The Medford School District has agreed to pay the federal government more than $800,000 to settle a longstanding dispute over Medicaid payments received by the district.

The Medford School District has agreed to pay the federal government more than $800,000 to settle a longstanding dispute over Medicaid payments received by the district.

The Office of the Inspector General sought the repayment after an audit conducted in 2003 showed a pattern of overpayments for health care services provided to special education students for the years 1998-2001.

School district attorney Tim Gerking said the overpayments were the result of "mistakes" made by district employees and confusion caused by federal guidelines he described as "complex, inadequate and confusing."

"In the government investigation and our own investigation, there was no evidence of deliberate, wrongful conduct," Gerking said.

Medford was among a number of districts nationwide that were audited in connection with the Medicaid funds. The Eagle Point School District agreed in 2002 to pay back $1.2 million associated with claims it had filed.

In a meeting with Mail Tribune editors Tuesday, Gerking and Medford schools Superintendent Phil Long said there was good news amid the bad: The federal government originally sought a payment of $2.3 million, which represented three times the estimated total of overpayments. The demand was reduced to $1.4 million in 2004 and the government has now agreed to accept $814,065.

Long noted the district had recently received an unanticipated boost in state funding for the current fiscal year. The state adjustment will net the district about $800,000, which will allow Medford schools to pay off the entire federal debt immediately.

Gerking said the Medicaid reimbursements covered health-care costs for special education students and included such things as speech therapy, nursing care and transportation to health care.

Gerking said federal auditors determined that the school district had not adequately documented some of the expenses. In some cases, he said, the district had documentation, but it did not meet the federal guidelines.

"Uniformly, participants in the (Medicaid) reimbursement program had great difficulty understanding the rules and interpreting those rules, particularly in respect to the documentation required for reimbursement claims," Gerking said.

The audit was performed in 2003 and examined 500 of the district's more than 12,700 claims filed in the four-year period. The financial penalty was extrapolated from the number of errors found in the 500 cases.

Gerking said the auditors found no evidence of deliberate or fraudulent actions on the part of district employees and noted that in the agreement with the federal agency, the district did not admit to any wrongdoing.