Federal investigators want $8 million back from Mo.

JEFFERSON CITY, Mo. (AP) -- Federal investigators say Missouri's tax on hospitals has not followed federal law, and they want the state to pay back at least $8 million in federal Medicaid money.

The state Department Social Services, which oversees Missouri's Medicaid health care program for the poor, has not repaid the money yet, insisting it has done nothing wrong.

Although the dispute with the federal government dates to last year, the state has not publicized it and acknowledged it only after being contacted this week by The Associated Press.

The state imposes what's known as a provider tax on hospitals, as well as nursing homes, pharmacies and health care management firms. Together they generate nearly $1.1 billion annually. The state then uses that money to draw down an additional $1.8 billion in Medicaid money from the federal government.

That pool of money then is paid back to hospitals and other health care providers who treat people on the Medicaid program.

In the 2004 fiscal year, according to the federal report, Missouri collected taxes of $552 million from 131 hospitals to obtain $997 million in federal funding.

Federal investigators said Missouri inappropriately collected taxes in fiscal 2004 on items not related to patient care, such as hospitals' cafeteria revenue, and hence drew down more federal money than it deserved. They also say Missouri changed its plan -- the tax basis and tax rate -- without first obtaining the federal government's approval of the changes as required.

"Missouri did not correctly interpret or comply with the requirements for a permissible provider tax," said an audit released in late March by the Office of Inspector General in U.S. Department of Health and Human Services.

Investigators originally had figured the state owed $23 million, but after getting the state agency's response to the audit, lowered that to an $8.2 million refund from taxes on 27 hospitals reviewed in 2004. Federal investigators warn the total could be much higher when considering all hospitals and later years. Investigators recommended that Missouri also pay back that money, but did not estimate the amount.

If forced to repay the Medicaid money, it likely would be withheld from future federal payments to Missouri for its Medicaid program.

"At this point we're waiting to hear what (the Centers for Medicare and Medicaid Services) says in response to this audit," department spokeswoman Sara Anderson said.

Representatives of the federal program did not immediately return calls seeking comment Wednesday.

The state said it has not changed its method for collecting the tax on hospitals in the past decade.

If the federal government determines that Missouri has been charging hospitals incorrectly, the state will ask that it be allowed to change policies going forward, but not be required to reimburse the government for past years.

"We've done the right things for 10 years. It wouldn't exactly be fair to go back and ask us to pay it back," Anderson said.

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On the Net:

Social Services Department: http://www.dss.mo.gov

Inspector General: http://oig.hhs.gov/