Office of Inspector General's Partnership Plan: Utah State Auditor's Report on Clinical Laboratory Services

EXECUTIVE SUMMARY:

This report of Medicaid clinical laboratory services in Utah for Calendar Years (CY) 1993 and 1994 was conducted by the Utah State Auditor (USA). The objective of the review was to determine the adequacy of the Utah Department of Health's (UDH) procedures and controls over the processing of Medicaid payments to providers of certain clinical laboratory services.

This work was conducted as part of our partnership efforts with State Auditors to expand audit coverage of the Medicaid program. As part of the review, the Office of Audit Services assisted the USA by (1) providing guidance for identifying, through computer applications, a universe of potentially overpaid claims resulting from certain chemistry, hematology, and urinalysis tests that were improperly grouped or duplicative of each other; (2) selecting a statistical sample of claims for the USA to validate the payments; and (3) appraising the sample results for the USA to report the estimated overpayments made. In addition, we have performed sufficient work to satisfy ourselves that the attached USA audit report can be relied upon and used by Health Care Financing Administration (HCFA) in meeting its program oversight responsibilities.

The USA determined that UDH did not have adequate controls to ensure Medicaid reimbursements for clinical laboratory tests did not exceed amounts recognized by Medicare for the same tests, The USA estimates that UDH reimbursed providers for potential overpayments totaling $319,972 (Federal share $239,329) in CYs 1993 and 1994. The USA further determined the overpayments occurred because the UDH has not issued information regarding bundling procedures to providers and does not have edit checks built into the computer programs to detect improper payments.

The USA recommended that the State agency: (1) provide providers information regarding bundling procedures; (2) implement edit checks to allow for only properly bundled tests to be paid; (3) determine if physicians ordered hematology indices; (4) consider adopting policies and procedures to prevent payment of unnecessary indices charges; (5) establish controls to prevent laboratory payments from exceeding Medicare rates; and (6) recover overpayments from at least the providers with the largest payment errors and make adjustments for the Federal share of amounts recovered on the Quarterly Report of Expenditures to HCFA.

As we do with all audit reports developed by nonfederal auditors, we provided a listing of the coded recommendations for use in working with the State to resolve findings and recommendations through our stewardship program.

We plan to share this report with other States to encourage their participation in our partnership efforts.