State audit finds $1.6 million in likely inappropriate Medicaid payments related to hospital stays

The payments were for transportation, personal nursing services and in-home health care while the patients was in the hospital and wouldn’t have received those services

By: - December 15, 2021 10:15 am
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A state audit of Medicaid payments by the Oregon Health Authority found that $1.6 million was likely spent on services that were not allowed while patients were in the hospital.

The audit was narrow: The Secretary of State’s office studied payments related to 25 people who were hospitalized for at least three days between January 2017 through 2019. To find inappropriate payments, auditors only traced those for services that are provided when a patient is at home or in the community, not the hospital: non-emergency medical transport, in-home health care services and private nursing services.

Auditors uncovered more than $52,000 in inappropriate payments for the 25 Medicaid members. They identified another $1.6 million in payments for those three services for other people during that three-year period that likely were also not allowed. 

Medicaid, which covers health care for low-income people, is the state’s largest program, costing $11 billion a year. More than 70% is paid by the federal government. The rest, about $3 billion, is paid by the state, accounting for more than one-third of Oregon’s entire budget.

Spending funds on improper payments diverts dollars that could otherwise be spent on services for Medicaid recipients.

– Oregon Secretary of State audit

The cost of the system makes it important to control to deter abuse, auditors said.

“Spending funds on improper payments diverts dollars that could otherwise be spent on services for Medicaid recipients,” the audit said.

Medicaid now covers 1.3 million people, or nearly one-third of Oregon’s population.

The complexity of the system makes it ripe for inappropriate payments, the audit said. The federal government estimates that more than 20% of Medicaid payments overall should not have been made.

The audit did not accuse providers of fraudulently billing the health authority, however.

“Improper payments are not necessarily indicative of fraud and could be overpayments, underpayments or claims that do not have adequate supporting documentation,” the audit said.

Hard to identify fraud

Kathy Davis, Audits Division senior auditor, told the Capital Chronicle that determining whether the inappropriate payments identified in the audit were fraudulent would require an extensive investigation. The system involves two agencies, the Oregon Health Authority and the Oregon Human Services Department, and different payment systems. 

“It’s really difficult to suss out whether there was fraud related to a transaction,” Davis said. “OHA does have a program integrity unit, and I spoke with the manager of that unit just a few weeks ago. And so they’re going to be looking more in-depth into all of that.”

The audit recommended that the Oregon Health Authority reimburse the federal government for money that was inappropriately spent and “implement cost-effective controls that would prevent or detect improper payments for unallowable services” while Medicaid patients are hospitalized.

The health authority agreed with the recommendations, but resisted the audit’s findings.

“We believe the sample size was too small to provide a representative sample of Oregon’s Medicaid population,” Dana Hittle, the agency’s interim Medicaid director, said in a letter to the Secretary of State’s Office. “During the period of January 2017 to February 2020, the timeframe the audit reviewed, Oregon served an average of 998,056 members each month through its Medicaid program. The scale of the audit was based on a judgmental selection of 25 inpatient hospital stays. This represents approximately .000025% of the average population served by Medicaid during that time frame.”

It’s really difficult to suss out whether there was fraud related to a transaction.

– Kathy David, senior auditor

Hittle said the agency is reviewing payments for non-emergency medic transportation payments and would reimburse those that were inappropriate. 

“If intentional fraud, waste, or abuse is identified through this research and outreach, OHA will pursue the appropriate legal remediations,” Hittle wrote.  

Audits in other states have consistently found that billings for non-emergency rides are susceptible to fraud, waste and abuse, the audit said. 

But in-home care services accounted for nearly all inappropriate payments for the 25 people: nearly $50,000. In Oregon, the Human Services Department regulates such services.

Hittle said the agency will work with the agency on recovering those payments.

The letter also said the health authority would consider expanding its automated analytical tools to try to catch more inappropriate payments or fraud. In the meantime, the agency will conduct quarterly reviews, Hittle wrote.

Agency officials told the Capital Chronicle that the health authority already has tight controls in place.

“OHA conducts regular and systematic oversight of compliance to prevent fraud, waste and abuse in Oregon’s Medicaid system,” Philip Schmidt, an agency spokesman, said in an email. “We audit the Medicaid delivery and billing systems, as well as Medicaid providers and contractors. OHA devotes oversight resources to the areas of greatest financial risk to the Medicaid system, or where there has been an identified need.”

Medicaid audited regularly

The Secretary of State regularly audits Oregon’s Medicaid system, which differs from the typical federal program and is operated under a waiver to provide services through regional insurers that go beyond direct medical care.

For example, Medicaid money in Oregon has been used to buy air conditioners to keep members safe when temperatures soar.

Oregon is seeking federal approval for even more flexibility in using health care money. It’s widely accepted by health experts that health status has much more to do with environment and lifestyle than with doctors’ visits.

But the challenge is capping costs. The federal government predicts that Medicaid expenditures will increase by one-third between 2019 to 2024. Oregon has limited the overall rise in Medicaid spending to 3.4% a year, but increases may vary for different items.

In some instances, the cost of implementing controls would be more expensive than the savings, the audit said.

Auditors also noted that the health authority’s first priority is to ensure that members are served.

“They would rather run the risk of maybe providing some services to someone inappropriately rather than not providing someone services who really need it,” Kip Memmott, the Secretary of State’s audit director, told the Capital Chronicle.

But it’s the auditor’s role to identify areas of risk and prod agencies to tighten up controls even more.

“There is no state that has their Medicaid program dialed in 100 percent,” Davis said. That’s why it’s important for auditors to step in to identify vulnerabilities, she added.

CORRECTION: Oregon spends about $3 billion on Medicaid each year. A previous version of this story misstated that amount.


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Lynne Terry
Lynne Terry

Lynne Terry, who has more than 30 years of journalism experience, is Oregon Capital Chronicle's editor-in-chief. She previously was editor of The Lund Report, a highly regarded health news site; reported on health in her 18 years at The Oregonian, was a senior producer at Oregon Public Broadcasting and Paris correspondent for National Public Radio.