Purpose

To determine whether the Department of Health established adequate controls over inpatient claims for recipients who were transferred between merged or consolidated hospitals and whether corresponding overpayments occurred. The audit covered the period from December 1, 2009 through June 30, 2014.

Background

The Department of Health (Department) administers the State’s Medicaid program. The Department’s responsibilities include establishing Medicaid policies for reimbursing hospitals and other health care providers for their services. Generally, when a Medicaid recipient is transferred among different hospitals, two separate payments are made: a payment for the first hospital’s claim and a payment for the second hospital’s claim. However, according to the Department’s regulations, separate payments are not allowed when transfers occur among hospitals or divisions that are part of a merged or consolidated facility. Under these circumstances, when a recipient is transferred from the first hospital to a merged or consolidated division or hospital, only the first hospital should bill Medicaid one claim for the entire episode of care.

Key Findings

• Medicaid made $1.6 million in actual overpayments and up to $5.3 million in potential overpayments because separate payments were made for recipients transferred among merged or consolidated facilities. Since the recipients were transferred between merged or consolidated facilities only one payment should have been made – to the first hospital.
• The Department did not enforce their regulations regarding Medicaid reimbursements for hospital transfer claims among merged or consolidate facilities. Further, the Department lacks an automated mechanism to identify merged hospitals and, as a result, it cannot readily detect or prevent inappropriate payments for inpatient transfers among these facilities.

Key Recommendations

• Review the improper payments for hospital transfer claims and recover inappropriate payments.
• Establish and implement policies to enforce regulations for inpatient transfers among divisions of merged or consolidated facilities.
• Develop and implement mechanisms to identify merged and consolidated hospitals and to prevent payments for inpatient transfers between them.
• Inform providers how to properly bill for patient transfers among divisions of merged or consolidated facilities.

Other Related Audits/Reports of Interest

Department of Health: Improper Medicaid Payments for Misclassified Patient Discharges (2009-S-26) 
Department of Health: Medicaid Claims Processing Activity April 1, 2013 Through September 30, 2013 (2013-S-12)
Department of Health: Medicaid Claims Processing Activity April 1, 2011 Through September 30, 2011 (2011-S-09)