OPA: procurement deficiencies, other issues with hospital consultancy contract | News
HAGÅTÑA (The Guam Daily Post) — The Office of Public Accountability has found several issues with a performance revenue cycle management (RCM) services contract for the Guam Memorial Hospital Authority.
These include deficiencies in GMHA’s procurement process regarding compliance with procurement law, factors indicative of preferential treatment towards hiring the contractor for RCM services, unreasonable bases included in the contractor’s 12% compensation, and ineffectiveness of the RCM consultancy due to continuing cash flow and patient receivable issues.
GMHA hired MedHealth Solutions in 2021 to serve as the RCM consultant. The agreement was signed and approved by the Office of the Attorney General and the governor.
The hospital authority agreed to pay MedHealth 12% of any dollar collected above a monthly collection baseline of $7.2 million. In addition, the consultant would be compensated 30% of any unbilled, uncollected or denied claims referred to MedHealth and for which payment is obtained on behalf of GMHA, according to Post files.
However, by November 2022, the hospital authority had terminated the contract. A termination notice stated that GMHA’s ability to manage its revenue cycle had matured enough to justify termination, and that the anticipated costs versus the value of services provide by MedHealth did not justify continuation.
The OPA did not name MedHealth in its audit, but the company is known through media reports and was identified by GMHA’s response to the OPA.
According to the audit, prior to coming on as the RCM consultant, MedHealth, through the extension of an unsolicited offer, performed a no-cost assessment of the hospital authority’s RCM in 2019, and provided recommendations to address its findings.
“GMHA subsequently made three attempts – one sole source procurement and two (requests for proposals) – to formally procure a contractor for RCM services. We noted several compliance deficiencies in GMHA’s processing of the contractor’s unsolicited offer and the three subsequent procurement attempts for RCM services,” the OPA audit stated.
According to the audit, GMHA procurement regulations allow for sole source procurements to arise from unsolicited offers, but Guam law states otherwise. The hospital authority attempted to use a sole source procurement to hire MedHealth in late 2019 and had signed a version of a contract by January 2020, but the Office of the Attorney General did not approve the procurement and instructed GMHA to go through the RFP process, the audit stated.
For the subsequent RFP attempts, the OPA found that MedHealth should have been disqualified as a nonresponsive bidder because it submitted cost or pricing data in violation of the general terms and conditions of the solicitation.
As for factors indicating preferential treatment, the OPA found that GMHA allowed submissions of percentage-based model proposals following a request from an affiliate of MedHealth, issued another RFP after discussions with the contractor, and drafted a contract that included compensation terms included in MedHealth’s proposal.
From June 2021 to Nov. 3, 2022, MedHealth had billed GMHA $5 million for services.
“We observed that the contract’s scope of services included the collection from self-pay patients and third-party insurers and involvement in the Medicare cost reporting, which GMHA stated was not performed by the contractor and instead fulfilled through guidance in claim process improvements (to include coding) and GMHA seeking a secondary contractor for Medicare cost reporting,” the OPA audit stated.
“Furthermore, the billable A/R collection sources (3Ms (Medicare, Medicaid, and the Medically Indigent Program); insurance providers; and self-pay, which includes tax refund garnishments from the Department of Revenue and Taxation) comprise of payors whose payments are guided by local and/or federal regulations,” the audit added.
Because of this, the OPA questioned $4.9 million paid and/or recognized as payable by GMHA for MedHealth invoices issued for July 2021 to October 2022.
Lastly, the OPA audit stated that the RCM consultancy did not appear to provide immediate relief for GMHA’s financial condition, based on the hospital authority’s fiscal year 2022 financial audit.
GMHA CEO/Administrator Lillian Perez-Posadas stated that the authority took issue with a number of the audit’s determinations, but their primary objection laid with the conclusion that the RCM contract was ineffective, or that there as an unreasonable basis for contractor compensation.
“GMHA notes that the draft report acknowledges the OPA’s inability to conclude with certainty the long-term value of the consultancy provided by MedHealth to GMHA,” Perez-Posadas stated.
The hospital authority also took issue wit the allegation that GMHA granted preferential treatment.
“GMHA maintains that the final contract terms were a result of negotiations with MedHealth, as required by procurement code. GMHA conducted the procurement in a transparent manner, including discussions at public meetings with the board of trustees and circulation to nine prospective vendors, indicating that the contract was not a product of deference or special treatment,” Perez-Posadas stated.
Regardless, GMHA agrees that the public auditor’s recommendations, which include revising the authority’s procurement planning and pre-evaluation process and to use a fixed payment amount for consultancy contracts, should be implemented.