‘Third-party’ auditor investigating Minnesota fraud received millions in state Medicaid funds

The “third-party” auditor contracted by Minnesota to investigate the state’s handling of Medicaid fraud in its social services programming has received millions of dollars through the state’s Medicaid agency in recent years, according to a Washington Examiner analysis of Medicaid spending data.

Optum, the outside firm assessing Minnesota’s Medicaid system for vulnerabilities, raked in more than $18.8 million in state Medicaid funds from January 2018 to December 2024.

The findings come as the state legislature prepares to vote on a bill to release an unredacted version of Optum’s initial audit report, which contained full pages of redactions.

Critics, including local lawmakers, have raised conflict-of-interest concerns about Optum’s seven-figure contract with the state government. The Minnesota Department of Human Services hired Optum to perform the audit for $2.3 million following public pressure to crack down on healthcare fraud within the agency.

Optum is a subsidiary of UnitedHealth Group, the largest health insurance company in the United States by revenue and enrollment. Both are headquartered at the Optum Circle campus in Eden Prairie, Minnesota, about 12 miles southwest of downtown Minneapolis.

In response to a Washington Examiner inquiry, DHS noted that UnitedHealth Group is no longer contracted to provide Medicaid services in Minnesota.

Until late 2024, UnitedHealthcare was the only for-profit managed care organization contracted with Minnesota’s Medicaid agency; the others were nonprofit organizations or county-owned. Designated providers, known as managed care organizations, are authorized to deliver Medicaid benefits through a contracted arrangement with the state government.

UnitedHealthcare and all other for-profit healthcare organizations, as of Dec. 31, 2024, are prohibited from participating in the state’s Medicaid program because of a Minnesota law passed that year requiring managed care contractors to be nonprofit organizations.

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DHS added that Optum State Government Solutions, the healthcare conglomerate’s data analytics arm, is the UnitedHealth Group division the state department is contracting with to analyze years of Medicaid claims.

“Optum SGS is a distinct business unit that supports state-specific policy, compliance, and analytics, including Medicaid claims processing, eligibility systems, and program integrity services,” DHS told the Washington Examiner.

The first tranche of Optum’s audit findings covered fee-for-service Medicaid claims submitted between January 2022 and December 2025, a period that includes when Optum’s medical provider branch was a program participant.

However, sections outlining specific vulnerabilities in Minnesota’s social services were heavily redacted, with some pages completely blacked out.

The Minnesota DHS said that oversight officials, when they decided to redact portions of the Optum report in accordance with the Minnesota Government Data Practices Act, did not want to provide sensitive information to bad actors seeking to take advantage of the state’s Medicaid system.

The redactions included “protections for trade secrets of our business partners and security information that could provide a road map for fraudsters,” DHS told the Washington Examiner. “Optum advised the department on which areas of the report contain trade secrets.”

Republican Minnesota state Rep. Kristin Robbins, chairwoman of the House Fraud Prevention and State Agency Oversight Committee, expressed frustration over the lack of transparency and the public’s inability to see if Optum has flagged any of its own providers in the audit.

“The majority of the report was redacted, so I don’t know what they found. The frustrating thing to me, as a legislator, is that they say they’re on it, and they’re finding fraud, and they’re flagging all these vulnerabilities, except they can’t possibly tell us what they are,” Robbins said in a phone call with the Washington Examiner.

“Yet they want us to spend millions and millions of dollars on technology upgrades,” Robbins said. “Well, until we understand better what the vulnerabilities are, we’re not writing them a blank check.”

Robbins said that DHS moved quickly to find a vendor, and from reading the vendor comparisons, she said that Optum appears to have the largest footprint in the oversight sector, working with many state Medicaid agencies to identify healthcare fraud.

“But we do have to be very careful about conflict of interest,” Robbins added. “And I didn’t see anything about conflict of interest in the discussion, so I am concerned. Did they just waive all conflicts?”

Minnesota House Republicans have advanced a bill, House File 3378, that would require DHS Commissioner Shireen Gandhi, an appointee of Gov. Tim Walz (D-MN), to release the Optum report immediately in its “entirety without redactions or edits.”

Those with full access to the report include Walz, DHS, and the Office of the Legislative Auditor, according to the bill’s authors. The state representatives said that legislators, however, are treated like the public when it comes to accessing proprietary data.

The chamber’s Judiciary Finance and Civil Law Committee is scheduled to vote on the bill at a House hearing this Thursday.

The audit has so far found that over 90% of claims submitted by early autism intervention centers did not properly follow state policies or procedures, an indicator of potentially fraudulent activity.

Between 2018 and 2023, the number of autism service providers surged from just 41 to 328, an abnormal growth driven in large part by poor policy language, according to the Optum report.

The proliferation of autism service providers has accordingly cost DHS millions in state funding. The audit’s vulnerability assessment concluded that out of the $1 billion that the DHS could have saved by enforcing better-written policies, $703 million was spent on autism services alone.

Of the nearly $19 million in Minnesota Medicaid claims paid out to Optum-registered providers, a third of the billing was for durable medical equipment and orthotic devices, one of the “high-risk” service areas flagged by federal officials as susceptible to fraud.

Last week, the Centers for Medicare & Medicaid Services announced a nationwide moratorium on the Medicare enrollment of certain durable medical equipment and orthotics suppliers after CMS discovered over $1.5 billion in suspected fraudulent claims tied to those billing codes.

Optum’s medical offices in Minnesota, mostly operating out of its Minneapolis-area corporate headquarters, submitted approximately $6.9 million in Medicaid claims billed as DME or orthotic support, including hand braces, wheelchairs, canes, walkers, commode chairs, and bathtub rails.

Well over half of Optum’s Medicaid reimbursement claims, $11.7 million, were filed for general medical supplies.

According to the CMS action notice, medical supply companies account for a majority of high-risk billing. On average, such suppliers submit more than 70% of the orthotic brace codes that CMS had identified as vulnerable to abuse and 80% of claims for off-the-shelf orthotic braces, a highly problematic coding category often used to collect Medicare payments illicitly.

OptumRx, the company’s prescription delivery service, billed Minnesota’s Medicaid program for the combined $18.6 million in DME and medical supplies.

In June 2024, OptumRx agreed to pay $20 million to resolve an investigation initiated by the Drug Enforcement Administration into whether it filled opioid prescriptions, placed primarily from a California mail-order pharmacy, for illegitimate nonmedical purposes in violation of the Controlled Substances Act.

Last year, federal prosecutors in the Justice Department’s fraud-fighting unit reportedly investigated UnitedHealth Group’s Medicare billing practices based on suspicion that the healthcare giant deploys doctors to gather diagnoses to boost its payments.

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Sources told Bloomberg that the DOJ was also investigating billing practices at OptumRx and how UnitedHealth reimburses its own physicians.

Optum did not respond to requests for comment.

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