Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
M   C
EDICARE S  URRENTLY 
 
  N C
OT  OLLECTIBLE 
 
  O  
VERPAYMENTS 
 
 
Daniel R. Levinson   
Inspector General  
 
June 2013 
OEI-03-11-00670   
   
EXECUTIVE SUMMARY:  MEDICARES CURRENTLY NOT COLLECTIBLE  
OVERPAYMENTS 
OEI-03-11-00670 
 
 
WHY WE DID THIS STUDY 
 
The Centers for Medicare & Medicaid Services (CMS) identifies billions of dollars in 
Medicare overpayments to health care providers each year.  In fiscal year (FY) 2010, 
overpayments totaled $9.6 billion.  However, not all overpayments are recovered.  
Overpayments for which the provider has not made a repayment for at least 6 months 
after the due date on the Medicare demand letter are classified as currently not 
collectible (CNC) and are not reported on CMSs annual financial statements.  These 
overpayments are not reported on the financial statements because they are not likely to 
be recovered. This report provides information about CNC overpayments.     
 
HOW WE DID THIS STUDY  
 
We requested details from CMS about CNC overpayments in FY 2010 and summary 
financial data for FYs 2007 to 2010. CMS provided most of the data from its Healthcare 
Integrated General Ledger Accounting System (HIGLAS).  We also surveyed CMS and 
all its claims processing contractors to identify (1) hindrances to debt collection and 
(2) strategies to reduce the number and dollar amount of overpayments that become  
CNC.  
 
WHAT WE FOUND 
 
CMS reported $543 million in new CNC overpayments across all contractors in FY 2010.  
However, CMS provided detailed information on $69 million in CNC overpayments for 
only seven contractors. Citing contractor transitions, CMS did not provide detailed data 
for the remaining 32 contractors.  For 54 percent of CNC overpayments associated with 
the seven contractors, the provider type was missing in HIGLAS.  For the seven 
contractors, 97 percent of FY 2010 CNC overpayments were not recovered.  According 
to contractors, inaccurate provider contact information delays or prevents some  
overpayment demand letters from reaching providers.  In addition, CMS and contractors 
reported that expanding the types of provider identifiers used to recover payments could 
improve debt collection efforts.      
 
WHAT WE RECOMMEND  
 
CMS should: (1) ensure that the HIGLAS variable for provider type is populated for all 
overpayments, (2) ensure that demand letters are mailed to the contacts and addresses 
identified by the provider, and (3) use tax identification numbers and provider transaction 
access numbers in addition to national provider numbers for the collection of 
overpayments.  CMS partially concurred with our first recommendation, did not concur 
with our second recommendation, and concurred with our third recommendation.  
   
   
TABLE OF CONTENTS       
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................6 

Findings........................................................................................................8 

CMS reported $543 million in new CNC overpayments across all 

contractors in FY 2010, but only provided detailed information on 

CNC overpayments for seven contractors .......................................8 

Ninety-seven percent of CNC overpayments were not recovered 

for the seven contractors with recovery information and newly 

classified CNC overpayments were over half a billion dollars 

annually..........................................................................................10 

Contractors reported that some demand letters do not reach 

providers, or reach providers late, because of inaccurate contact 

information .....................................................................................11 
 
CMS and contractors reported that expanding the types of  

provider identifiers used to offset payments could improve 

could improve debt collection efforts ............................................11 
 
Conclusion and Recommendations ............................................................13 

Agency Comments and Office of Inspector General Response .....15 

Appendixes ................................................................................................17 

A: Contractor Recommendations Regarding Currently Not 

Collectible Debt .............................................................................17 

B: Agency Comments  ..................................................................19 

Acknowledgments......................................................................................22 

 
         
   
OBJECTIVES 
1. 	  To describe details of Medicare Part A and Part B overpayments 
identified in fiscal year (FY) 2010 and classified currently not 
collectible (CNC) as of December 31, 2011. 
2. 	  To identify the annual dollar amount of new CNC overpayments from  
FY 2007 to FY 2010. 
3. 	  To identify issues that hinder efforts to reduce the number and dollar 
amount of overpayments that become CNC.  
4. 	  To identify strategies for reducing the number and dollar amount of 
overpayments that become CNC. 
BACKGROUND 
In FY 2010, the Centers for Medicare & Medicaid Services (CMS) 
identified $9.6 billion in Medicare overpayments.1  Overpayments are 
improper payments to providers that need to be returned to the Medicare 
program, e.g., payment for a noncovered service.  An overpayment 
becomes a debt owed to the Federal Government when CMS makes a 
determination of overpayment.2  It is recognized as an account receivable 
in Medicares financial system once a demand letter is issued.3  
CNC is a financial accounting classification for any accounts receivable 
for which the provider4 has not made a repayment for at least 6 months 
after the due date on the first Medicare letter requesting repayment.5 CNC 
debt continues to be referred for collection but is not reported on CMSs 
financial statements because collection is unlikely.6    
This is the first OIG study on all Medicare Parts A and B CNC 
overpayments.   
Contractor Responsibility   
CMS contracts with private companies known as carriers, fiscal 
intermediaries, and Medicare Administrative Contractors (MAC) to fulfill 
Medicare administrative functions such as processing claims, making 
 
1 CMS response to January  27, 2012, Office of Inspector General (OIG) data request.   
2 CMS, Medicare Financial Management Manual, Pub.  No. 100-06 (Manual), ch. 3,  
     
 10. 
 
