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Department of Health and Human Servces 
OFFICE OF 
INSPECTOR GENERAL 
MEDICARE CREDIT BALANCES 
SKILLED NURSING FACILITY PATIENT 
ACCOUNTS

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u . V: 
Richard P. Kusserow 
INSPECfOR GENERA 
JUY 199 
,,:w  OFFCE OF INSPECTOR GENERA

The mission of the Offce of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Servces' (HHS) 
programs as well as the health and welfare of beneficiaries served by those programs. This 
statutory mission is carred out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating components: the Offce of Audit Servces, the 
Office of Investigations, and the Offce of Evaluation and Inspections. The OIG also informs 
the Secretary of HHS of program, and management problems, and recommends courses to 
correct them. 
OFFICE OF AUDIT SERVICE 
The OIG's Offce of Audit Servces (OAS) provides all auditing servces for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carryng out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and effciency throughout the Department. 
OFFCE OF INTIGATIONS 
The OIG's Offce of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and 
unjust enrichment by providers. The investigative effort of 01 lead to criminal convictions 
administrative sanctions, or civi money penalties. The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
AN 
OFFICE OF EVALUATION  INSPECfONS 
The OIG's Offce of Evaluation and Inspections (OEI) conducts short-term management and 
program evaluations (called inspections) that focus on issues of concern to the Department 
the Congress, and the public. The findings and recommendations contained in these inspection 
reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 
and effectiveness of departmental programs. 
This report was prepared in the Kansas City Regional Office under the direction of Don 
McLaughlin, Regional Inspector General, and Jim Wolf, Deputy Regional Inspector General. 
Project staff: 
Kansas City  Headquarers 
Ray Balandron, Team Leader  Thomas Noplock, Program Specialist 
Dennis Tharp, Project Leader  Barbara Tedesco, Statistician 
Phil O'Hare 
Tim Dold 
To obtain a copy of this report, call the Kansas City Regional Offce at (816) 426-3697.  "\'
Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

MEDICARE CREDIT BALANCES 
SKILLED NURSING FACILITY PATIENT

ACCOUNTS

.. S~RVIC 
Richard P. Kusserow 
INSPECfOR GENERA 
'0 
~~".a  OEI-07-90-0010  EXECUTIVE  SUMMAR 

PUROSE 
The purpose of this national inspection is to determine the dollar amount of Medicare 
credit balances that exist at skilled nursing facilties (SNFs), and the time used by 
SNFs and Medicare intermediaries in reporting and adjusting credit balances. 
BACKGROUN 
Whenever a Medicare payment is made to a provider (e.  , skilled nursing facility) in 
excess of the amount of payment that is due, a credit balance is created. The SNFs 
as well as the Medicare intermediaries, have a responsibility to resolve these credit 
balances. 
In previous reviews, the OIG has identified significant credit balances in hospitals. 
1985 inspection estimated $164 milion in Medicare credit balances in hospitals 
nationwide. A more recent audit of 76 hospitals servced by nine intermediaries found 
$266 milion in unrecovered hospital credit balance overpayments nationally. As a 
result of our reviews of hospital credit balances, we decided to determine if similar 
problems exist in nursing homes. 
METHODOLOY 
We selected a random sample of 50 SNFs in two stages. In the first stage, five States 
were sampled. Subsequently, 10 SNFs were sampled within each State for an on-site 
examination of patient account records. 
We requested the 50 SNFs to provide a listing of all credit balances as of March 31 
1990. We determed the existence of an actual credit balance based upon a review 
of the patient ledgers and Medicare log maintained at the facility. Our review 
determined the amount of the credit balance, the date the SNF notifed the Medicare 
intermediary of the existence of the credit balance, and the length of time it took the 
intermediary to adjust the amount of the credit balance. 
We recognize that the Medicare Catastrophic Coverage Act (MCCA) of 1988 was in 
effect during our sample period. Although the exact impact of the repeal of MCCA 
of 1988 on our sample cannot be determined, we believe the impact is negligible. 
FIINGS 
Projected Medare Cred  We estimate nationwide that 
Balances are Substantil 
overdue credit balances in SNFs could be as much as $12.7 milion as of March 31 
1990.  Credit Balances Are Not Reported  5 milion dollars, when projected 
Tunly 
nationwide, in Medicare credit balances in SNFs were not reported after 1 year had 
elapsed (as of March 31, 1990). 
Interri 
Are Not Adjustig Cred  Fifty-eight percent of the 
Balances Tunly 
Medicare credit balances reported to the intermediaries were not adjusted within 60 
days of notice by the SNF. 
RECOMMATIONS 
The HCFA Should: 
Require Intermediaries to Take Action to Adjust Credit Balances; 
Require 
PJtermediaries to Timely Process Adjustment of Credit Balances; 
Work With Intermediaries to Increase the Awareness of Program Providers to 
Timely Identify and Report Credit Balances; and 
Seek Authority To Penalize Providers which Do Not Timely Report Credit 
Balances. 
AGENCY COMMNT 
The HCFA generally concurred with the recommendations presented in our draft 
report. As a result of HCF A's comments regarding our last recommendation, we have 
modified our language to indicate that HCFA should seek authority, rather than 
legislation, to penalize providers which do not timely report credit balances.  . . . . . . . . . .. 
. . . . . . . . ..  ..  ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ....    ...   ...   ...   ...   ...   ...   ...   ...   ..  ..  
TABLE OF CONTENTS

