EXECUTIVE SUMMARY:

Our objectives were to (1) consolidate the results of four prior State Medicaid agency reports on hospital patient transfers billed as discharges and (2) review Medicaid reimbursement policies for unaudited States and the District of Columbia to determine whether overpayments could occur if transfers were incorrectly coded as discharges.  North Carolina, Illinois, New York, and Indiana all have Medicaid payment provisions similar to the Medicare prospective payment system and our audits of those States identified overpayments of approximately $6.4 million ($3.6 million Federal share) for hospital patient transfers incorrectly reported as discharges and additional potential overpayments of $3.7 million ($1.9 million Federal share).  We evaluated other Medicaid State plans to identify States that prospectively pay for inpatient services and limit payment for transfers. 

We recommended that CMS:  (1) monitor the recovery of identified and potential overpayments described in our 4 State-specific reports and (2) encourage the 25 States and the District of Columbia to consider performing focused postpayment assessments of hospital discharges and to recover overpayments for transfers inappropriately billed as discharges.  CMS agreed with our recommendations.