Tennessee's Medicaid program did not comply with federal requirements for claiming uncompensated care at public hospitals as certified public expenditures, exceeding the allowed claim amount by $1.1 billion, according to a recent audit.
The Health and Human Services Department's Office of Inspector General report found that for state fiscal years between 2009 and 2014, Tennessee claimed a total of $2 billion in certified public expenditures. Of this amount, only $909.4 million was allowable and supported.
TennCare claimed $482.1 million in excess certified public expenditures that it did not return after calculating the actual care costs for Medicaid enrollees and uninsured patients at public hospitals.
"TennCare strongly disputes the findings and resulting recommendations of this federal audit, which clearly highlights a flawed federal process," said Stephen Smith, deputy commissioner and director of TennCare, in a statement. "TennCare has provided completely acceptable and sufficient information to justify the Medicaid claims from which a majority of the erroneous findings are based."
It is unreasonable for OIG to hold TennCare responsible for its activities 12 years ago as anyone relevant to the findings is no longer employed there, he said.
In January, the Centers for Medicare and Medicaid Services approved Tennessee's Medicaid block grant waiver amendment, allowing for more administrative flexibility and set financing for its Medicaid program. It was the first state to gain approval for this type of block grant arrangement.
Although the federal funding cap may mean less financial risk for Tennessee than a renewal of the existing program, the shared savings provisions could also add to the state's financial incentive to reduce TennCare spending.
Upon looking at Tennessee's claims from state fiscal year 2010 through 2013, OIG saw that the state claimed the same amount of $373.8 million each year, leading officials to believe the specific estimates of certified public expenditures were not calculated as required.
The agency compared the state's claimed expenditures to its summaries of actual expenditures for each year while reviewing the uncompensated care calculations and other supporting documents.
OIG could only audit through 2014 because that's the last year Tennessee calculated the actual costs for all its hospitals, said Lloyd Meyer, senior auditor for OIG's Office of Audit Services. The federal government lost more than $300 million from the state's failure to state actual costs.
Tennessee's certified public expenditures reflected $609.4 million in claims that exceeded the allowable amount, according to the audit. That included $522.3 million in unsupported net costs of caring for uninsured patients at institutions of mental diseases, $53.6 million of unallowable net costs of caring for TennCare patients with mental diseases between age 21 and 64, and $33.5 million of overstated costs because of incorrect calculations.
OIG recommended that Tennessee refund $397.4 million in overpayments to the government for excess expenditure claims, provide support for or refund $370.1 million in unsupported net costs of caring for uninsured patients with mental diseases and establish new policies and procedures going forward to ensure compliance with federal requirements.
Meyer said OIG will submit the findings to CMS for review.