More than 3,000 Minnesota care providers found out earlier this week the state and federal government has terminated their Medicaid funding, and they have 60 days to file an appeal. This is the result of the Minnesota Department of Human Services (DHS) conducting a five-month review of over 5,500 providers that depend on Medicaid.

The review came amid continued federal scrutiny of Minnesota social service organizations, spurred by the state’s pandemic-related fraud scandals.

In December, the Centers for Medicare & Medicaid Services announced it would withhold $2 billion in Medicaid funds from Minnesota. A month later, DHS announced it would revalidate over 5,500 “high-risk providers” by May 31.  During the revalidation process, which typically happens every five years, DHS reviewed care providers’ ownership disclosures and proofs of insurance, verified the number of required service providers, and made unannounced on-site visit, according to a news release DHS sent out on Thursday.

Of the 5,500-plus providers, 2,061 were revalidated and are continuing to provide Medicaid services without interruption. Just over 3,400 were notified they will stop receiving payments. Of those, 2,491 were told this was due to incomplete documentation, 916 because of failed on-site verification visits, and four because of failed background checks.

Deputy Commissioner Shireen Gandhi expressed concern for patients, saying in the release, ​​“More than 1 million Minnesotans deserve to have confidence and trust in the Medicaid providers they depend on for lifesaving and life-affirming care.”

Business Perspective on Medicaid Cuts

The more than 3,000 care providers in the state whose Medicaid funding was cut include both well-established companies and startups like YourPath Health, a venture-backed, St. Paul-based startup that serves as a drug rehabilitation center.

Two weeks ago, a DHS agent arrived at YourPath Health for an unannounced site visit. “There was no communication between site visit and [the] letter,” says Jordan Hansen, CEO of YourPath.

Hansen says he was stunned when he received a notification from the state that his business couldn’t bill for Medicaid any longer.

“My reaction was ‘We are closing, essentially,’” he tells TCB. Nearly all of YourPath’s patients use Medicaid.

RELATED: The New Health Care Arms Race: Minnesota Hospitals Bulk Up

Hansen says what got the company dinged was that it failed to disclose that two of his partners haven’t seen patients in two and four years, respectively. But, he adds, it wasn’t because of fraud.

“When we launched YourPath, we didn’t know we needed venture funds,” Hansen says. “We started out under two private practices with counseling and medical services. Over time, we replaced [those services] with an outpatient program.”

Since Monday, Hansen has filed an appeal with DHS to re-establish its Medicaid funding. The company is still seeing patients, but Hansen says the company isn’t allowed into the state’s MN-ITS system to see whether patients’ insurance covers YourPath’s services.

DHS says providers have 60 days to file an appeal. It adds that, while some care providers may appeal, “the disenrollments mean some Minnesotans will need to change the way they access Medicaid services.”

There’s a new webpage helping Minnesotans find care, listing resources for connecting to new services.