State reviewing findings and processes from third-party audit as next phase of development begins



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NEWS RELEASE



*Feb. 6, 2026*




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Jennifer Amundson
651-431-5692
[email protected]

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Minnesota advances work on Medicaid anti-fraud systems

"State reviewing findings and processes from third-party audit as next phase of development begins"

Work to update Minnesota’s Medicaid claims processing systems using advanced analytics has cleared its first hurdle. The state expects to have a complete pre-payment review process in place by the end of the year.

Over the last three months, Optum has been working with the Minnesota Department of Human Services to develop an automated system to review fee-for-service Medicaid claims before they are paid, flagging items that need additional review before they are paid.

To guide that work, the company reviewed nearly four years of past Medicaid claims in 14 high-risk services to test software algorithms. Optum also reviewed Minnesota’s policies for paying Medicaid claims. While the first phase of that work is complete, the testing found areas where the state and Optum need to revise some data sets for the system and consider policy updates to improve efficiency. 

This initial reporting revealed patterns of claims in Early Intensive Developmental Behavioral Intervention services that didn’t match clear policies or procedures. If the pre-payment system being developed now had been in place at the time, these items would have been flagged for further review and payments paused, until additional investigation was completed. A flag for further review does not mean the service was inappropriate.

“This is not a measure of fraud, waste and abuse, but it shows us where we need to do more work to understand why these claims are raising red flags,” said John Connolly, deputy human services commissioner and state Medicaid director. “We may need to clarify policies so claims that deserve to be approved are not unnecessarily flagged. In other cases, providers may not have the training they need to file claims properly. We won’t know until we do the work to understand.”

This is the first set of reports from Optum after just 90 days. Over the next 9 months the state will continue to refine work on the pre-payment system. If the department identifies activity that looks suspicious, it will be investigated and referred to law enforcement if necessary.

“Health care payments systems are complex. To run correctly, they need a lot of information,” said Connolly. “It can take months to fine-tune the software and the processes to get these programs working. Once that work is done, it can reduce the risk of fraud.” 

In the first 90 days of its one-year contract Optum has: 


* Established a pre-payment analytics process
* Executed 192 targeted analytics across 14 high-risk service areas
* Initiated pre-pay claim analysis with each payment cycle
* Completed a quality control protocol (claims editing) to assess automation opportunities 

The reporting by Optum represents a point in time at the conclusion of the first 90 days of work. Minnesota will continue to work with Optum to refine the pre-payment system for Medicaid processing. Over the next 9 months, work will continue to refine processes, automate the pre-payment review process and establish efficient workflows.

“As this process continues, we will be as transparent as we possibly can. We’re not just building a prepayment review system; we’re working to rebuild trust with the people of Minnesota. It means we will have to show our work as we move forward, being willing to admit that we don’t have all the answers yet,” said Connolly. “Right now, Minnesota is doing more than any other state when it comes to minimizing the risk of fraud, hardening our systems against bad actors and aggressively investigating suspected fraud, waste and abuse, referring cases to law enforcement when we find wrongdoing. Our goal is to win back trust by making Minnesota a national leader in Medicaid program integrity.”

Since the fall of 2024, the Minnesota Human Services Department has introduced new processes and reforms to detect and prevent fraud by:


* Identifying 14 high-risk services and establishing a licensing moratorium on new service providers in those programs
* Discontinuing the Housing Stabilization Services program
* Auditing Autism Service providers, including onsite visits
* Implementing licensure for autism centers
* Disenrolling inactive providers
* Beginning enhanced pre-payment review before fee-for-service payments are made to providers in the 13 high-risk services

More information about Minnesota’s efforts to fight fraud can be found on the Medicaid program integrity webpage [ [link removed] ].

 

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