Objective

To assess the extent of implementation of the five recommendations included in our initial audit report, Improper Managed Care Payments for Misclassified Patient Discharges (Report 2021-S-8).

About the Program

The Department of Health (Department) administers New York’s Medicaid Program. Many Medicaid recipients receive their medical services through managed care, whereby the Department pays managed care organizations (MCOs) a monthly premium for each enrolled recipient and, in turn, the MCOs arrange for the provision of services for recipients and reimburse providers. When a hospital bills an MCO for an inpatient stay, the hospital reports certain information on its claims, including patient status codes to indicate whether the patient was transferred or discharged at the end of their stay. These codes are important because reimbursement methodologies for transfers and discharges are different and may result in lower payments for transfers.

The objective of our initial audit report, issued on August 19, 2022, was to determine whether MCOs made inappropriate payments to hospitals that failed to properly report correct patient discharge codes on inpatient claims. The audit covered the period January 1, 2016 through December 31, 2021. The initial audit identified 2,808 managed care inpatient claims, totaling $32.3 million, for Medicaid recipients who were reported as discharged from a hospital but then admitted to a different hospital within the same day or the following day (which often meets the definition of a transfer). We selected a judgmental sample of 166 claims, totaling $2,474,162, from six hospitals, and reviewed the associated patients’ medical records. Our review found:

• 47 claims were overpaid $323,531 because they were incorrectly coded as discharges when the patients were actually transferred to another facility.
• 13 claims, totaling $101,447, were incorrectly billed as inpatient claims when outpatient services were actually provided.

Key Findings

Department officials made minimal progress in addressing the problems we identified in the initial audit report and significant actions are still needed. In particular, none of the overpaid or high-risk claims we identified in our initial audit have been reviewed. In addition, the Department has not taken steps to ensure MCOs develop processes to identify and recover Medicaid managed care overpayments like those we identified, nor has the Department made enhancements to the Medicaid Data Warehouse to allow for a more thorough review of claims submitted by MCOs. Of the initial report’s five audit recommendations, none have been implemented.

Key Recommendation

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