EXCU SUMY

INRODUCTION. . . 

FINDINGS  . . . . . . . . . . . . . . . . . . . 3

Projected Medicare Credit Balances Are Substantial. . . . . . . . . . . . . . . . . . . . . 3

Credit Balances Are Not Reported Timely  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Intermediaries Are Not Adjusting Credit Balances Timely. . . . . . . . . . . . . . . . . 3

RECOMMNDATIONS  . . . . . . . . . 5

AGENCY COMMENTS  . . . . . . . . . 6

APPENDICES:

A - Estimated State and National Credit Balances  . . . . . . . . . . . . . . . . . . '. A
B - Credit Balances Untimely Reported  . . . . . . . . . . . . . . . . . . . . . . . . . . .. B
C - Untimely Adjustment by Intermediaries  . . . . . . . . . . . . . . . . . . . . . . . .. C
D - Health Care Financing Administration Comments  . . . . . . . . . . . . . . . . . D INTRODUCTION

PUROSE 
The purpose of this national inspection is to determine the dollar amount of Medicare 
credit balances that exist at skilled nursing facilities 
(SNFs), and the time used by 
SNFs and Medicare intermediaries in reporting and adjusting credit balances. 
BACKGROUN 
The Social Security Act, Section 1814 (a)(2)(B) provides for Medicare payments to 
eligible SNFs for patients certified by physicians as needing that level of medical care. 
Whenever such a payment for servces is made to a Medicare provider and for various 
reasons the payment is in excess of the correct payment amount, a credit balance 
exists and monies are due back to the Medicare program (Social Security Act, Section 
1866 (a)(l)(C)). 
When credit balances are created, certain responsibilties rest with the SNF and the 
Medicare intermediary. Even though no formal time frames exist for reporting, the 
SNF must notify the intermediary of the amount of the credit balance after its 
identifcation. Subsequently, the Medicare intermediary must adjust future SNF 
payments in the amount of the credit balances. 
In previous reviews, the OIG has identified significant credit balances in hospitals. 
1985 inspection estimated $164 millon in Medicare credit balances 
in hospitals 
nationwide. A more recent audit of 76 hospitals servced by nine intermediaries found 
$266 milion in unrecovered hospital credit balance overpayments nationally. As a 
result of our reviews of hospital credit balances, we decided to determine if similar 
problems exist in nursing homes. 
MElHODOLOY 
We selected a random sample of SNFs from the universe of all Medicare-participating 
SNFs using a modified Rao, Hartly, Cochran method. A two stage cluster sample was 
selected where States were chosen in the first stage with probabilty proportionate to 
size. These States are: California, Florida, Missouri, Pennsylvania, and Wisconsin. 
In the second stage, a simple random sample of SNFs within each State was selected. 
In each State, 10 SNFs were chosen for review. One SNF, however, was out of 
business at the time our on-site visit was made, making a total of 49 SNFs. 
We requested each SNF in the sample to provide the OIG with listings of outstanding 
Medicare credit balances as of March 31, 1990 for our review. If there were no credit  balances identifed by the facilty, all patient balances as of March 31, 1990, were 
examined. We recognize that the Medicare Catastrophic Coverage Act (MCCA) of 
1988 was in effect durig our sample period. According to a June 1991 OIG Report 
Influences on Medicare s Skilled Nursing Facilty Benefit" (#OEI-05-89-01590), 
increased SNF payments are continuing even after repeal of the MCCA in May 1990. 
