The California Department of Health Care Services made incorrect Medicaid electronic health record incentives payments to 61 hospitals, according to an audit by the Office of Inspector General of the Department of Health and Human Services.

The incorrect payments totaled $23.2 million, an amount that includes both overpayments and underpayments—the net overpayment was $22 million, the federal audit found. California did not always pay EHR incentive program payments in accordance with federal requirements, concluded the OIG.

California state capitol
California state capitol

“The State agency made incorrect hospital incentive payments because it did not review supporting documentation from the hospitals to help identify errors in its calculations,” auditors said. “Because the incentive payment is calculated once and then paid out over four years, payments made after Dec. 31, 2015, will also be incorrect. The adjustments to these payments total $6,318,006.”

The OIG report notes that the Government Accountability Office has identified improper payments as the primary risk to the EHR incentive programs.

“These programs may be at greater risk of improper payments than other programs because they are new and have complex requirements,” auditors note.

Also See: Washington State made $11.3M in faulty Medicaid EHR incentive payments

Of the 64 hospital incentive payment calculations the OIG reviewed, 61 did not comply with federal regulations or guidance or both. In addition, the report finds that some calculations had multiple deficiencies.

Among the recommendations that OIG made to California in terms of corrective actions:

  • Refund to the federal government $22 million in net overpayments made to the 61 hospitals.
  • Adjust the 61 hospitals’ remaining incentive payments to account for the incorrect calculations, which will result in cost savings of $6.3 million after Dec. 31, 2015.
  • Review the calculations for the hospitals not included in the 64 hospitals OIG reviewed to determine whether adjustments are needed and refund to the federal government any overpayments identified.
  • Review supporting documentation from all hospitals to help identify any errors in incentive payment calculations.

In written comments in response to the audit, California disagreed with OIG’s first recommendation and agreed with the three other recommendations.

“Regarding our first recommendation, the State agency agreed that incorrect Medicaid EHR incentive payments may have been made to hospitals, but did not concur with our recommended refund amount,” according to OIG.

“Specifically, the state agency commented that it believes further detailed analysis and validation of hospital data is required to support the overpayments we identified in our review,” it added. “Our review used hospital-generated schedules and internal financial records, which did not include detailed testing against actual payments and adjudicated claim data; and as part of its approved audit strategy, it has committed to conducting audits of all hospitals participating in the EHR incentive program and has prioritized the audits of the 64 hospitals we reviewed.”

However, auditors insisted that their findings and recommendations are valid and suggested that the California Department of Health Care Services work with the Centers for Medicare and Medicaid Services to “resolve any discrepancies that are identified between its post-payment audit calculations and our calculations of the incentive payments.”

Agencies from the state of California did not directly respond to requests for additional comments about the OIG findings.

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