3 Ibid., ch. 5,   400.21. 
 
4 In this report, provider refers to any  type of Medicare provider  or  supplier 

(e.g., hospital, physician, durable medical equipment, prosthetics, orthotics, and supplies 
 
(DMEPOS)  supplier) unless otherwise indicated. 
 
5  Manual, ch. 5,   400.20. 

6 CMS, CMS Financial  Report Fiscal Year 2011, p. 59. 

Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   1 
         
   
payments, recovering overpayments, and reporting on all financial 
activities.  These contractors process over a billion Medicare claims each 
year.   
Contractor Identifiers 
Some administrative contractors are responsible for more than one type of 
claim activity, e.g., Parts A and B.  CMS uses contractor identifiers to 
identify the contractor and type of claim activity in a particular geographic 
area. In this report, we use the term contractor to refer to these 
contractor identifiers.  There were 39 contractors in FY 2010.    
Overpayment Recovery  Activities 
The Manual contains requirements for contractors regarding overpayment 
recovery activities. Once overpayments are identified, contractors are 
required to take timely and aggressive efforts to collect the debts.7  CMS 
has stated that although the term aggressive may not be defined 
specifically in the Manual, CMS considers the collection processes 
outlined in the Manual to be aggressive.8  
Contractor overpayment recovery activities required by CMS include:9  
	   creating and managing the accounts receivables for the overpayments, 
	   mailing demand letters to providers for repayment, 
	   making phone calls to providers that have not responded to demand 
letters,  
	   implementing offsetting of providers future payments to recover 
overpayments, 
	   establishing and managing providers extended repayment plans,  
	   mailing notices to providers of intention to refer the overpayment to 
the Department of the Treasury (Treasury) for collection, and 
	   referring eligible overpayments to Treasury for collection. 
Contractors send demand letters to providers with overpayments.  
Typically, the first demand letter states that the provider was overpaid, and 
that if the overpayment is not repaid in full within 30 days, the debt will 
become delinquent on day 31 and interest will begin to accrue.  The letter 
 
7 45 CFR   30.10(a); Manual, ch. 3,   10.  
8 CMS response to  OIG survey, March 2012.  
9  Manual, ch. 3, 4, and 5.  
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   2 
         
   
also explains methods the provider can use to repay the debt and the 
providers right to appeal the overpayment determination.10    
When a provider has not responded by day 45 to a Part A demand letter or 
by day 60 to a Part B demand letter,  the contractor must telephone the 
provider to seek recovery of the overpayment.11    
Although providers are responsible for updating their addresses with 
CMS, if letters are returned as undeliverable, the contractor must attempt 
to locate the provider through various means, including checking with 
State and local medical societies.12    
Contractors send a final demand letter, known as the Intent to Refer 
Letter, if the provider has not responded to earlier contacts before the 
debt becomes 90 days delinquent.  It informs the provider that the 
overpayment will be referred to Treasury for collection if the provider 
does not repay within 60 days or request an extended repayment plan. 
Recovering Overpayments. Contractors must begin recovering 
overpayments by offsetting payments unless the provider sends a check 
for the full amount of the overpayment or requests an extended repayment 
plan within a certain timeframe.13  Contractors collect the majority of 
overpayments through offsetting.  Offsetting is the process whereby funds 
are deducted from a future payment to repay a current debt.  Contractors 
use the provider number to identify the provider payments that are to be 
offset.     
In 2012, CMS issued instructions to contractors to implement provider 
requests for immediate offset.14  Immediate offset prevents interest from  
accruing on the overpayment if the debt is recovered in full before day 31.  
A request for immediate offset is considered a voluntary repayment by the 
provider.  
In 2012, CMS also issued instructions to contractors to collect 
overpayments owed by suppliers of DMEPOS that maintain surety 
bonds.15  DMEPOS suppliers must maintain a surety bond of at least 
$50,000 to enroll and remain enrolled in the Medicare program.  
 
10 Upon receiving a demand letter, if a provider submits a timely request for a first- or 

second-level appeal of the overpayment determination, contractors must cease (or not 

begin) recoupment until these appeals reach their conclusion.  This policy is referred to  as 

Limitation on Recoupment (935) in the Manual, ch. 3,   200. 
 
