How did the state miss problems with Optum?

Before handing over its sprawling behavioral health system to Optum Health this July, the state wanted to know whether the company would be able to process the thousands of invoices and claims submitted every month. So it looked at Optum’s claims management system and declared it was good to go.

But as soon as Optum took over, its claims management system failed under the crush of real-world use. Hundreds of nonprofits and small businesses found themselves cash-strapped as they went unpaid, sometimes for months, as their claims remain unprocessed by Optum’s system.

Optum touted its system in its initial proposal as an improvement on how to assess and pay thousands of invoices and claims for services for New Mexico’s mentally ill and those struggling with substance abuse.

So how did a state review fail to detect the potential for such big problems prior to Optum’s takeover?

Not surprisingly, the firm and the state have competing versions.

“We believed the system worked, the [Behavioral Health Collaborative] believed the system worked,” Sandy Forquer, president of Optum Health New Mexico, said last month, referring to the state’s review of its system. “The problems that emerged were ones we did not expect, the state did not expect.”

The state, however, says its review identified some issues that Optum agreed to correct, but apparently did not.

“We indicated that there were some issues and Optum said they would correct them,” said Betina Gonzales-McCracken, a spokeswoman for the New Mexico Behavioral Health Collaborative.

McCracken acknowledged that the volume of invoices and claims that flooded the system once it went live July 1 were much greater than the test sample of claims the state used to conduct its readiness review. That increased volume “magnified the problems that were identified,” she said.

The state has since levied a sizable penalty — more than $1 million — on Optum, a fine the firm is disputing.

A broader question

Optum’s inauspicious start as manager of New Mexico’s behavioral health system isn’t the first time the state has confronted disastrous problems related to systems run by complex software and computer networks.

In July 2006 New Mexico converted to a massive new software system called the Statewide Human Resource, Accounting, and Management Reporting System (SHARE), which hit snags from the start across state government. Thousands of state workers were not paid, received incorrect amounts, or saw their vacation or sick leave adjusted inexplicably.

Meanwhile, payments to as many as 11,000 jurors statewide were delayed while state contractors also saw their payments held up due to problems with SHARE.

Most of those immediate problems were brought under control in the first six months. But other deeper problems persisted. Earlier this year, federal highway administration officials suspended millions of dollars in reimbursement payments to the state transportation department because SHARE couldn’t adequately verify and track payroll costs and capital assets, such as land or buildings related to projects eligible for federal aid.

The state’s episodic experience with bumpy roll out of complex software begs a second question: Is there a better way of vetting the quality of such systems prior to their use?

Linda Roebuck Homer, director of New Mexico Behavioral Health Collaborative, which hired Optum, said Thursday she didn’t have a ready answer, but she added a newly hired monitor — Alicia Smith & Associates LLC — charged with overseeing Optum Health, may be able to shed some light on the situation in January.

The monitor is reviewing the Optum contract, including the state’s review process, Roebuck Homer said.

Improvements are noted, even as some problems persist

Optum Health appears to have rounded the corner on its late payments to providers.

As of Nov. 27, Optum had paid out $112 million in claims of $120 million in government money received for distribution, Forquer told the Collaborative on Thursday. The claims management system paid roughly 60 percent of provider claims in October and November, up from 18 percent in September, according to an Optum report handed out Thursday.

Patsy Romero, a local health care consultant, seemed to confirm that news, telling the Collaborative that a provider she was working with in Española and Taos had had 93.7 percent of its claims paid through Optum.

But Romero added that the provider had dedicated more employees than in the past — six workers vs. one — to the effort of making sure their claims are paid, adding costs to administration and taking much-needed expenses away from other priorities.

David Ley, a behavioral health provider and acting co-chair of the New Mexico Youth Provider Alliance, told Collaborative members that they shouldn’t mistake fewer complaints from providers to mean that all was good now under Optum. He knew of several providers that were letting employees go, he said.

“I think providers are going to be complaining less because they have other significant fires they’re putting out,” Ley said.

Ley also said 36 percent of his claims were being rejected, leading him to ponder “how the system can work so differently for different providers. That’s an issue you should address,” Ley told the Collaborative.

Roebuck Homer stressed that despite the increase in payment rate to providers the state and Optum aren’t free of problems.

“We’re still getting reports of people who are only paid 50 percent of what they were expecting,” Roebuck Homer told Collaborative members. “We’ve directed the monitor to look at this.”

She added: “We still have providers who do not have contracts.”

Some nonprofits and firms that have had contracts in the past to perform services haven’t won them under Optum, and they are worried about individuals in their communities going without help.

Optum is making changes to how claims are paid that should ease the burden on providers who are working harder to ensure their claims are paid, Forquer said.

How Optum performs in coming months is of great interest to hundreds of providers, the thousands they serve as well as the state of New Mexico and the firm.

If Optum is found lacking, New Mexico has made clear that it may have to make the tough decision of terminating the firm’s four-year $1 billion contract. But that would leave the state without a system in place.

But a decision, if it ever gets to that point, is months away, officials have said.