Colorado Claimed Unallowable Medicaid Inpatient Supplemental Payments

The Colorado Department of Health Care Policy & Financing (State agency) claimed unallowable Medicaid inpatient supplemental payments during Federal fiscal year 2012. Colorado's Centers for Medicare & Medicaid Services (CMS)-approved State plan specified the supplemental payments for the program, effective as of October 1, 2010, as $600 per Medicaid day; however, beginning October 1, 2011, the State agency made payments of $650 per Medicaid day, which CMS had not approved, for 106,000 Medicaid days. As a result, the State agency made overpayments to providers totaling $5.3 million ($2.7 million Federal share).

The error occurred because the State agency did not ensure that the payment amounts authorized in the State plan for the Medicaid inpatient supplemental payments program were the actual amounts used to make payments.

We recommended that the State agency (1) refund $2.7 million to the Federal Government, (2) determine the amount that the State agency incorrectly paid after our audit period in program funds at $650 per Medicaid day and refund that amount to the Federal Government, and (3) ensure that the payment amounts specified in its CMS-approved State plan are the amounts used to make payments. The State agency concurred with our recommendations, and identified an additional $2.7 million for the year subsequent to our audit period and stated it would refund this amount within 1 year of our final report. We verified that the State agency correctly calculated this overpayment.