Oklahoma Improperly Claimed Federal Reimbursement for Most Reviewed Medicaid Inpatient Psychiatric Hospital Service and Disproportionate Share Hospital Payments to Children's Recovery Center

The Oklahoma Health Care Authority (the State agency) claimed $6.2 million in Federal reimbursement for Medicaid inpatient psychiatric service payments made to Children's Recovery Center (CRCO) that were not in accordance with Federal requirements for inpatient psychiatric hospital services.

For States to claim Federal reimbursement for their Medicaid inpatient psychiatric service payments to a psychiatric hospital, the hospital's inpatient services must meet the Federal definitions of such services. These definitions require the provider to demonstrate compliance with the basic Medicare Conditions of Participation (CoP) generally applicable to all hospitals and two special Medicare CoP applicable to psychiatric hospitals.

CRCO did not demonstrate compliance with the basic or special Medicare CoP at any time during the audit period. Therefore, all of the $6.2 million in Federal reimbursement for Medicaid inpatient psychiatric service and DSH payments made to CRCO for claims with dates of service outside the regulatory gap period was not allowable. An additional $466,000 for claims with dates of service during the regulatory gap period is set aside for further review by the State agency and CMS. The State agency made these improper claims because it believed that CRCO had met all requirements to be eligible for Medicaid inpatient psychiatric service and DSH payments.

We recommended that the State agency (1) refund $6.2 million to the Federal Government, (2) work with CMS to determine whether the State agency should refund an additional $466,000 to the Federal Government for its share of payments made to CRCO for claims with dates of service during the regulatory gap period, (3) identify and refund the Federal share of any additional payments made to CRCO for claims with dates of service after the audit period if neither the State agency nor CRCO can demonstrate the hospital's compliance with Federal requirements for inpatient psychiatric hospital services, and (4) ensure that Federal reimbursement for Medicaid inpatient psychiatric service and DSH payments to psychiatric hospitals is claimed only if those hospitals can demonstrate compliance with the basic and special Medicare CoP. The State agency agreed with our first, third, and fourth recommendations and disagreed with our second recommendation.