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The answer: state AGs are now going after payers, and that changes your contracting posture
Maryland Attorney General Anthony Brown’s suit against UnitedHealth Group and Optum, filed August 2025 in Baltimore City Circuit Court, signals that state AGs are willing to pursue managed care organizations, not just providers, under state False Claims Acts for billing and utilization failures. For behavioral health operators contracting with UnitedHealthcare Community Plan, Optum Behavioral Health, or any Medicaid MCO, that shift creates two things at once: heightened downstream audit exposure when a payer’s systems produce bad data, and real negotiating room to rework prior authorization, medical necessity, and claims adjudication terms at the next contract cycle.
Here is the underlying fact pattern. Brown filed the lawsuit in Baltimore City Circuit Court, alleging the companies violated Maryland’s False Claims Act, and the suit is seeking approximately $380 million in damages, up to triple the initial contract price. The underlying contract with the Maryland Department of Health ran from 2019 to 2024 and was worth $126.9 million for Optum to manage the state’s Administrative Services Organization program.
The complaint’s core allegation matters for anyone billing SUD or mental health services in Maryland: the system “denied legitimate claims, failed to provide receipts to large-scale providers like hospitals… Paid incorrect amounts to providers, and failed to block rampant, multi-million-dollar fraud in areas such as substance abuse treatment and laboratory urine testing.” Providers were paid on estimates for the better part of a year. That is the operator problem in one sentence.
Why the enforcement climate makes this bigger than one state
Look at the market concentration first. Five for-profit, publicly traded companies account for 50% of Medicaid MCO enrollment nationally, and in FY 2021, payments to comprehensive Medicaid MCOs accounted for 52% of total Medicaid spending, or more than $376 billion. If you run a treatment center in Delaware, Virginia, Pennsylvania, Florida, or any of the other 40-plus MCO states, you are almost certainly billing one of the same parent firms named in Maryland’s complaint.
Now stack the federal enforcement backdrop. The Department of Justice reported settlements and judgments exceeding $2.9 billion in FY 2024, up from $2.68 billion in FY 2023, and nearly $1.7 billion of that total related to healthcare. DOJ specifically flagged ongoing FCA litigation against UnitedHealth Group’s Medicare Advantage business. State AGs and their Medicaid Fraud Control Units, coordinated through the National Association of Medicaid Fraud Control Units (NAMFCU), are watching the same pattern. Add the CMS Medicaid and CHIP Managed Care Final Rule at 42 CFR Part 438, the MHPAEA parity framework enforced jointly by DOL, HHS, and Treasury, and the HHS OIG audit pipeline, and the answer is straightforward: enforcement risk against payers is no longer theoretical, and providers get pulled into the record every time.
The Monday-morning contracting playbook: what to redline in your MCO agreement
If you are a behavioral health operator with an MCO contract up for renewal in the next 12 months, treat the Maryland complaint as free discovery. Here is what belongs on the redline list:
- Claims adjudication SLAs with teeth. Push for a defined clean claim rate obligation from the payer (not just from you), a maximum days-to-adjudicate window, and interest penalties on late payments. If the payer’s system goes down, your pro forma should not.
- Prior authorization standards tied to ASAM Criteria 4th Edition. Require the MCO to apply the current ASAM edition for SUD level-of-care decisions, including for residential withdrawal management and outpatient partial hospitalization. Reject contracts that let the payer swap in an internal medical necessity tool without notice.
- Denial documentation and appeal rights. Contractually require written denial rationale citing the specific criterion, a named clinical reviewer, and a defined peer-to-peer window. This is your MHPAEA record.
- Overpayment/underpayment reconciliation clauses. The Maryland allegations describe both under- and overpayments. Build in a defined lookback period, netting rules, and a cap on retroactive recoupment.
- Audit cooperation limits. Do not agree to open-ended records requests. Define scope, timing, and the sampling methodology.
- Termination for cause tied to regulator action. Give yourself an out if the MCO is sanctioned by CMS or the state Medicaid agency.