Although the exact impact of the MCCA of 
1988 on our sample cannot be 
determined, we believe the impact is negligible. 
We determined the existence of an actual credit balance based upon a review of the 
patient ledgers and other documentation maintained at the facility. To ensure validity 
of the credit balances, we requested the facilties to veri the existence of each credit 
balance and credit balance amount. Our review determined the amount of the credit 
balance, the date the SNF notified the Medicare intermediary of the existence of the 
credit balance, and the length of time it took the intermediary to adjust the amount of 
the credit balance. 
We conducted a subsequent review several months later of all the SNFs which had 
outstanding credit balances at the time of our on-site visits. This follow-up review was 
performed to verify dollar amounts and the current disposition of the credit balances. 
We also determined which SNFs had stil not reported those credit balances to the 
appropriate intermediaries.  FINDINGS

Projecte Medare Cred Balances are Substntl 
Projecting to the national universe of Medicare SNFs, overdue credit balances of 
approximately $12.7 milion are due back to Medicare (See Appendix A). As 
discussed in the next finding, we define a balance as overdue if it was outstanding after 
45 days. 
Credit Balances Are Not Report Tunly 
Based upon information from nursing facilty personnel that they reconcile balances 
monthly and allowig 15 days afterwards to report credit balances, we believe 45 days 
is a reasonable time frame for reporting credit balances to the intermediaries. 
We found that 36 of the 74 credit balances in our sample were reported after 45 days 
but before 1 year had elapsed. Of these 36 credit balances, only 3 were reported 
within 100 days. Half of the 36 were not reported until at least 200 days had elapsed. 
Only about one-fifth (14 of 74) were reported timely, according to our defiition. 
We found that 24 of the credit balances due back to the Medicare program had not 
been reported after 1 year had elapsed. The national projection for these credit 
balances is $2.5 milion (See Appendix B). 
According to provider personnel, no incentive exists for the SNFs to identify and 
report credit balances. Therefore, the facilties gave little priority to identifyng and 
adjusting credit balances.

As part of our follow-up review, we determined that 79 percent (19 of 24) of the 
credit balances outstanding at the time of our on-site review were stil credit balances 
over 6 months later. 
Intenniari Are Not Adjustig Credit Balances Tunly 
The Part A Medicare Intermediary manual (Sect. 2220.
3) states that the actual costs 
of servces cannot be determned until the end of the 
accounting period. This 
because providers are paid on an estimated cost basis during the year with a final 
settlement adjustment based on actual costs being made at the end of the reporting 
period. Although there are no established time frames or promulgated procedures 
regarding the period of time which an intermediary must adjust a credit balance, we 
used 60 days as a reasonable time frame. This is consistent with Medicaid 
overpayment recovery provisions for State Medicaid agencies.  Using this gauge of timeliness, our review found 58 percent (29 of the 50 Medicare 
credit balances which were reported) were not adjusted by the intermediaries within 
60 days of notice by the SNF (See Appendix C).  RECOMMENDA TIONS

