Butler Memorial Hospital will receive $1.6 million in reimbursement of tobacco settlement funds according to an audit released Wednesday, May 31, by the state.

Pennsylvania Auditor General Timothy L. DeFoor announced the audits for 17 health care facilities across the Commonwealth, including Butler Memorial, which merged with Excela Health earlier this year to create the Independence Health System.

“Pennsylvania utilizes a rigorous auditing process to ensure that funds are being disbursed in accordance with the applicable policies and regulations,” said Tom Albanesi, CFO of the Independence Health System, in an official statement. “All five Independence Health System hospitals cooperate fully with the Pa. Department of Auditor General in conducting those audits. These audits are routine and ongoing.”

The amount is for claims filed during the fiscal year which ended in June 30, 2021, and would be paid in the 2023 Tobacco Settlement Payment Year.

As part of the Master Settlement Agreement with the major tobacco manufacturers in 1998, the state of Pennsylvania received $11 billion to be portioned out between 2000 and 2025.

In the summer of 2001, the Tobacco Settlement Act authorized the state’s Department of Human Services to allocate moneys from the agreement to provide funding for hospitals serving low-income or uninsured patients.

“Our audits ensure hospitals have documentation to support the receipt of tobacco settlement funds before receiving reimbursement for uncompensated care,” DeFoor said.

Hospitals that qualify to receive settlement money can receive payment through either the “uncompensated care” method or the “extraordinary expense” method, with Butler Memorial opting for the latter. A hospital qualifies to receive reimbursement on an extraordinary expense claim when the cost of that claim exceeds twice the average cost of all claims for that facility and for which the hospital provided inpatient services to an uninsured patient.

For the fiscal year ending June 30, 2021, Butler Memorial reported 13 extraordinary expense claims. The state determined that 11 of the claims met the criteria to qualify for reimbursement, with these claims amounting to more than $1.6 million.

For comparison, for the settlement period of the prior fiscal year which ended June 30, 2020, Butler Memorial received just over $1.2 million on 12 extraordinary expense claims.

“Independence Health System is appreciative of the supplemental funding received, as it lessens the financial losses we incur on treating Medicaid patients,” Albanesi said.