As Brown put it in the press release: “Marylanders in crisis and the providers who care for them rely on Maryland’s Medicaid program for essential mental health and substance abuse care.” Providers are named as victims here, not co-defendants. Use that framing when you sit down with your MCO contracting rep.
Denial documentation standards and when to escalate to the AG
The Maryland facts pattern shows why documentation discipline is not a paperwork exercise. When a payer’s system produces phantom denials, incorrect payments, and missing remittance advice, the provider who kept a clean paper trail is the one who gets paid, appeals successfully, and stays out of the fraud investigation. The one who did not gets averaged into the estimate.
Operator-side standards to implement now:
- Track denial rate by CARC/RARC code, by payer, by level of care. If your denial rate on SUD residential claims to one MCO jumps above your baseline by more than a couple of points, that is a pattern, not a fluke.
- Preserve every prior authorization artifact. Portal screenshots, reference numbers, peer-to-peer notes, denial letters. Store them with the claim.
- Reconcile 835s against expected allowables from the fee schedule monthly. The Maryland complaint alleges providers were paid based on educated guesses for nearly a year because the state could not process claims. Do not assume the check equals the contract.
- Know your escalation ladder. Payer grievance, state Medicaid managed care ombudsman, state Insurance Department (for parity), state Medicaid Fraud Control Unit, and the Attorney General’s office. In Maryland, that is Brown’s office directly. Under most state False Claims Acts, providers who identify MCO fraud can file qui tam complaints and share in recoveries.
The 60-day overpayment rule cuts the other direction too. If you identify an MCO overpayment to your own organization, you have a federal obligation to return it. That is not a payer-side risk. That is yours.
Frequently asked questions
Does the Maryland AG lawsuit against UnitedHealth and Optum create direct liability for network providers?
No. The complaint names UnitedHealth Group and Optum, Inc. As defendants under Maryland’s False Claims Act. Providers are described as victims of the broken system. However, providers who knowingly submitted or retained claims they knew were unsupported still carry their own FCA exposure, and the discovery record in this case will likely surface provider-level billing data.
How should operators document prior authorization denials to preserve appeal and regulatory complaint rights?
Keep the full authorization request, the denial notice with the cited criterion, the name and credentials of the reviewer, peer-to-peer notes with time stamps, and the appeal package. This record is what you need for an internal appeal, an MHPAEA complaint to DOL or the state Insurance Department, or a referral to the state Medicaid Fraud Control Unit.
What contract clauses in an MCO agreement should be renegotiated in light of increased payer enforcement?
Focus on claims adjudication SLAs with financial penalties, medical necessity criteria pinned to the ASAM Criteria 4th Edition for SUD care, defined denial documentation standards, capped retroactive recoupment windows, scoped audit cooperation obligations, and termination rights triggered by regulator sanctions against the payer.
Are behavioral health services specifically named in the Maryland complaint, and how does that affect SUD and mental health providers?
Yes. The complaint centers on Maryland Medicaid’s behavioral health program and specifically references substance abuse treatment and laboratory urine testing as areas of alleged fraud that the system failed to prevent. SUD and mental health providers should expect the state to review historical claims data from the 2019 to 2024 contract window.
What are operators’ obligations under state False Claims Acts if they identify MCO overpayments or underpayments?
Federal law requires providers to report and return identified overpayments within 60 days. Most state False Claims Acts, including Maryland’s, mirror that obligation. If a provider identifies MCO conduct that suggests fraud against the Medicaid program, they may file a qui tam action and, if successful, share in the recovery. Get counsel before you file.
References
- CBS Baltimore: Maryland sues UnitedHealth Group and Optum over defective Medicaid computer system
- Fierce Healthcare: Maryland sues Optum over ‘defective’ computer system
- The Baltimore Banner: Maryland lawsuit blames faulty software for Medicaid fraud
- KFF: A Closer Look at the Five Largest Publicly Traded Companies Operating Medicaid Managed Care Plans
- National Law Review: DOJ’s False Claims Act Recoveries Top $2.9 Billion in FY 2024
- Fierce Healthcare: DOJ secured $1.7B from healthcare False Claims settlements, judgments in 2024