Wisconsin Physicians Service Insurance Corporation Did Not Properly Settle Indiana Medicare Disproportionate Share Hospital Cost Report Payments

With respect to Medicaid patient days, Wisconsin Physicians Service (WPS) did not properly settle Medicare cost reports submitted by Indiana hospitals for Medicare disproportionate share hospital (DSH) payments in accordance with Federal requirements. The 48 selected providers improperly claimed a total of 14,325 Medicaid patient days on their Medicare cost reports, resulting in DSH overpayments totaling $6.1 million. These improper claims included both unallowable and unsupported patient days and involved separate Child Health Insurance Program (S-CHIP) recipients, Aid to Residents in County Homes (ARCH) recipients, 590 Program recipients, and dual eligibles.

The Indiana Family and Social Services Administration (State agency) notified inpatient hospitals in Indiana that effective June 29, 2011, the State agency had updated its eligibility verification system (EVS) so that providers could more readily differentiate certain DSH-eligible beneficiaries from non-DSH-eligible beneficiaries. Federal requirements exclude S-CHIP (which allows States to provide health care coverage to uninsured children in families whose incomes are too high to qualify for Medicaid but too low to afford private health care coverage) and ARCH (a State-level program that provides case review services to certain residents of county nursing homes) recipients from the calculation of Medicaid patient days used to determine a provider's Medicare DSH payment adjustment. Prior to June 29, 2011, the EVS did not differentiate between S-CHIP and CHIP administered through a Medicaid expansion program (M-CHIP), whose recipients receive full Medicaid benefits and are eligible for inclusion.

We also reviewed 590 Program recipients and dual eligibles. The 590 Program is funded solely by Indiana and provides certain health care services to individuals between the ages of 21 and 64 who are residents of State-owned facilities. Its recipients are excluded from the calculation of Medicaid patient days used in Medicare cost reports. In the context of Medicare DSH payments, "dual eligibles" refers to individuals who are entitled to Medicare Part A and eligible for inpatient hospital Medicaid benefits.

We recommended that WPS (1) revise the finalized Medicare cost report settlements to recover $6.1 million in Medicare DSH overpayments and refund to the Federal Government; (2) revise final cost report settlements that we did not review, recover any additional Medicare DSH overpayments and refund those recovered amounts to the Federal Government; and (3) communicate with State agency officials annually to identify and obtain any State-level guidance affecting recipient categories that figure into Medicare DSH cost report payments.

WPS concurred with our first recommendation but did not concur with the remaining recommendations. After reviewing WPS's comments, we maintain that all of our findings and recommendations remain valid.