HCF A Shoul Take Actin to Adjust Cred Balances 
Th 
The HCF A should instruct Medicare intermediaries to adjust actual credit balance 
amounts identifed by this inspection and to adjust credit balances on an ongoing basis. 
If projected to the universe, overdue credit balances to the Medicare program would 
be approximately $12.7 milion nationally (See Appendix A). 
HCF A Shoul Reqe Interiari to Tunly Proces AdjustTent of Credit 
Th 
Balances 
The HCF A should require Medicare intermediaries to timely adjust outstanding credit 
balances. A time frame of 60 days, after notification by the SNF that a credit balance 
exists, would correlate with Medicaid program overpayment recovery provisions for 
State agencies (Public Law 99-272, the 1985 Consolidated Omnibus Budget 
Reconcilation Act Section 9512) to facilitate prompt resolution of credit balances. 
Although, in some instances, time frames may need to be extended to verify disputed 
Medicare claim amounts and to determine actual credit balance status, we recommend 
that HCF A work with intermediaries to establish 60 
days as a goal for the resolution 
of credit balances. 
Intri 
Th HCFA Shoul WIdorel W  it  To Incease th Awaren of Prgram
Provi 
to Tunly  and Report Cred Balances 
The HCF A should work with intermediaries to emphasize to providers that credit 
balances should be reported within a reasonable time. As a result of awareness 
programs and discussions with intermediaries, the HCF A may choose to develop their 
own definition of reasonable time. 
Efforts to encourage provider awareness could include newsletters, training sessions, or 
on-site visits and/or reviews that establish a priority emphasis to this provider 
responsibility. The HCF A might also consider assessing interest on those credit 
balances not reported within a reasonable time.

Autri  Prvi 
Th HCFA Shoul Seek  to Penlie  whih Do Not Tunly Report 
Credit Balances 
The HCF A should seek authority that will allow it to impose a penalty on program 
providers for failng to timely identify and report credit balances.  AGENCY COMMENTS

The HCFA concurred with the recommendations presented in this report. The HCFA 
agreed with the intent of the last recommendation which stated that HCF A should 
seek legislation to penalize providers which do not timely report credit balances. As a 
result of HCF A's comments regarding our last recommendation, we have modified our 
language to indicate that HCF A should seek authority, rather than legislation, to 
penalize providers which do not timely report credit balances. 
The HCF A believes that it will have the necessary authority to levy penalties once the 
Office of Management and Budget approves mandatory requirements for reporting 
credit balances. We agree that these mandatory reporting requirements, which would 
allow HCF A to suspend all payments to providers if providers do not timely report 
credit balances, is a suffcient penalty to provide an 
incentive for timely reporting.  APPENDIX A

ESTITED  AN  CRIT BAlCE 
STATE  NATIONAL 
No.  No. with  Average  Tot.  Project.
ST.  sample  Cr. Bal.  Per SNF  Dollars Found 
$1976.  215  656. 
$ 208.  218. 
$2503.  648  403. 
$1948.  163  541.06 
$ 154.  810. 
MEDICAR NATIONAL ESTIMATE  $12  733  830 
90% Confidence interval (lower)  $ 2 747  720 
. (upper)  $22  719  941  APPENDIX 
UNY 
CRIT BALCE 
REPOR1ED 
# of Credit 
Bal' s Not Reported  $ Amt. of 
Avg. Amt. per 
state 
wi thin 45 days  Credi t Bal. s  Credi t Bal. 
$13  188  648 
$ 1, 158  193 
461  591 
$11  990  $2, 398 
537  537 
Total  $36, 334  $1, 009 
# of Credit 
Bal' s Not Reported  $ Amt. of 
Avg. Amt. per
state  after 1 yr. period  Credit Bal.  Credi t Bal. 
$ 4, 601  920 
308  154 
$ 8, 
232  515 
948  948 
Total  $14, 089  587 
Medicare National Estimate:  $2, 518, 191
reported until
for the 24 credit balances which were not 
after one year had elapsed. 
90% Confidence interval (lower) $ 319 778 
(upper)  716  603  APPENDIX C

