Objective

To assess the extent of implementation of the four recommendations included in our initial audit report, Improper Medicaid Payments for Misclassified Patient Discharges (Report 2020-S-8).

About the Program

The Department of Health (Department) uses the All Patient Refined Diagnosis Related Groups (DRG) methodology to reimburse hospitals for inpatient medical care. The DRG methodology classifies patients according to their diagnosis and severity of illness, which provides the basis for calculating the reimbursement. When a hospital bills Medicaid for an inpatient stay, the hospital reports certain information on its claims, such as the patient’s diagnoses and services received as well as the date of the admission and when the services ended. Hospitals also report patient status codes to indicate whether the patient was transferred or discharged because DRG reimbursement methodologies for transfers and discharges are different, often resulting in lower payments for transfers.

We issued our initial audit report on August 17, 2021. The audit objective was to determine whether the Medicaid program made inappropriate fee-for-service payments to hospitals that failed to properly report correct patient discharge codes on inpatient claims. The audit covered the period January 1, 2015 through December 31, 2019. We found the Department did not have a process to identify and recover improper Medicaid payments for inpatient claims with incorrect patient status codes. As a result, we identified over $28 million in improper and questionable Medicaid payments for recipients who were reported as discharged from a hospital but then admitted to a different hospital within 24 hours of the reported discharge (which often meets the definition of a transfer).

Key Findings

Officials have made some progress in addressing the problems we identified in the initial audit report, but additional action is still required. Of the initial report’s four audit recommendations, one has been implemented, two have been partially implemented, and one has not yet been implemented.

Key Recommendation

Officials are given 30 days after the issuance of this follow-up to provide information on any actions that are planned to address the unresolved issues discussed in this report.