A recent review of North Carolina’s Medicaid administration found a need for organizational improvements. Part of the answer for DHHS is to hire several high-priced consulting firms.

By Rose Hoban

In the wake of a consultant’s report stating that North Carolina’s Medicaid program needs to beef up its organizing, budget forecasting and administrative capabilities, health leaders have hired two more consulting firms to guide the Division of Medical Assistance, which manages the Medicaid program, through administrative changes.

In two no-bid contracts that allow for individual consultants to be paid as much as $803,000 per year, two management consulting firms will advise DMA on reorganizing the finance section and assessing the program-integrity and audit sections.

The first contract, for $3.25 million, went to the consulting firm Alvarez & Marsal to create a new organizational structure for DMA, including writing job descriptions and recruiting people to fill financial positions in the Medicaid program.

The consultants also will review the organization and performance of the NCTracks program and the division’s communications.

Staffing details from Alvarez and Marisal contract.
Staffing details from Alvarez and Marsal contract.

The firm Alvarez & Marsal is best known for being tapped in 2008 to manage the bankruptcy of financial giant Lehman Brothers at a cost of nearly a half-billion dollars. Critics of the financial bailout said that bill was too high.

The contract calls for work to be done by eight people with salaries ranging from $242 to $473 per hour and an “intern” earning $84 per hour. One of the consultants, a “director,” is slated for 2,040 hours of work for total earnings over the year of $803,760 (see chart.).

More recently, Alvarez & Marsal drew scrutiny in Louisiana, where the firm received a $4 million contract to find efficiencies in that state’s Department of Administration. Louisiana included a clause in its contract with the firm that if the state does not meet savings targets based on Alvarez & Marsal’s suggestions, the state can withhold $600,000 of the total payment.

No such clause exists in the North Carolina contract, which also stipulates that the state can extend the contract for another year if necessary.

The second contract, for $487,500, went to Navigant Healthcare to do an assessment of DMA’s fraud-detection and audit sections and develop budget and strategic plans for each section. That contract lacked details about individual salaries for consultants, but stipulates a total of 1,950 hours of work during the year of the contract.

“DHHS is bringing in leading service firms to improve and strengthen operations of the state’s Medicaid program,” wrote DHHS spokesman Kevin Howell when queried about the high-priced consulting contracts.

“We have directed them to identify opportunities to deliver Medicaid services more efficiently and effectively – and be part of the solution.  DHHS and the beneficiaries we serve will benefit from the knowledge and experience these firms bring to the table.”

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7 replies on “Consultants Make Top Dollar to Scrutinize N.C. Medicaid”

  1. Working in the Mental Health field, I came up with the following: At the current average LME/MCO reimbursement rates, $803,760 represents the following – Individual Therapy with a Licensed Clinical Social Worker for 45 minutes 1X/2 weeks for a year for 526 people – OR – A 40 minute medication management session with a Psychiatrist 1X/month for one year for 587 people. What do YOU think of these numbers?

  2. The table in this article outlines estimated times for certain positions. As a professional in the consulting business, I understand estimated hours and amounts, but I don’t believe that should be what is charged. While I haven’t seen the contract, I would “hope” the billing is based on actual hours and that those hours have enough detail to be acceptable. Has anyone looked at this?

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