Medicaid Program – Improper Medicaid Payments for Misclassified Patient Discharges

Issued Date
August 17, 2021
Health, Department of (Medicaid Program)


To determine whether the Medicaid program made inappropriate fee-for-service (FFS) payments to hospitals that failed to properly report correct patient discharge codes on inpatient claims. The audit covered the period from January 1, 2015 to December 31, 2019.

About the Program

The State’s Medicaid program is administered by the Department of Health (Department). The Department’s eMedNY computer system processes Medicaid claims submitted by providers for services rendered to Medicaid-eligible recipients and generates payments to reimburse the providers for their claims.

The Department uses the All Patient Refined Diagnosis Related Groups methodology to reimburse hospitals for inpatient medical care. When a hospital bills Medicaid for an inpatient stay, the hospital reports certain information on its claims, such as the patient’s diagnoses and services received, as well as the time and date of admission and when the services ended. This information is used to calculate the payment made to the hospital.

Hospitals must also use certain patient status codes to indicate whether the patient was transferred or discharged at the end of their stay. These codes are important because payments may vary significantly depending on whether a patient is transferred or discharged. For example, a claim where a patient was transferred to another facility may result in a lower payment than if a patient was simply discharged home from the hospital.

Key Findings

During the audit period, January 1, 2015 through December 31, 2019, we identified 2,048 FFS inpatient claims totaling $28.5 million for Medicaid recipients who were reported as discharged from a hospital but then admitted to a different hospital within 24 hours of the discharge (which often meets the definition of a transfer). These claims are at a high risk of overpayment if the first hospital inappropriately reports an actual transfer as a discharge. We selected a judgmental sample of 31 claims (of the 2,048) from three hospitals totaling Medicaid payments of $457,973 and reviewed the associated patients’ medical records. Our review found:

  • 15 claims were overpaid $252,107 because they were incorrectly coded as discharges when the patients were actually transferred to another facility.
  • The Department does not have a process to identify and recover improper Medicaid payments for inpatient claims with incorrect patient status codes.

Key Recommendations

  • Review the $252,107 in overpayments and recover as appropriate.
  • Review the remaining 2,017 high-risk claims totaling $28 million identified in this audit and recover overpayments as appropriate. Ensure prompt attention is paid to those providers that received the highest amounts of payments.
  • Develop a process to identify and recover Medicaid overpayments for FFS inpatient claims that have a high risk of incorrect patient status codes such as those identified by this audit.

Andrea Inman

State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236