11  Manual, ch.  4,   10 and  80.2. 

12 Ibid. 

13 Ibid. 

14 CMS, Change Request 7688, January 27, 2012, revised February 9, 2012. 

15 CMS, Change Request 7167, January 20, 2012; Change Request 7744, April 20, 2012. 

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Overpayments up to the full value of the bond can be collected from the 
surety bond company.   
In addition, contractors can refer outstanding overpayments to Treasury 
for cross servicing, i.e., for collection through one of Treasurys 
programs.16  An example is the Treasury Offset Program, which may offset 
eligible Federal and State payments to recover the Medicare overpayment.  
Treasury uses a providers tax identification number to identify the 
payments to be offset.   
Contractors have the option of referring overpayments to Treasury before 
the debt is 180 days delinquent.17  However, if the overpayment is more 
than 180 days delinquent, contractors must refer it to Treasury.  Debts are 
not eligible for referral to Treasury if they are less than $25, in bankruptcy 
status, in appeal status, under investigation by a law enforcement agency 
and the investigating agency has instructed the contractor not to attempt 
collections, or the debtor is deceased.18    
Once a debt is referred to  Treasury,  the contractor ceases active collection 
efforts but maintains the accounts receivable in its accounting system for  
potential offset.  The contractor also ensures that any collections by 
Treasury are posted to the account and entered into CMSs Debt 
Collection System.     
CNC Classification  
According to the Manual, the CNC classification of an overpayment does 
not stop collection efforts and has no bearing on whether the overpayment 
is eligible for referral to Treasury or whether future Medicare payments to 
the provider can be offset.  CMS classifies overpayments as CNC because 
they are not likely to be collected.  Overpayments classified as CNC are 
not reported on CMS financial statements.19    
An overpayment is eligible for CNC classification when it is in the amount 
of $25 or more and is at least 180 days delinquent, without any collection 
activity within the last 180 days. 
 
16 In a May 2010 report, Collection Status of  Medicare Overpayments Identified  by  

Program Safeguard Contractors, OEI-03-08-00030, OIG reported that Treasurys cross-

servicing program  does  not have a high rate of return.  For each year between FYs 2003 

and 2007, the program never collected more than 2 percent of all debt referred to it. 

17  Manual, ch.  4,   70.5. 

18  Ibid.,  70.6. 

19 CMS, CMS Financial  Report Fiscal Year 2011, p. 59. 

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A debt can be classified CNC regardless of referral to Treasury, 
bankruptcy, appeals, fraud and abuse investigation, or litigation, or 
whether the debtor is deceased.20    
The Manual instructs contractors to seek approval from the CMS regional 
office before classifying an overpayment as CNC.21  However, according 
to CMS staff, overpayments are classified CNC through an automated 
process in the Healthcare Integrated General Ledger Accounting System  
(HIGLAS) when they reach a certain age.  CMS reviews the debts after 
CNC classification and will notify contractors if it disapproves of the 
classification.   
HIGLAS 
CMS began implementing HIGLAS in 2005 to meet provisions of the 
Federal Financial Management Improvement Act of 1996.  Since 2005, 
CMS has been transitioning its Medicare Part A and Part B contractors 
into HIGLAS on a staggered basis. As of FY 2010, 17 of 39 contractors 
had yet to be fully transitioned to HIGLAS.    
CMS expects HIGLAS to enhance CMSs oversight of claims 
administration contractor financial operations ... [and] provide high 
quality, timely data for decision making and performance measurement.22  
CMS Evaluation of Contractors Recovery  Activities 
CMS reported that it monitors contractor timeliness on the following 
recovery activities: issuing demand letters, posting updates to debts, 
notifying providers of intention to refer debt to Treasury, and referring 
eligible debts to Treasury.    
CMS has stated that it reviews contractor performance through onsite 
visits, desk reviews, and analyses of financial reports.  It uses review 
protocols and performance standards to monitor contractor performance.  
It also reviews contractors monthly status reports with details related to 
overpayment recovery.   
Previous OIG Work 
In a 2008 early alert memorandum, OIG described associations between 
selected DMEPOS suppliers that had CNC debts exceeding $50,000 and 
other closely associated businesses that received Medicare payments.23   
 
20  Manual, ch. 5,  400.20.   If the debt is less than $25  but  otherwise eligible for CNC  
classification, contractors are required to  recommend that CMS terminate collection 
activity.   
21 Ibid. 

22 CMS, Financial Report  Fiscal Year 2011, p. 20. 

23 OIG,  Early Alert Memorandum:  Payments to Medicare Suppliers and Home Health
  
Agencies Associated With Currently Not Collectible Overpayments, OEI-06-07-00080, 

November 2008. 
 
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The results of the study indicated that individuals associated with CNC 
overpayments could inappropriately receive Medicare payments by 
omitting owner/manager information on their enrollment applications and 
working through other DMEPOS suppliers and home health agencies.  
OIG stated that although, taken alone, the finding that certain suppliers 
with CNC debt were associated with other suppliers receiving payments 
did not establish improper activity, CMS may determine that such 
affiliations justify enhanced oversight.     
METHODOLOGY 
Data Collection and Analysis 
Financial Data From CMS.  In January 2012, we requested that CMS 
provide detailed financial data about overpayments demanded in FY 2010 
and classified as CNC as of December 31, 2011.  We received detailed 
data for 7 of 39 contractors. Details included the contractors identifier 
number, date the accounts receivable was created, name of the provider,  
provider type, claim type, amount of the overpayment when it became 
CNC, amount recovered on milestone dates before and after the 
overpayment became CNC, and amount owed on the overpayment as of 
December 31, 2011.  CMS extracted the data from HIGLAS.   
We also collected summary financial data for FYs 2007 to 2010 on 
overpayments, CNC overpayments, and cumulative CNC overpayments.  
CMS extracted the data from HIGLAS for contractors using HIGLAS, and 
from its Contractor Administrative Budget and Financial System (CAFM) 
for contractors not using HIGLAS. 
We sent our original request for both detailed and summary financial data 
to CMS in January 2012. As of April 2012, we had not received the 
detailed data, and the summary information we received did not properly  
address our request. Therefore, we met with CMS to discuss these issues 
and subsequently revised our request for both the detailed and summary 
data. We received detailed data for seven contractors and summary data 
for all contractors in June 2012. We  continued to request and receive 
clarifications regarding the data until September 2012.    
We reviewed the detailed financial data for FY 2010 to identify the 
number and dollar amount of CNC overpayments by contractor for the 
seven contractors. We also identified the types of providers with CNC 
overpayments and the amount of money recovered on CNC overpayments 
as of December 31, 2011, for these contractors.   
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We reviewed the summary financial data for FYs 2007 to 2010 to 
determine the level of CNC debt each year and how it trended over this 
period. 
CMS Survey. We surveyed CMSs Division of Medicare Debt 
Management, Financial Services Group in March 2012 to identify its 
strategies, policies, and procedures for recovering overpayments and 
reducing CNC debt.  We also used the survey to determine CMSs 
perspective on the barriers that prevent overpayment collection and 
changes needed to overcome the barriers.  
Contractor Survey. We surveyed all CMS contractors in March 2012 to 
identify their strategies and procedures for collecting overpayments before  
they become CNC, issues they encounter that make it difficult to collect  
overpayments before they become CNC, and changes they believe are 
needed.  
We obtained from CMS a list of contractors corporate executives.  We  
sent the executives instructions to complete one survey each for their 
Parts A and B MAC, durable medical equipment (DME) MAC, carrier, 
and fiscal intermediary lines of business.  In total, they completed 23 
surveys. In our analysis, we counted each survey as one contractor, and 
we report the frequency of contractor responses to survey questions from  
the 23 surveys. Table 1 shows the number of each type of contractor that 
completed the survey.     
 
