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December 10, 2008

DiNapoli Calls for Improvements to
New York’s Medicaid Billing System

“Single Most Costly Program in State Needs More Scrutiny”

State Comptroller Thomas P. DiNapoli today called for improvements to New York’s automated system for processing Medicaid claims as he released an audit showing inadequate oversight of the system and other problems, resulting in millions of dollars in improper payments to health care providers, and other claims that were paid without necessary scrutiny.

DiNapoli also released a second Medicaid audit today that found $1.8 million in overpayments to providers that incorrectly billed Medicaid for Medicare Part B services. In many instances, the providers either double-billed the services or did not accurately report payment information on their claims. Both audits found that eMedNY, the automated system used to detect fraud and abuse, was not being used properly.

“At a total cost of $42 billion a year, Medicaid is the single most costly program administered by the state,” DiNapoli said. “We need to make sure all those dollars are spent carefully. But our auditors continue to find systemic problems with the Department of Health’s Medicaid claims processing system. Questionable claims keep slipping through. At a time when state and local governments are facing record deficits, we have to scrutinize all spending and use every tool available to detect fraud and billing errors. Small steps to improve the claims processing could save taxpayers millions of dollars.”

The Comptroller’s office has issued several audits identifying problems with eMedNY, the claims processing system used by the Department of Health (DOH). When claims are processed by eMedNY, they are subject to various automated checks or edits which determine whether the claims are eligible for reimbursement. For example, eMedNY can verify the eligibility of recipients and detect unwarranted procedures or duplicate bills. eMedNY can deny or suspend a claim or take other actions if certain criteria are not met.

In 2007 alone, auditors have found $55 million in overpayments or improper payments because the automated edits in eMedNY were not properly set up, not set up at all or not functioning as intended. Prior audit findings include:

  • $1.2 million in questionable or fraudulent claims were submitted by two dentists. One dentist billed Medicaid for providing seven patients with 32 fillings each and then later for pulling the same 32 teeth for each patient. The dentist claimed he filled or pulled all 32 teeth in a single office visit. The other dentist improperly billed Medicaid on 97 separate occasions for filling 25 or more teeth for patients in a single day. In one instance, this dentist claimed he provided a patient with 52 fillings. Although DOH officials told auditors they considered 24 fillings for a single patient visit to be excessive, they had not established policies or automated edits to red flag excessive procedures.
  • $5.7 million in inappropriate Medicaid payments were made to home care providers for services that were likely never provided. Auditors found eight cases where Medicaid paid for home care services totaling $13,928 after the patients had already died. eMedNY failed to detect these inappropriate payments even though one provider billed for services more than a month after an individual’s date of death.
  • $1.3 million was paid to medical providers who billed for more than the allowed number of HIV tests. Auditors found one provider billed for 12 tests for one patient in a single year. Auditors found that edits in eMedNY were not properly set up, enabling medical providers to bill for these extra tests.

In the audit released today, DiNapoli’s auditors found that DOH does not have an appropriate system for the oversight and IT governance of eMedNY. Auditors found the process for managing the system is not clearly understood among staff and is undocumented. DOH does not have a formal, structured process for prioritizing and approving edit changes. Instead, DOH often relies on “who complains the loudest” to determine the most urgent edit request to submit for programming. Edit changes are not always properly authorized by the various program units or adequately monitored after they are activated to ensure that they are functioning as intended. Edits are not terminated when they are no longer needed.

These control weaknesses result in inappropriate payments occurring or payments not getting the necessary review. For example, auditors identified $5.5 million in payments that were not subject to the intended level of scrutiny because of errors in the edit management process. In addition, auditors found another $437,655 in Medicaid overpayments.

Auditors recommended that DOH:

  • Establish a formalized system of IT governance for all program units to follow. The system should clearly detail the process for the format, prioritization, approval and documentation of all edit changes, and for the monitoring of the edits after the changes have been made;
  • Perform a formal risk assessment for the eMedNY edit change process, ensure that controls have been established to mitigate all the identified risks and update the assessment periodically;
  • Provide program units with formal training in the edit process and in the use of eMedNY tools for monitoring performance;
  • Develop a process for identifying and terminating obsolete edits and for implementing combination edits; and
  • Recover the $437,655 in overpayments identified in the audit and determine whether any of the $5.5 million paid should be recovered.

DOH generally agreed with the audit findings but expressed concerns that some legitimate claims could be potentially denied if certain edits were activated.

Click here for a copy of the eMedNY audit.

Click here for a copy of the Medicare Part B audit.

About the State Comptroller’s Medicaid Audits
The Office of the State Comptroller conducts regular audits of the state’s $42 billion Medicaid program. Auditors review Medicaid claims that have been submitted by service providers and identify billing patterns and other circumstances that warrant an examination to determine whether claims are valid and appropriate.


Quick Facts on Auditing Medicaid in New York

Program Size and Scope

  • New York State has the largest Medicaid program in the nation ― $42 billion spent annually.
  • Funding: Federal share is 50%, state share is 34%, local share is 16%.
  • Medical services are provided to approximately 4 million recipients in New York State.
  • About 60,000 healthcare providers receive Medicaid payments from New York State.
  • More than 342 million Medicaid claims are processed annually.
  • Experts estimate that at least 3 percent of the nation’s annual health care costs are lost to outright fraud. In New York’s Medicaid program that estimate represents about $1.3 billion.

Roles in Detecting Medicaid Fraud

  • The Office of the State Comptroller audits all state payments, including Medicaid payments. These audits include the audit of weekly claims and the post audit of the Medicaid Program.
  • The Office of Medicaid Inspector General coordinates the work of executive agencies and cooperates with the Attorney General, the Office of the State Comptroller and localities for fraud investigation and auditing.
  • Appropriate law enforcement agencies prosecute Medicaid fraud cases.
  • The Office of the State Comptroller works with the Medicaid Inspector General and the Attorney General’s office to establish protocols and systems to avoid overlap and to ensure coordination.

Comptroller’s Audit Approach and Audit Results

  • DiNapoli’s team of 10 auditors identified $55 million in overpayments or improper payments because key internal controls in the automated claims processing system were not working properly or had not been set up at all.
  • Conducts audits of weekly payments and computer systems controls every day.
  • Conducts data-driven, fraud-focused audits of healthcare providers.
  • The Office of the State Comptroller uses state-of-the-art software tools to detect potentially fraudulent transactions.


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