Audit Division

Audit Summary


Department of Human Resources

Division of Health Care Financing and Policy

Report LA00-14


Results in Brief

            Although improvements have been made in the Medicaid system, some weaknesses still exist that increase the risk claims are not always appropriately paid.  We found that program edits designed to help ensure claims are proper did not always work, and overrides were not always approved and documented.  In addition, information in some cases can be input or modified after a claim has been entered without authorization and often bypasses system edits.  Finally, payment and rate adjustments occurred without adequate review or oversight.


            Medicaid payments are significant and expanding.  They have increased from $165 million paid to 5,000 medical providers in 1991 to nearly $450 million paid to 10,000 providers in 1998.  In addition, the Division operates in a complex environment resulting from extensive federal and state requirements. This environment and the dollar magnitude of the program increase the risk for the improper processing and payment of claims.   Although the Medicaid system is generally well designed, weaknesses in the system can potentially result in large dollar losses to the program.  Therefore, processing and payment controls are essential to reducing the risk of claims being improperly paid


Principal Finding


·                    The Division’s claims processing system allowed payments for illogical medical procedures despite computer edits designed to detect and deny such instances.  The system paid 13 claims totaling over $6,000 for gender-specific procedures performed on the opposite sex.  We identified seven recipients listed as male in the system who received maternity-related procedures.  We also found six recipients noted as female in the system who received procedures related to male anatomy.  (page 13)


·                    We also identified several claims where we could not determine if the system functioned properly and rejected the claims for the one time only edit.  For example, three recipients received two hysterectomies and one recipient had two claims paid for an appendectomy.  The latter of these claims should have processed against the “one time procedure repeated” edit and been rejected by the system.  Three of the claims did, in fact, reject and received an approval code.  However, we could not determine if they rejected for the one time only edit or other reasons.  Further, we could find no evidence these claims were reviewed and the duplicate procedures approved. (page 14)


·                    The Division has not reviewed its weekly conflicting procedure edit report since 1997.  About 60,000 claims totaling $28 million processed against one of these edits to  “pay now and review later” in calendar year 1998.  Division personnel indicated that the reviews were time consuming and unproductive (98% error free).  However, Department no documentation could be provided supporting this statement.  (page 15)


·                    There is no programmed routine within the Medicaid system nor procedures for Division personnel to retrospectively review a recipient’s claim history to ensure claims were not paid after eligibility has discontinued.  In one case, a recipient’s case closed (recipient died) January 4, 1998, but then had 66 paid transactions in the system totaling more than $26,000. Although we discovered the January 1998 date was an input error, if it had been correct there is no process in place that would have detected this error.  (page 15)


·                    The override process of Medicaid system edits continues to have problems, as reported in our 1991 audit report.  Overrides are occurring without the proper approvals.  We found 18 of 50 claims with a “payment amount” override, and 23 of 29 claims with a “stale date” override that had no evidence of approval, as required by the Division. In addition, six of 30 claims with a “multiple edit” override and one claim with an “eligibility” override, were approved after the claims had already been processed.  (page 16)


·                    Overrides of system edits, even when approved, did not always have the required documentation necessary to support them.  Our review found six claims with a “multiple edit” override and six claims with a “stale date” override, lacked the required supporting documentation as required by Division policy.  Our review also found five claims with a “stale date” override, five claims with a “long-term care” override, and one claim with a “limitation” override that did not have the required notation of the override recorded on the claim.  (page 19)

Department of Human Resources

Division of Health Care Financing and Policy


Agency Response

to Audit Recommendations










Develop controls, including periodically reviewing the edit process, to ensure edits are functioning properly





Develop authorization, documentation, monitoring, and reporting requirements for the use of approval codes by the fiscal agent






Continue the analysis of the conflicting procedures edit process and develop the SURS procedures manual





Develop procedures to periodically review a recipient’s claims history when Medicaid eligibility has been discontinued






Develop policies and procedures detailing the circumstances, documentation, and approvals necessary for each type of override






Periodically review the fiscal agent’s compliance with override policies and procedures





Review the system process for deleting claims from a claimant’s history file and the entry of information when such information is not on the original claim.  Based on this review, develop related controls for the modification, deletion, or input of information affecting previously entered Medicaid claims









Develop authorization, documentation, and review requirements for adjustment transactions





Review rate adjustments and retroactive payments to ensure their validity