Colorado Claimed Unallowable Medicaid Nursing Facility Supplemental Payments

The Colorado Department of Health Care Policy & Financing (State agency) claimed $4.1 million ($2.5 million Federal share) in unallowable Medicaid nursing facility supplemental payments for State fiscal years (FY) 2010 and 2011. For these two FYs, the State agency made supplemental payments to nursing facilities that exceeded the State agency's calculated prospective payment amounts for these facilities, resulting in overpayments totaling $1.2 million ($741,000 Federal share). In addition, the State agency made Certified Public Expenditure (CPE) supplemental payments to State government-owned or -operated nursing facilities and non-State government-owned or -operated nursing facilities that exceeded their applicable upper payment limits (UPLs), resulting in overpayments totaling $2.9 million ($1.7 million Federal share).

In FYs 2010 through 2012, the State agency incorrectly included both State government-owned or -operated nursing facilities and non-State government-owned or -operated nursing facilities in its UPL calculations for privately-owned and -operated nursing facilities. Because the combined payments remained below the UPL for privately owned and operated nursing facilities, this error did not result in any overpayments during our audit period. However, the potential exists for overpayments in subsequent periods.

We recommended that the State agency (1) refund $2.5 million to the Federal Government, (2) improve policies and procedures to ensure that its accounting system captures sufficient facility-level detail to ensure that actual payments do not exceed prospective payments, (3) strengthen internal controls to ensure that it follows its State plan methodology so that CPE supplemental payments made to nursing facilities are equal to or below the applicable UPLs in accordance with Federal requirements, and (4) strengthen internal controls to ensure that it calculates UPLs for the three categories of nursing facilities in accordance with Federal and State requirements. The State agency agreed with our recommendations.