Missouri psychiatric hospital being called on to repay Medicaid $21 million

July 3, 2013

ST. LOUIS (AP) — Missouri should pay back more than $21 million in federal Medicaid payments made to a state-operated children's hospital in St. Louis County, according to an audit released Friday by the Federal Office of Inspector General.

The audit found that Hawthorn Children's Psychiatric Hospital failed to meet regulatory requirements to qualify for the federal Medicaid reimbursements over a period of five years.

It found that the state did not have proper outside review of two conditions required for inpatient mental health facilities: Proof of appropriate staffing and adequate systems and programs; and proof of record-keeping for mental health patients. The audit didn't address whether the services were provided, only that there was a lack of proper review.

The audit covered the period from July 1, 2005, through June 30, 2010. The Office of Inspector General cannot require the state to pay back the money. The Centers for Medicare and Medicaid Services will decide whether to seek repayment of some or all of the money, and Missouri can appeal that decision.

Missouri Department of Social Services spokeswoman Rebecca Woelfel said the department disagrees with the audit and will continue to defend its position.

The former director of the Department of Social Services, Alan Freeman, contested the findings in a letter dated Feb. 13. The letter, included with the audit, said Medicaid officials failed to alert the state that the hospital was out of compliance. It also stated that some standards Hawthorn failed to comply with applied only to mental health hospitals serving patients 65 or older, not children.

"DSS strongly disagrees with the OIG's recommendation that it refund $21,374,765 to the federal government," Freeman wrote.

In response, the audit said a federal law clarified that the hospital must follow Medicaid standards for reimbursement, regardless of the age of those served.

Freeman had been director of Social Services for just five months when he resigned in May to return to his previous private-sector job as president and CEO of Grace Hill Health Centers Inc. Deputy director Brian Kinkade took over again as acting director, the same role he held from July 31, 2011, until Freeman's appointment on Dec. 26.

Freeman's departure came one week after Ian McCaslin was replaced as director of the department's Medicaid division.

Hawthorn, on a 26-acre campus near Pagedale, is Missouri's only free-standing children's psychiatric hospital.

Source: Jim Salter, "Audit: State-run hospital should pay back $21M," Associated Press, June 28, 2013.