Elizabeth Earl

Peninsula providers sue Xerox over Medicaid payment snafus

KENAI — Three Kenai Peninsula health care providers filed a lawsuit against Xerox State Healthcare for failing to provide contracted services. South Peninsula Hospital in Homer, the Kenai Vision Center and the Alaska Speech and Language Clinic, both in Kenai, filed the lawsuit in federal court, requesting that it be designated a class-action lawsuit. Xerox State Healthcare, a Georgia-based subsidiary of Xerox Corporation, provides Medicaid claim technology to state health care organizations. Alaska implemented one of Xerox State Healthcare’s Medicaid Management Information Systems in October 2013, intending to use it to manage reimbursement. However, the system was unable to accept new, legitimate claims that day. Claims were rejected, leading to a loss in reimbursement for the approximately 22,000 health care providers enrolled, costing “hundreds of millions of dollars,” according to the complaint. “The providers were deprived of regular reimbursement for many months, and had to fund operations from other sources or go out of business,” the complaint states. “The need to resubmit improperly rejected claims required health care providers to incur labor costs of clerical time. Some larger providers hired additional staff, while others paid overtime to existing employees, to the detriment of other parts of their medical businesses.” The plaintiffs also claim that Xerox knew the system was faulty. The state engaged a company called ACS State Healthcare to build an MMIS in 2007. Although the company said it would have a system ready to launch by October 2010, it was not ready to go live until three years later. Xerox acquired ACS in 2010. The Alaska Department of Health and Social Services tested the system in September 2013, just before it went live, and found 44 errors that it requested Xerox correct. The company replied with reassurances that the system was ready to go live, which the DHSS believed, according to the complaint. In addition to supplying a system that failed, Xerox also allegedly refused to fix the problem for months, according to the complaint. A DHSS investigation in 2014 revealed that “hundreds of thousands” of unprocessed paper claims from smaller providers were sitting in stacks in the Xerox facility. A large number of electronic claims were also “suspended,” with no action for extended periods of times, according to the complaint. Providers immediately noticed the problem when few claims were accepted, and those that were received no reimbursement. South Peninsula Hospital bills approximately $16 million to Medicaid every year, about 28 percent of its income; Kenai Vision Center bills approximately $150,000 annually, and the Alaska Speech and Language Clinic billed $14,160 between October 2013 and early 2014. “The effect on providers was the same as with the unprocessed paper claims: reimbursements were not received, causing financial hardship,” the complaint states. To bail out the health care providers, the DHSS lent out approximately $160 million, to be repaid when the claims were processed. All the providers had to resubmit all their claims between four and seven times over the next two years to receive payment, according to the complaint. “In many situations, resubmitted claims were rejected as well,” the complaint states. “One dental practice has written off over $500,000 in claims that it was unable to submit within one year of the dates of service because of the MMIS failure.” The Alaska Speech and Language Clinic was forced to cut back its services. Kenai Vision Center’s office manager spent more than 200 hours troubleshooting and still has not been reimbursed $3,000 for Medicaid claims. South Peninsula Hospital employees put in 971 hours of overtime as well as extra time during the day, which delayed billing to other insurance companies, according to the complaint. Derotha Ferraro, the director of public relations and marketing for South Peninsula Hospital, said the state had multiple conversations with the hospital during the time the system was not working properly. Winning the lawsuit would be a positive outcome for the providers, but it is essentially compensation for what they have already spent to overcome the system’s failures, she said. “We had hard costs, things like overtime, extra staffing trying to make heads or tails of things and resubmit claims and research claims and everything, just trying to survive that Medicaid confusion,” Ferraro said. “But then there’s also lost opportunity. We really had all of our staff, which isn’t very many, focused on this and we were missing other opportunities.” The plaintiffs are asking for three times their damages plus punitive damages. Arthur Stock, an attorney from Philadelphia-based firm Berger & Montague who is coordinating the case with Kenai-based attorney Peter Ehrhardt, said it will be some time before any action is taken. Although the complaint lists a general punitive amount, he said he could not disclose a more exact figure. A representative from Xerox did not reply to a request for comment. This is not the first lawsuit over the failed MMIS system. Alaska DHSS sued Xerox in September 2014 over the failed system, demanding that the company fix the problems. The company responded and all major problems were corrected by March 2015, according to Gov. Bill Walker’s office. Elizabeth Earl can be reached at [email protected]

Hilcorp applies for two exploration wells near Ninilchik

KENAI — Hilcorp Alaska’s plans to drill two additional oil and natural gas exploration wells southeast of Ninilchik are moving forward into the permitting phase. If approved, the company plans to begin clearing vegetation in late September, construct a gravel pad and begin drilling two wells to be completed by May 2016. Hilcorp has been exploring in the Deep Creek unit, near Happy Valley, since 2013. The plans for the Happy Valley Middle Pad have been in the works since March 2004 under then-operator Unocal. The company is currently working in four other pads in the Deep Creek Unit and has proposed another pad to the northwest of the Happy Valley Middle Pad. The company says it presented the initial idea to the public in Ninilchik in October 2014. “Hilcorp employees are actively engaged with regulators and stakeholders on all activities within the state,” the company said in the application. “Hilcorp community outreach to date has included presentations to the Kenai Chamber of Commerce, the Alaska Support Industry Alliance, the Anchorage Chamber of Commerce, and the Cook Inlet Regional Citizens Advisory Council. Hilcorp has also participated in Ninilchik Natives Association, Inc. board meetings to present project updates.” The proposed gravel pad will be approximately 300 feet by 400 feet and will include an approximately 2 mile access road. Because the proposed road will cross the Happy Creek, the company will construct a bridge and install a 12-foot culvert, according to the application. The road will connect to an existing logging road, an extension of Tim Avenue, which branches off the Sterling Highway at milepost 142.8. To support the culvert and additional access, approximately 175 feet of Tim Avenue will be widened. The contractors will attempt to use existing road material to widen the road and propose to fill in approximately 0.02 acres of wetland to prevent future erosion of the road, according to the application. If granted, the permit does not allow the company to set up a permanent operation — if the exploration is successful, the company will have to file another application for permission to continue. A Hilcorp spokesperson did not return a request for comment regarding a construction start date or potential hires within the area. The company said in its application that 88 percent of its workforce is made up of Alaska residents. If the project is successful, the company will establish permanent drilling facilities and build a buried pipeline that would stretch 5.6 miles to reach an existing Enstar pipeline, according to the application. Hilcorp, a privately held company based in Houston, Texas, has rapidly expanded its holdings in Alaska in the last decade. After it won a regulatory approval for its purchase of Marathon Oil’s Alaska assets in 2012, Hilcorp took control of approximately 70 percent of the natural gas production in the Cook Inlet. In July, the company cut a deal with Exxon Mobil subsidiary XTO Energy to purchase its Cook Inlet holdings for approximately $550 million. Elizabeth Earl can be reached at [email protected]


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