Missouri Did Not Comply With Federal and State Requirements Prohibiting Medicaid Payments for Inpatient Hospital Services Related to Provider-Preventable Conditions

The Missouri Department of Social Services (State agency) did not comply with Federal and State requirements prohibiting Medicaid payments for inpatient hospital services related to treating certain provider-preventable conditions (PPCs), which are certain reasonably preventable conditions caused by medical accidents or errors in a health care setting. The State agency did not follow the provision of its Centers for Medicare & Medicaid Services (CMS)-approved State plan directing it to perform a retrospective clinical review of the claims with diagnosis codes identified as PPCs. In addition, the State agency paid inpatient hospital claims in which the present-on-admission (POA) indicator data field had been left blank. We identified inpatient hospital claims totaling $2.7 million ($1.7 million Federal share) that contained a diagnosis code identified as a PPC and (1) a 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. Therefore, we are setting aside this amount for resolution by CMS and the State agency.

Furthermore, when developing and implementing its system edits, the State agency incorrectly excluded some diagnosis codes that were subject to the payment reduction. In addition, the State agency incorrectly included other diagnosis codes that should not have been subject to the payment reduction.

The State agency's noncompliance with Federal requirements occurred because the State agency did not have adequate policies and procedures to review certain claims to determine whether payments should have been adjusted. In addition, the State agency did not correctly implement all relevant information into its system edits.

We recommended that the State agency work with CMS to determine what portion of the $1.7 million (Federal share) was unallowable for Federal Medicaid reimbursement and refund that unallowable portion to the Federal Government. We also made procedural recommendations to the State agency that it develop policies and procedures to ensure that all claims with PPCs that had certain POA codes are identified and adjusted in accordance with Federal and State requirements and to ensure that the correct diagnosis codes are being used to identify PPCs.

The State agency concurred with our findings and described procedures that it had implemented or planned to implement to address our recommendations. The State agency said that it had implemented procedures to review all inpatient hospital claims to determine whether the payments should be adjusted for claims containing PPCs and added that its contractor had retrospectively processed inpatient hospital claims for our audit period and had identified an estimated recoupment (both Federal and State funds) of $220,000 for claims with PPCs.