Grady to repay state $20M in Medicaid overpayments
By Craig Schneider
The Atlanta Journal-Constitution
In a “body blow” to efforts to save the cash-strapped Grady Health System, the facility must
pay $20 million to the state due to Medicaid overpayments made to the center years ago,
officials said.
Grady CEO Michael Young said the hospital is paying for desperate decisions made by his
predecessors. He said Grady officials in 2004 and 2005 aggressively maximized the amount
of Medicaid they received, leaving the current regime to pay back the extra millions.
“They were kind of robbing Peter to pay Paul,” Young said. “They took their money when
they could ... and now it’s become someone else’s challenge.
“This is a real body blow to us,” he added.
Young said he understands those Grady officials were scrambling to keep the hospital alive.
They did not break the law since the system allowed for such Medicaid overpayments, so
long as the money was eventually paid back, state officials said.
“Was it short-sighted? Yes. Was it necessary? Yes,” said Grady chief financial officer
Michael Ayres, who was not at the hospital at the time. “Did they do us a disservice by
making us pay it later? Yes.”
Grady owed the state $13 million in 2004, and $7 million in 2005, Grady officials said. The
figures include the Grady Health System and Hughes Spalding Children’s Hospital, which is
owned by Grady.
By 2006, the hospital owed $900,000, which Grady officials said was more in tune with the
moderate overpayment figures they have generated since.
Grady is on an extended payment plan and expects to finish the payments in October. Grady
officials say the money could have reduced the hospital’s $60 million debt to Emory and
Morehouse medical schools, which staff the hospital’s physicians. It could have helped fix
dilapidated equipment and facilities, or provided raises to staff, officials said.
Young said the hospital can absorb the blow because it is in better financial shape than in
past years. Without the current efforts to control costs and raise money from the community,
the $20 million bill could have devastated hospital finances, said hospital spokesman Matt
Gove.
But Grady is still struggling, and expects to end this year with a $37 million operating loss.
Grady is the state’s largest charity hospital and the facility depends on Medicaid for much its
revenue. Medicaid is a joint federal-state program that provides health insurance for lowincome people.
Each year, Grady and other hospitals send a Medicaid financial statement to the state
Department of Community Health, outlining their estimate on how much Medicaid they
should receive. The state then performs its own calculations and determines whether it has
overpaid or underpaid the hospitals.
State health officials say it is not uncommon for a hospital to end the year owing money to
the state due to Medicaid overpayments. Some hospitals of similar size to Grady have had
similar overpayments, said DCH spokeswoman Joye Burton.
“Clearly we want to get as close to the cost coverage target as we can, so neither side owes
the other,” Burton said.
Pam Stephenson, vice chairwoman of the current Grady board, served on the hospital board
during those years, and she said she had raised objections to maximizing the payments.
“I think it was risky, and I don’t think we should have exposed ourselves to that risk,”
Stephenson said.
Essentially, the hospital raised its charges for medicaid procedures and services in 2004 and
2005, without notifying the state to adjust the hospital’s rate of Medicaid reimbursement, said
Ayres, the hospitals chief financial officer.
That allowed Grady to receive more Medicaid money than it should have obtained, he said.
“It’s the story of Grady,” he said. “Do what you have to do today to survive.”