Contracting Practices for Tennessee Home & Community-Based Services for Mentally Retarded Persons

The United States Department of Health and Human Services (HHS), Office of the Inspector General (OIG) reviewed the State of Tennessee's contracting records for home and community-based services (HCBS) between July 1, 2000, through June 30, 2002.

The objective of this review was to determine whether the State of Tennessee Medicaid agency complied with federal and state regulations in awarding and monitoring contracts for the HCBS mental retardation and developmental disabilities program. The 11 contracts audited from a list of 135 contracts totaling approximately $300 million represented $19.7 million in expenditures (federal share $9.9 million) between July 1, 2000, and June 30, 2002.

The OIG determined that the State Medicaid agency, through the Tennessee Department of Mental Retardation Services (DMRS) did not comply with federal and state regulations in awarding and monitoring HCBS contracts. Of the 11 judgmentally selected HCBS contracts we reviewed, none completely complied with regulations. The regulatory violations occurred because the Tennessee Medicaid agency did not establish adequate procedures to monitor DMRSs contracting activities, and DMRS lacked sound administrative controls over the contracting process. By not following federal and state regulations governing the awarding and monitoring of contracts, the State agency had no assurance that the 4,300 mentally retarded and developmentally disabled beneficiaries received the intended HCBS benefits.