Review of Indiana Medicaid Disproportionate Share Hospital Eligibility for July 1, 2000, Through June 30, 2003

For the period July 1, 2000, through June 30, 2003, the State paid $142.3 million ($88.2 million Federal share) to three State-owned psychiatric hospitals that were not eligible to receive Medicaid disproportionate share hospital (DSH) payments.  The hospitals did not meet Federal Medicaid eligibility requirements because they did not comply with Medicare conditions of participation (CoP) requirements.  Generally, hospitals demonstrate compliance with basic Medicare CoP through an accreditation process performed by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO).  Psychiatric hospitals must also meet additional staffing and medical records requirements. 

We recommended that the State refund $88.2 million to the Federal Government for the Medicaid DSH payments made to the three ineligible State-owned psychiatric hospitals for the audit period and ensure that Medicaid DSH payments are made only to eligible hospitals.  The State disagreed with our finding and recommendations.  The State agency believed that Medicare and Medicaid CoP had been met for the facilities through a combination of JCAHO accreditation and the Medicaid survey and certification process, including the special CoP for psychiatric hospitals.  After reviewing the State agency's comments, we maintain that our finding and recommendations are valid.