Arizona Made Incorrect Medicaid Electronic Health Record Incentive Payments to Hospitals

Although the Arizona Health Care Cost Containment System (State agency) made Medicaid electronic health record (EHR) incentive program payments to eligible hospitals, it did not always make these payments in accordance with Federal and State requirements. Specifically, from October 1, 2011, through January 31, 2016, the State agency made incorrect Medicaid EHR incentive payments to 24 of the 25 hospitals reviewed, totaling $15 million. These incorrect payments included both overpayments and underpayments, resulting in a net overpayment of $14.8 million. Because the incentive payment is calculated once and then paid out over 4 years, payments made after January 31, 2016, will also be incorrect. The adjustments to these payments total $1.7 million.

The Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009, established Medicare and Medicaid EHR incentive programs to promote the adoption of EHRs. As an incentive for using EHRs, the Federal Government is making payments to providers that attest to the "meaningful use" of EHRs. The State agency made approximately $219 million in Medicaid EHR incentive program payments from October 1, 2011, through March 31, 2015. Of this amount, $151 million was paid to 70 hospitals.

We recommended that the State agency (1) refund to the Federal Government $14.8 million in net overpayments made to the 24 hospitals, (2) adjust the 24 hospitals' remaining incentive payments to account for the incorrect calculations (which will result in cost savings of $1.7 million after January 31, 2016), (3) review the calculations for the hospitals not included in the 25 we reviewed to determine whether payment adjustments are needed and refund to the Federal Government any overpayments identified, (4) educate hospitals to ensure that they follow Federal and State requirements for calculating their incentive payments, and (5) review supporting documentation provided by all hospitals to help identify any errors in their incentive payment calculations.

In written comments on our draft report, the State agency did not agree with our findings. The State agency also provided information on actions that it had taken or planned to take to address our recommendations.