FILE - Jackson Memorial Hospital Miami Florida

Aerial image of Jackson Memorial North Hospital in Miami.

Federal auditors have not finished their review of Florida Medicaid spending but state officials already are disputing one anticipated contention: Florida must refund $436 million in Medicaid funding “improperly paid” to its largest public hospital.

The Florida Agency for Health Care Administration (AHCA) and Jackson Memorial Hospital are both challenging a pending determination by the U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) that incorrect payments were delivered to the Miami-Dade hospital between 2010 and 2014.

In response to a story first reported by Politico, which obtained a draft of the OIG audit written in May, AHCA Secretary Mary Mayhew said the draft’s conclusions about the state’s Low-Income Pool (LIP) program that reimburses hospitals for treating low-income people and the uninsured “are completely erroneous and misleading.”

“The OIG uses inaccurate data and completely ignores the important intersection between LIP and Medicaid payments,” Mayhew said in a written statement, accusing the OIG of “blatantly attempting to calculate LIP payments using a methodology that has been the subject of multiple lawsuits against the Centers for Medicaid & Medicaid Services (CMS), one that they were ultimately forced to discontinue.”

According to the AHCA, OIG’s LIP audit methodology uses a 2010 rule issued for a different Medicaid program, the Disproportionate Share Hospital (DSH) fund, which also provides funding to hospitals that treat large numbers of indigent patients but is not the same as LIP.

The rule reduced hospital funding for “dual eligible” patients, or those who qualify for Medicaid and Medicare, the Public Health Insurance program for the elderly.

A federal ruling determined the rule was not properly announced with proper notice and comment periods, declaring it unconstitutional.

According to supporting documents obtained by Politico, Jackson Memorial described OIG’s draft findings “largely inaccurate, are based on erroneous assumptions, and misconstrue or mischaracterize documentation provided in the course of the audit.”

According to the draft report, Florida Medicaid providers received $5.1 billion in LIP funds between 2010-14. Jackson Memorial received $1.8 billion of that LIP funding – nearly four times the second-highest recipient.

According to a February AHCA memo, Jackson Memorial has 22 percent of all licensed hospital beds in Miami-Dade County. It treats more than 74,000 Medicaid patients annually.

Jackson Memorial is operated by Jackson Health, one of the nation’s largest safety net hospital systems. It operates three hospitals – Miami, North Miami Beach, South Miami-Dade – community clinics, urgent care centers, nursing homes and delivers health care to Miami-Dade jail inmates.

In 2018, Jackson Health provided about $382.6 million in free or reduced-cost care, and spent $47 million on medical care for county jail inmates, the company said. Jackson Health also spent about $16 million on primary care clinics and an additional $12 million operating nursing homes, it said.

Jackson Memorial received about $110 million in LIP funding in 2018, which accounted for about 5 percent of its $2 billion annual budget.

The OIG draft report said the AHCA failed to establish policies to "identify and correct instances in which hospitals overstated their cost limits” and failed to monitor spending of LIP funds between 2010-14, according to Politico.

The OIG draft report said Jackson Health erroneously claimed compensation from LIP for care costs for undocumented immigrants and outpatient care for prisoners while omitting or underreporting Medicare and Medicaid payments.

The OIG also claims the state has not refunded HHS for $64 million in overpayments that Jackson Memorial had previously acknowledged.

Florida’s LIP program was created in 2006. It is one of eight states, led by both Republicans and Democrats, that have similar programs to help reimburse hospitals for uncompensated care, according to CMS.

The state’s LIP program has been a source of partisan contention since 2014 when the Republican-controlled Legislature declined to expand Medicaid under the Affordable Care Act (ACA) to nearly 800,000 Floridians.

The Obama administration sought to scale back LIP funding in 2015, preferring that states instead expand Medicaid under the ACA. Florida’s LIP funding that year was reduced from nearly $2 billion to $600 million a year.

Former Florida Gov. Rick Scott filed a lawsuit against the Obama administration’s efforts to reduce LIP funding, calling it illegally coercive, and a lawsuit challenging the federal government’s audit methodology for LIP, claiming it was illegal and that HHS never properly informed the state of its intention.

The former lawsuit failed but the latter is still pending.

In 2017, the Trump administration restored Florida’s LIP funding to about $1.1 billion a year.