HCFA:

Three Largest Medicare Overpayment Settlements Were Improper

OSI-00-4: Published: Feb 25, 2000. Publicly Released: Mar 27, 2000.

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Pursuant to a congressional request, GAO: (1) reviewed the application of the Federal Claims Collection Act to the Health Care Financing Administration's (HCFA) settlement of overpayment matters with providers; and (2) developed case studies of settlements that may have been improper.

GAO noted that: (1) HCFA provided GAO with copies of 96 agreements reflecting Medicare overpayment settlements that it negotiated from 1991 through July 1, 1999, in which the overpayment exceeded $100,000; (2) GAO found nothing improper in the settlement of 93 of the 96 matters; (3) GAO did determine, however, that HCFA acted inappropriately in several respects as to settlement of the three largest matters, which constituted 66 percent of all Medicare overpayment settlements since 1991 for which HCFA provided GAO records; (4) in these settlements, HCFA agreed to accept $120 million for debts exceeding $332 million; (5) as to these matters, HCFA should have obtained clarification from those charged with implementing the Federal Claims Collection Act, including the Department of Justice and GAO, before unilaterally choosing not to obtain approval from Justice of the settlements; (6) such clarification should have been sought because HCFA's own regulations required any compromise of a claim over $100,000 to be approved by Justice, and those who settled the matter thought approval was necessary; (7) the official who negotiated these three settlements chose not to seek approval because he was concerned that if he did, the "deals would go up in smoke" and he knew that the settlements were not in the best interest of the government; (8) although HCFA chose not to seek a clarification or actual approval from Justice, it is not entirely clear that the Federal Claims Collection Act actually required Justice approval; (9) Federal Claims Collection standards require Justice approval only when an appropriate agency official has determined that the compromised claim is owed; (10) there is some doubt whether HCFA's fiscal intermediaries, who determine the overpayment amounts, are appropriate agency officials within the meaning of the standards; (11) concerning the specifics surrounding the three settlements, HCFA appears to have disregarded the permissible settlement criteria established by regulation, since evidence suggests that the providers were all able to pay the entire overpayment amount, that HCFA would have prevailed if matters were litigated, and that the amount of recovery would have exceeded the cost of collecting each of these multimillion-dollar debts; (12) GAO's investigation revealed that former HCFA Administrator Bruce Vladeck had directed subordinates to settle these matters; and (13) more importantly, his participation in the largest of these settlements raised conflict-of-interest concerns, which GAO could not resolve given his refusal to meet with it.

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