RICHMOND, Va. — Virginia’s inspector general is investigating a contract worth up to $1.5 million that the state’s Medicaid office awarded to a company owned by a former U.S. government employee who helped oversee federal oversight of the state.

The Department of Medical Assistance Services said earlier this week that it asked for the investigation to “ensure full transparency.” The agency did not say what prompted the request and declined to answer questions.

The Associated Press and lawmakers have made inquiries about the contract in recent weeks.

Medicaid is a government funded health care program for the poor whose costs are split between federal and state governments. The federal government has issued multiple deferrals and disallowances of Medicaid payments in Virginia in recent years.

State records show DMAS officials approved a contract in July to hire Pennsylvania-based AYS Finance Management Services as a federal contracts consultant. AYS is owned by Teia Miller, a former senior-level employee at the federal Centers for Medicare and Medicaid Services who was in frequent contact with state officials about problems with Medicaid contracts, communication that including an official notice in April that the federal government was seeking reimbursement of $13 million in unauthorized use of Medicaid funds.

Internal emails indicate top DMAS officials tried to recruit Miller to work as a state employee, but Miller indicated she wanted a higher salary. In a May 14 email, Miller said she suggested she be hired as an independent contractor at rate that would pay a yearly salary of more than $300,000 for a contract that was to last three to five years. DMAS’ salaries for its top officials top out at around $200,000, according to a database of state employee salaries maintained by the Richmond Times-Dispatch.

“The savings I would bring to DMAS, would well exceed the amount of the contract,” Miller wrote in an email.

The state finalized the contract with Miller’s company in July at a yearly rate of about $320,000.

AYS was hired as a subcontractor on a larger information technology contract with Computer Aid Inc., despite the fact that Miller is assisting with federal contracting and not IT issues. DMAS spokeswoman Christina Nuckols said Computer Aid’s standard fee on subcontracts like AYS is 8.5%.

The contract is for one year, which DMAS can extend as needed. During contract negotiations with Miller, DMAS Chief Financial Officer Chris Gordon indicated in an email to Miller that it would be a five-year contract.

“I look forward to working closely with you in the weeks and years to come,” Gordon said.

DMAS’s internal procurement form shows the agency did not have the attorney general’s office review the contract or provide justification why it didn’t, as is typical practice.

Internal records show little difference between regular state employees and Miller. She uses a state-owned email address and computer. After she was hired, she asked if she could view a new employee orientation remotely. She also submitted reimbursement claims similar to what state employees are entitled to for occasional travel to and from her home in Harrisburg, Pennsylvania, to Richmond, including mileage and per diem.

Miller did not respond to requests for comment.

Nuckols — DMAS’ spokeswoman — said the agency would not comment until after the inspector general’s investigation was complete. Inspector general spokeswoman Kate Hourin confirmed that there is an “ongoing investigation.”

State Sen. Stephen Newman, Republican chairman of the Senate Education and Health Committee, said lawmakers are concerned about the contract and are closely monitoring the investigation.

“We need to know if there are any ties between the offer of a lucrative state contract and the past work of this former federal government employee on Virginia’s DMAS cases,” Newman said.

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Inspector general investigates Virginia Medicaid contract – Washington Post