Civil Fines and Penalties Debt:

Review of CMS' Management and Collection Processes

GAO-02-116: Published: Dec 31, 2001. Publicly Released: Dec 31, 2001.

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This report focuses on the debt collection processes and procedures used by the Department of Health and Human Services' (HHS) Centers for Medicare and Medicaid Services (CMS). The primary reason for the growth of CMS' civil monetary penalties (CMP) receivables was the expansion of fraud and abuse detection activities from fiscal year 1995 through fiscal year 1997 that significantly increased reported fraud and abuse debts in fiscal year 1997. GAO's analysis of CMS' CMP receivable data revealed similar financial accountability and reporting issues as those identified for non-CMP receivables by CMS' external financial statement auditors. GAO identified (1) unreconciled differences of tens of millions of dollars in the CMP receivables balances reported by HHS and CMS for fiscal years 1997 through 1999 and (2) an unreconciled net difference of about $22 million between the CMP receivables balance in CMS' general ledger and the detailed subsidiary systems as of September 30, 2000. The data reliability issue prevented GAO from determining the overall adequacy of the CMP debt collection policies and procedures. However, GAO's limited tests showed that debt collection policies and procedures were followed for 11 of the 12 selected delinquent debts. GAO could not determine whether debt collection policies and procedures were followed for the 12th selected debt because supporting documentation was unavailable.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: CMS has not changed its position and continues to disagree with this recommendation. CMS officials continue to express their belief that GAO's recommendation does not recognize that each case is unique and requires an individual assessment and determination by regional attorneys based on the merits of that case. Contrary to CMS officials contention, GAO's recommendation does not call for CMS to establish a rigid, inflexible process for developing settlement amounts. Nonetheless, GAO continues to believe that CMS should establish procedures for typical control practices (i.e., document, review, and approve) that should be used when exceptions to overall policies occur to ensure that management's objectives are being met.

    Recommendation: The Administrator of CMS should establish and implement formal written debt collection policies and procedures for handling instances in which a discount greater than 35-percent is allowed, including the documentation, review, and approval of such settlements.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  2. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. In March 2004, CMS hired a contractor who validated CMP receivables in the general ledger, evaluated current processes, and recommended improvements. The evaluation included recommendations for determining a proper approach for its allowance for uncollectible CMP debts. CMS considered these recommendations to determine the most efficient means of reflecting a realistic allowance for uncollectible accounts. In addition, in September 2002, a CMS contractor developed detailed written accounting procedures for CMS's Asset Management Group Procedures Manual, including procedures for properly establishing an allowance for uncollectible CMP debt.

    Recommendation: The Administrator of CMS should establish formal written policies and procedures to ensure that the allowance for uncollectible CMP debts is properly determined using such an approach.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  3. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. CMS hired a contractor, who validated CMP receivables in the general ledger, evaluated current processes, and recommended improvements. The evaluation included recommendations for recording the uncollectible allowance. CMS considered these recommendations to determine the most efficient means of reflecting a realistic allowance for uncollectible accounts. In addition, in September 2002, a CMS contractor developed detailed written accounting procedures for CMS's Asset Management Group Procedures Manual, including procedures for properly establishing an allowance for uncollectible CMP debts. However, GAO has not yet been provided the detailed written accounting procedures to review to ensure that the appropriate procedures were included.

    Recommendation: The Administrator of CMS should determine an approach for assessing the collectibilty of outstanding amounts so that a meaningful allowance for uncollectible accounts can be reported and used for measuring debt collection performance.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  4. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. In CMS's Corrective Action Plan, it stated that (1) general ledger reconciliation protocols have been established, (2) written cash reconciliation procedures were developed, and (3)reconciliations are performed monthly. In September 2002, a CMS contractor developed detailed written procedures for CMS's Asset Management Group Procedures Manual, including a section on performing general ledger and cash reconciliations. According to the procedures, the reconciliations will be performed monthly to ensure the accurate recording of long-term care CMP receivables between the subsidiary system and the general ledger. Specifically, the CMP receivables balances reported in CMS's general ledger are reconciled to the Civil Monetary Penalty Tracking System (CMPTS).

