CMS Did Not Reconcile Medicare Outlier Payments Properly: GAO

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Original story posted on: July 24, 2012

WASHINGTON, D.C. – Contrary to federal regulations and guidance, the Centers for Medicare & Medicaid Services (CMS) did not reconcile outlier payments associated with more than 95 percent of cost reports recently referred to the agency by nine Medicare contractors, according to an executive summary released by the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG).

Failure to reconcile such payments occurred in 292 of 305 cost reports in all, the summary indicated. As a result, the Medicare contractors did not reach final settlement in any of those 292 cases.

For the 13 remaining cost reports, CMS evaluated information submitted by the Medicare contractors and correctly determined that reconciliations of outlier payments were not required, the OIG noted.

CMS adjusts basic prospective payments for unusually high costs. These additional payments, known as outlier payments, are meant to protect hospitals from excessive losses due to atypically expensive cases. Medicare contractors refer hospitals' cost reports to CMS for reconciliation of outlier payments.

The failure to reconcile outlier payments connected to the 292 aforementioned cost reports represented delayed payments to Medicare, along with associated interest – funds that should have been returned to the Medicare Trust Fund, the OIG noted. The delayed processing of outlier payments due from Medicare to hospitals, along with associated interest, could have affected hospitals' financial viability, according to the OIG’s report. In addition, Medicare lost out on interest that stopped accruing once the Medicare contractors referred the cost reports to CMS for reconciliation of outlier payments.

In response to the matter, the HHS OIG released a list of four recommendations to CMS. First, the investigatory body advised CMS to work to ensure that Medicare contractors immediately move to reconcile outlier payments and perform final settlements on the 292 cost reports yet to be finalized.

Second, the OIG recommended that CMS work to ensure that Medicare contractors reconcile outlier payments and perform final settlement on all cost reports submitted after designated audit periods, thus adhering to federal guidelines. Third, CMS was advised to implement an automated system to recalculate outlier claims in order to facilitate reconciliations. Finally, the OIG recommended that CMS work with the Medicare contractors to develop and maintain a complete and accurate list of cost reports with outlier payments requiring reconciliation.

CMS concurred with all of those recommendations and described corrective actions it had implemented or planned to implement in response, the OIG reported.

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Mark Spivey

Mark Spivey is a national correspondent for RACmonitor and ICD10monitor who has been editing and writing reports for the websites for eight years.

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