MRMC faced with repaying $1 million to Medicaid

Through a miscalculation some years back that labeled Magnolia Regional Medical Center’s labor and delivery area as a “birthing center,” the hospital is now facing close to $1 million in overpayment recoupment from Medicaid for 2010-14. Margaret West, administrator and chief executive officer, said Tuesday that to date, a total of $862,690 has been repaid for 2010, 2011, and 2014. It is unknown at this point what will be owed for 2012 and 2013.

West said she was first notified of this overpayment around the middle of July. This was addressed at the July 27 MRMC Board of Commissioners meeting and discussed again at the Aug. 24 meeting.

Though the calling back of funds by Medicare and Medicaid is nothing new for the hospital, West said this was an unusually large amount.

West said Tuesday that it was decided by hospital auditors that “because of the design of the new labor and delivery area, we would be eligible to have an insurance reimbursement from Medicaid as a birthing center because of its calculation of square footage.” Medicaid began paying $1,250 per diem rather than $850.

She explained that Medicaid pays $850 a day (per diem) for the mother. “Just on the mother,” she said. “The baby is a different category all together.”

MRMC uses Welch Couch & Co. of Batesville as the hospital’s auditing firm, which they have done for a number of years. Auditor Bill Couch was on hand for the July 27 board meeting to explain the issue.

In an email today, Couch explained that “the birthing center personnel work as a team providing quality care to all patients in their care, without direct assignment to any one patient, much the same as in an intensive care unit. But CMS regulations require labor and delivery costs to be allocated based on a ratio of charges and not on a ratio of patient days.”

“It’s not that we’re actually having to pay back, it’s money that they (Medicaid) say we never should have gotten to start with,” West said. “We’re just repaying what where we were overpaid is what it basically is. But when it comes all at one time it hurts us.”

A financial hit like this could force some small rural hospitals to close the doors, she noted. “Fortunately, we are in pretty good financial shape. We are OK. We’re going to ride this through.”

“We did not do anything wrong. There was nothing that the hospital did wrong,” West emphasized. “It was really just an oversight with the auditing firm. Really, the fact is we’re just paying back what we were overpaid.”

She explained that the auditing firm had a longtime standing agreement with a government entity as to how these costs were allocated, but with no contract and nothing signed.

In his email, Couch stated that the agency he was dealing with was Pinnacle Business Solutions, Inc.

“There was nothing in writing,” West said. “That’s one of the issues. He (Couch) talks to them, like we talk to our lawyers. It was like a ‘given’ and he said he’d been doing it for 20 years.” West said she was under the impression that the individual who had originally approved this allocation was now retired.

In addition to Welch Couch & Co., the hospital has now hired a second auditing firm “to go back and look at cost reports to see if there were any other issues,” West said, “to have other eyes to look at it, to see if there’s anything else that maybe had been overlooked or that another firm would question whether that was the correct way of doing it.”

This firm, she added, has found through looking at reports, that an opportunity may exist to recoup $400,000 back from another area “that maybe we could have done differently on a cost report.”

In his email, Couch stated this was “still in the research phase, but an appeal is possible as this issue affects most hospitals in Arkansas.” He could not give a definite answer as to how many other Arkansas hospitals were affected, but noted “the hospital must provide obstetric services in a birthing center to likely have been affected.”

“It’s very complicated,” West said. “You have to be an auditor to know how to do a hospital cost report. Basic hospital accounting, chief financial officers and comtrollers don’t do those.”

In this situation, West lamented, the hospital has actually lost money two ways, because its upper payment limit (UPL) was decreased because it was receiving the higher reimbursement.

“For hospitals that have a high percentage of Medicaid and Medicare patients,” she explained, “the government - based on a cost report - will calculate that we’re going to give you back X number of dollars based on that percentage of Medicaid/Medicare patients that you have.” Had MRMC received the $850 per diem payment rather than the $1,250 payment, “we would have had a higher UPL payment. But because we were getting the $1,250 that decreased the UPL payment; therefore, we kind of lost on both ways. The government wants us to pay them back, but the government won’t go back and re-calculate the UPL payment.”

The hospital currently receives a total of 1.375 percent of each cent of city sales tax money. The city’s sales tax is at 2.375 percent. A total of 1.125 percent goes to the hospital, with 0.25 percent dedicated to hospital operation and maintenance.

The hospital receives sales tax revenue each month. It was reported at the Aug. 24 board meeting that sales tax revenue for the month of July was $49,619. The sales tax account balance was reported at $2,636,917, following a transfer of $862,690 to the operating fund. This transfer was used to cover the Medicaid recoupment for 2010, 2011, and 2014.

West said in Tuesday’s interview that “we’re asking Mike Boyd (city attorney) to look at making sure that we can use our tax for operation and maintenance, to be able to help pay this back. We do have some money in the bank from our tax dollars, which was set side for operation and maintenance. We haven’t really had to delve into it a lot for maintenance, but this is kind of what it’s for. But we certainly want to make sure we’re doing the right thing before we do that.”

“There’s definitely a push in the state government to save Medicaid because of all the money with the private option and expenses, so Medicaid is looking for every dollar they can get,” she added.

story created on Thursday 8/27/2015 at 8:18:21 am by D Edington

story modified on Friday 8/28/2015 at 10:49:23 am by D Edington

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