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The objective of this review was to determine whether (1) Oregon calculated its State Fiscal Years (SFYs) 2002 and 2003 upper payment limits (UPL) for non-State government nursing facilities in accordance with Federal regulations and the approved state plan amendments and (2) Oregon’s estimated Medicaid payments for SFYs 2004 and 2005 were within the UPLs. We found that Oregon did not calculate the SFYs 2002 and 2003 UPLs for non-State government nursing facilities in accordance with Federal regulations and its approved State plan amendments. Oregon’s Medicaid payments to non-State government nursing facilities exceeded the UPLs by more than $230.5 million ($137.2 million Federal share) in SFYs 2002 and 2003. In addition, Oregon’s estimated Medicaid payments for SFYs 2004 and 2005 could exceed our projected UPLs per Federal regulations by $76.3 million ($45.9 million Federal share). We recommended that Oregon reduce claimed expenses on its CMS-64 quarterly expenditure reports by $230,538,269 ($137,219,260 Federal share) for SFYs 2002 and 2003 and calculate UPLs in accordance with Federal regulations to prevent Federal overpayments of $45.9 million for SFYs 2004 and 2005. Oregon agreed in part with our findings and recommendations, but disagreed with the Federal share to be returned.