Table 1: Contractors Completing OIG Survey   
Type of Contractor   Number of Surveys  
Parts A and B MAC  11 
DME MAC   4 
Carrier   4 
Fiscal Intermediary  4 
Total   23 
  Source:  OIG  survey, March 2012. 
 
Limitations 
We did not independently verify financial data that CMS provided, nor did 
we independently verify survey responses from CMS and its contractors. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   7 
         
   
FINDINGS 
CMS reported $543 million in new CNC overpayments 
across all contractors in FY 2010, but only provided 
detailed information on $69 million in CNC  
overpayments for seven contractors 
For FY 2010, CMS reported $543 million in total new CNC overpayments 
across all 39 contractors.  However, CMS provided detailed data for only 
seven. These seven contractors processed 22 percent of Medicare 
payments.  CMS determined that these were the only contractors for which 
HIGLAS had detailed and consistent information on CNC overpayments.   
These seven contractors represented 13 percent or $69.4 million of the 
total overpayments classified as CNC in FY 2010.  The number of CNC 
overpayments for these contractors ranged from 1 to 55,715, for a total of 
70,530. 
Citing contractor transitions, mergers, and splits, CMS could 
not provide data consistently for most contractors  
CMS stated that its inability to provide consistent detailed data for the 
remaining 32 contractors was caused in part by workloads being 
transitioned to a new contractor, being added to a contract involving a 
merger, or being split from a former workload.  Since 2005, CMS has been 
transitioning contractors to meet the competitive contract requirements of  
contracting reform.24  Under this reform, CMS has been replacing carriers 
and fiscal intermediaries with MACs and the transitions were not yet 
complete as of December 2012.        
CMS decided not to transfer all overpayment details to HIGLAS 
when contractors made the transition from other systems  
Various types of financial data are maintained in HIGLAS.  However,  
CMS stated that during contractor transitions to HIGLAS, it transferred 
only summary data for years prior to the transition because of the volume 
of data maintained by the contractor for those prior years.  Therefore, at 
the time of transfer to HIGLAS, the current status of the overpayments 
was transferred but the original overpayment amounts and any collection 
activity were not transferred. Once the contractor transferred to HIGLAS, 
the detailed data for years prior to the transfer were not available in 
HIGLAS. 
 
24 The Medicare  Prescription Drug, Improvement, and Modernization Act of  2003  
required contracting reform. 
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CMS and its contractors lack an automated method for 
extracting certain CNC overpayment information from its 
systems  
CMS reported that some of the detailed data OIG requested in 
January 2012 would have to be searched for manually and then manually 
entered into a spreadsheet.  One contractor alone estimated that it would 
take 3,421 staff hours to look up and enter principal and interest on its 
account receivables that became CNC for the milestones requested by 
OIG. In April 2012, OIG sent a revised request to CMS that aimed to 
reduce the data collection burden. The revised request allowed CMS to 
provide available detailed data while not requiring extensive effort on the 
part of individual contractors. 
The details we requested included information on the dollar amount of the 
overpayment and the amount recovered on certain dates before and after 
the overpayment became CNC.  Without this information for all 
contractors, CMS would not be able to determine the range of individual 
overpayments in demand letters, the percentage of overpayment dollars in 
a specific year that were classified CNC, and the number of days after 
which debt recoveries fall off.   
Even though CMS and contractors maintain automated systems, certain 
data can be retrieved and manipulated only manually.  According to the 
independent auditors of CMSs financial statements for FY 2011, 
Medicare contractors ... 
     continue to rely on a combination of claims processing  
     systems, personal computer-based software applications and  
     other ad hoc systems to tabulate, summarize and prepare  
     information that is reported to CMS.  The accuracy of the  
     financial reports remains heavily dependent on inefficient,  
     labor-intensive manual processes that are also subject to an  
     increased risk of inconsistent, incomplete or inaccurate  
     information being submitted to CMS.25    
Provider type was not available for 54 percent of the CNC 
overpayments with detailed data  
One of the variables in HIGLAS is provider type.  For 54 percent (38,181) 
of the CNC overpayments with detailed data, CMS could not provide the 
provider type. When this information is missing, CMS cannot identify 
overpayments across provider type, and therefore cannot target its efforts 
to reduce CNC debt among certain types of providers. 
 
