Office of Inspector General's Partnership Plan: Montana Legislative Auditor's Office Report on Medicaid Expenditures for Durable Medical Equipment

EXECUTIVE SUMMARY:

This review of the Medicaid Expenditures for Durable Medical Equipment in Montana for the period from July 1, 1993 through June 30, 1995 was conducted by the Montana Legislative Auditor (MLA) as part of our partnership efforts with State Auditors to expand coverage of the Medicaid program. We provided the MLA with copies of the Office of Inspector General audit reports on this subject and technical assistance during the course of the audit. We also performed a desk review of the MLA's audit report to satisfy ourselves that the report can be relied upon and used by the Health Care Financing Administration (HCFA) in meeting its program oversight responsibilities.

The MLA performed a limited scope review of the Montana Medicaid expenditures for medical equipment and supplies. The Medicaid program is administered by the Department of Public Health and Human Services (Department). The objectives of the review were to (1) determine whether the Department pays more than necessary for medical equipment and supplies and (2) identify procedures to achieve cost savings for the Department in the acquisition of medical equipment and supplies.

The MLA's report on the purchasing and payment procedures discussed areas of potential cost savings and recommended that:

• The Department evaluate competitive bidding for term contracts for oxygen concentrators to reduce costs. The MLA estimated if the Department purchased concentrators using the General Services Administration contract pricing and the Veterans Administration maintenance contract pricing, the annual cost savings could be between $336,000 and $504,000 annually.

• The Department require a written description and/or prior authorization of all Medicaid items paid from invoices billed under miscellaneous equipment identification codes. The MLA identified $134,091 in questionable or unallowable Medicaid costs paid to providers who billed for equipment using a miscellaneous equipment identification code.
  
• The Department work with the Department of Administration to evaluate whether the current State term contract for diapers could be modified and/or expanded to achieve Medicaid cost savings. The MLA estimates potential annual savings of $24,332 through the use of a term contract.
  
• The Department define allowable incontinence supplies and document the medical necessity of these supplies including disposable wipes.

We plan to share this report with other States to encourage their participation in our partnership efforts.