Health Law Daily Wrap Up, AUDITS AND MONITORING—OIG REPORTS: Indiana did not properly oversee Medicaid providers, (Oct 28, 2025)

By Sherri M. Schroeder, J.D.

HHS-OIG's audit showed the state’s oversight of HCBS services for developmentally disabled Medicaid enrollees did not fully comply with federal waiver and state health, safety, and administrative requirements at 30 residential settings.

An audit performed by HHS’s Office of Inspector General (HHS-OIG) has shown that Indiana Family and Social Services Administration—the state agency responsible for oversight of home and community-based services (HCBS) residential providers serving Medicaid enrollees with developmental disabilities—is not in full compliance with state and federal Medicaid requirements for such enrollees under Section 1915(c) of the Social Security Act. Specifically, Indiana did not fully comply with federal waiver requirements and state requirements for health, safety, administrative, and residential records. Of the 20 residential providers and 30 residential settings reviewed, the HHS-OIG found 246 instances of noncompliance. Therefore, the auditors recommended that it correct the instances of noncompliance, improve its oversight, and work with its providers to improve internal controls for health and safety, record maintenance, and training. (OIG Report, No. A-05-24-00013, Oct. 9, 2025)).

Audit. Using paid claim data provided by the Indiana agency, the HHS-OIG auditors identified 255 residential providers in Indiana. They then selected a nonstatistical sample of 20 residential providers for review based on various factors; from those, the auditors selected a nonstatistical sample of 1 or more supported living settings where residential services were provided, for a total of 30 residential settings. The auditors then conducted unannounced site visits accompanied by state agency staff between Oct. 7 and Nov. 22, 2024.

Findings. “The State agency did not fully comply with Federal and State health and safety requirements in overseeing residential providers that service participants with developmental disabilities who received supported living services through the program,” stated the auditors. Specifically, 15 residential providers did not comply with one or more administrative requirements, resulting in 46 instances of provider noncompliance. Noncompliance included failure to meet transportation requirements, failure to obtain or maintain required criminal history check documentation, lack of relevant training, and lack of written emergency safety and security policies and procedures.

Of the 30 residential settings reviewed, 29 were not in compliance with one or more state health, safety, and residential records requirements. Specifically, the auditors found 116 instances of noncompliance with health and safety requirements associated with 27 residential settings. Among other things, the noncompliance issues included unsafe, unclean, water-damaged, or moldy ceilings, walls, and floors in 13 residential settings; lack of fire extinguishers or current inspections in 13 settings; 11 settings with peeling, chipped, or cracked paint; 8 with rooms that did not have permanent light fixtures; an unlocked medicine cabinet containing a controlled substance in 1 setting; 2 settings with improperly contained bodily fluids; and 2 with fire hazards. In addition, the auditors found 84 instances of noncompliance with residential records requirements associated with 18 residential settings. Record requirements noncompliance included things such as lack of a participant’s current ISP in their personal file at 6 residential settings; lack of a participant's photo at 10 settings, and lack of consent for emergency treatment at 7 settings.

Causes. According to HHS-OIG, the cause of the state agency’s noncompliance is incorrect interpretation of policies related to maintenance of records, the need for additional guidance to clarify state requirements, and inadequate training. The state agency acknowledged that its inspection process failed to ensure Medicaid participants “resided in a safe setting because the case managers incorrectly interpreted policies related to site visits and the maintenance of records, may need additional guidance to clarify State requirements, or had inadequate training,” per the auditors’ report.

Conclusion. The auditors noted that the Indiana agency was working directly with HHS-OIG to address the areas of noncompliance identified during the site visits. Per the agency, it has implemented corrective actions to resolve most of the 246 instances of noncompliance. It also initiated several complaint investigations resulting in corrective action plans for several residential sites, closure of a residential site, and termination of a residential provider staff member. To improve its oversight and monitoring, the state agency is using a multi-pronged approach to monitor residential providers’ compliance and quality, conducting internal reviews of training, administrative code, and policies/procedures, and working to standardize foundational training and tracking of training. To improve internal controls, the Indiana agency will collaborate closely with residential providers, provide technical assistance, and conduct onsite reviews, among other things. District staff and case managers also received additional training.

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