Medicaid Outlier Payments at Inpatient Hospitals in Texas

EXECUTIVE SUMMARY:

Our objective was to determine whether the Texas Health and Human Services Commission (the State agency) limited cost outlier payments to exceptionally high-cost cases.  The State agency did not limit cost outlier payments to exceptionally high-cost cases.  Specifically, the State agency (1) did not use current cost-to-charge ratios, (2) used noncovered charges in calculating the outlier payments, and (3) did not have sufficient policies and procedures in place to monitor cost outlier payments.  We recommended that the State agency (1) revise its method of computing cost outlier payments and (2) develop policies and procedures to more closely monitor outlier payments.  Texas disagreed with our recommendation to revise its method of computing cost outlier payments but agreed to review its processes and update its formal policies.