MEDICARE AS A SECONDARY

PAYMENT SOURCE

END-STAGE RENAL DISEASE 
Richard P. Kusserow 
INSPECTOR GENERAL 
-82 
OAl-07  JANUARY 1988  OFFICE OF INSPECTOR GENERAL 
The mission of the Offce of Inpector General (OIG) is to promote the effciency, effec
tiveness and integrty of program in the United States Deparment of Health and 
Human Servces (HHS). It does this by developing methods to detect and prevent fraud 
waste and abuse. Created by statute in 1976, the Inpector General keeps both the 
Secretary and Congress fuy and cuently inormed about program or management 
problems and recommends corrective action. The OIG perform its mission by conduct
ing audits, investigations and inspections with approxiately 1 200 staf strategically lo
cated around the country. 
OFFICE OF ANALYSIS AND INSPECTIONS 
This report is produced by the Offce of Analysis and Inpectons (OAl), one of the three 
major offces within the OIG. The other two are the Offce of Audit and the Offce of In
vestigations. The OAI conducts inpections which are tyically short-term studies 
designed to determe program effectiveness, eff  ency and vuerabilty to fraud or 
abuse. 
THIS REPORT 
Entitled "Medicare as a Secondar Payment Source--End Stage Renal Disease 
" this in
spection was conducted to determne if the Medicare program is improperly reimbursing 
for medical servces which are covered under an employer group health plan as primary 
payer. 
' The inspection was prepared by the Regional Inpector General, Offce of Analysis and 
. Inpections, Kansas City region. Paricipating in this project were the following people: 
Kansas City Region  Dallas Region 
James Wolf (Leader)  Ralph Tunell 
Phil O'Hare  . Leah Bostick 
Hugh Owens 
Ray Balandron 
Atlanta Region 
Doris Philips 
Barbara Quiroga  James Wilson 
Headquarters
Bar 
Steeley 
Mark Krshat 
Mar Hogan  ................ ..................  ................ ... .................. ..................... ............ .................. .. ... ....... ............... ....... ............ .......... .......................... .. .............. ........................................
............ ........... ................................. ...... ..... .... 
TABLE OF CONTENTS 
PAGE 
EXECUTIVE SU MMARY 
INTRODUCTION ... ........ 
BACKGROUND 
PU RPOSE  ................................. 2 
METHODOLOGY 
FINDINGS AND RECOMMENDATIONS 
APPEN DIX ....................... ........ ................... .................. 

AEil.E: I...... ... .......... ... .......... 
1r  ................. ..... .... 1 ()

II........................................................................ 
1rAEiL.E: 
HCFA COM M ENTS.  ..... 12  EXECUTIVE SUMMARY

