Review of Select Medicaid Inpatient Psychiatric Hospital Service Requirements for One Illinois State-Owned Psychiatric Hospital During the Period January 1, 2000, Through December 31, 2009

Our review found that the Illinois Department of Healthcare and Family Services (State agency) claimed $82.9 million in Federal matching funds for inpatient psychiatric service and disproportionate share hospital (DSH) payments made to Hospital A during the period January 1, 2000, through December 31, 2009, that were not in accordance with select Federal inpatient psychiatric hospital service requirements. We have set aside $12.6 million in Federal matching funds for payments made to Hospital A for claims with dates of service during a period when some applicable regulations were inadvertently changed. During the audit period, Hospital A did not demonstrate compliance with the special Medicare Conditions of Participation (CoP) because the State agency did not believe that such demonstration was necessary.

For periods during which a psychiatric hospital does not demonstrate compliance with the basic and special Medicare CoP, all inpatient psychiatric service and DSH payments received from the State agency are ineligible for Federal matching funds. The basic Medicare CoP address issues such as licensing, quality of care, safety, patient rights, self-assessment and performance improvement, and service availability. The special Medicare CoP specify staffing and medical record requirements.

We recommended that the State agency (1) refund $82.9 million in Federal funds for its share of inpatient psychiatric service and DSH payments made to Hospital A for claims with dates of service outside the regulatory gap period, (2) work with CMS to determine whether the State agency should refund an additional $12.6 million in Federal funds for its share of payments made to Hospital A for claims with dates of service during the regulatory gap period, (3) identify and refund the Federal share of any additional payments made to Hospital A for claims with dates of service after the audit period if neither the State agency nor Hospital A can demonstrate the hospital's compliance with Federal inpatient psychiatric hospital service requirements, and (4) ensure that Federal matching funds for inpatient psychiatric service and DSH payments are claimed only for psychiatric hospitals that can demonstrate compliance with the special Medicare CoP. The State agency disagreed with our recommendations.