LDH Needs Stronger Procedures to Make Sure Nursing Facility Medicaid Payments Are Accurate

Louisiana Department of Health (LDH) officials need to strengthen the processes they use to ensure the accuracy of Medicaid payments to nursing facilities, the Legislative Auditor said in a report released today. Although the Department does ensure that nursing facilities spend the required amount on patient care, improvements need to be made in other oversight areas, the state auditor said.

In calculating Medicaid rates for nursing facilities, state law requires that LDH include the level of need for all residents (private pay, Medicare, and Medicaid). Other states, however, only consider those residents who receive Medicaid when determining their Medicaid rates. Auditors found that Louisiana could have saved approximately $19.7 million in fiscal 2016 if only Medicaid residents were included in the Medicaid rate calculations.

In addition, state law requires that LDH use a minimum factor of 9.25 percent to calculate a nursing facility’s fair rental value, which is also included in the Medicaid rate. Other states use rental factors between 6 percent and 9 percent. Auditors found that if Louisiana were to use the Treasury bond rate of 2.5 percent plus a risk factor of 2.5 percent in calculating fair rental values for the nursing facilities, the state could save about $57 million per year.

Auditors found as well that while Louisiana has approximately 260 private nursing facilities, LDH does not require its auditor to conduct full-scope audits on all of them every year. As a result, the state’s Medicaid reimbursement rates could be based on inaccurate cost information.

LDH officials also did not penalize any nursing facilities that submitted late cost reports in fiscal year 2014, and they have not established penalties for those facilities with repeat audit findings. Auditors found that LDH failed to assess $274,864 in late cost report penalties for 16 facilities from fiscal years 2014 to 2016.

In addition, auditors found that LDH paid out $3.2 million for nursing facility residents who were not Medicaid eligible in fiscal 2014, but made no attempt to recover the payments. LDH’s Program Integrity Section also does not conduct any procedures to identify improper payments to nursing facilities. External contractors identified approximately $300,000 in improper payments to nursing facilities between 2013 and 2016.