PURPOSE  The inpection was conducted to determe whether or not: 
Medicare overpaid for servces to end-stage renal disease (ESRD) 
beneficiares who were covered by employer group health plan 
(EGHPs) and, if so, how much was overpaid; 
identifg 
medical providers were  beneficiares covered by EGHPs in 
addition to their Medicare entitlement; 
providers were correctly bilng the Medicare contractors; 
clai 
Medicare contractors had appropriately adjudicated  to ensure 
clai 
Medicare was the secondar payer for those  submitted by 
providers that had not detected the EGHPs; and 
the Health Care Financing Admistration (HCF A) had provided 
policies and procedures to promote identification of ESRD 
beneficiares with EGHP coverage. 
BACKGROUND 
Several years ago, Congress recogned that a substantial number of Medicare 
beneficiares had access to medical inurance through their employment. Therefore 
makg 
Congress amended the Social Security Act  Medicare a secondar payer of health 
care expenses when a beneficiar had an employment-related medical inurance plan 
clai. 
which would be the primar or fist payer of medical 
Based on the Omnbus Budget Reconcilation Act of 1981, which amended Section 
1862(b) of the Social Security Act, Medicare is the secondar payer for ESRD 
beneficiares for up to 12 months followig entitlement if the person is eligible for medi
cal inurance under an EGHP. Coverage by an EGHP can be through the employment 
of the beneficiary, a spouse, or another person (usualy a parent). Reguations and in
structions implementing this provision have been issued by HCF A to intitutional and 
nonititutional renal dialysis facilities and to medical care providers. 
METHODOLOGY 
The Office of Inspector General (OIG) conducted a program inspection of admission 
and biling records of 498 ESRD patients at 36 randomly selected renal dialysis facilties 
in 9 States. The OIG also inpected related payment records from Medicare inter
mediaries and carriers, the Medicare program contractors responsible for the payment of  Medicare claim. The inpection covered beneficiares receiving dialysis servces during 
calendar year 1985. 
MAJOR FINDINGS 
A review of facility and  , and subsequent follow-up 
payent records
contacts Medicare mad excess payents of 
, indicates that in  1985 
$926 526 for renal dialysis selVices provided by sampled facilities. 
$19,563, in 1985. 
Projected natonally, Medicare overpaid  181 
Due to weakesses in adission procedures, in over one-fourth of the cases 
the provider did not identify benefciares covered by an EGHP which was 
the primar payer. 
With minor modifcatons, the Social Security Administraton (SSA) 
application form represent an important document for the basic detection 
of benefciaries covered by an EGHP. 
Due to weakesses in the Medicare contractors' informaton-gathering and 
review processes, identification was not mad of a signifcant number of 
payents for which Medicare did not have primar liability. 
Lak of coordinaton of beneft payents between Medicare intermediaries 
and carrers contrbuted to improper contractor payents in excess of 
$206, 000. Projected natonal savings would be $4 360,500. 
In a number of cases, ESRD benefciares were entitled at diferent times 
under health insurance numbers with both the benefciary identificaton 
codes (RICs) T andA. Due to a change of benefciary stat, the RIC 
changed but the numbers were not cross-referenced by Medicare 
contractors to refect total payent amounts. Cross-referencing would aid 
in the identificaton of overpayent total. 
RECOMMENDATIONS AND AGENCY COMMENTS 
The HCF A should require Medicare contractors to recover all 
identified overpayments for the 1985 review period, and ensure 
compliance with HCF A intructions and guidelies in order to identify 
and recover Medicare overpayments. 
The HCF A is intructing the contractors to recover al identifed overpayments. 
However, HCF A does not feel that the overpayment problem is as signcant as 
projected. While we recogne the efforts of HCF A and the contractors over the last  .. .
several years, we point out that the savigs were the product of a statistically valid sample 
as described in the footnote to Table TI. 
The HCF A should revise its regulations to require the use of an 
admission form which fully develops Medicare secondar payer (MSP) 
sources, and adopt admission procedures which 
identif beneficiaries 
priar 
covered by an EGHP that is a  payer. liewise, HCF A should 
consider application of appropriate sanctions, to include civil monetary 
clai 
penalty where false  have been submitted, for providers that are 
consistently found to ignore MSP provisions. 
The HCF A generally concurs with the recommendation and is exploring more intensive 
bil review procedures and, if necessar, sancdon of providers that do not comply with 
MSP provisions. The HCFA' s reference to a generaled admission form pertai 
areas that should be covered by all providers as part of their individualized admission 
form. Further, according to HCFA policy, revisions to Federal regulations covering 
provider agreements are being prepared which wil expand on criteria for provider per
formance in detection of MSP situations. 
The HCF A should develop sources of inormation on beneficiaries with 
EGHP coverage either by: 
enlisting the cooperaton of SSA in revising the HCFA-43 applicaton form 
to obtain and transer EGHP informaton, or 
requiring Medicare contractors to establish and follow a separate EGHP 
information-gathering process directly with the benefciary. 
The HCF A concurs with the recommendation and has required contractors to develop 
MSP inormation after receipt of the first claim from a beneficiar. The SSA comments 
reflect its wingness to work with HCF A in this area. 
The HCF A should ensure that both Medicare intermediares and 
carrers have a coordination of benefits capabilty in place to provide for 
proper claim processing and identification of EGHPs. 
The HCFA agrees with the recommendation. The HCFA response reflects that its data 
exchange system, as implemented, provides leads to servcing contractors in developing 
claims. 
The HCF A should ensure that Medicare contractors are 
cross-referencing their own beneficiary suff account records to achieve 
a total payment history.  The HCF A is in agreement with the recommendation. A system to extract extraneous 
