Last week, OIG’s Office of Audit Services released its latest report on Medicare Administrative Contractors’ (MACs) compliance with Medicare cost report oversight requirements. The report, which is titled Medicare Administrative Contractors Did Not Consistently Meet Medicare Cost Report Oversight Requirements (the Report), identified 287 audit issues across all twelve MAC jurisdictions during the audit period, i.e., federal fiscal years 2019 through 2021.
Background
Pursuant to their contracts with CMS, MACs must ensure that providers follow the cost reporting principles and policies that are contained within the agency’s Provider Reimbursement Manuals and the regulations at 42 C.F.R. §§ 413.20 and 413.24. CMS has developed specific performance requirements for MACs to carry out these functions. 42 U.S.C. 1395kk-1(b)(3). CMS’s Quality Assurance Surveillance Plan (QASP) measures the MAC’s compliance with the Statement of Work requirements in the contracts between CMS and the MACs in the following areas:
- Appeals
- Audit & Reimbursement (A/B MACs only)
- Beneficiary Customer Service
- Claims Processing
- Financial Management
- Debt Management
- Medical Review
- Medicare Secondary Payer
- Provider Customer Service Program
- Provider Enrollment (A/B MACs only)
QASP evaluations of each MAC take place annually. More information on the QASP and its evaluation is available here.
Focusing on Audit & Reimbursement (AR), CMS has established thirteen AR performance standards, which include (but are not limited to) desk review and audit quality, cost report acceptability timeliness, and Notice of Amount of Program Reimbursement (NPR) timeliness. CMS assigned each performance standard a performance threshold that it used to determine whether the MAC adequately performed that standard. The Report focuses on the Review and Audit Quality AR Standard (referred to as AR-4). Using AR-4 as an example, the performance threshold for FFY 2021 was 95 percent. To achieve this percent performance, CMS established a weighted methodology that assigned points for seven categories. The seven categories include the following: (1) accurate desk review used, (2) uniform desk review modules accurately completed, (3) audit program steps accurately completed, (4) accurate and complete workpapers, (5) accurate summary of issues, (6) accurate NPR reimbursement, and (7) accurate cost report. To determine whether a MAC achieved this 95 percent performance threshold, CMS selected for review a sample of cost reports settled by the MACs.
Methodology
OIG’s objective was to determine whether individual MACs met Medicare cost report oversight requirements stated in the MAC contracts. OIG’s audit covered the agency’s contracts with all 12 A/B MAC jurisdictions responsible for reviewing and settling provider cost reports, focusing its audit on QASP standard AR-4 and the issues identified by CMS on the annual QASP evaluations for FFY 2019 through 2021.
Based on the QASP results for these evaluation periods, OIG selected a non-statistical sample of six jurisdictions that failed to reach the AR-4 95 percent performance threshold in at least one year of the audit period for a more detailed review of their internal controls, cost report documentation and audit processes, and oversight. In addition, OIG found that these six jurisdictions had numerous issues identified by OIG during the QASP reviews for each of the three years in the audit period.
OIG’s Findings
The report found that each of the twelve MAC jurisdictions failed to meet the 95 percent performance threshold for AR-4 for at least one year within the audit period. CMS identified 287 total audit issues, which the report categorizes into the below five categories. For each of the categories, the report provides several examples of the issues identified. This article includes only a sample of those examples.
- MACs did not perform proper review.
- Example: “One MAC did not calculate the Hospital Acquired Condition program in the Provider Statistics and Reimbursement (PS&R) cost report settlement data, resulting in an overpayment of approximately $250,000.”
- Inadequate review of graduate medical education and indirect medical education reimbursement.
- Example: “One MAC used an incorrect GME update factor, resulting in a GME overpayment of $3,000.”
- Improper review of allocation, grouping, or reclassification of charges to cost centers.
- Example: “One MAC failed to account for physician and physician assistant salaries, resulting in an estimated cost reduction of approximately $1.8 million that would have significantly reduced the Medicare reimbursement to the hospital.”
- Improper calculation and reimbursement for nursing and allied health programs.
- Example: “One MAC erroneously included Title XIX Health Maintenance Organization (HMO) days and skilled nursing facility inpatient routine charges in the calculation of a proposed adjustment, resulting in an estimated overpayment of more than $250,000.”
- Inadequate review of bad debts.
- Example: “One MAC's workpapers did not state that it reviewed the provider's policies and procedures for billing the State for deductible and coinsurance amounts. The audit program requires MACs to review the provider's policies and procedures for billing the State for the deductible and coinsurance amounts. If the provider does not have an ongoing billing system—or if there is a system in place but it has not been operated properly—the related bad debts for deductible and coinsurance amounts claimed under Medicare should be disallowed.”
MAC oversight personnel from the six sampled jurisdictions suggested that CMS contributed to the MACs’ failure to meet Medicare cost report oversight requirements in multiple ways, including unclear guidance from CMS, limited feedback on the results of the CMS QASP reviews, and inadequate training for specific challenges faced by individual MACs.
OIG’s Recommendations and CMS’s Response
The Report recommends that CMS take the following three actions:
- Provide MACs with a thorough explanation of the QASP results;
- Update the audit program to incorporate revised change requests and Technical Direction Letters so MACs can obtain a better understanding of CMS expectations and be evaluated on current requirements; and
- Offer MACs additional training and guidance, based on the results of their QASP, and include best practices used by MACs.
CMS responded to each of the recommendations. CMS indicated that it meets weekly with each individual MAC to go through a detailed report outlining QASP findings and results. CMS indicated that it is currently working to incorporate change requests and Technical Direction Letters into the audit programs to give MACs a better understanding of CMS’s expectations of evaluation. CMS also stated that it is also in the process of issuing a revised uniform desk review that incorporates additional change requests or Technical Direction Letters that have been issued since the latest version issued in 2021. CMS stated that it supports the MACs in their review of cost reports and has provided a uniform desk review program that provides guidance to MACs on conducting desk reviews. Finally, CMS also stated that it provides various training methods to the MACs related to the cost report and reimbursement areas.
CMS requested that OIG consider the first and third recommendations closed as implemented.
OIG’s report is available here.
