Upper Payment Limit Payments to Texas State Hospitals for Inpatient Services

Executive Summary

We could not determine whether Texas calculated upper payment limit (UPL) payments totaling $112.3 million for inpatient services in accordance with Federal regulations and the State plan because the State did not retain the documentation needed to support its UPL calculations. Medicaid provides payments to certain hospitals for inpatient services provided that the payments do not exceed the UPL, which is a reasonable estimate of the amount that would be paid for Medicaid services under Medicare payment principles. Because the State did not ensure that its staff followed document-retention policy, we are setting aside the $112.3 million ($69.1 million Federal share) in UPL payments for further CMS review.

We recommended that the State (1) work with CMS to recalculate the UPL, compare it to the payments made, and refund the Federal Government's share of any overpayments identified as a result of the recalculation and (2) implement procedures to ensure that supporting documentation for UPL payments is retained. The State said that it would comply with the recommendations.