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NYS Comptroller


Taxpayers' Guide to State and Local Audits

Department of Health
Medicaid Program: Managed Care Organizations:
Payments to Ineligible Providers

Issued: February 26, 2018
Link to full audit report 2016-S-59
Link to 90-day response

To determine whether the Department of Health (Department) and managed care organizations (MCOs) have adequate processes in place to prevent payments to ineligible providers, and whether improper payments were made to ineligible providers. Our audit covered the period January 1, 2012 to December 31, 2016.

The Medicaid program provides a wide range of medical services to those who are economically disadvantaged and/or have special health care needs. The Department administers New York’s Medicaid program. For the State fiscal year ended March 31, 2017, New York’s Medicaid claim costs totaled over $58 billion, of which managed care accounted for about $34 billion. Under managed care, Medicaid pays MCOs a monthly premium for each enrolled Medicaid recipient, and the MCOs arrange for the provision of services their members require.

Medicaid providers who violate statutory or regulatory requirements related to the Medicaid or Medicare programs or who have engaged in other unacceptable insurance practices face possible sanctions, such as exclusion or termination from the Medicaid program. Providers that are excluded or terminated from Medicaid are no longer eligible to receive payments from MCOs for services rendered to Medicaid recipients. With the State’s recent operational shift to providing Medicaid services under managed care, MCOs have a greater responsibility for ensuring that managed care payments are not made to ineligible health care providers. To carry out this responsibility
effectively, MCOs must have adequate resources and procedures to identify providers that have been excluded or terminated from the Medicaid program, deny their claims, and thus prevent improper payments.

Key Findings
During the audit period, the Department launched efforts to improve its ability to detect and prevent payments by MCOs to ineligible providers. Notwithstanding those efforts, however, we identified certain weaknesses in the Department’s and MCOs’ processes that, if properly addressed, could improve their ability to detect and prevent improper payments to ineligible providers.

  • We determined MCOs improperly paid $50.3 million during the audit period, as follows:
    • $37.6 million for 379,761 claims paid to ineligible providers; and
    • $12.7 million for 198,515 claims paid to pharmacies where the prescribing physician was excluded from the Medicaid program or otherwise ineligible for Medicaid payments.
  • We identified 22.5 million MCO encounter claims that lacked the provider identification information needed to assess the propriety of payments totaling over $2 billion. We obtained provider information for the encounter claims of two MCOs (totaling about $145 million) and determined the MCOs paid 951 claims totaling $82,943 to ineligible providers. In a separate analysis, we also determined the MCOs paid 1,320 claims totaling $295,635 to pharmacies for prescriptions ordered by physicians who were excluded from the Medicaid program or otherwise ineligible to receive Medicaid payments.

Key Recommendations

  • Review the improper payments we identified and instruct MCOs to recover overpayments as appropriate.
  • Obtain the missing provider IDs on the encounter claims that lacked this information, assess the propriety of these claims, and recover any improper payments.
  • Improve monitoring efforts to assist MCOs in detecting and recovering improper payments to ineligible providers, including (but not limited to):
    • Notifying all MCOs of all ineligible providers identified by the Sanction Provider Reports;
    • Increasing the frequency of notifications to MCOs regarding ineligible providers; and
    • Performing routine audits of encounter claims that include matches against all available federal and State databases to identify payments made to ineligible providers.

Other Related Audits/Reports of Interest
Department of Health: Medicaid Managed Care Organization Fraud and Abuse Detection (2014-S-51)
Department of Health: Improper Payments for Recipients No Longer Enrolled in Managed Long Term Care Partial Capitation Plans (2015-S-9)

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