25 CMS, Financial Report  Fiscal Year 2011, p. 119. 
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The overpayments with missing provider type were all for Part B.  CMS 
reported that the Part A provider type is a mandatory field in HIGLAS, and 
that some of the Part B provider types were missing because of manual 
entry of the provider type into HIGLAS or data transfer into HIGLAS.    
The 7 contractors with detailed data were responsible for a total of  
70,530 CNC overpayments.  Of the CNC overpayments with a provider 
type (32,349), the most common type was internal medicine physician 
(11,615).   
Ninety-seven percent of CNC overpayments were not 
recovered for the seven contractors with recovery 
information and newly classified CNC overpayments 
were over half a billion dollars annually 
For the seven contractors with detailed data, 97 percent of FY 2010 CNC 
overpayments were not recovered as of December 31, 2011.  The total 
amount of CNC overpayments for the seven contractors was $69.4 
million, with recoveries of $2.4 million.  The individual CNC 
overpayment amounts for the seven contractors ranged from $25 to  
$2.8 million.  
As shown in Table 2, the annual amount of newly classified CNC 
overpayments for all contractors was over half a billion dollars from  
FY 2007 through FY 2010.  New CNC debt was highest in FY 2008, when 
it was almost $1 billion.   
In the 4-year period from FY 2007 to FY 2010, new CNC overpayments 
for all contractors represented 6 to 9 percent of total overpayments each 
year.26  In FY 2010, the cumulative dollar amount of CNC overpayments 
was $10.3 billion. 
   
                       Table 2: New  CNC Overpayments, FYs 20072010  
Fiscal  New CNC  Cumulative CNC 
 Payments   Overpayments  
Year  Overpayments   Overpayments  
2007  $300,079,271,648  $8,949,356,467   $645,773,093   $7,636,015,057  
2008  $308,018,573,321  $10,081,999,497   $919,048,278   $8,414,602,533  
2009  $311,435,787,217  $9,859,838,882   $896,945,631   $9,381,427,037  
2010  $335,866,123,715  $9,626,517,110   $542,528,449   $10,308,752,975  
 
                                     Source:  CMS, HIGLAS,  and CAFM. 
 
26 These statistics are based on CMS summary financial data.  The CNC classification for 
overpayments in a particular year could be based on  overpayments identified and  
demanded in a  previous year.  Overpayments identified at the end of a FY  may not be  
classified as CNC until the following FY.  CNC overpayments may include 
overpayments that are under appeal. 
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Contractors reported that some demand letters do not 
reach providers, or reach providers late, because of 
inaccurate contact information   
Eight of twenty-three contractors surveyed said they do not encounter 
difficulties in trying to reduce debt before it becomes CNC.  Of the 
remaining 15, more than half (9) reported issues with the accuracy of 
provider contact information.  These contractors stated that provider 
names and addresses on demand letters are not necessarily correct or are 
not the ones that providers have requested be used to ensure prompt 
response. 
HIGLAS creates demand letters and inserts the providers contact 
information.  Contractors reported that some letters are returned as 
undeliverable. Some contractors also noted that demand letters do not 
reach providers that have been terminated from Medicare or are out of 
business. Other letters do not reach the right contact person in a 
providers organization promptly.  Part  A providers, in particular, want 
letters sent to an address that is different from the facility address 
maintained in HIGLAS. 
CMS and contractors reported that expanding the 
types of provider identifiers used to offset payments 
could improve debt collection efforts   
In addition to national provider identification numbers, CMS and 
contractors reported that other identifiers, such as tax identification 
numbers and provider transaction access numbers (PTAN),27 would help 
with recoveries. 
CMS staff has stated that providers can escape offsetting when they 
change or receive additional national provider identification numbers. 
Identifying providers by tax identification number would be a more 
reliable way of collecting overpayments through offsetting.  Two 
contractors also suggested using tax identification numbers to identify 
affiliated providers and offset their payments to repay providers  
overpayments.  
As mentioned earlier, Treasury uses tax identification numbers in its 
payment-offsetting programs.  CMS reported that as of May 2011, 
Treasurys Federal Payment Levy Program (FPLP) began collecting 
Medicare debts by offsetting Medicare payments for contractors related to 
the contractor for which the debt was originally identified.  FPLP uses a 
 
27 Contractors assign PTANs to providers upon enrollment.  A provider may have a 
different PTAN for each of its service locations.  
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   11 
         
   
providers tax identification number, not the provider number, to perform  
this offset.    
Currently, CMS pays fees to Treasury for collecting overpayments through 
offsetting and other means.  CMS reported that collection fees are $17 per 
offset.  For FY 2010, CMS paid fees of $6 million on collections of 
approximately $39 million.  These collections included Treasury Offset 
Program collections as well as Treasury and private collection agency 
collections received directly from providers.   
CMS could save some of these fees if it used tax identification numbers 
internally for offsetting purposes.  CMS has already begun this process in 
HIGLAS for certain debts. 
Regarding the use of PTANs, one contractor reported that it received CMS 
approval to cross-reference a providers PTANs.  This allowed the 
contractor to collect overpayments from a provider who stopped billing 
under one PTAN but continued to obtain payment under another.  
Appendix A lists contractor recommendations for overcoming hindrances 
to reducing CNC debt. 
   
