Medicaid Hospital Outlier Payments in New York for State Fiscal Years 1998 through 2002

EXECUTIVE SUMMARY:

Our objective was to determine whether the New York State Department of Health's method of computing inpatient hospital cost outlier payments resulted in reasonable payments.  With one exception, New York's method of computing inpatient hospital cost outlier payments generally resulted in reasonable payments.  New York did not use the most accurate cost-to-charge ratios to convert billed charges to costs.  Had it done so, New York could have saved approximately $21.5 million ($10.75 million Federal share) in cost outlier payments between State fiscal years 1998 and 2002 at the three hospitals that we reviewed. 

We recommended that New York amend its State plan to require retroactive adjustments of interim cost outlier payments based on cost report data for the year in which the inpatient discharge occurred.  New York concurred with our recommendation, but stated that implementation would require changes in State regulations and the applicable State plan.