A federal audit shows the Wisconsin Department of Health Services (DHS) did not properly document charges for services at 27 residential care centers serving troubled youth from October 2004 to September 2006. The federal inspector general is recommending that Health and Human Service (HHS) officials follow up on the audit by requesting a $22.8 million reimbursement from the state.

According to the audit:

In Federal fiscal year (FFY) 2005, the State began using an RCC reimbursement methodology devised by the consultant it hired to target new revenues that might be available to the State. The consultant advised that in accordance with section 1905(r)(5) of the Act, the RCC costs for treatment services provided by youth care workers and social workers could be claimed as “other services” under HealthCheck. At that time, the State agency had been excluding RCC treatment services from its allocation of RCC costs claimed for Medicaid reimbursement. The consultant developed a Medicaid reimbursement methodology for RCC costs that included two components: (1) a HealthCheck base rate for each RCC, consisting of the estimated Medicaid portion of the RCC daily billing rate, and (2) a HealthCheck administrative rate, consisting of a fixed percentage of the RCC daily rate. The administrative rate component is intended to cover nontreatment expenses that the RCC incurred to implement and participate in HealthCheck. To determine total costs for these services when claiming Medicaid reimbursement, the State agency used both rates in its calculation; it listed these costs on the CMS-64 as “other practitioner services.”

This reimbursement methodology significantly increased the dollar amount of the State agency’s claims for Medicaid reimbursement for its purchase of RCC services. Specifically, the RCC costs claimed for Medicaid reimbursement in FFY 2005, the first year that the State agency implemented the methodology, increased by $18,302,620 ($10,674,089 Federal share).

Using the reimbursement methodology that its consultant developed, the State agency claimed RCC costs of $41,382,076 ($23,986,398 Federal share) for the period October 1, 2004, through September 30, 2006. Of the $41,382,076 ($23,986,398 Federal share) in RCC costs that the State agency reported to CMS, $36,246,515 ($21,009,550 Federal share) related to HealthCheck base rate costs, and $5,135,561 ($2,976,849 Federal share) related to HealthCheck administrative rate costs.

DHS Sec. Kitty Rhoades’s rebuttal is attached to the audit. The state claims that the federal auditors misinterpreted and misapplied their own laws and rules in concluding that the state had failed to justify charges under the program. The rebuttal also indicates that the state is still using the disputed billing method, which means HHS could eventually ask for an even larger refund covering 2004 to the present.