California Made Incorrect Medicaid Electronic Health Record Incentive Payments to Hospitals

Although the California Department of Health Care Services (State agency) made Medicaid electronic health record (EHR) incentive program payments to eligible hospitals, it did not always make these payments in accordance with Federal requirements. Specifically, from October 1, 2011, through December 31, 2015, the State agency made incorrect Medicaid EHR incentive payments to 61 of the 64 hospitals reviewed, totaling $23.2 million. These incorrect payments included both overpayments and underpayments, resulting in a net overpayment of $22 million. Because the incentive payment is calculated once and then paid out over 4 years, payments made after December 31, 2015, will also be incorrect. The adjustments to these payments total $6.3 million.

The Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009, established Medicare and Medicaid EHR incentive programs to promote the adoption of EHRs. As an incentive for using EHRs, the Federal Government is making payments to providers that attest to the "meaningful use" of EHRs. The State agency made approximately $971 million in Medicaid EHR incentive program payments from October 1, 2011, through December 31, 2014. Of this amount, $601 million was paid to 263 hospitals.

We recommended that the State agency (1) refund to the Federal Government $22 million in net overpayments made to the 61 hospitals, (2) adjust the 61 hospitals' remaining incentive payments to account for the incorrect calculations (which will result in cost savings of $6.3 million after December 31, 2015), (3) review the calculations for the hospitals not included in the 64 we reviewed to determine whether payment adjustments are needed and refund to the Federal Government any overpayments identified, and (4) review supporting documentation from all hospitals to help identify any errors in incentive payment calculations.

In written comments on our draft report, the State agency disagreed with our first recommendation and agreed with our remaining recommendations.