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   12 
         
   
CONCLUSION AND RECOMMENDATIONS    
It is critical that CMS make efforts to reduce the number and dollar 
amount of overpayments that become CNC since these overpayments are 
unlikely to be recovered.  In 2010, CMS reported $543 million in new 
CNC debt.  However, CMS had difficulty retrieving detailed data about all 
CNC overpayments from a central source or from all of its contractors in a 
timely way.  The financial data CMS was able to provide for 7 of 39 
contractors was too limited to use for a comprehensive contractor- or 
provider-level analysis of CNC overpayments.  Such analysis could help 
CMS target its efforts to reduce the number and dollar amount of CNC 
overpayments.  
CMS could provide detailed data for only seven contractors, representing 
22 percent of Medicare payments.  Moreover, no provider type was 
identified in 54 percent of CNC overpayments for these seven contractors.  
Without this detailed information, CMS cannot target its efforts to collect 
overpayments. 
Although the detailed overpayment data for seven contractors were too 
limited to allow an in-depth analysis of all CNC overpayments, CMSs 
summary data across all contractors show that, each year, half a billion 
dollars will likely not be recovered.  The detailed data for the seven 
contractors showed that 97 percent of FY 2010 CNC overpayments were 
never recovered. 
Contractors said undeliverable demand letters were a problem and that 
automated letters from HIGLAS were not always addressed to the location 
requested by the provider. CMS and some of its contractors said debt 
recovery would be improved if CMS used additional provider identifiers, 
such as tax identification numbers, to  offset Medicare payments.        
We recommend that CMS:   
Ensure That the HIGLAS Variable for Provider Type Is 
Populated for All Overpayments   
CMS included the provider type variable in HIGLAS, yet OIG found a 
substantial number of records in which this variable was blank for Part B 
overpayments.  CMS should ensure that all overpayments, regardless of 
claim type, have this information.  When this variable is populated, CMS 
will be able to determine which provider types have the greatest CNC 
debt. 
   
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   13 
         
   
Ensure That Demand Letters Are Mailed to the Contacts and 
Addresses Identified by the Provider 
Contractors reported that HIGLAS does not necessarily send automatic 
demand letters to the address providers prefer, especially for Part A  
facilities. To provide contractors with an opportunity to make a voluntary 
repayment without incurring interest, CMS should take steps to ensure that 
demand letters are correctly addressed. 
Use Tax Identification Numbers and PTANs in Addition to 
Provider Numbers To Offset Payments and Collect 
Overpayments   
Treasury programs routinely use tax identification numbers to identify  
providers that are receiving Government payments.  CMS has begun using 
this tool in HIGLAS for certain debts, and we recommend that it use this 
tool routinely for all debts.  By using the tax identification number to 
identify affiliated Medicare providers whose payments can be offset, CMS 
can start offsetting without delay and potentially recover more  
overpayments.  Moreover, CMS could save money by reducing the fees it 
pays to Treasury for certain collections.   
CMS should also require contractors to cross-reference PTANs to ensure 
overpayment collection from providers who stop billing under one PTAN 
but continue to obtain payment under another.  If necessary, CMS should 
add PTANs as a data element in HIGLAS.   
   
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   14 
         
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with one of OIGs three recommendations and stated that, 
aside from CNC overpayments, its debt collection efforts have been very 
effective.  CMS noted that it collects approximately 80 percent of its debt 
before the debt becomes CNC and is referred to Treasury.  
CMS partially concurred with our first recommendation, that it ensure that 
the HIGLAS variable for provider type is populated for all overpayments.  
CMS noted that adding the provider type for all overpayments will not 
improve its recoupment efforts since the field is not used in the collection 
process, but stated that it will review the option of making the provider 
type field mandatory in HIGLAS.  OIG continues to recommend that CMS 
ensure that the provider type field is complete, as CMS may use this 
information to identify provider types with the greatest CNC debt and to 
better target its debt collection efforts.  
CMS did not concur with our second recommendation, that it ensure that 
demand letters are mailed to the contacts and addresses identified by the 
provider.  CMS stated that demand letters are already mailed to the 
addresses identified by providers in the Provider Enrollment, Chain, and 
Ownership System (PECOS).  CMS also stated that it encourages 
contractors to educate providers on the importance of providing their 
correct billing address and contact person, and keeping this information 
updated. A number of CMSs contractors reported problems with 
providers contact and address information on demand letters.  In a May, 
2013 report entitled Improvements  Needed To Ensure Provider 
Enumeration and Medicare Enrollment Data Are Accurate, Complete, and 
Consistent  (OEI-07-09-00440), OIG assessed provider enrollment data 
and found significant problems with the accuracy of providers address 
information in PECOS.  Therefore, OIG continues to recommend that 
CMS take additional steps to ensure that demand letters are delivered to 
correct provider contacts and addresses. 
CMS concurred with our third recommendation, that it use tax 
identification numbers and PTANs in addition to provider numbers to 
offset payments and collect overpayments.  CMS noted that the offsetting 
function in the version of HIGLAS that it is using does not allow for 
offsetting across business entities.  CMS stated that HIGLAS is based on a 
commercial off-the-shelf product and the most current version of the 
product has been upgraded to allow for this functionality.  However, CMS 
has been directed by the Office of Management and Budget to not upgrade 
to the newer version of the software.  CMS noted that it hopes to be 
allowed to implement the newer version, which would allow for faster 
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   15 
         
