Rhode Island Did Not Ensure Its Managed Care Organizations Complied With Requirements Prohibiting Medicaid Payments for Services Related to Provider-Preventable Conditions

Rhode Island did not ensure its Medicaid managed-care organizations (MCOs) complied with Federal and State requirements prohibiting Medicaid payments to providers for inpatient hospital services related to treating certain provider-preventable conditions (PPCs). PPCs are certain reasonably preventable conditions caused by medical accidents or errors in a health care setting. For our audit period, we identified that MCOs paid providers approximately $4 million for 241 claims that contained PPCs. Rhode Island's internal controls were not adequate to ensure that its MCOs complied with Federal and State requirements. For instance, Rhode Island did not follow up with the MCOs to determine why present on admission codes were missing or whether the payments made for the related claims complied with Federal and State requirements. In addition, the MCOs did not have policies or procedures to identify PPCs on claims for inpatient hospital services or determine whether payments for claims containing PPCs should have been reduced. As a result, the unallowable portion of the $4 million identified for our audit period was included in the capitation payment rates for State fiscal years 2017 and 2018.

We made several recommendations to Rhode Island, including (1) work with the MCOs to determine the portion of the $4 million that was unallowable for claims containing PPCs and its impact on current and future capitation payment rates; (2) include a clause in its managed-care contracts with the MCOs that would allow the State agency to recoup funds from the MCOs when contract provisions and Federal and State requirements are not met, thereby resulting in potential cost savings; and (3) require the MCOs to implement internal controls to prohibit payments for inpatient hospital services related to treating PPCs, and other procedural recommendations.

In written comments on our draft, Rhode Island concurred with four of our six recommendations and described the actions that it planned to take to address them. Although the State agency did not concur with two of our recommendations, it did describe how it plans to take action related to them.