Noridian Healthcare Solutions, LLC, Did Not Always Refer Medicare Cost Reports and Reconcile Outlier Payments

Of 21 Medicare-participating hospital cost reports with outlier payments that qualified for reconciliation, Noridian Healthcare Solutions, LLC (Noridian), referred 11 cost reports to CMS in accordance with Federal guidelines. However, Noridian did not refer 10 cost reports that should have been referred to CMS for reconciliation. Of these, three cost reports had not been settled and should have been referred to CMS for reconciliation. We calculated that the financial impact to Medicare of the unreconciled outlier payments associated with these cost reports was approximately $6.9 million. The seven other cost reports had been settled and had exceeded the reopening limit. We calculated that the financial impact to Medicare of the unreconciled outlier payments associated with these cost reports was approximately $17.7 million.

Medicare supplements basic prospective payments for inpatient hospital services by making outlier payments for unusually high-cost cases. Medicare contractors refer hospitals' cost reports to CMS for reconciliation of outlier payments. Effective April 2011, CMS gave Medicare contractors the responsibility to perform reconciliations upon receipt of authorization from the CMS Central Office.

Of the 11 cost reports that were referred to CMS with outlier payments that qualified for reconciliation, Noridian had reconciled the outlier payments associated with 6 cost reports. However, Noridian had not reconciled the outlier payments associated with the remaining five cost reports. We calculated that the financial impact to Medicare of the outlier payments associated with these five cost reports was approximately $7.2 million.

We recommended that Noridian (1) review the 10 cost reports that qualified for referral and, if applicable, determine whether the cost reports may be reopened, reconcile the associated outlier payments, and refund the amounts due to Medicare; (2) reconcile the outlier payments associated with the 5 cost reports that were referred, work with CMS to reconcile the associated outlier payments, finalize these cost reports, and ensure the return of funds to Medicare; (3) ensure that control procedures are in place so that all cost reports with qualifying outlier payments are referred and reconciled; and (4) review all cost reports submitted since the end of our audit period and ensure that those whose outlier payments qualified for reconciliation are referred and reconciled in accordance with Federal guidelines. Noridian concurred with all of our recommendations and described corrective actions that it had taken or planned to take.