County's Medicaid ailment; Errors lead state to reject 39% of claims on first pass, creating a $200-mil. gap

Crain's Chicago Business

December 4, 2006

By Greg Hinz

Cash-strapped Cook County is losing about $200 million a year-at least temporarily-because of its failure to submit the right paperwork at the right time to the state.

Thirty-nine percent of Medicaid claims submitted for inpatient treatment at county hospitals in fiscal 2006 were rejected due to billing errors, according to the Illinois Department of Healthcare and Family Services, which administers the Medicaid program. The data, obtained through a Freedom of Information Act request, cover only the yearlong period ended June 30, but state officials say the figures have been similar in previous years.

Of the 30,962 rejected claims, more than half were due to paperwork errors, such as missing or incorrect billing codes, or because they were submitted too late. Another quarter were bounced because, on their face, the patients or procedures involved did not appear to qualify for Medicaid coverage.

Cook County's rejection rate is above the average 22% figure for Medicaid claims filed by private hospitals in Illinois, Healthcare and Family Services says.

The department estimates the total value of Cook County's rejected claims at about $200 million. While ``most'' of that money is paid after corrected claims are filed, a spokesman says the department does not know how long that takes nor what the cost is in lost cash flow.

`non-functional' system

One county commissioner, Michael Quigley, calls the 39% error rate ``staggeringly high'' and a sign of a ``non-functional'' system. ``We're going to fix it,'' he says.

Linda Rae Murray, new interim co-chief of the Bureau of Health Services, says she is ``surprised the error rate was only 39%.''

``This is an area where the bureau has not functioned well in the past,'' Ms. Murray says. But she says efforts are under way to improve the situation.

Other sources say the county's rejection rate is a holdover from the days when the county received a set amount of state funding each year and only had to justify the payments months after receiving them. The state recently switched to a new system in which paperwork has to be correct before payment, saying such a step is required by the federal government, which provides most Medicaid funding.

Both the county's health chief and his chief financial officer resigned in recent months. It faces a projected fiscal 2007 budget deficit of more than $500 million.

Copyright 2006, Crain Communications

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