Colorado Medicaid MCO Adjusts 2000 Financial Outlook After Discovering Accounting Error

One of Colorado's largest Medicaid managed care plans, Colorado Access, is "further in the red than anyone knew," mostly because of an accounting error that was discovered just a few weeks ago, the Denver Post reports. The HMO covers about 160,000 Medicaid and CHIP program beneficiaries. The company's "[o]utdated" accounting programs overlooked a $7 million debt on the HMO's 2000 income, putting the company in worse financial shape than expected. Last week, Colorado Access officials told state insurance regulators that the HMO actually had lost $3.37 million in 2000, instead of earning a $1.1 million profit. In the first half of 2001, the HMO reported a $2.5 million loss. Colorado Access CEO Don Hall said, "It's an embarrassing accounting error," noting that the HMO's "rapid membership growth" has "outpaced" it's accounting system capacity. The HMO faces another "more troubling problem," the Post reports. When the HMO negotiated 2001 reimbursement rates with care providers, it based those payments on what "executives thought had kept the HMO in the black in 2000." But the contracts are "eroding the HMO's bottom line to the tune of $200,000 to $400,000 a month," the Post reports. Beneficiaries' medical bills also outpace money the HMO receives in premiums and state Medicaid funds. Hall said that the HMO will not cut back services for beneficiaries but might have to adjust reimbursement rates next year. In the meantime, the HMO has "dipped into its cash reserves" to boost its "bottom line." To operate in Colorado, HMOs are required to maintain cash reserves, also known as "risk-based capital." Because Colorado Access has "dropped just below its required cash reserve level," the HMO has filed a "corrective action plan" with the state Division of Insurance that should replenish the reserves by February (Austin, Denver Post, 9/6). For further information on state health policy in Colorado, visit State Health Facts Online.