This audit was performed jointly with the Office of Inspector General of the Illinois Department of Public Aid and the Illinois Division of Medical Programs as part of the Inspector Generals partnership efforts with States to expand audit coverage of the Medicaid program. This final report points out that hospitals claimed excessive Medicaid reimbursements by coding transfers to other prospective payment hospitals as discharges (discharges usually qualify for higher reimbursement). We estimate potential improper payments of approximately $2.3 million ($1.2 million Federal share) during the period July 1996 through February 2000. In addition to financial adjustments, we recommended that the State agency provide additional guidance to hospitals, emphasizing the importance of coding the correct patient status at the time of discharge/transfer. We also recommended that the State review the potential for effective controls in its claims processing system to detect, monitor, and correct inpatient hospital claims improperly coded as discharges.