data from the files is being developed to assure cross-referencig of beneficiar accounts. 
The text of HCF A's comments to the draf inpection report are included in the Appen
dix.  INTRODUCTION 
BACKGROUND 
xvr 
Title  of the Social Security Act (42 USC 1395), enacted in 1965, established the 
Medicare program to pay for health care servces for eligible beneficiares 65 and over. 
As originally enacted, Medicare was made the fist or priary payer for beneficiaries 
health care servces, with the exception of workers' compensation or servces provided in 
Federal hospitals. The 1972 amendments to the Social Security Act extended Medicare 
coverage to persons of al ages on the basis of a diagnosis of end-stage renal disease 
(ESRD). 
The Social Security Act subsequently was amended to limt Medicare payment for 
beneficiaries inured under an employment-related medical inurance plan. This in
cludes employer-sponsored and self-insured programs. Thoughout the report, the term 
employer group health plan (EGHP) wi be used for such plan. 
priar 
In these cases, the group health plan is the  payer for servces rendered, and 
Medicare is the secondar payer, to the extent that servces have been paid for by the in
litation 
surers. This  is referred to as the Medicare secondar payer (MSP) provisions. 
A major extension of these provisions was Section 2146 of Public Law 97- , Omnbus 
Budget Reconcilation Act of 1981, which became effective October 1, 1981. This legisla
tion amended Section 1862(b) of the Social Security Act to make Medicare the secon
dary payer to employer group health plan for beneficiaries with end-stage renal disease. 
This section of the Act basicaly alows a benefit coordination period between Medicare 
and EGHPs. Ths is a 1-year span of time afer dialysis stars and comprises an initial 3
month waiting period for a beneficiar to be eligible for Medicare benefits. There are ex
ceptions to this waiting period which can provide entitlement for up to the fu 12 months 
from initiation of dialysis. The exceptions include the qualifed beneficiar having (1) 
begun a self-care dialysis traig plan or (2) received a kidney tranplant durg the ini
tial 3 months afer staring dialysis. 
Throughout the applicable coordination period, Medicare usually wil be the secondary 
payer for those individuals entitled to benefits solely on the basis of ESRD. The 
provisions of this amendment pertain to servces furnshed after September 1981 to 
ESRD-entitled individuals for the 12-month coordination period which began on or after 
October 1, 1981. 
Federal regulations implementing this secondary payer provision were published April 5 
1983. Based upon these regulations, the Health Cae Financing Administration (HCF A) 
issued intructions to hospital-based and nonhospital-based renal dialysis facilties in 
1983. Previous intructions covering the Medicare program as secondar payer were is
sued by HCF A in May 1982. The HCF A intructions called for records to be maintained  , 1981. 
on claims showig an EGHP and for subsequent reexamnation of these records when 
regulations were promulgated for individuals entitled to Medicare on the basis of ESRD. 
Reguations and HCF A instructions made implementation of provisions retroactive to 
October 1
There were 103,997 beneficiares identifed as ESRD enrollees by the middle of 1985. 
Of these, 9 598 beneficiares were entitled to Medicare ESRD benefits in calendar year 
1985. Many of these individuals were employed prior to the onset of ESRD which re
quired a continuous program of dialysis, and they continued to work and have coverage 
through their employers. Such coverage would exist regardless of the number 
employees because there is no requirement under ESRD provisions that the employer 
priar 
must have 20 or more employees. In such cases, the EGHP would be the  payer 
for medical expenses incurred up to the intial 12 months of the beneficiaries' Medicare 
entitlement. 
The HCF A directives require Medicare intermediares and carers to have administra
clai  priar 
tive procedures that screen al  for the existence of other  payers. Inter
mediares and carers (hereafer referred to as contractors) make program payments for 
clai 
intitutional and nonititutional provider  respectively. 
Steps taken admistratively by HCF A since 1984 to enhance detection of al third-party 
resources include (1) a one-time effort to recover ESRD dollars incorrectly paid for 
claims processed, (2) the establishment in Fiscal Year 1985 of Medicare secondary payer 
(MSP) goals for contractors (a specific MSP-ESRD goal was established in Fiscal Year 
1986), (3) periodic on-site MSP reviews of providers by contractors to analyze the effec
tiveness of MSP outreach program. Other activities being pursued by HCF A included a 
maig 
one-time questionnaie  to elicit MSP inormation for beneficiares and estab
lishment of a State or regional depository for MSP inormation to which Medicare con
clai. 
tractors could query 
PURPOSE 
The Offce of Analysis and Inspections (OAl), Offce of Inpector General (OIG), had 
conducted a number of regional inspections from 1983-1985 to determe if ESRD 
facilties were identifyng EGHP coverage for ESRD Medicare beneficiaries and biling 
appropriately, and the propriety of payment made by Medicare contractors. These 
reviews identified substantial Medicare payments where an EGHP existed but was not 
identified by the provider or Medicare contractors. 
The Office of Audit (OA), Offce of Inspector General, has also been involved in ac
tivities related to MSPIESRD. In a recent report, OA found in reviewing an earlier 
period that Medicare contractors in the State of Washington had been improperly reim
bursing facilities for medical servces where an EGHP was primary. 
A joint Region IX OA and OAI study focused on how accurately claims were processed  by Medicare intermediares when there was a prior indication of a primary payer other 
than Medicare and a no-payment claim was submitted. When a beneficiary was found in 
both samples, the beneficiar was dropped from this sample for overpayment calculation. 
Considerig the fidings of these regional inpections and the administrative initiatives 
of HCF A, the OIG undertook this inpection to determe the national prevalence of un
detected MSP situations for ESRD beneficiaries and to estimate the cost of improper 
Medicare payments.

