National Government Services, Inc., Did Not Always Refer Medicare Cost Reports and Reconcile Outlier Payments in Jurisdiction 8

Of 18 Medicare-participating hospital cost reports with outlier payments that qualified for reconciliation, National Government Services, Inc. (NGS), referred 11 cost reports to the Centers for Medicare & Medicaid Services (CMS) in accordance with Federal guidelines. However, NGS did not refer seven cost reports that should have been referred to CMS for reconciliation. Of these seven, one cost report had not been settled and should have been referred to CMS for reconciliation. As of December 31, 2011, the financial impact to Medicare of the unreconciled outlier payments associated with this cost report was approximately $2.1 million. The six remaining cost reports (of the seven that NGS did not refer to CMS) had been settled and exceeded the reopening limit. We calculated that the financial impact to Medicare of the unreconciled outlier payments associated with these six cost reports was approximately $6.1 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, NGS had reconciled the outlier payments associated with five cost reports by December 31, 2011. However, NGS had not reconciled the outlier payments associated with the remaining six cost reports. As of December 31, 2011, the financial impact to Medicare of the outlier payments associated with these six cost reports was approximately $10.9 million.

We are setting aside approximately $236,000 in outlier payments associated with claims that we could not recalculate.

We recommended that Wisconsin Physicians Service Insurance Corporation (WPS) (the Medicare contractor that assumed NGS's responsibilities) (1) review the seven 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 and to the provider; (2) reconcile the outlier payments associated with the six 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 and to the provider; (3) work with CMS to resolve the $236,000 in outlier payments that we could not recalculate; (4) ensure that control procedures are in place so that all cost reports with qualifying outlier payments are referred and reconciled; and (5) 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.

WPS concurred with all but one of our recommendations and described corrective actions that it had taken or planned to take. WPS stated that the number of claims that we could not recalculate should have been changed because several claims were not the final adjusted claims and did not need to be recalculated. We corrected our finding and recommendation related to the claims that we could not recalculate accordingly.