Medicaid audits prompt protests from caregivers

State audits of companies that provide Medicaid-funded homes and services for adults with disabilities are sending shock waves through the businesses, which say the state is demanding repayment of millions of dollars for what amounts to minor paperwork errors.

"This is ludicrous," said Paul Schurman, a Louisville lawyer who represents one company affected by the audit and said he's getting calls from others. "Not one is saying I provided bad care. It's because I didn't cross a T or dot an I."

Moreover, some worry the audits could force companies to cut back services or go out of business altogether — defeating the purpose of the program Kentucky launched in 2007 to try to get adults out of institutions such as nursing homes or Oakwood, a state-run facility in Somerset.

Under that program, hundreds of adults moved from facilities into smaller, more homelike settings with expenses for daily living and care covered by Medicaid.

"My concern is for the folks who moved from institutions into neighborhood settings," said Donovan Fornwalt, executive director of The Council on Developmental Disabilities in Louisville.

If available homes and services decline, some people might wind up back in facilities they left, he said.

Officials with the state Cabinet for Health and Family Services said they are simply following the mandate of the federal Centers for Medicare and Medicaid Services to perform regular audits of billing for such programs. Federal rules are very exact about how individual companies must fill out paperwork and how to document services they provide, said Veronica Cecil, chief of staff for the cabinet's Department of Medicaid Services.

And once the state finds an error, it must seek repayment of any funds involved.

"We do not have discretion," Cecil said. "Once it's been identified, the federal government says we have to take it back."

The state is seeking repayment of $2.7 million for 2011, 2012 and 2013, the three years it covered in last year's audits of nearly 300 providers of care for adults with disabilities. Amounts range from a few hundred dollars up to $678,402 sought from Louisville-based ResCare, which bills itself on its website as "the nation's largest private provider of services to people with disabilities."

Cecil said the state has collected about $600,000 so far through what it's describing as "recoupment audits." Of funds collected, 86 percent goes to the federal government and 14 percent to the state for the share it contributed to the program.

She noted that companies may appeal the repayment amount and the state is willing to work out plans for those unable to pay the full amount.

"We try to work very closely with providers," she said.

Some companies, especially smaller or nonprofit ones, say they don't have the money to repay the state — it's already been spent on care of residents — and fear it could force them into bankruptcy or out of business. And some don't have resources for lengthy administrative appeals.

"We respectfully request that recoupment for minor documentation errors be stopped immediately," said the Kentucky Association of Private Providers in a statement released by Shannon McCracken, president of the association.

Providers don't understand why they are being forced to repay money they spent housing, caring for people and providing therapy and activities, McCracken said.

"That money was not used in any way except to invest in that person's success and make them successful in the community," she said. "Just because Medicaid is now auditing and scrutinizing documents as they never have before, does not mean the services were not provided or not provided well."

Some wonder why the state waited to scrutinize all three years in one audit. Had the state audited the companies after each year and identified problems, they said they could have corrected problems much sooner, costing far less money.

Cecil said the timing was based on the resources available to the state. Future audits will be conducted every year, she said.

At least one company, ResCare, already is cutting services, but it's not clear whether the move is related to the audits.

ResCare declined to comment on the reason for its decision to close homes in Louisville for 23 adults and shut down a day training program for 32 people.

Instead it released a statement from spokeswoman Nel Taylor that read in part, "We remain committed to providing quality services to the people we serve."

The cabinet said ResCare notified it June 2 that the company was voluntarily terminating its day training program and residential services that included staffed residences of up to three people and group homes of up to eight. Cabinet officials will assist, if necessary, in relocating those affected.

Harry Keltz of Louisville said he was alarmed to learn last month that ResCare was closing its Fern Creek home where his friend James "Jimmy" Henson lives. Henson, who has severe mental disability and other developmental problems, has been with ResCare since 2002.

Before that, Henson, 53, was at Oakwood. Multiple problems at Oakwood helped prompt the state to look for alternative homes for residents.

Keltz said he and Henson's brother, Greg Henson, visit Jimmy Henson regularly and like having him nearby. They've been calling other homes in the area, seeking an opening, with no success.

They're worried about where he might wind up, though state officials have told Keltz they are working to find another home.

"The state has told me they are doing everything possible to keep Jimmy close to us," Keltz said.

Reporter Deborah Yetter can be reached at (502) 582-4228. Follow her on Twitter at @d_yetter.