UNY 
INRMDIA 
ADmSTM 
BY 
# of  # of  # of 
# of  $ Amt.  $ Amt. 
Notices  Adjust.  Adjust. 
Credi t  of Adjus  of Adj us
ST.  Balances  issued  .(60 da  .(60 da  60 da  60 da 
$ 3, 
612  $ 9 576

888  892

896  $ 9 906

279  $12  263

$ 1, 544

TOTAL  675  181

34 

C - 1
 APPENDIX D

HETH CAR FINANCIG ADMISTRTION COMMS

D - 1
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Health Care

DEPARTMENT OF HEALTH & HUMAN SERVICES  Financing Administration

Memorandum 
APR I
Date 
J. Michael Hudso 
Actig Adm;n1!\ 
From 
OIG Draf Report: "Medicare Credit Balances in Skied Nursing Facilty Patient
Subject 
Accounts " OEI-07-90-00910 
Inpector General 

Offce of the Secretar 
sumares 
We have revewed the above-referenced report which  the results of 
OIG' s revew of credit balances in patient accounts at skied nursing facities 
(SNF. Based on the review, OIG projects that as much as $12.7 mion rould be 
outstandig in SNF credit balance accounts. 
. We agree with OIG's recommendations. Our detailed comments on each 
recommendation are attached. However, we are concerned that the samplig 
methodology used by OIG has not produced a reliable estimate of total SNF credit 
balances. We  , 49 facilty sample of SNFs does not accutely 
believe a 5 State
reflect national SNF credit balances, nor does it capture SNF dierences across the 
States (e.g., number of individuals served). . The report assumes al conditions are 
the same across other  , we are requestig that OIG descdbethe 
States. Therefore
methodology and the actuaral projections used to generae the fidigs from 
sampled SNFs to al SNFs in the State and nationaly. 
Than you for the opportnity to comment on this draf report. Please advie 
us whether you agree with our position on the report s recommendations at your 
ealiest convenience.

Attachment  Comments of the Health Care Financin Administration 
on OIG's Draft Report: "Medicare Credit Balances 
in Skilled Nursing Faciltv Patient Accounts" 
(OEJ-07-90-009UD 
OIG Recommendation

tae 
RCF A should  action to adjust credit balances.

RCF A ReSDonse 
We agree. We request OIG to provide HCFA with the documentation for the 
wi 
specifc situtions identifed in the review. We  instruct the intermediares to 
recover these fuds though the remittance process. Regardig our ongoing effort 
the intermediares were diected in a memorandum dated September 26, 1991, to 
necessar action is taen to 
control provider adjustment requests and to ensure that 
credit balances. 
adjust al reported 
OIG Recommendation 
credit balances. 
RCF A should require intermediares to tiely process adjustment of 
HCF A RestJonse 
We agree that adjustment clai should be processed in a tiely maner. We are 
curentIy workig on specifcations for an electonic sytem to receive and process 
clai. Th 
adjustment  reduce the amount of tie needed 
sytem wi signcatly 
to process adjustments. In the meantime, however, we instrcted the intermediares 
pendig  , regardless of source, to no more than a 
to reduce al  adjustment claims
TI 
2-month workload by March 1, 1992.  instruction was included in the 
September 26, 1991, memoradum. 
OIG Recommendation 
RCF A should work with intermediares to encourage the awaeness of program 
credit balances. 
providers to tiely identif and report  Page 2

HCF A ReSDonse

, we intiated a major effort to recover al credit balances. 
We agree. In Apri 1991 notig 
it of its responsibilty to 
Each Medicae provider received three letters 
tiely maner. We alo developed 
Medicae credit balance in a 
identi and repay 
approva under the 
, which we have submitted for 
mandatory reportg requiements
Paperwork Burden Reduction Act. 
OIG Recommendation 
HCF A should seek legilation to penale providers which do not tiely report 
credit balances. 
HCF A Response

We believe that the intent of this recommendation ca be achieved though 
reportg  received 
mandatory  requiements. Once we have 
application of the 
approv of the requiements from the Offce of Management and Budget, 
progr 
intermediares wi be able to withold or suspend  payments when a 
fa 
provider  to 'provide the requied data