoman for the 
U.S. Department of Health and Human Services.

Viewed as an unallowable operating expense was $3.5 million for 
spaghetti, cheese, milk and other foods the district received free from 
the U.S. Department of Agriculture.

Unallowable salaries included those of employees who had nothing to do 
with Medicaid administration, such as food service coordinators, 
housekeeping supervisors, crafts trainers, construction project managers 
and bilingual teachers.

"Their records were pretty sloppy," Holtz said. "That's why we 
ultimately stated the HISD didn't support its claim."

HISD is not the only school district to get audited. The U.S. inspector 
general's office has audited or will audit school district reimbursement 
programs -- health services and administrative expenses -- in 20 to 25 
states, Holtz said.

School districts elsewhere are challenging the audits and raising the 
issue that the federal government is withholding Medicaid money owed to 
schools, Abbott said.

The state Health and Human Services Commission, which oversees state 
Medicaid programs and disbursed both the federal and state money to 
HISD, declined to comment on the specifics of the U.S. inspector 
general's audit.

The federal Centers for Medicare & Medicaid Services will decide whether 
to accept the auditor's recommendation that HISD repay the $2.79 
million. The state Health and Human Services commission would have the 
task of collecting the money.

HISD, already facing a $30 million budget deficit, could negotiate with 
the commission and try to lower the amount it has to repay or ask that 
the $2.79 million be deducted from future awards.

Problems with HISD's Medicaid reimbursements have surfaced before.

Bernetta Jo Young, an accountant in HISD's Medicaid finance department, 
filed a grievance against her supervisors in part because she says 
employees were asked to increase client school districts' federal 
Medicaid reimbursements through illegal accounting.

At a grievance hearing in June, she testified, "Management has asked 
us -- and when I say `us,' I'm referencing the accountants -- to perform 
what we feel are unlawful accounting practices."

She and Kawana Bowie, a former HISD employee in the Medicaid finance 
department, testified that federal Medicaid reimbursements were based in 
part on surveys of how much time a sample number of school district 
employees spent on Medicaid-related duties.

HISD obtained more federal money by eliminating from surveys some 
employees that did little or no Medicaid-related work, Bowie testified.

Bowie said she and another employee resigned from HISD in part because 
they had been asked to perform what they considered illegal accounting.

Abbott said HISD never asked employees to perform illegal accounting.

HISD's internal review of Medicaid reimbursement procedures, begun in 
November 2002, concluded that "two staff members used procedures outside 
of approved HISD and state guidelines. During the course of that 
internal review, those two employees resigned, and all other employees 
were directed to strictly follow state and HISD established procedures."

In August 2003, HISD retained auditors at McConnell, Jones, Lanier and 
Murphy to perform an independent investigation of Young's allegations. 
With that investigation about 90 percent complete, Abbott said, HISD has 
made improvements in "internal controls" based on the auditor's 
preliminary recommendations.


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