Medicaid Audit Readiness

Medicaid Audit

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 a child with a disability obtain special education services, school-based health services (IE OT, PT, Speech, and Mental Health services to mention a few), and transportation services. Schools may also receive reimbursement for the cost of performing certain administrative activities related to the Medicaid Administrative Outreach Program under provisions of the Early and Periodic Screening, Diagnosis and Treatment Program.

School districts that participate in their state’s Medicaid School Program must adhere to both state and federal rules applicable to Medicaid. That responsibility applies not only to operating the program, but properly maintaining student claim information, and financial records. Districts are also required to participate in a Medicaid audit if called upon and provide timely resolutions to findings. 

The sheer mention of an audit of any type or on any scale is often the cause of many sleepless nights. Some of the most often seen audit findings include:

  • The plan of care was not signed by a qualified practitioner.
  • The service type is not included in a qualified plan of care.
  • An IDEA parental consent form was not on file for this student.
  • The district inadvertently included unallowable costs or inadvertently didn’t include costs allowable under 2 CFR Part 200.

To prepare for a Medicaid audit a district should develop an audit readiness plan. This might be thought of as an audit readiness proactive toolkit. Items that should be included and/or the districts methodology behind these items should be included in this resource. Also, where are these items located if not kept in a specific electric folder or paper file cabinet. Check your states methodology for the length of time this information should be maintained.

  • The Uniform School Accounting System reports for the period in question to backup associated reported costs. This applies to employed staff and contractors.
  • Provider Licenses including contracted staff and drivers’ licenses for bus drivers.
  • Student and staff attendance records
  • Referrals signed by the appropriate authority if relevant.
  • Transportation logs if applicable. This could also include bus maintenance records, and documentation of costs.
  • IEPs with service type and assessment/evaluation/re-evaluation information included.
  • Signed IDEA parental consent forms.
  • Service documentation data should include students’ name, service start and end time, group sizes, service notes including progress, ICD 10 codes, CPT Codes, date of said service, and providers electronic signature or signed paper copies. This should be maintained on employed and contracted staff.
  • Supervision logs if applicable.

Lastly, districts should develop a plan and be prepared to update this toolkit as Medicaid methodologies or district policies change.


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