Audit of New Jersey's Upper Payment Limits for State Fiscal Year 2001 Through 2003

EXECUTIVE SUMMARY:

Our objective was to determine whether New Jersey calculated the upper payment limits (UPLs) for non-State government hospitals in accordance with Federal regulations and the approved State plan amendments.  Federal funds are not available for Medicaid payments that exceed the UPLs.  We found that New Jersey calculated the state fiscal years (SFYs) 2001 and 2002 UPLs for non-State government hospitals' inpatient services in accordance with Federal regulations and the approved State plan amendment.  However, New Jersey did not calculate the SFY 2003 UPL in accordance with Federal regulations and the approved State plan amendment, which resulted in unallowable Medicaid payments of $17,579,568 ($8,789,784 Federal share).  New Jersey generally calculated the UPLs for non-State government hospitals' outpatient services in accordance with Federal regulations and the approved State plan amendment.  However, New Jersey inadvertently applied an improper inflation factor in its SFY 2003 UPL calculation, resulting in unallowable Medicaid payments of $3,817,050 ($1,908,525 Federal share).  We recommended that New Jersey refund to the Federal Government unallowable Medicaid payments of $10,698,309.  New Jersey officials concurred.