A new follow-up audit by the New York State Comptroller’s Office reveals that the Department of Health has made limited progress in recovering millions in improper Medicaid payments linked to hospitals billing outpatient services as more expensive inpatient care.
The report, released March 12, assesses the Department of Health (DOH) and the Office of the Medicaid Inspector General’s (OMIG) response to a 2023 audit that flagged widespread billing errors and overpayments totaling hundreds of millions of dollars. Of the original five audit recommendations, only three have been partially implemented and two remain unaddressed.
The 2023 audit examined 34,264 inpatient claims—totaling $360.6 million—where patients were discharged within 24 hours, raising red flags that the services might have been outpatient procedures improperly billed as inpatient care. A closer review of 190 sample claims found that nearly half were inappropriately billed, with $1.6 million in overpayments identified.
Despite these findings, the follow-up report shows that DOH and OMIG have not developed a system to identify or prevent similar errors. Officials have yet to recover the full $874,023 still owed from the sample claims. Only 13 of the remaining 50 claims have been voided since the original report, and none of the recoveries were directly tied to audit-triggered actions.
The report also notes that nearly $51 million in potential recoverable payments could now be permanently lost due to six-year look-back provisions for Medicaid audits.
A core concern is DOH’s lack of clear billing guidance for hospitals. While a Medicaid update with new billing guidelines is in progress, it has not yet been published. The audit also highlights that many short-stay inpatient claims still lack required room and board charges, further indicating probable misclassification.
“The agency failed to take meaningful action to resolve known errors or prevent future ones,” auditors concluded.
More than 1,900 new inpatient claims for hospital stays of five hours or less—worth $22.1 million—have been billed since the initial audit. Still, OMIG and its contractor, the Island Peer Review Organization (IPRO), have not included these high-risk claims in their reviews.
The auditors strongly urged the state to develop a risk-based system to proactively flag and review short-stay inpatient claims, incorporate patient length-of-stay into audits, and take immediate steps to recover overpayments before additional claims fall outside the statutory recovery window.
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