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California Overpaid Hospitals $22 Million, Federal Audit Shows

By Doug Desjardins  
   October 10, 2016

The state's Department of Health Care Services disputes OIG's findings.

A federal audit estimates the state Department of Health Care Services (DHCS) made incorrect Medicaid incentive payments to hospitals in California totaling more than $22 million over four years and must repay the federal government.

Those were the findings of an audit from the Office of Inspector General (OIG) released in September by the U.S. Department of Health and Human Services (HHS).

The OIG audit looked at EHR incentive payments made by the DHCS and found that from October 1, 2011 through December 31, 2015, the state agency made incorrect Medicaid EHR incentive payments to 61 of 64 hospitals reviewed. These incorrect payments included a net overpayment of $22,043,234.

The audit contends the DHCS made incorrect payments because it did not follow federal protocols and didn't always make payments in accordance with federal requirements.

OIG also stated that the DHCS did not always review supporting documentation from hospitals to help identify errors in its calculations. As a result, the OIG recommended that the DHCS refund the federal government the $22 million in overpayments made to 61 hospitals.

In a statement, the DHCS countered that the Centers for Medicare & Medicaid Services had advised it that overpayments and underpayments could be addressed through adjustments to future incentive payments to eligible hospitals (EHs).

Additional analysis and validation of data reported by the EHs is required to support the overpayments identified by the OIG, the DHCS stated.

The DHCS has prioritized auditing the 64 EHs reviewed by OIG and intends to have the audits completed within the current state fiscal year. Any overpayments identified will be offset against the EH's future recalculated incentive payments, according to the statement.

If overpayments exceed future payments, DHCS will refund the overpayment to the federal government.

The OIG investigated incentive payments made by the DHCS on behalf of the federal government for a Medicaid EHR incentive program for hospitals. The payments were part of $601 million in Medicaid EHR incentive payments made to 263 California hospitals from 2011 to 2015.

The audit looked at 64 hospitals in the state that received more than $2 million in incentive payments during the first year of the program.


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