BATON ROUGE - The Department of Health learned late Monday that the state will have to repay $239.5 million to the federal government for overpayments the agency made to fund LSU hospitals between 1996 and 2007.

Known as the "DSH Disallowance," the Centers for Medicare and Medicaid Services (CMS) had previously ruled that the state owed $362 million for billing for costs not allowed under Medicaid rules in the Disproportional Share Hospital program. The DSH program is used to cover expense of hospitals that treat large numbers of indigent patients. The department previously identified $122.6 million in offsetting funds, but maintained its appeal of the remaining $239.5 million. The Departmental Appeals Board within the U.S. Department of Health and Human Services ruled Monday in favor of CMS.

"We are, of course, disappointed by this decision from Washington. The loss of nearly $240 million in our Medicaid program is a significant challenge even in good fiscal times, and particularly difficult as the federal government continues to put policies in place that further tie our hands and strain our ability to manage our Medicaid program," said Secretary Bruce D. Greenstein. "But we've also been prudent in preparing for this worst-case scenario. We've said time and time again when asked to spend money set aside to pay for the disallowance that it would be irresponsible, and that has been proven true. Additionally, I want to make it clear that we have done a thorough analysis, changed our methodologies and policies to put tighter management of Medicaid in place to ensure that this will not happen again. "

LDH has already set aside $90 million in this fiscal year to cover a portion of the disallowance payment and has included the additional money as LDH officials work with the Division of Administration to develop the budget for fiscal year 2011-12.

The disallowance was originally issued by CMS on September 15, 2009. CMS asserted that in 1997 the state did not appropriately recoup DSH dollars that were overpaid to the nine state-run LSU-HCSD hospitals.

The state has maintained in its appeals that CMS expressly approved a state policy that struck recoupment language in 1997 and should only be liable for about $7 million overpaid in the first three quarters of that year before CMS approval.

Even so, the department took immediate steps when the disallowance was first issued to aggressively review all LSU uncompensated care payments to ensure only allowable costs are now included in those payments. 

The Louisiana Department of Health strives to protect and promote health statewide and to ensure access to medical, preventive and rehabilitative services for all state citizens. To learn more about LDH, visit For up-to-date health information, news and emergency updates, follow LDH's blog at, Twitter at and search for the Louisiana Department of Health on Facebook.