Purpose

To determine whether the Medicaid program made improper payments to Certified Home Health Agencies under the Episodic Payment System. The audit covered the period May 1, 2012 through December 31, 2015.

Background

Effective May 1, 2012, the Department of Health (Department) implemented the new Episodic Payment System (EPS) to reimburse Certified Home Health Agencies (CHHA) for health care services provided to Medicaid recipients in the home. CHHAs provide various services including, but not limited to: part-time services to individuals who need skilled health care; long-term nursing services; home health aide services; physical therapy; and social worker and nutrition services. CHHAs allow Medicaid recipients to receive services in their homes instead of unnecessary placement in medical facilities, such as hospitals or rehabilitative centers.

The EPS is based on 60-day episodes of care. CHHAs can be paid for a full episode (when the episode of care is 60 days) or for a partial episode (when the episode of care is less than 60 days). Payments for a partial episode may be pro-rated based on the number of days of care on the claim or may be a full payment for certain circumstances – such as when the patient is transferred to hospice, a hospital, or home self-care or in the event of the patient’s death. For the period May 1, 2012 through December 31, 2015, Medicaid made $1.2 billion in EPS payments.

Key Findings

Auditors identified about $16.6 million in improper Medicaid payments to 95 CHHAs. About 93 percent ($15.4 million) of the overpayments went to 20 CHHAs. Specifically, the audit found:

• $8.2 million in overpayments to CHHAs for recipients who were transferred into Managed Long Term Care (MLTC) during a 60-day episode of care. The CHHAs should not have received full 60-day payments. Rather, the CHHAs should have received pro-rated payments for the partial episodes of care. For example, a CHHA received a full payment of $11,607 for a recipient who received home health services for only four days. On the fifth day, the recipient was enrolled in an MLTC plan. The CHHA billed Medicaid using an incorrect discharge status code of “Discharged to Home or Self-Care” on the claim. If the provider used the correct discharge code, the provider would have received $774 (not $11,607) for the episode. As a result, Medicaid overpaid $10,833 for this episode of care;
• $7.1 million in overpayments to CHHAs that improperly billed multiple episodes for the same recipient within 60 days of the recipient’s original episode start date; and
• $1.3 million in overpayments to CHHAs that improperly received full 60-day payments for recipients who subsequently obtained services from a different CHHA within 60 days of an episode of care.

Auditors also determined that the Department had not established controls to identify, prevent, and recoup the types of overpayments we identified.

Key Recommendations

• Review the $16.6 million in improper payments made to CHHAs and recover overpayments, as appropriate. Ensure prompt attention is paid to those providers that received the largest dollar amounts of overpayments
• Develop and implement mechanisms to identify and recover overpayments when CHHAs do not bill according to Department guidelines.

Other Related Audits/Reports of Interest

Department of Health: Appropriateness of Medicaid Eligibility Determined by the New York State of Health System (2014-S-4)
Department of Health: Optimizing Medicaid Drug Rebates (2015-S-1)