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April 4, 2007


Audits Detail Weaknesses in Department
of Health Oversight Of Medicaid Expenses

State Inappropriately Paid $25.7 Million for Services for Medicaid Recipients;
Another Audit Finds $2.6 Million Paid for Enrollees Not Eligible for Child Health Plus

The State Department of Health (DOH) overpaid medical providers $25.7 million for clinic services for hospitalized Medicaid recipients because controls within DOH’s eMedNY claims processing system designed to prevent double payments for services were not being used and the clinics were not following Medicaid billing guidelines, according to an audit released today by New York State Comptroller Thomas P. DiNapoli.

A second audit of DOH’s oversight of the Child Health Plus B program was also released today. Auditors found that more than $2.6 million was paid for premiums for enrollees that were not eligible to participate in the program.

“Our auditors found that critical internal controls created to identify inappropriate payments, ineligible recipients and waste in the Medicaid system were either not operating as effectively as they should or were not being used at all. This is cause for concern given that we had already identified some of these overpayment problems in a previous audit,” DiNapoli said. “I’m pleased that the Department is moving quickly to address the oversight weaknesses we identified in these audits and is attempting to collect money that is owed to the taxpayers.”

When auditors examined Medicaid claims paid to clinic providers during a five-year period from 2001 through 2006, they found that clinics inappropriately billed the state more than $25.7 million, including $17.7 million for services provided to patients during a hospital stay and another $8 million for clinic and emergency room services provided on the same day the patient was admitted to the hospital.

Under the current Medicaid guidelines, if a Medicaid patient receives medical services in a hospital emergency room or outpatient clinic and is then admitted directly to the hospital, the Medicaid reimbursement is based on the hospital’s all-inclusive inpatient rate established by DOH. No separate payments should be made to these hospitals for emergency room or clinic services.

Two of the clinics that auditors examined, located in drug and alcohol rehabilitation facilities certified by the State Office of Alcohol and Substance Abuse Services, inappropriately billed the state more than $4.9 million for routine medical services, such as taking blood pressure and patient physical exams. These services were already covered under inpatient rates. Almost 77 percent ($2.2 million of $2.8 million) of the billings for one of the clinics were duplicate, inappropriate bills. Auditors also noted that the owners of the two clinics were affiliated with the hospitals. In one instance, the president and CEO of one of the clinics was also a director to the hospital and the brother of the hospital president, while the hospital president was the clinic treasurer. The other clinic with questionable billings was partially owned by the hospital where the patients were admitted.

Because of the significance of the billing problems identified by auditors, DOH has indicated that it will no longer be reimbursing these two facilities and will seek repayment from the clinics. It may also decertify these clinics from participating in the Medicaid program.

DOH officials had previously acknowledged that improvements were needed to prevent double payments for services provided to hospitalized Medicaid patients when a Comptroller’s audit was issued in 2000 (audit 98-S-10). In fact, DOH built controls into the eMedNY claims processing system to address these issues. However, auditors found that when DOH launched eMedNY in March 2005 that it did not utilize these controls and instead relied on information provided by the Office of the Medicaid Inspector General (OMIG) to identify invalid claims on a post-payment basis.

Auditors determined that if DOH had been using the controls built into eMedNY that they would have detected these inappropriate payments. According to DOH officials, they were not using these controls because they would have placed an undue financial burden on providers. While auditors agreed that DOH should evaluate the use of one of the built-in controls, they argued that there was no reason not to utilize other controls. Auditors also questioned how thorough OMIG’s process was for identifying questionable claims, given that they did not identify the two clinics that over billed the state $4.9 million.

In the other audit released today, auditors found that DOH paid premiums to health insurance plans, totaling $2.6 million, for enrollees of Child Health Plus B who were ineligible for the program because they were eligible for other health insurance programs. Auditors also found problems with controls to prevent duplicate payments and that enrollments were not always supported by proper eligibility documentation.

In written responses to the audits, DOH indicated that it was taking steps to recover the inappropriately paid money. DOH noted that the state Medicaid program is required to pay the Medicare coinsurance amount for patients with Medicaid coverage and that some of the $25.7 million in overpayments also includes payments for patients who were dually eligible for Medicare and Medicaid. Auditors determined that this matter might apply to only $1.1 million of the $25.7 million in inappropriate payments identified.

Links to Audits:

Click here for a copy of the audit of DOH's oversight of Medicaid payments to clinic providers (Audit 2006-S-51).

Click here for a copy of the audit of DOH's oversight of the Child Health Plus B program.

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