   
collection of overpayments, increased collections through offset, and 
ultimately a reduction in CNC debt.  OIG agrees that tax identification 
numbers should be used to offset overpayments across all business 
relationships and hopes that CMS will be granted the opportunity to 
upgrade to the newer system soon. 
CMS stated that it disagrees with OIGs finding that CMS was able to 
provide detailed information on CNC overpayments for only seven 
contractors. CMS stated that it had decided not to transition to HIGLAS 
detailed information to support previous years overpayment data.  Rather, 
the detailed information remained in former Medicare contractors' legacy 
systems.  CMS stated that data for the remaining contractors were 
available, but that providing the detailed information for those 
32 contractors would involve an extensive amount of Medicare 
contractors and CMS resources to obtain the data.   
OIG requested that CMS provide detailed information regarding CNC 
overpayments for all 39 CMS contractors.  However, as noted in the 
findings of this report, CMS indicated that detailed overpayment 
information for 32 contractors would have to be searched for and entered 
manually.  One CMS contractor alone estimated that it would take 
3,421 staff hours to look up and enter the information that OIG requested 
regarding the contractors CNC overpayments.  OIG only accepted from  
CMS detailed CNC overpayment information for the seven contractors 
because these were the only contractors with detailed data that CMS was 
able to provide in a timely way and without extensive staff resources. 
The full text of CMSs comments is provided in Appendix B. 
   
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   16 
         
   
APPENDIX A 
Contractor Recommendations Regarding Currently Not 
Collectible Debt  
Fifteen contractors said they encounter issues that make it difficult to 
reduce the number and/or dollar amount of currently not collectible (CNC) 
overpayments.  The table below contains a list of issues identified by the 
contractors and their suggestions for addressing the issues.  
 
 
Number of  
 
Contractors 
Issue   Contractor Recommendations  
That Identified 
 
Issue (n = 15)  
Inaccurate  9  Send demand letters to specific contacts and not to generic addresses at large 
Contact  facilities.  
Information for  Implement a programming change for the Healthcare Integrated General Ledger 
Provider  Accounting System (HIGLAS) to pull the appropriate address for demand letters from  
the provider file of the Part A claims processing system.   
Similar to the Do Not Forward process for undeliverable checks, if an overpayment 
demand letter is returned as undeliverable, make no further payments until the 
provider updates its address with Medicare. 
Conduct more frequent validation of provider address information. 
Bankruptcy   6  Pass legislation that clarifies bankruptcy  rules regarding Government debts.    
Cases  Look at the bankruptcy process involving the Office of the General Counsel, the 
regional office, and the contractor community.  Perhaps a central data repository 
would improve coordination.  Contractors wait a considerable time for direction on 
disposition and status of various bankruptcy areas.   
Appealed   5  Allow offsetting of certain overpayments in appeal.  This would require legislative and 
Overpayments  regulatory change regarding the limitation on recoupment provisions [ 935 of the 
  Medicare Prescription Drug, Improvement and Modernization Act of 2003].  
Have HIGLAS wait to classify overpayment as CNC until the appeal process is 
completed. 
Overpayments  5  Establish an automated process similar to the Non Treasury Disbursing Office levy  
Not Collected  process as a way to recover overpayments.  For example, a process could 
From Affiliated  automatically offset a provider's tax refund or other Government payments if there are 
Providers,  outstanding Medicare overpayments in HIGLAS.  
Terminated 
Provide contractors with Medicaid contact names for States within their jurisdiction to  
Providers, and 
begin establishing processes for recoupment against Medicaid funds. 
Other Sources  
Change the system to collect nondemanded Part A overpayments (i.e., those initiated 
by providers) by  offsetting affiliated providers.  Currently, Part A nondemanded 
overpayments are not collected from affiliated providers.  
Establish regulation, change manual, and change Statement of Work to allow  
collection from related organizations. Currently, if the debt is uncollectible for a 
provider that has a related organization, the contractor is not able to pursue recovery  
from the related organization. 
Provide contractors with the option of bypassing the automatic classification when  
they have knowledge that the debt is collectible.  CNC classification is currently  
controlled by HIGLAS.   
Change the system to automatically recover overpayments based on shared tax 
identification number.  
Do not allow providers to reenroll in Medicare if they have past Medicare debts.  
  continued on next page 
 
 
 
 
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   17 
         
   
(Continued) 
 
