A new report says the state of Illinois still owes the federal government more than $140 million for overpaying a Chicago academic medical center that didn't provide as much free and discounted care to the poor as it claimed more than a decade ago.

That outstanding debt involving the University of Illinois Hospital & Health Sciences System was by far the single largest uncollected payment cited in a report this week from the HHS' inspector general office, which concluded the CMS needs to get more aggressive in recouping money from state Medicaid programs.

The inspector general's report this week (PDF) said CMS officials have failed to collect a total of $226 million—including Illinois' debt—for cases in which federal auditors concluded that state Medicaid programs had overpaid local healthcare providers.

Medicaid provides healthcare coverage to low-income and disabled residents using state and federal funds. But when state Medicaid programs overpay hospitals and doctors, federal law requires the CMS to recoup the part of the payment that came from the U.S. Treasury.

In most cases, that appeared to have happened. HHS' inspector general's report examined 147 Medicaid audits issued between 2000 and 2009, and found that nearly $1 billion of the $1.2 billion in overpayments had been recouped.

But the inspector general's office criticized the CMS for not collecting every dollar, especially since some of the original Medicaid audits are nearly a decade old. Federal rules say the CMS is supposed to have six months to dispute an audit's findings.

Acting CMS Administrator Marilyn Tavenner said in a written response to this week's report that the CMS was still in the process of investigating some of the audit findings and resolving the matters with the states. She noted that CMS officials have the right to disagree with the auditors about disputed overpayments, and may even change their minds after talking with the providers targeted for audit.

In the case of the Chicago hospital, Tavenner said only that the CMS “is close to resolving the recommendations.”

Back in 2004, the HHS auditors evaluated the hospital then known as University of Illinois at Chicago Hospital and found that its executives had significantly overstated the true cost of the inpatient and outpatient care provided to Medicaid recipients and the uninsured between 1997 and 2000.

Those overstatements led to the hospital receiving a total of $281 million too much from Medicaid's disproportionate-share payment system, which provides extra compensation for facilities that care for large numbers of expensive government patients. Of that amount, $140 million came from federal funds, and should have been recouped by the CMS, auditors at the time said (PDF).

Spokespeople for Gov. Pat Quinn and the state Medicaid program could not immediately comment on the 2004 findings, nor on any ongoing discussions with the CMS regarding repayments.

It's not clear how the state could afford to pay the CMS anything. Illinois already has the nation's worst credit rating among states, mainly because of $96 billion in unfunded pension liabilities for state employees, and efforts to reform the system are likely to be met by litigation from pensioners, analysts say.

The other outstanding Medicaid debts cited in the report this week ranged in size from $700,000 to $34 million, and included findings concerning Medicaid providers in Indiana, Missouri and New York.