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NYS Comptroller


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Department of Health
Medicaid Program: Improper Fee-for-Service Payments for Services Covered by Managed Care

Issued: January 10, 2019
Link to full audit report 2017-S-74

To determine whether Medicaid made improper fee-for-service (FFS) payments for certain services covered by mainstream managed care plans. Our audit covered the period January 1, 2013 to April 30, 2018.

The Department of Health (Department) pays Medicaid providers using the FFS or managed care method. Under the FFS method, the Department, through its Medicaid claims processing and payment system (eMedNY), pays providers directly for services rendered to Medicaid recipients. Under the managed care method, the Department pays managed care plans a monthly premium for each Medicaid recipient enrolled in managed care, and the managed care plans pay providers for services rendered to their members. The Medicaid program should not pay claims on a FFS basis when the services are covered by managed care.

The State’s Medicaid program offers different types of managed care. Most recipients are enrolled in mainstream managed care plans (Plans), which provide comprehensive medical services ranging from hospital inpatient care to physician and dental services. Accordingly, Plans are responsible for providing most medical services to enrollees. Generally, Plans are also required to pay for medical services for newborns whose mothers are Plan enrollees. However, some services are excluded (carved out) from the Plans’ benefit packages and paid separately through FFS. Medicaid FFS claims are subject to various payment controls through the eMedNY system. For example, eMedNY edits determine whether recipients are enrolled in Plans and will deny FFS claim payments unless the services are carved out from the recipient’s Plan benefit package. The carved-out services are controlled by the scope of benefits information maintained in eMedNY.

Key Findings

  • Medicaid made over $36 million in improper FFS payments for inpatient, practitioner, and dental services that should have been covered by Plans.
  • Many of the improper payments identified were for newborn-related medical services. Generally, a child born to a mother enrolled in a Plan should be enrolled in the mother’s Plan from the month of birth. Improper payments occur when newborns are not enrolled in the Plans timely, and hospitals inappropriately bill Medicaid FFS for the services.
  • The Department has not taken effective steps to ensure Plans promptly report enrollee pregnancies to the entities responsible for managed care enrollment of newborns.
  • The Department does not track or penalize lateness when hospitals do not report live births within five business days to the Department.
  • The Department does not have a process to routinely or timely identify and recover all improper FFS payments that result from retroactive updates to a recipient’s Plan eligibility (including retroactive enrollments of newborns into their mothers’ Plans), or retroactive updates to the scope of benefits information in eMedNY.

Key Recommendations

  • Review the $36 million in FFS claim payments and recover overpayments, as appropriate. Work with the entities responsible for managed care enrollment to help ensure timely enrollments of newborns.
  • Develop a process for timely identification and recovery of improper FFS Medicaid payments for managed care services resulting from retroactive managed care enrollments and retroactive updates to the scope of benefits information in eMedNY.

Other Related Audit/Report of Interest
Department of Health: Improper Fee-for-Service Payments for Pharmacy Services Covered by Managed Care (2014-S-5)

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