State Audits To Identify Medicaid Overpayments to Nursing Homes

HRD-77-29: Published: Jan 24, 1977. Publicly Released: Jan 24, 1977.

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Techniques used by nursing home operators to inflate Medicaid costs and reimbursements were studied in New York, Florida, Massachusetts, and Virginia. The purpose of the study was to determine the adequacy of Department of Health, Education, and Welfare (HEW) and state systems to control and deflect such costs and the progress made by HEW in implementing state reimbursement on a cost-related basis.

The most common types of costs which should have been disallowed were nonpatient care revenues, costs not related to patient care, undocumented expenses, costs of capital items expensed rather than capitalized, and capital items both expensed and capitalized. Of more than $300 million in total costs submitted by nursing homes, states disallowed about $9 million or 3 percent. Field audits were productive in identifying costs that should be disallowed, but the states varied substantially in their field audit efforts. Law enforcement officials in New York and Massachusetts used field audits to obtain evidence for convictions of nursing home operators for fraudulent claims. The cost of state field audits will be justified if overpayments can be prevented or recouped.

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