Stephen Anderson, Kansas Inspector General, briefed the Senate Committee on Government Efficiency on a performance audit of managed care organization (MCO) prior‑authorization and claims practices in Kansas Medicaid (KanCare). The audit covered Jan. 1, 2021, through Dec. 31, 2023, and was published on Oct. 2; the IG reported 17 findings, 42 recommendations and 12 observations.

The audit identified three primary problem areas: delays in peer‑to‑peer reviews that slowed access to critical care; widespread use of observation status where hospital clinicians judged inpatient admission appropriate; and inconsistent MCO determinations for post‑acute care authorizations. Anderson summarized an operational consequence: "If you're in the hospital, you're an inpatient," meaning hospitals must provide care but the MCOs’ classifying patients as observation rather than inpatient can sharply reduce reimbursement and create administrative burdens for hospitals seeking prior authorization for post‑acute placement.

The audit called out one recurring practice (Finding 13) in which MCOs denied hospital claims for readmissions within 30 days, even when the later admission was unrelated, and characterized such denials as administrative rejections that shifted costs to hospitals. Anderson said hospitals report prolonged bed occupancy while staff await authorizations for post‑acute placement, which both increases provider costs and reduces bed availability.

The audit also raised potential conflict‑of‑interest concerns: it reported that one major MCO (UnitedHealthcare) owns clinical decision support tools used to determine inpatient criteria (InterQual and MCG in the private market) and also has subsidiaries that perform claims‑review services (Optum, Change Healthcare). The IG’s report recommended that contractual and disclosure practices be reviewed because the MCOs’ ownership of clinical criteria tools and related claims services creates an appearance of a self‑reviewing pipeline.

Anderson said monetary impacts are highly concentrated: a relatively small percentage of claims by count were denied (the audit reported denial‑by‑count rates near 7%), but the value of denied claims was large. Calendar‑year examples cited in the report showed that denials by value were concentrated in hospital claims and increased year to year; for example, the IG reported a multi‑hundred‑million‑dollar scale of denied hospital claim value for major MCOs in later audit years and said denials by monetary value accounted for a high proportion of total denied dollars.

KDHE’s and MCO responses are summarized in the audit; KDHE acknowledged concerns and said it would do additional research. The Inspector General told the committee he is arranging a meeting with KDHE and MCO representatives to discuss the findings and next steps.

Ending: The IG urged legislative and executive follow‑up on the report’s recommendations, including improved oversight, clearer provider manuals, disclosure of vendor ownership where applicable, and mechanisms to reduce delays in peer‑to‑peer reviews and post‑acute authorizations.