Medicare Home Health Agencies:

Overpayments Are Hard to Identify and Even Harder to Collect

HEHS/AIMD-00-132: Published: Apr 28, 2000. Publicly Released: May 24, 2000.

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William J. Scanlon
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Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) oversight of the amounts of overpayments home health agencies (HHA) owe Medicare, focusing on: (1) whether HCFA quickly identifies and collects overpayments from closed HHAs; (2) the accuracy of the overpayment amounts HCFA reported for closed Texas HHAs; and (3) whether HCFA can effectively record and track overpayments due from closed agencies.

GAO noted that: (1) HCFA is slow to identify amounts closed HHAs owe Medicare and collects little of the overpayments due from such HHAs following their closure; (2) because HHAs receive interim payments based on estimates of what their allowable costs will be, Medicare claims administration contractors must retrospectively adjust the payments after receiving and reviewing a report of an agency's costs; (3) HHAs have 5 months after they close to submit their final cost report to the contractors; (4) contractors generally take 18 months to make a final determination of the amount, if any, a closed HHA owes; (5) contractors have been discouraged from making quicker determinations for closed HHAs because doing so would disrupt timely determinations in cost reports from operating HHAs; (6) GAO found that little has been collected from the 15 closed Texas HHAs that HCFA reported as owing the most money; (7) in late 2000, HCFA plans to implement the home health prospective payment system mandated by the Balanced Budget Act of 1997, which will involve predetermined payments for home health services; (8) HCFA's proposed home health prospective payment system should reduce the potential for overpayments to HHAs because payment amounts would not be adjusted retrospectively to reflect allowable HHA costs; (9) GAO's estimate of the overpayments due from the 15 closed HHAs differs significantly from the estimate HCFA initially reported; (10) using the same definition of an overpayment as HCFA, GAO estimated that these HHAs could owe $68 million--one-third of HCFA's initial $209 million estimate; (11) two factors accounted for the difference: (a) contractor staff made errors entering data into one of HCFA's overpayment recording and tracking system, such as a $4.6 million duplicate entry; and (b) HCFA's initial query of this overpayment recording and tracking system did not specify that superseded transactions be excluded from the reported overpayments; (12) about $43 million of GAO's $68 million overpayment estimate stems primarily from unfiled cost reports; (13) HCFA's inability to accurately record and track overpayments has been a consistent weakness documented in its financial statement audits from fiscal year (FY) 1996 through FY 1999; (14) HCFA's contractors record and track overpayment activity for HHAs and other providers using a variety of fragmented and overlapping computer systems but do not always reconcile the data from these various systems; and (15) HCFA implemented several interim measures in 1999 to improve the reliability of its overpayment information and is planning additional improvements, however, they could take years to implement.

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