    Recommendation: In order to improve CMS' accounting, reporting, and collection of CMP receivables, the Administrator of CMS should establish and implement formal written accounting and reporting policies and procedures for ensuring the accurate recording of information into the general ledger.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  5. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. CMS developed an accounts receivable aging report from the Civil Monetary Penalty Tracking System (subsidiary system) in July 2002, regional offices validated the aging report in August 2002, and adjustments were made to the general ledger in September 2002. Also, in September 2002, a CMS contractor developed detailed written procedures for CMS's Asset Management Group Procedures Manual, including a section on establishing long-term care CMP receivables in the general ledger. The procedures state that the aging reports will be used to establish long-term care CMP receivables in the general ledger as part of the monthly reconciliation between the general ledger and subsidiary system.

    Recommendation: In order to improve CMS' accounting, reporting, and collection of CMP receivables, the Administrator of CMS should establish and implement formal written accounting and reporting policies and procedures for recording of long-term care receivables in the general ledger since long-term care CMP receivables currently are not recorded in the general ledger until a collection is made.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  6. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. CMS hired a contractor to validate CMP receivables in the general ledger, evaluate current processes, and recommend improvements. For long-term care CMP receivables, CMS developed an accounts receivable aging report from the Civil Monetary Penalty Tracking System (subsidiary system) in July 2002, regional offices validated the aging report in August 2002, and adjustments were made to the general ledger in September 2002. Also in September 2002, a CMS contractor developed detailed written procedures for CMS's Asset Management Group Procedures Manual, including a section on reconciling long-term care CMP receivables between the general ledger and subsidiary system. According to the procedures, the aging report will be reviewed monthly to reconcile between the general ledger and subsidiary system. As a result, actions have been taken related to the reconciliation of long-term care CMP receivables, which accounted for 88 percent of the total CMP receivables as of September 30, 2000.

    Recommendation: In order to improve CMS' accounting, reporting, and collection of CMP receivables, the Administrator of CMS should establish and implement formal written accounting and reporting policies and procedures for reconciling CMP receivables between CMS' general ledger and the detailed subsidiary systems.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  7. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. Procedures have been implemented to ensure the amount of CMP receivables reported in CMS's financial statements agrees with the amount in HHS's Accountability Report. Specifically, the CMP receivables balances reported in CMS's audited financial statements are reconciled to the amounts reported in HHS's Accountability Report to ensure the accuracy and validity of the information reported. Support was provided documenting that the fiscal year 2001 and 2002 amounts reconciled. In September 2002, a CMS contractor developed detailed written accounting procedures for CMS's Asset Management Group Procedures Manual, including a section on comparing and reconciling long-term care CMP receivables reported in CMS's financial statements and HHS's Accountability Report. In addition, starting in August 2003, the Premium Billing and Collections Division Director will review and sign off on final CMP balances reported to HHS.

    Recommendation: In order to improve CMS' accounting, reporting, and collection of CMP receivables, the Administrator of CMS should establish and implement formal written accounting and reporting policies and procedures for comparing CMP receivables reported in CMS' audited financial statements and HHS' accountability report.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  8. Status: Closed - Implemented

    Comments: CMS has implemented corrective actions to address this recommendation. In fiscal year 2002, a CMS contractor validated CMP receivables and evaluated the debt referral process. CMS reviewed the contractor's recommendations and referred all eligible debts to Treasury in March 2003. In September 2002, a CMS contractor developed detailed written procedures for CMS's Asset Management Group Procedures Manual, including a section on referring eligible long-term care CMP debt to Treasury. According to the procedures, outstanding CMP receivables will be reviewed to continually send eligible debts to Treasury.

    Recommendation: The Administrator of CMS should establish and implement formal written debt collection policies and procedures for referring eligible long-term care CMP debt to Treasury as required by the Debt Collection Improvement Act of 1996.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

 

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