For many school administrators, just hearing the word “audit” can trigger a wave of anxiety. The stakes are especially high when it comes to Medicaid audits.
In this blog, we’ll walk through how Medicaid audits work, the difference between Medicaid and IDEA audits, and what your district can do to stay ahead of compliance issues, before the auditors come.
Understanding School-Based Medicaid Audits
The Medicare Catastrophic Coverage Act of 1988 allows for Medicaid payments for health services provided to Medicaid-eligible children under the Individuals with Disabilities Education Act (IDEA). IDEA mandates schools provide special education and intervention services to help children with disabilities access the education and school-based health services they need. These services often include occupational therapy (OT), physical therapy (PT), speech therapy, mental health services, and transportation.
In addition to these direct services, schools may receive reimbursement for administrative activities related to the Medicaid Administrative Outreach Program under the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Program. Examples could include immunizations, screenings, or other health services provided in schools to Medicaid-eligible students.
School districts participating in their state’s Medicaid School Program must comply with both federal and state Medicaid rules. Medicaid is a joint federal-state program: the federal government sets baseline standards, while states have flexibility to define specific policies, reimbursement rates, and administrative processes. Therefore, districts must adhere to overarching federal regulations and their particular state’s Medicaid program requirements.
This responsibility also involves maintaining accurate student claim information, detailed financial records, and being prepared to participate in Medicaid audits when requested. Districts must also resolve audit findings promptly to maintain eligibility for Medicaid reimbursements.
How Often Do Schools Get Audited for Medicaid?
- It varies by state
Some state Medicaid agencies conduct audits annually, while others do spot checks every few years. - High-billing districts may get more attention
Districts that submit large volumes of Medicaid claims or show unusual billing patterns are more likely to be audited. - Random or risk-based selection
Many audits are selected at random, but others are triggered by previous audit findings.
Note that Medicaid audit is not the same as IDEA audit. Although IDEA and Medicaid audits both relate to services for students with disabilities, they have different focus areas.
IDEA audits verify compliance with the Individuals with Disabilities Education Act, ensuring schools properly identify students with disabilities, develop and follow Individualized Education Programs (IEPs), and use federal IDEA funds appropriately. These audits review documents like IEPs, parental consents, evaluations, and expenditure records related to special education.
School Medicaid audits, meanwhile, focus on the accuracy of Medicaid billing for health-related servicesRelated Services Support services (such as speech therapy, occupational therapy, or transportation) that are required to assist a child with a disability in benefiting from their educational program. provided to Medicaid-eligible students. These audits verify Medicaid eligibility, physician orders, service documentation, and billing to prevent improper claims and fraud.
💡 Takeaway for school districts:
Because you never know how far back an audit may reach, it’s essential to retain all Medicaid-related documentation for at least 5–7 years, depending on your state’s requirements.
Who Conducts Medicaid Audits in Schools?
Audits can come from multiple sources from both state and federal agencies:
- State Medicaid Agencies
State Medicaid agencies play an important role in a state’s Medicaid program integrity by conducting audits to identify overpayments, fraud and noncompliance. They work with federal agencies like CMS and OIG to ensure proper use of Medicaid funds and to improve program efficiency. - Centers for Medicare and Medicaid Services (CMS)
CMS is the primary agency responsible for overseeing Medicare and the federal portion of Medicaid. Their role is to establish guidelines and regulations that providers must follow. CMS conducts audits to ensure compliance with these rules and to identify areas of concern. Their audits usually revolve around the state agencies making sure that they follow guidelines and regulations in managing the Medicaid program. - Office of Inspector General (OIG)
The OIG conducts audits to promote independent oversight into the effectiveness of government programs, ensuring they are achieving their intended goals and to detect and prevent fraud, waste and abuse. They focus on large-scale issues, like improper billing, fraud, or failure to meet federal requirements. - Payment Error Measurement (PERM) Audits
A PERM audit measures improper payments in Medicaid and Chip and produces improper payment rates for each program. Improper payment rates are based on reviews of fee-for service (FFS), managed care and eligibility of Medicaid and Chip in the year under review. Each district is reviewed every three years by federal agencies.
What to Expect When for a Medicaid AuditMedicaid Audit A thorough review conducted by federal or state agencies to ensure that Medicaid billing practices comply with all applicable regulations.
Below is what school districts can typically expect if you’re selected for a Medicaid audit. This summary is based on decades of experience and outlines the common steps and requests you’re likely to encounter. It’s a helpful reference you may want to keep on hand or save for future use.
An audit will begin with the auditing agency issuing a formal audit request, sometimes called an engagement letter. The letter will outline the following:
- List of programs to be audited (Ad-Claim, Medicaid FFS, Financials etc.)
- They wish to review dates of service, student and provider, financial, Random Moments, etc. information for whom the auditors wish to see copies of records and other documentation.
- When the records are due.
- Whether the audit is onsite or records must be sent and the method of delivery (secure fax, email or delivery of records).
The state agency has a meeting with stakeholders on the first day of the audit to establish contacts and to review the expectations of the audit and answer any questions that the district may have as well as the expectations of how the records are to be prepared (i.e. highlighted areas, clear copies, one record per page and the order of the documents).
- Typically, the agency gives the district 30 days to prepare records for the audit. If an extension is needed be sure to communicate this as soon as it is known you are not going to be able to meet the deadline.
- The auditors will begin to review the records on the scheduled day of the audit.
- If you are contacted to say that a record is needed, missing or not legible, etc., make this a priority to locate the record and send it as soon as possible.
- Their call is a courtesy, and if the record wasn’t sent or illegible by the first day of the audit, they could count it as a finding, and you could have to pay back funds.
When the audit is completed, the auditors will set up a closing meeting with a detailed account of their findings, usually with a percentage score. They give you a specified time where you can send documentation to support the claim before they issue their final percentage score with the amount of reimbursement.
- You should respond to the auditors with your feedback on the audit as well as create a corrective action plan (CAP) of your plan to prevent the findings found in the future.
- Depending on your score (each state has its own metrics), if your score is below the threshold in a particular category, it could trigger a reaudit.
💡 Recommended reading: Importance of Medicaid Documentation and How it Benefits School Districts
Be Ready for Your District’s Next Medicaid Audit
At Go Solutions we acknowledge that auditing services do not begin at the time that a district audit is announced and the importance of conducting self-audits. Claims entered are reviewed and analyzed on an ongoing basis to check compliance.
Go platform has many built-in edits to flag these claims for review. Flags appear on Dashboard reports for district review, as well as our many other convenient reports that are available to be downloaded, are used as valuable resource tools. These reports serve as a “roadmap” for areas of “weakness” that helps focus on the appropriate scope of the self-audits. The Go Solutions Customer Success Manager works hand in hand with the district coordinator to remedy any non-compliance findings that need corrective action.
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