Indiana Improperly Claimed Federal Reimbursement for All Reviewed Medicaid Inpatient Psychiatric Hospital Service Payments to Evansville State Hospital

The Indiana Office of Medicaid Policy and Planning (the State agency) claimed $7.1 million in Federal reimbursement for Medicaid inpatient psychiatric service payments made to Evansville State Hospital (Evansville) that were not in accordance with Federal requirements for inpatient psychiatric hospital services.

For States to claim Federal reimbursement for their Medicaid inpatient psychiatric service payments to a psychiatric hospital, the hospital's inpatient services must meet the Federal definitions of such services. These definitions require the provider to demonstrate compliance with the basic Medicare Conditions of Participation (CoP) generally applicable to all hospitals and two special Medicare CoP applicable to psychiatric hospitals.

Evansville did not demonstrate compliance with the special Medicare CoP at any time during the audit period. Therefore, all of the $7.1 million in Federal reimbursement for Medicaid inpatient psychiatric service payments made to Evansville for claims with dates of service during the audit period was not allowable. The State agency made these improper claims because it believed that Evansville had met all requirements to be eligible for Medicaid inpatient psychiatric service payments.

We recommended that the State agency (1) refund $7.1 million to the Federal Government and (2) ensure that Federal reimbursement for Medicaid inpatient psychiatric service payments to psychiatric hospitals is claimed only if those hospitals can demonstrate compliance with the special Medicare CoP. The State agency did not concur with our first recommendation and did not comment on our second recommendation.