SD DSS reported to the Government, Operations, and Audit Committee (GOAC) on Thursday May 23. Laurie Mikkonen, Finance Officer presented a Corrective Action Plan due to the audit finding as a result of the FY2018 Single Audit. The audit finding included inadequate controls over the calculation of Diagnosis Related Group (DRG) reimbursement rates and the audit finding type is a Significant Deficiency.
The Department of Legislative Audit (DLA) had two recommendations. The 1st recommendation was that DSS implement stronger controls over the calculations to prevent and detect errors. The 2nd recommendation was to recover the overpayments to providers.
As of April 1st SD DSS, has implemented Recommendation 1. These enhanced procedures include:
- Performing independent side-by-side DRG calculations by two staff people including milestones for comparison throughout the procedures
- DSS CFO will review and sign-off
- Additional testing of paid claims will be sampled and reviewed for accuracy of payment throughout the year. (During testimony SD DSS mentioned sample of claims to be viewed weekly)
- Additional oversight of potential updates to the claim-processing system prior to the release of updates
- 2nd BIT developer will verify procedures throughout their process
Additional recommendations from a third-party expert included:
- Move the implementation date of annual DRG weight update to January 1st. Data used to complete the DRG calculations is available at September month-end. Historically, DSS has completed the calculations in September/October and implemented the new weights in October resulting in a very short turnaround to review, test, and implement the DRG calculations. Going forward, DSS will complete the calculations in September/October and implement the new weights in January in conjunction with implementation of annual Medicare updates. This will allow adequate time for secondary review and additional testing activities to occur prior to implementation. Note: SD DSS will be discussing these changes with impacted hospitals over the course of the next few months.
- Year-over-year comparison of DRGs and claims for reasonableness
Recommendation 2: DSS will recover the overpayments from providers. DSS began collecting overpayments in January 2019 and $6.0 million total dollars has been collected through May 15, 2019. DSS anticipates collecting $500k, completing 100% of all recoveries by June 30, 2019. Collections are related to a prior fiscal year and the general fund share are deposited in the state general fund. DSS is required to return the federal share to the Centers for Medicare and Medicaid Services (CMS).
CMS has reviewed the audit finding and corrective action plan and concurs with the findings and recommendations. Once all collections have been completed and reported to CMS, SD DSS anticipates the finding to be resolved.