OPA says the company received 'preferential treatment,' contract led to $4.9M in questioned costs
By Mar-Vic Cagurangan
Guam Memorial Hospital has paid a consulting firm for billing and collection services based on an unreasonable compensation formula, leading to $4.9 million in dubious costs, according to the Office of Public Accountability.
The OPA said MedHealth Solutions LLC's unreasonable fees were not commensurate with its performance during the contract period from 2021 and 2022.
While the hospital’s financial audits showed increases in gross patient revenues during fiscal years 2021 and 2022, OPA noted that GMH collected only around 47 percent to 48 percent of gross patient revenues during the contract period.
During the years before MedHealth's contract, OPA noted that GMH’s revenue collection rate averaged between 58 percent and 59 percent.
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The questionable compensation scheme and poor performance were among the several anomalies red-flagged by the public auditor on the hospital’s deal with MedHealth.
The OPA said MedHealth received “preferential treatment” despite being a “nonresponsive” bidder.
“This audit reviewed the acquisition and performance of the Revenue Cycle Management contractor in great detail and noted several deficiencies that warrant further legal review,” Public Auditor Benjamin J.F. Cruz said.
“What really baffles me in all my years of public service is how GMH management allowed an unsolicited bidder to receive a multi-million-dollar contract that was non-responsive to begin with,” he added.
MedHealth provided revenue cycle management services to GMH from June 2021 to Nov. 3, 2022, and billed the hospital $5 million.
Based on the contract, MedHealth was to receive 12 percent for amounts collected above the hospital’s projected monthly collections of $7.2 million.
GMH earlier explained that MedHealth's payments were “contingent on collections exceeding the estimated projections, at which point it will receive 12 percent of the amounts above that projection as a contingency.”
GMH canceled the contract after finding that the company had an expired license. According to the Department of Revenue's record, MedHealth's license expired in August 2022.
But the OPA found that GMH’s solicitations for the revenue cycle management services showed "indications of preferential treatment" toward hiring MedHealth.
The OPA, for example, noted that GMH allowed MedHealth to submit percentage-based model proposals following a request from a "contractor affiliate." GMH issued a solicitation "after discussions with the contractor" and drafted a contract that included the exact compensation terms sought by MedHealth.
"GMH’s procurement regulations define a responsive bidder as a person who has submitted a proposal that conforms in all material respects to the RFP," the OPA said, "We found that the contractor was not responsive with the terms of the RFP because there were two instances in which the contractor violated the provision by providing cost or pricing data in its proposal."
The company’s ownership has also been a subject of speculation. An affidavit of ownership disclosure signed on July 21, 2020 listed Rene Ramos, Paul Pineda and Glen Hermes as MedHealth’s owners.
'The OPA said the scope of MedHealth’s contract included the collection from self-pay payors and third-party insurers and involvement in Medicare cost reporting.
However, citing GMH’s statement, OPA said these functions were not performed by the contractor and “instead fulfilled through guidance in claim process improvements, including coding, and GMH seeking a secondary contractor for Medicare cost reporting.”
“From the unsolicited offer by a contractor to them being granted preferential treatment by submitting percentage-based compensation when the RFP clearly stated a fixed-price cap for the initial term; to an unreasonable basis for the contractor billing GMH $5 million for services rendered, to which GMH stated they did not perform, we concluded to question $4.9 million paid and/or recognized as payable by GMH for the contractor’s invoices,” Cruz said.
Before being contracted as a consultant, MedHealth performed a no-cost assessment of the hospital’s revenue management in 2019 through the extension of an unsolicited offer, the OPA said.
“GMH subsequently made three attempts – one sole source procurement and two requests for proposal – to formally procure a contractor for RCM services. We noted several compliance deficiencies in GMH’s processing of the contractor’s unsolicited offer and the three subsequent procurement attempts for RCM services," the OPA said.