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Review of Medicaid Claims Made by Freestanding Residential Treatment Facilities in New York State

July 8, 2008 | Audit A-02-06-01021

Executive Summary

The New York State Department of Health (DOH) improperly claimed $21.5 million in Federal Medicaid reimbursement for services provided to beneficiaries residing in 11 freestanding alcohol and substance abuse residential treatment facilities that were institutions for mental diseases (IMD). All 30 of the sampled claims were for beneficiaries between the ages of 22 and 64. Federal Medicaid funding generally does not cover any services to beneficiaries under the age of 65 who are in an IMD.

This overpayment occurred because (1) DOH improperly designated certain detoxification claims as eligible for Federal Medicaid reimbursement; (2) one provider improperly billed Medicaid for inpatient rehabilitation services using an outpatient category-of-service code; and (3) DOH continued to improperly claim Federal Medicaid reimbursement for services furnished by one provider after the provider had increased its number of beds, bringing it within the Medicaid definition of an IMD. DOH said that the State had already refunded a portion of the overpayment.

We recommended that DOH (1) refund the $6.6 million balance of the overpayment, (2) ensure that its controls to designate certain detoxification claims as federally nonparticipating are properly working, (3) designate two providers as federally nonparticipating for beneficiaries under 65 years of age, and (4) determine the amount of improper Federal Medicaid reimbursement claimed subsequent to our audit period and return these overpayments to the Federal Government. DOH concurred with the recommendations.

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