The New Jersey Department of Human Services Claimed Medicaid Disproportionate Share Hospital Payments to Five Hospitals That Did Not Meet Federal Eligibility Requirements

Contrary to Federal requirements, New Jersey claimed Medicaid Disproportionate Share Hospital (DSH) payments totaling $100 million ($50 million Federal share) for five hospitals that did not meet Federal requirements for DSH payments during our audit period. Under the DSH program, a State is required to make special payments, known as DSH payments, to hospitals that serve a disproportionate share of low-income and/or uninsured patients. For a hospital to receive DSH payments, the State must classify the hospital as a DSH. A State may not define or deem a hospital as a DSH unless the hospital has a Medicaid inpatient utilization rate (MIUR) of not less than 1 percent. (A hospital's MIUR, expressed as a percentage, is the number of inpatient days attributable to patients who were Medicaid-eligible, divided by the total of the hospital's inpatient days in a particular year.)

Specifically, for the five hospitals, New Jersey calculated a MIUR of less than 1 percent during one or more State fiscal years and said that it claimed DSH payments for the hospitals because it misinterpreted Federal regulations on DSH eligibility.

We recommended that the State (1) refund $50 million to the Federal Government and (2) ensure that all hospitals designated as DSHs meet Federal eligibility requirements for DSH payments. The State partially agreed with our first recommendation and did not indicate either concurrence or nonconcurrence with our second recommendation.