Number of  
 
Contractors 
Issue   Contractor Recommendations  
That Identified 
 
Issue (n = 15)  
  3  Automate the daily phone call list (for Part A overpayments delinquent 45 days and 
Insufficient Use     for Part B overpayments delinquent 60 days) within HIGLAS.  
of Automation     Automatically generate notification to the overpayment area if an extended  
and     repayment loan is in default status.  Currently, the overpayment staff has to manually  
Technology     look for defaulted loans. 
  Create an automated flag within reports of Medicare Recovery Audit Contractor  
  appeals if an account in appeal status has reached a problematic level of aging.  
  Currently, collection staff has to look through reports using various report filters.  
  Create a portal through which providers can look up how much they owe the 
Medicare program. 
Create a portal through which providers can input both their credit balance 
adjustments and their quarterly Comprehensive Error Rate Testing page.  This would 
significantly lower administrative costs to the program. 
Further automate communication between the Centers for Medicare & Medicaid 
Services (CMS) Debt Collection System, Department of the Treasury (Treasury), and 
contractors.  
Part A Held  2  Make changes in HIGLAS to release held funds for the amount of overpayments 
Funds   without releasing the hold on payments.  If a Part A provider is on full payment hold 
for any reason, including failure to submit a cost report, HIGLAS holds payments but 
does not apply them to outstanding debts. This lack of debt recovery leads to 
increased CNC debt.   
Threshold for   2  Reevaluate dollar threshold for referrals to Treasury.  Currently, individual 
Demand Letter  overpayments less than $25 are not referred to Treasury even if the demand letter  
and Treasury   involved multiple overpayments greater than $25 in the aggregate.  CMS policy  
Referral1  requests contractors to submit these debts for write offclosed instead of 
submitting the aggregate amount to Treasury.  
Raise Part B threshold amount for demand letter from $10 to $25 to be consistent 
with the $25 threshold for referring overpayments to Treasury.   Currently, Part B 
overpayments less than $10 are considered under threshold and no demand letter is 
sent for these amounts.   
Other   3  Allow contractors to receive contingency fees for debts collected over a certain age 
based upon uncollectible status.  This will give them an incentive to increase 
collections through various legal means such as offset through affiliated companies 
or collection through current employers.   
Allow contractors greater flexibility in approving requests for extended repayment.  
Source:  Office of  Inspector General survey, March 2012. 
 
1  CMS requires contractors to  send demand letters to providers to  collect Part A overpayments of $25 or more and  Part B overpayments of  
$10 or more.  Parts A and B debts under these  thresholds can  be aggregated to meet  the threshold amount and then demanded.  Debts  
under $25 are not eligible for Treasury referral and CMS does  not require aggregation of amounts under this threshold.  
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   18 
        APPENDIX 8 
...
Agency Comments 
~#'4
"<<> .... 
~	
(  DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
'--.-~ 	
Administrator 
Washington, DC 2020t 
MAR  2 7 2013 
DATE: 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Marilyn Tavenner 

Acting Administrator 

SUBJECT: 	 Office of Inspector General (OIG) Draft Report:  "Medicare's Currently Not 
Collectible Overpayments," (OEI-03-11-00670) 
Thank you for the opportunity to review and comment on the OIG draft report referenced above. 
The OIG set out to describe details of a certain class of Medicare Part A and B overpayments 
that were identified in fiscal year (FY) 2010 and classified under financial accounting rules as 
"currently not collectible" (CNC) by December 31 , 2011. OIG also wanted to identify the 
annual dollar amount of new CNC overpayments from FYs 2007 and 2010. Additionally, OIG 
wanted to identify issues that hinder efforts to reduce the number and dollar amount of 
overpayments that become CNC, and to identify strategies for reducing the number and dollar 
amount of overpayments that become CNC. 
The Centers for Medicare & Medicaid Services (CMS) appreciates the time and resources OIG 
has invested in this review of CNC overpayments. CMS is committed to using its resources to 
collect overpayments in a manner that is cost effective, efficient, and ensures compliance with 
statutory and regulatory requirements . Outside of this class of overpayments, CMS ' debt 
collection efforts have been very effective. Based on an internal review of the Medicare 
contractor financial reporting for the past four fiscal years, CMS collects approximately 80 
percent of its debt prior to the debt becoming CNC and prior to its debt being referred to the 
Department of the Treasury (Treasury) . This percentage was calculated using the Medicare 
contractor's accounts receivable reports for FYs 2009 and 2012. 
The CMS uses various tools to aggressively pursue the collection of overpayments throughout 
the timeline of a debt. CMS uses the CNC accounting classification for debts that are over 180 
days delinquent. A CNC classification does not stop or hamper CMS collection strategies. CMS 
aggressively goes after all debts by issuing demand letters, making phone calls, recouping 
current payments, working with debtors who request an extended repayment schedule (ERS), 
issuing intent to refer letters, and referring debt to Treasury for collection. 
The CMS' most successful collection tool is internal recoupment, where the Medicare contractor 
recoups overpayments from subsequent payments to the debtor. Another successful tool CMS 
uses to collect debts is approving an ERS. An ERS can be granted for a period of up to 60 
Medicare's Currently Not Collectible Overpayments (OEI-03-11-00670)  19   
   
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Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)  21 
         
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector General. 
Isabelle Buonocore served as the team leader for this study.  Other Office 
of Evaluation and Inspections staff from the Philadelphia regional office 
who contributed to the report include Conswelia McCourt, Amy 
Henderson Riley, and Amy Sernyak; central office staff who provided 
support include Scott Manley and Debra Roush.  
 
 
 
Medicares Currently Not Collectible Overpayments (OEI-03-11-00670)   22 
         
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office 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 Services  
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components: 
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides auditing services  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 carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections 
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General 
The Office of Counsel to the  Inspector  General (OCIG) provides general legal services to 
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and  abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.