By Jeffrey H. Brochin, J.D.
Of the $1.8 billion in low income pool program payments made to the hospital during the OIG audit period, it claimed Medicaid reimbursement of $686 million ($412 million federal share) in excess of allowable costs.
An HHS Office of Inspector General (OIG) review of Florida Medicaid’s payments to Jackson Memorial Hospital--Florida’s largest teaching hospital--under the low income pool (LIP) program, revealed that the state paid hundreds of millions to the hospital under the LIP program that were not in accordance with the waiver and applicable federal regulations (OIG Report, No. A-04-17-04058, August 30, 2019).
LIP overpayments. As part of its Research and Demonstration Waiver for Medicaid reform, Florida established the LIP program to compensate hospitals for providing care to low-income patients. During state fiscal years (SFY) 2010 through 2014, hospitals received a total of $5.1 billion in LIP funds. Jackson Memorial Hospital received $1.8 billion of that total. CMS performed reviews of the LIP program covering SFYs 2007 through 2009 and found that Florida did not provide adequate oversight and guidance. As a result, the hospitals claimed unallowable costs and inconsistently documented, calculated, and reported costs. Florida also had not refunded $146.1 million of federal funds related to hospital-reported LIP overpayments disallowed by CMS. The OIG’s objective was to determine whether Florida made LIP payments to the hospital in accordance with the waiver and applicable federal regulations.
How OIG conducted the review. The OIG focused its review on the Jackson Memorial Hospital, which received the largest amount of LIP payments, $1.8 billion, or approximately 35 percent of the state-wide total, with the second-ranking hospital receiving only about 10 percent of LIP funds. The OIG reviewed the cost-limit calculations and the supporting LIP data to identify any unallowable items or clerical errors, and recalculated the hospital’s cost limits to determine the amount the state agency paid the hospital in excess of its costs of caring for low-income patients.
What the study found. The OIG audit determined that the state Medicaid agency paid hundreds of millions to the hospital under the LIP program that were not in accordance with the waiver and applicable federal regulations. Of the $1,798,392,602 in LIP payments made to the hospital during the audit period, $1,112,047,198 was allowable. However, the remaining $686,345,404 ($411,932,576 federal share) that the state agency claimed for Medicaid reimbursement was for payments in excess of the hospital’s allowable costs.
Recommendations and response. The OIG recommended that Florida (1) refund $412 million to the federal government, including $64 million of hospital-reported net overpayments and $348 million of unallowable costs identified during the audit; (2) instruct hospitals to establish procedures to return the federal share of any overpayments in their LIP cost-limit calculations; (3) establish procedures to ensure that Florida returns to the federal government the federal share of overpayments reported by hospitals; and (4) improve its oversight of the LIP program.
The hospital disagreed with most of the OIG’s findings, and most significantly, the hospital contended that the OIG incorrectly determined that it should offset Medicare and commercial insurance payments against costs for dual-eligible patients. After reviewing the hospital’s comments, the OIG stood by its findings and recommendations as correct, with one exception related to nonmedical assistance costs. Florida disagreed with the findings, and like the hospital, the state argued that the study incorrectly determined that the hospital should offset Medicare and commercial insurance payments against costs for dual-eligible patients.
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