ST. PAUL -- Allina Health System agreed Friday to give Attorney General Mike Hatch unfettered access to its books and employees so he can complete a review of the nonprofit company's spending.
The action came more than a week after Hatch filed court papers requesting access to more documents for an audit he began in June. In his court filing, Hatch estimated that nearly half of the health insurance premiums paid to Medica, Allina's HMO, went to administrative costs, including employee perks and image consultants.
While Hatch said Friday he is not drawing any conclusions now or alleging wrongdoing, he still questions whether spending for golf getaways, lavish company parties and big-salary consultants are consistent with the nonprofit's mission.
Hatch said he will conduct similar reviews at the state's other nonprofit health care companies to compare with Allina.
After Allina balked at Hatch's request for thousands of additional documents, a powerful state senator called a hearing to open his own probe. But Senate Finance Chairman Doug Johnson, DFL-Tower, postponed it after Hatch and Allina's chief executive Gordon Sprenger reached the deal, approved by a Hennepin County judge.
"If the audit process should break down again, I will immediately call another hearing," Johnson warned.
Under the deal, former Deputy Commerce Commissioner James Miller will oversee the review and Allina will make all employees and documents available to Hatch, while preserving Allina's right to protect its correspondence with its attorneys.
Hatch is scheduled to complete his audit in July and present a report to the Allina board shortly thereafter. The report and all supporting documents will be made public.
"He has given me his word that the company will be cooperative," Hatch said of Sprenger.
At issue is what percentage of member premiums is going to Allina's administration rather than to direct medical care. Medica reported spending about 10 percent on those costs.
Although the perks and other administrative costs -- which Hatch maintains consume 47 percent of premiums -- may not be illegal, Hatch said they may raise questions whether Medica premiums are higher than they need to be.
Allina maintains that Hatch is overstating its administrative expenses, and the attorney general acknowledged that vague reporting standards complicate matters.
Before Friday's development, Sprenger had complained that Hatch was being unreasonable in his demand for documents. He held that audits conducted by the IRS and the Minnesota Departments of Commerce and Health have consistently shown that Allina lives by the rules that govern it.
But on Friday, Sprenger said he was "delighted to have this (audit) back on track. We always wanted to cooperate."
Sprenger added, "We're interested in getting this all on the table so there's no mystery."
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