Medicare:

Renal Facility Cost Reports Probably Overstate Costs of Patient Care

HRD-93-70: Published: May 18, 1993. Publicly Released: May 24, 1993.

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Pursuant to a congressional request, GAO reviewed Medicare dialysis payment rates and the Health Care Financing Administration's (HCFA) proposal to reduce these rates, focusing on: (1) the definitions Medicare uses to define costs for payment rate-setting; (2) the quality of the most recent audited rate-setting cost data; and (3) whether costs incurred by integrated and nonintegrated firms differ.

GAO found that: (1) HCFA and the dialysis industry disagree about the cost-finding principles that should be applied in gathering data used to set composite rates; (2) Medicare cost principles are more appropriate than generally accepted accounting principles for rate-setting purposes; (3) the composite rate has remained the same since 1983, but the number of outpatient providers has increased 67 percent and most providers report costs below their Medicare payment rate; (4) end stage renal disease (ESRD) audits are necessary to ensure that accurate cost data are used for rate setting and that they conform with Medicare cost principles; (5) audits performed by intermediaries and subcontractors were incomplete and poorly done; and (6) integrated facilities can provide dialysis treatment at lower cost by allocating expenses among more than one facility.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HHS revised and updated its audit guidance for the recent round of ESRD audits.

    Recommendation: To ensure that the future audits of dialysis facilities provide accurate and reliable cost data, the Secretary of Health and Human Services should direct the Administrator, HCFA, to revise and update HCFA audit guidance and instructions.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HHS provided training to auditors before the recent round of ESRD audits.

    Recommendation: To ensure that the future audits of dialysis facilities provide accurate and reliable cost data, the Secretary of Health and Human Services should direct the Administrator, HCFA, to ensure that the auditors understand the technical aspects of the ESRD Program.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: The agency allotted about 150 hours for each ESRD cost report audit in its recent audit effort. While this represents an increase from prior audit efforts, this amount of time is probably insufficient to ensure adequate audits. Budget constraints prevented a larger increase, according to the agency.

    Recommendation: To ensure that the future audits of dialysis facilities provide accurate and reliable cost data, the Secretary of Health and Human Services should direct the Administrator, HCFA, to provide sufficient time to complete the audits.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: The agency performed independent reviews of a portion of the audits conducted during the recent audit effort.

    Recommendation: To ensure that the future audits of dialysis facilities provide accurate and reliable cost data, the Secretary of Health and Human Services should direct the Administrator, HCFA, to monitor and review the audits to ensure that audit standards are followed and required work is performed.

    Agency Affected: Department of Health and Human Services

 

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