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DiNapoli: New Medicaid reimbursement method leads to $31 million in overpayments

by jmaloni

Press release

Fri, Aug 16th 2013 06:30 pm

DOH paid hospitals up to five times amount billed

The state Department of Health made as much as $31 million in excessive Medicaid payments for patients who died within 24 hours of being admitted to a hospital after a new method of calculating hospital payments went into effect, according to an audit released by New York State Comptroller Thomas P. DiNapoli.

"A new payment process that was supposed to be fairer to hospitals is instead being unfair to taxpayers," DiNapoli said. "DOH officials have allowed hospitals to receive significantly more money than they billed for, sometimes amounting to hundreds of thousands of dollars for a single claim. Given the financial challenges facing New York, and the magnitude of the potentially excessive payments we identified, DOH should immediately review its payment methods and correct the problem."

For the fiscal year ended March 31, 2012, New York's Medicaid program had more than 5.5 million enrollees and Medicaid costs totaled more than $50 billion. During that time period, Medicaid paid hospitals approximately $5.5 billion for inpatient services.

Due to a December 2009 change in the law, the Medicaid program implemented a new inpatient reimbursement methodology based on the severity of illness, the risk of mortality and other factors. The previous reimbursement methodology was based primarily on the length of a patient's hospital stay.

DiNapoli's auditors found that since DOH started using the new methodology, Medicaid has paid significantly more for claims when patient deaths occur within the first day of admission.

In a review of 1,833 inpatient claims from Dec.1, 2009, through Sept. 30, 2012, in which patients died within the first day of admission, auditors found Medicaid paid the hospitals $50.8 million, although the hospitals' charges actually totaled $22.6 million. Thus, Medicaid paid the hospitals $28.2 million more than the hospitals charged on their claims. The payments in question averaged 225 percent of providers' submitted charges, or more than five times the overall rate for inpatient claims.

For example, on a claim with hospital charges totaling $9,685, Medicaid paid $153,329 for care provided to a patient who died within the first day of admission. On another claim, a hospital charged Medicaid $36,618, but Medicaid paid the hospital $273,555.

DiNapoli's auditors further determined the state could have saved as much as $31.1 million if the 1,833 questionable claims were calculated under modifications similar to those made for another type of claim in 2011.

DiNapoli recommended DOH:

•Formally assess the new payment system, including the inpatient reimbursement methodology that compensates hospitals for the cost of care when death occurs within one day of admission; and

•Revise the reimbursement methodology as warranted.

In its response to the audit, DOH indicates the reimbursement for one-day inpatient claims should not be examined in isolation and instead must be examined as part an overall evaluation of all claims paid under the new reimbursement system. DOH officials said they will complete an overall evaluation by Dec. 1. Auditors agreed that this would be an appropriate approach.

For a copy of the complete report, visit http://www.osc.state.ny.us/audits/allaudits/093013/12s5.pdf.

In addition to this audit, DiNapoli, as part of his responsibilities to audit state payments, has expanded an ongoing Medicaid audit initiative that has found more than $1.64 billion in waste, fraud and abuse since February 2007, including more than $85 million in 2013.

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