DiNapoli: State Medicaid System Wastes Millions

Out-of-State Hospitals Cash in on New York's Medicaid Program

May 3, 2010--New York State made excessive and unnecessary Medicaid payments of at least $150 million because of pervasive problems with its billing system and policies, according to a series of audits released today by State Comptroller Thomas P. DiNapoli. In fact, out-of-state hospitals were overpaid about $21.4 million for medical procedures because the state was using outdated reimbursement information. The findings of the audits were referred to the Office of the Medicaid Inspector General.

"Too often, New York's Medicaid system treats tax dollars like Monopoly money," DiNapoli said. "There is too much easy come, easy go allowed in the program. The cost of this program continues to rise because no one is paying attention to the problems with the automated billing system. It is outrageous that out-of-state hospitals can cash in on New York's Medicaid recipients because New York is relying on outdated information. There is no Free Parking jackpot to bail this program out. The waste and abuse in this program is costing taxpayers too much money."

In two audits, DiNapoli found the state Department of Health (DOH) overpaid out-of-state providers about $21.4 million for non-emergency services going as far back as 2002. The errors occurred because DOH relied on outdated reimbursement formulas or because it did not apply the correct reimbursement rates. Auditors also found that costly non-emergency procedures were taking place in out-of-state hospitals without prior approval as required.

In one case, DOH paid an Ohio hospital $1.5 million for a non-emergency service without prior approval provided to a Medicaid recipient from Plattsburgh when the hospital should only have been paid $117,000. In another instance, a Massachusetts hospital was paid $316,500 for a service that should have only cost $4,400.

Other examples of overpayments included:

  • $102,021 was paid to an Ohio hospital for a lymphoma treatment when a New York hospital would have only received $21,563;
  • $65,916 was paid to a Michigan hospital for caring for an eye disorder problem when a New York hospital would have been paid $7,065;
  • $19,399 was paid to a West Virginia hospital for treating a respiratory infection when a New York hospital would have received $8,549;
  • $13,286 was paid to a Rhode Island hospital for a cesarean section when a New York hospital would have gotten $3,188; and
  • Other procedures where out-of-state hospitals received considerably more than New York hospitals would have been paid: insertion of ear tubes $2,088 compared to $491; Carpal Tunnel surgery $5,083 compared to $740; and a colonoscopy $2,309 compared to $453.

A third audit estimates that the Medicaid program overpaid New York hospitals about $74.5 million for patients that were discharged and readmitted to the same hospital for treatment for the same or a related illness within 31 days. For instance, a Medicaid recipient was admitted to a hospital for treatment of kidney and urinary tract infections and was discharged. About five hours after discharge, the recipient was readmitted to the hospital for these problems. Because the hospital did not combine the visits into a single claim as required, it was paid $22,152 for the patient rather than the appropriate reimbursement amount of $11,076.

Auditors determined there would be substantial cost savings if DOH adopted the billing practices of other states. For instance, New Jersey denies all initial claims for a hospital readmission that take place within seven days of the discharge of the same patient from the same hospital for the same or a related illness until proper justification is provided. If New York adopted similar policies, an additional $53 million in payments would have been avoided.

Among the recommendations to DOH:

  • Recover overpayments.
  • Update eMedNY system to pay out-of-state hospitals correct reimbursement amounts.
  • Enforce prior approval requirements before sending New York State Medicaid recipients to out-of-state healthcare providers.
  • Change Medicaid payment policies for hospital readmissions to require closer scrutiny and more justification before payment is made.

The State Comptroller's office has issued numerous audits identifying problems with eMedNY, the claims processing system used by DOH.

DOH officials agreed that many of these claims were significantly overpaid and changed the way it reimburses out-of-state hospitals for services and is examining how hospital readmissions are paid. The full response of DOH is included in the audit.

For the DOH/Excessive Medicaid Payments for Hospital Readmissions audit report, follow this link: http://www.osc.state.ny.us/audits/allaudits/093010/09s28.pdf.

Follow this link for the DOH/Medicaid Payments for Out-of-State Ambulatory Surgery Services report: http://www.osc.state.ny.us/audits/allaudits/093010/09s29.pdf.

And click here for the DOH/Medicaid Overpayments for Non-Emergency Out-of-State Inpatient Services report: http://www.osc.state.ny.us/audits/allaudits/093010/09s35.pdf.

About the State Comptroller's Medicaid Audits
The Office of the State Comptroller conducts regular audits of the state's $45 billion Medicaid program. In 2009, auditors identified $182 million in overpayments and savings. 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.

Click here for a photo from the Press Conference.

Click here for the Comptroller's Audio.