Reducing the Cost of Hospital Services Provided to County Inmates (2013-MS-4)

Issued Date
September 19, 2014

[read complete report - pdf]

We also released eight county reports: Chautauqua [pdf], Clinton [pdf], Erie [pdf], Jefferson [pdf], Orleans [pdf], Oswego [pdf], Rensselaer [pdf] and Westchester [pdf] Counties.

Purpose of Audit

The purpose of our audit was to determine if counties are controlling inmate hospital costs and paying the appropriate rates for the services provided for the period January 1 through December 31, 2012.


Inmate health care costs can be a heavy burden on a county’s financial resources. For example, inmate hospital health care costs in the eight counties audited totaled about $2.8 million in 2012. Of this amount, about $1.4 million, or 50 percent, was for inpatient hospital services while $1.4 million, or 50 percent, was for outpatient hospital services. New York State Public Health Law requires counties to pay Medicaid diagnosis related group (DRG) rates to hospitals for inmate inpatient services. Counties also have the opportunity to reduce the local share of inmate inpatient hospital costs by submitting Medicaid-eligible inpatient hospital claims to the federal government for up to 50 percent reimbursement. There is no law that sets the amounts that counties should pay for outpatient services provided to inmates. However, county officials can negotiate rates with hospitals and providers to lower outpatient costs.

Key Findings

  • The counties do not have adequate procedures for reviewing inpatient hospital claims and as a result, seven of the eight counties audited did not pay the appropriate Medicaid DRG rates on 90 percent of the inpatient hospital claims paid in 2012.
  • Three counties did not submit claims seeking potential federal reimbursement of up to $46,352 for inpatient medical services provided to inmates.
  • Seven of the eight counties have negotiated rates and discounts for inmates’ outpatient services, but outpatient costs varied significantly in the counties audited due to different practices used.

Key Recommendations

  • Strengthen procedures for auditing inpatient hospital claims and ensure that accurate and appropriate rates are charged.
  • Develop a process to claim federal reimbursement for inpatient hospital claims.
  • Negotiate with hospitals and provides to obtain discounted rates for outpatient hospital services.