National Heritage Insurance failed at times to report Medicare cost reports and reconcile outlier payments, according to a report from HHS' Office of Inspector General.
For the audit, the OIG compared records from the CMS database to information received from Medicare contractors for cost reports that included medical services provided between Oct. 1, 2003, and December 31, 2008, to determine whether National Heritage had referred cost reports to CMS for reconciliation in accordance with federal guidelines. It also determined whether cost reports that qualified for referral to CMS had been reconciled by Dec. 31, 2011.
Of 18 Medicare-participating hospital cost reports with outlier payments that qualified for reconciliation, National Heritage referred 12 cost reports to CMS in accordance with federal guidelines, according to the report. However, National Heritage did not refer six cost reports that should have been referred to CMS for reconciliation. Of these, three cost reports had not been settled and should have been referred to CMS.
The OIG found that as of Dec. 31, 2011, the difference between the outlier payments associated with two of these three cost reports and the recalculated outlier payments totaled at least $2,952,536, and that about $1 million was due from Medicare to a provider for the third cost report that should have been referred to CMS for reconciliation. The net financial impact of the outlier payments associated with these three unreferred cost reports was therefore at least $1,926,256 that was due to Medicare.
The three remaining cost reports had been settled, had exceeded the three-year reopening limit, and should have been referred to CMS for reconciliation, according to the OIG. The OIG found that as of Dec. 31, 2011, the financial impact of the outlier payments associated with those three cost reports totaled about $3.1 million.
Of the 12 cost reports that were referred to CMS with outlier payments that qualified for reconciliation, National Heritage had not reconciled the outlier payments associated with any of these cost reports by Dec. 31, 2011. The OIG found that as of Dec. 31, 2011, the financial impact of the outlier payments associated with 11 of the 12 cost reports that were referred but not reconciled was at least about $20.7 million that was due to Medicare, and that $167,647 was due from Medicare to a provider for one of the 12 cost reports that were referred but not reconciled.
The OIG recommended that National Government Services, the Medicare contractor that assumed National Heritage's responsibilities do the following:
1. Review the six cost reports that qualified for referral and, if applicable, determine whether the cost reports may be reopened, reconcile the associated outlier payments, and refund the amounts due to Medicare and to the provider.
2. Reconcile the outlier payments associated with the 12 cost reports that were referred, work with CMS to reconcile the associated outlier payments, finalize these cost reports, and ensure the return of funds to Medicare and to the provider.
3. Ensure that control procedures are in place so that all cost reports with qualifying outlier payments are referred and reconciled.
4. Review all cost reports submitted since the end of our audit period and ensure that those whose outlier payments qualified for reconciliation are referred and reconciled in accordance with federal guidelines.
NGS concurred with the OIG's findings related to outlier status of the cost reports. However, NGS stated that it would determine the specific amounts associated with these cost reports after the outlier calculations and final settlement of the cost reports. Also, the OIG said NGS described corrective actions that it had taken or planned to take in response to our recommendations.
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