DEPARTMNTDEPARTMENT OF OF HEALTH HEALTH && HUMNHUMAN SERVICES SERVICES OFFICEOFFICE OF OF INSPECTOR INSPECTOR GENERAL OffceOffice of of Audit Services,Servce, Region Region ILL III (~f-'l:~~~ PublicPublic LedgerLedger Buiding,Building, Suite Suite 316 316 ~l).lalJ 150150 S. Independence MallMall WestWest Phiadelphia,Philadelphia, PA 19106-349919106-3499 JUNJUN 2232009 3 2009 ReportReport Number: A-03-08-00202A-03-08-00202 Theodore DallasDallas ExecutiveExecutive DeputyDeputy SecretarySecretary DeparmentDepartment ofof Public Public WelfareWelfare Health andand WelfareWelfare Building,Building, RoomRoom 234234 Harsburg,Harrisburg, PennsylvaniaPennsylvania 17105-2675 17105-2675 Dear Mr. Dallas:Dallas: Enclosed isis thethe U.S.U.S. Department Deparent of of Health Health and and Human Human Services Services (HHS), OfficeOffice ofof Inspector Inspector General (OIG),(DIG), final report entitledentitled "Review ofof DisproportionateDisproportionate Share Hospital PaymentsPayments Made by Pennsylvania to State-Operated InstitutionsInstitutions forfor MentalMental Diseases." Diseases." WeWe willwil forwardforward a copy of this report toto thethe HHS actionaction officialofficial notednoted on thethe followingfollowing page for review and any action deemed necessary. The HHS action official willwil makemake finalfinal determnationdetermination as as toto actionsactions takentaken onon allall mattersmatters reported.reported. We request thatthat youyou respondrespond to to this ths officialofficial withinwithn 30 days fromfrom thethe date date of of this ths letter.letter. Your response should present any comments or additional information that you believe may have a bearingbearng onon the final determnation.determination. Pursuant to the Freedom of Information Act, 55 U.S.c.U.S.c. §§ 552,552, OIGDIG reports generally are made available to the public to the extent that information in the report is not subject to exemptions in the Act. Accordingly,Accordingly, thisthis reportreport wilwill be be posted posted on on thethe InternetInternet atat http://oig.hhs.gov.http://oig.hhs.gov. IfIf you have any questions or commentscomments aboutabout thisths report,report, please do not hesitate to call me, or contact RobertRobert Baiocco,Baiocco, AuditAudit Manager,Manager, atat (215)(215) 861-4486,861-4486, oror throughthough e-maile-mail at at [email protected](goig.hhs.gov. PleasePlease referrefer toto reportreport numbernumber A-03-08-00202 in all correspondence. Sincerely, Stephen V· bitsky f RegionalRegional InspectorInspector GeneralGeneral f Stephenforfor AuditAudit V' bitsky ServicesServices EnclosureEnclosure PagePage 22 - TheodoreTheodore DallasDallas DirectDirect ReplyReply to HHS Action Official:Offcial: JackieJackie GarnerGarer ConsortiumConsortium Administrator Consortium for MedicaidMedicaid andand Children'sChildren's Health Health Operations Operations Centers for Medicare && MedicaidMedicaid ServicesServices 233 NorthNort Mkhigan Mkhigan Avenue, Avenue, SuiteSuite 600600 Chicago, llinoislllinois 6060160601 Department of Health and Human Services OFFICE OF INSPECTOR GENERAL REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS MADE BY PENNSYLVANIA TO TATE PERATED S -O INSTITUTIONS FOR MENTAL DISEASES Daniel R. Levinson Inspector General June 2009 A-03-08-00202 Office of Inspector General http://oig.hhs.gov The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components: Office of Audit Services The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations. These assessments help reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. Office of Evaluation and Inspections The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, and the public with timely, useful, and reliable information on significant issues. These evaluations focus on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI reports also present practical recommendations for improving program operations. Office of Investigations The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and misconduct related to HHS programs, operations, and beneficiaries. With investigators working in all 50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the Department of Justice and other Federal, State, and local law enforcement authorities. The investigative efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. Office of Counsel to the Inspector General The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and operations and providing all legal support for OIG’s internal operations. OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement authorities. NoticesNotices THIS REPORT IS AVAILABLE TO THE PUBLIC at http://oig.hhs.gov Pursuant to the Freedom of Information Act, 5 U.S.C. ' 552, Office of Inspector General reports generally are made available to the public to the extent that information in the report is not subject to exemptions in the Act. OFFICE OF AUDIT SERVICES FINDINGS AND OPINIONS The designation of financial or management practices as questionable, a recommendation for the disallowance of costs incurred or claimed, and any other conclusions and recommendations in this report represent the findings and opinions of OAS. Authorized officials of the HHS operating divisions will make final determination on these matters. EXECUTIVE SUMMARY BACKGROUND Pursuant to Title XIX of the Social Security Act (the Act), the Medicaid program provides medical assistance to low-income individuals and individuals with disabilities. The Federal and State Governments jointly fund and administer the Medicaid program. At the Federal level, the Centers for Medicare & Medicaid Services (CMS) administers the program. Each State administers its Medicaid program in accordance with a CMS-approved State plan. Although the State has considerable flexibility in designing and operating its Medicaid program, it must comply with applicable Federal requirements. In Pennsylvania, the Department of Public Welfare (the State agency) administers the Medicaid program. Pennsylvania’s Federal share is approximately 55 percent. Section 1923 of the Act requires that States make Medicaid disproportionate share hospital (DSH) payments to hospitals that serve a disproportionately large number of low-income patients. The Omnibus Budget Reconciliation Act of 1993 limits these payments to the annual costs incurred to provide services to Medicaid and uninsured patients less payments received for those patients. This limit is known as the hospital-specific DSH limit. In State fiscal year (FY) 2006–07, Pennsylvania made $291.9 million ($158.8 million Federal share) in DSH payments to eight State-operated Institutions for Mental Diseases (IMD). Section 1905(i) of the Act and 42 CFR § 435.1010 define an IMD as “a hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care and related services.” OBJECTIVES Our objectives were to determine whether the State agency (1) complied with Federal and State requirements when it calculated DSH payments to the eight State-operated IMDs for State FY 2006–07 and (2) did not exceed the hospital-specific limits imposed by section 1923(g) of the Act. SUMMARY OF FINDING The State agency did not comply with Federal and State requirements when it calculated the hospital-specific limits for the eight State-operated IMDs for State FY 2006–07. The State agency included in its calculations some patient days for individuals who were inmates being held involuntarily by the State’s criminal justice system. We removed the unallowable days and recalculated the hospital-specific limits for each State-operated IMD. Our calculation totaled $349,268,003. DSH payments to the eight State-operated IMDs totaled $291,927,766 for State FY 2006–07. The appendix provides the calculation of the hospital-specific limit and the DSH payments made for each of the eight State-operated IMDs. The State agency’s DSH payments did not exceed the corrected hospital-specific