New Jersey Claimed Excessive Medicaid Disproportionate Share Hospital Payments for Five County-Operated Psychiatric Facilities

The New Jersey Department of Human Services (State agency) claimed Federal reimbursement for certain Disproportionate Share Hospital (DSH) payments that did not exceed hospital-specific limits. DSH payments may not exceed hospitals' uncompensated care costs for providing services to patients who are eligible for Medicaid or have no health insurance for services provided during the year (known as the "hospital-specific limit.")

The State agency claimed DSH payments totaling $23.7 million ($11.9 million Federal share) that exceeded five county-operated psychiatric facilities' hospital-specific limits. The remaining DSH payments totaling $247.4 million ($123.7 million Federal share) were equal to or less than the hospital-specific limits. The overpayments occurred because the State agency had not established procedures for reconciling and adjusting the facilities' expenditures to ensure that DSH payments did not exceed hospital-specific limits.

We recommended that the State agency (1) refund $11.9 million to the Federal Government and (2) establish procedures for reconciling and adjusting the county-operated psychiatric facilities' expenditures to ensure that the facilities' DSH payments do not exceed hospital-specific limits. The State agency did not concur with our first recommendation. Regarding our second recommendation, State agency officials said that they have implemented procedures to ensure that the amounts claimed for reimbursement for all psychiatric hospitals are allowable in accordance with Federal regulations and guidelines.