Objective

To determine whether Medicaid made improper payments to hospitals for outpatient services that were erroneously billed as inpatient services for recipients enrolled in managed care. The audit covered the period from July 2019 through June 2023.

About the Program

The Department of Health (DOH) administers the Medicaid program. Most of the State’s Medicaid recipients receive their medical services through managed care organizations (MCOs). When managed care enrollees receive inpatient care or outpatient care from hospitals, MCOs reimburse the hospitals. The Centers for Medicare & Medicaid Services (CMS) defines outpatient care provided in a hospital as care that a patient receives, typically in the emergency department or observation room, without being admitted to the hospital as an inpatient, even if the care takes place overnight. CMS guidance states inpatient admissions are generally appropriate when the admitting practitioner expects the patient to stay through at least two midnights. The audit focused on inpatient claims with patient stays less than 24 hours (“short-stay”) to identify high-risk claims that could have been incorrectly classified as inpatient instead of outpatient.

Key Findings

• From a risk population of 61,171 reported short-stay admissions with payments totaling $684.5 million, we reviewed a sample of 33 totaling $773,492 and found seven (21%) totaling $83,568 were improperly billed as inpatient instead of outpatient. All seven had patient stays of 10 or fewer hours. The remaining risk population of 61,138 reported short-stay admissions totaling $683.8 million was provided to DOH for its review.
• DOH did not conduct reviews of reported short-stay inpatient admissions or provide guidance to MCOs and hospitals to assist them with determining whether a short-stay claim should be billed as inpatient or outpatient, which could have contributed to the billing misclassifications.
• Statements from officials at two hospitals and five MCOs were not always consistent regarding inpatient admission rules, including when patients leave against medical advice.

Key Recommendations

• Develop and provide guidance to hospitals and MCOs to assist them in determining if a service should be billed as an inpatient or outpatient claim, including when patients leave the hospital against medical advice.
• Review the sampled payments we determined were inappropriately billed and recover overpayments. Develop a risk-based approach to review the remaining 61,138 reported admissions that had payments totaling $683.8 million, giving particular focus to shorter patient stays (e.g., patient stays of 10 or fewer hours), to identify improper payments and make recoveries, as appropriate.
• Develop an ongoing process to identify and review the appropriateness of high-risk, short-stay inpatient claims, such as the ones identified in the audit.