The Department of Health (Department) administers the State’s Medicaid program which uses a reimbursement methodology known as diagnosis related groups (DRGs) to pay most hospitals for inpatient services. When a hospital bills Medicaid using DRG, it must indicate whether the patient was a transfer or a discharge since a discharge payment is generally more than a transfer payment. We found that 211 out of 270 high risk claim payments were incorrectly coded as a discharge and resulted in Medicaid overpayments totaling about $5.4 million. We also identified about 3,000 other claims that were improperly coded and could have resulted in an additional $12 million in improper Medicaid payments. Our audit contains five recommendations to recover funds, investigate the high risks claims we identified, and action to take to preclude overpayments from being made in the future.For a complete copy of Report 2009-S-26 click here.