Indiana Claimed Medicaid Reimbursement for High-Dollar Inpatient Services That Were Unallowable

The Indiana Office of Medicaid Policy and Planning (State agency) claimed approximately $1 million in Federal reimbursement for unallowable high-dollar payments that it made to hospitals for inpatient services. Federal reimbursement is authorized to State Medicaid agencies for expenditures that constitute payment for part or all of the cost of services furnished as medical assistance under the State plan.

The State agency uses a prospective payment system to claim Medicaid reimbursement for inpatient service costs based on the charges that a hospital submits to the State agency. When a hospital's charges exceed predetermined charge thresholds, the State agency makes what is known as an outlier payment. Outlier payments are intended to protect hospitals against large financial losses associated with high-cost cases. Because of these outlier payments, extraordinarily high-cost cases generally result in high-dollar Medicaid payments.

We selected 250 inpatient claims with payments of $200,000 or more, totaling $82.1 million ($50.3 million Federal share), for services provided from January 1, 2006, through December 31, 2009, and reviewed the charges related to those payments. Of the 250 high-dollar Medicaid payments that the State agency made to hospitals for inpatient service claims, 20 were allowable. The State agency recalculated the payment amounts for the 230 claims we determined had erroneous charges resulting in overpayments totaling $1.6 million ($1 million Federal share). The overpayments occurred because hospitals reported incorrect charges. Hospital officials attributed the incorrect charges primarily to data entry errors.

We recommended that the State agency refund $1 million to the Federal Government and use the results of this audit in its provider education activities related to data entry procedures. The State agency generally agreed with our recommendations.