Alaska officials want medical providers to pay back millions in Medicaid payments

Alaska health care providers are being ordered to pay back millions of dollars in Medicaid payments that the state health department says they received in error.

The Alaska Department of Health and Social Services needs to recoup a total of about $15 million from about 1,100 health care providers, according to Jon Sherwood, deputy commissioner for Medicaid and health care policy at the department.

"It was a really big shock," said Angela Beplat, an occupational therapist and owner of Nature's Way Rehabilitation Services in Soldotna. Beplat, the sole, part-time provider at her business, expects to repay a few thousand dollars that she had received as payment through Medicaid, the state-federal program that provides health care coverage for low-income Americans.

"It just felt like a really bad joke," Beplat said.

The state health department is still calculating how much each health care provider must pay back, Sherwood said. The payments will likely range from a couple dollars to $1 million depending on the number and type of services the providers billed to Medicaid between October 2017 and the end of June — the monthslong stretch when the state says it was paying too much.

"This was a mistake on our part," Sherwood said. "It was an omission."

The mistake: Last year, Alaska cut Medicaid payments by about 10 percent for services billed by medical professionals providing primary, specialty and acute care, including physicians, physical therapists, chiropractors and optometrists. The reduction was supposed to go into effect Oct. 1, 2017. But it didn't.


The error was caught last month, and the state is now implementing the cut retroactively. Alaska health care providers aren't happy.

"Providers in Alaska who are seeing people with Medicaid shouldn't be the ones who have to pay the price for what the state of Alaska is calling, quote, an administrative oversight," said LeeAnne Carrothers, president of the Alaska Physical Therapy Association.

In interviews, health care providers said they were surprised, confused and concerned to learn they had to send money back to the state. It was something they hadn't budgeted for, they said. Some said they worried the recoupment paired with the reduction would be enough to persuade some health care providers to turn Medicaid patients away, or at least further limit how many they treat.

"I definitely have to reconsider how many kids I'll be able to see on Medicaid and not only just because the cost of repayment but the reduction in rate," said Nancy Lovering, a speech-language pathologist in Anchorage and a representative for the Alaska Speech-Language-Hearing Association. "My rent didn't go down and my malpractice insurance didn't go down, but my reimbursement continues to go down."

Sherwood said the Medicaid reduction can be traced back to 2016 when the health department had to tighten its budget for the 2017-18 fiscal year in light of the state's multibillion-dollar budget deficit. It cut costs in several ways, including reducing Medicaid payments for services from primary, specialty and acute care providers. Sherwood called the 10.3 percent reduction "very unusual." The rate change went through the required regulatory process, including a 35-day public comment period, he said.

While the other cost reductions went into effect, Sherwood said, the 10.3 percent cut never got implemented. That's because the state didn't submit a work order to have its vendor change the rates in its Medicaid payment system. There was a lack of clarity about who was responsible for submitting the work request, the department said.

"In the case of this regulation, it involved multiple divisions and would have resulted in multiple work orders," Sherwood said. "We did not catch that one of the work orders that should have been attached didn't move forward."

The department typically has over 250 work orders at any given time, according to a health department spokesman.

Changing the rates in the system would have also triggered additional notifications to health care providers — alerting them that a reduction was underway, Sherwood said.

The error wasn't caught until last month when someone went to adjust the Medicaid rates, and realized they'd never been reduced, he said.

Now, the state must backtrack and enact the 10.3 percent cut retroactively, recouping about $15 million, Sherwood said. The state's Medicaid services budget totals about $1.7 billion.

"We do have an obligation to recoup overpayments and return the federal portion because Medicaid is both federally and state funded," Sherwood said. "We regret that providers have to deal with this."

Sherwood said the department expected to tell medical providers how much they owe by the end of July. Providers can pay back the money all at once or in installments, he said. He also expected the state to allow providers to request a hardship waiver if they can't pay.

Beplat, Lovering and other health care providers said they had a lot of questions for the state, including how much they would have to pay back and by what date.

"There's a lot of unknown factors," said Brice Alexander, medical practice administrator at Anchorage Pediatric Group, a nine-provider clinic.

Some providers said they had heard talk about the possibility of a Medicaid payment reduction last year, but when they never got notice that it was going into effect, they assumed it had not gotten approved or didn't impact their practice.

"I was told we'd get a 30-day notice," said Lovering, who is the sole provider at her business, and has one part-time employee. "There's been literally no notification from the state."


"We just assumed things were not affecting us as much as we thought they would be," Alexander said.

Alexander estimated the Anchorage clinic will have to pay back roughly $100,000. Providence Health and Services Alaska could have to repay anywhere from $500,000 to $1 million, said a spokeswoman. Lovering estimated she'd have a bill for roughly $7,000 or $8,000.

"I know there are other practices that are going to be paying much more," Lovering said. "I have co-workers who are retiring at the end of the month and it's like, what are they going to do? No one expected to have to write a check for $8,000."

Sherwood said he wasn't aware of the state failing to implement a Medicaid payment adjustment in the past. He said the health department had recently reviewed and changed some of its policies in an effort to avoid having it happen again.

"We have clarified our policies to make sure everyone understands their roles and to make sure there's a certain level of redundancy — that it's not dependent on one person getting everything right," he said.

Tegan Hanlon

Tegan Hanlon was a reporter for the Anchorage Daily News between 2013 and 2019. She now reports for Alaska Public Media.