Texas Made Incorrect Medicaid Electronic Health Record Incentive Payments

The Texas Health & Human Services Commission (State agency) did not always pay electronic health record (EHR) incentive payments in accordance with Federal and State requirements. The State agency made incorrect EHR incentive payments to 38 hospitals totaling $15.3 million. Specifically, the State agency overpaid 26 hospitals a total of $13.9 million and underpaid 12 hospitals a total of $1.4 million, for a net overpayment of $12.5 million. Because the hospital calculation is computed once and then paid out over 3 years, payments made after December 31, 2014, will also be incorrect. The adjustments to these payments total $163,000.

The Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009, established Medicare and Medicaid EHR incentive programs to promote the adoption of EHRs. As an incentive for using EHRs, the Federal Government is making payments to providers that attest to the "meaningful use" of EHRs. The State agency was one of the largest payers of incentive payments, making approximately $448 million in Medicaid EHR incentive program payments during calendar years 2011 and 2012.

We recommended that the State agency (1) refund to the Federal Government $12.5 million in net overpayments made to the 38 hospitals and adjust the 38 hospitals' remaining incentive payments to account for the incorrect calculations (which will result in future cost savings of $163,000); (2) review the calculations for the hospitals not included in the 45 we reviewed to determine whether payment adjustments are needed and refund any overpayments identified; (3) review supporting documentation for the numbers provided in the cost reports and ensure that the correct cost report periods are used; and (4) provide guidance to the hospitals stating that (a) inpatient nonacute-care services and unpaid Medicaid services should be excluded from bed-days and discharge lines of the incentive payment calculation, (b) neonatal intensive care unit bed-days and discharges should be included, and (c) bad debts, courtesy discounts, and any other unallowable charges should be excluded from charity care charges.

In written comments on our draft report, the State agency did not agree or disagree with our recommendations. However, it provided information on corrective actions taken and actions to be implemented. State agency officials stated that they will initiate recoupments and refund the $12.5 million in net overpayments to the Federal Government and will use an independent audit firm to conduct in-depth reviews as part of the post-payment audit process. The State agency explained that the postpayment audits, in concert with specific actions outlined in its comments, will address the issues identified in the audit. Although we did not verify that the State agency took these actions, it is our opinion that the actions described could address our findings and recommendations.