Purpose

To determine the implementation status of the two recommendations made in our initial audit report, Improper Episodic Payments to Home Health Providers (Report 2016-S-4).

Background

The State's Medicaid program provides a wide range of health care services to individuals who are economically disadvantaged and/or have special health care needs.  Effective May 1, 2012, the Department of Health (Department) implemented the new Episodic Payment System (EPS) to reimburse Certified Home Health Agencies (CHHA) for health care services provided to Medicaid recipients in the home. EPS is based on 60-day episodes of care. CHHAs can be paid for a full episode (when the episode of care is 60 days) or for a partial episode (when the episode of care is less than 60 days).

We issued our initial audit report on December 8, 2016. The audit objective was to determine whether the Medicaid program made improper payments to CHHAs under the EPS. The audit covered the period from May 1, 2012 through December 13, 2015. Our audit identified $16.6 million in improper Medicaid payments to 95 CHHAs. About 93 percent ($15.4 million) of the overpayments went to 20 CHHAs. Specifically, the audit found:

• $8.2 million in overpayments to CHHAs for recipients who were transferred into Managed Long Term Care during a 60-day episode of care. The CHHAs should not have received full 60-day payments. Rather, the CHHAs should have received pro-rated payments for the partial episodes of care;
• $7.1 million in overpayments to CHHAs that improperly billed multiple episodes for the same recipient within 60 days of the recipient’s original episode start date; and
• $1.3 million in overpayments to CHHAs that improperly received full 60-day payments for recipients who subsequently obtained services from a different CHHA within 60 days of an episode of care.

We recommended that the Department review and recover the improper payments, and develop and implement mechanisms to identify and recover overpayments when CHHAs do not bill according to Department guidelines.

Key Findings

Department officials made some progress in addressing the problems we identified in the initial audit report. However, further actions are still needed as only $590,455 of the $16.6 million in improper Medicaid payments we identified had been recovered. Also, the Department had not developed mechanisms to identify and recover overpayments when CHHAs do not bill according to Department guidelines. Of the initial report’s two audit recommendations, one was partially implemented and one had not yet been implemented.

Key Recommendation

Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Other Related Audit/Report of Interest

Department of Health: Improper Episodic Payments to Home Health Providers (2016-S-4)