Washington State Claimed Federal Medicaid Reimbursement for Inpatient Hospital Services Related to Treating Provider-Preventable Conditions

The Washington State Health Care Authority (State agency) claimed Federal Medicaid reimbursement for inpatient hospital services related to treating certain provider-preventable conditions (PPCs). For the period July 1, 2012, through December 31, 2013, we identified 463 claims totaling $18.3 million ($10.8 million Federal share) that contained PPCs and (1) a present-on-admission indicator code (POA code) indicating that the condition was not present on admission, (2) a POA code indicating that the documentation in the patient's medical record was insufficient to determine whether the condition was present on admission, or (3) no POA code.

Although Federal and State regulations prohibited the State agency from paying for services related to PPCs, and the State agency would no longer pay for inpatient hospital services related to PPCs as of January 1, 2010, under its State plan, the State agency did not have policies and procedures to determine whether payments should have been adjusted for claims containing PPCs that had certain POA codes or were missing POA codes. As a result, the State agency did not determine the unallowable portion of the $18.3 million ($10.8 million Federal share) that was for services related to treating PPCs and should not have been claimed for Federal Medicaid reimbursement. Therefore, we set aside this amount for resolution by the Centers for Medicare & Medicaid Services (CMS) and the State agency.

We recommended that the State agency (1) work with CMS to determine what portion of the $10.8 million Federal share claimed was unallowable for Federal Medicaid reimbursement and refund to the Federal Government the unallowable amount; (2) review all paid claims before our audit period for inpatient hospital services with dates of admission from January 1, 2010, through June 30, 2012, to determine whether payments should be adjusted for any claims that contained PPCs that had certain POA codes or were missing POA codes; (3) refund to the Federal Government its share of any unallowable amounts for those paid claims reviewed; and (4) ensure that its policy and procedure requiring a retrospective clinical review are fully implemented and effective in prohibiting unallowable payments for inpatient hospital services related to PPCs.