METHODOLOGY 
The program inpection methodology included the identification of 36 ESRD facilties in 
9 States which were picked at random using a 2-stage sample design. The States and the 
facilties were selected with probabilty proportional to size using the number of ESRD 
beneficiares as an indicator of size. The 36 facilities included 20 hospitals and 16 non-
hospital-based or free-standing facilties. The facities within each State were selected 
using a method which reflected the relative distribution of hospital and nonhospital 
facilities in that State. 
Beneficiares whose ESRD Medicare entitlement began in calendar year 1985, and who 
were treated at these facilties, were included in the study. Admission and patient biling 
records for these ESRD beneficiares were reviewed in order to validate the ESRD onset 
date and to determe whether the facility had correctly identifed and biled Medicare 
priar 
on behalf of beneficiares where an EGHP would have been  payer. A total of 
498 records were reviewed for al facilities. At each of these facilities, the team con
ducted personal intervews with the providers' admssions and business offce staf 
bilg 
responsible for patient admission and  functions. Payment records were obtained 
from 21 Medicare contractors for the beneficiares in the sampled facilties. These docu
priar 
ments were used to verify whether Medicare made  payments for the ESRD 
priar 
beneficiares during the period in which EGHPs had liabilty as  payers. 
A review was conducted of these records to identif whether an EGHP existed. Where 
provider records reflected an employed spouse or relative, the inpection then ascer
tained whether the spouse or relative was a member of an EGHP, and whether the 
beneficiar was covered as par of that plan. Where an EGHP existed, but had not been 
identified by the provider and/or Medicare contractor for primar payment, the inpec
tion team referred to the contractor s payment records to determne the overpayment 
the intermediar and/or carer. The amount of national savigs was obtaied by project
ing the total overpayment from the sample to the ESRD providers for calendar year 1985.  FINDINGS AND RECOMMENDATIONS

The primar purpose of the inpection was to determe, for a 12-month period, the ex
tent of overpayments made by Medicare contractors for servces to ESRD beneficiaries 
provided by a randomly selected sample of 36 hospital and nonhospital providers, and to 
calculate projected savigs if the results are applied to the unverse of ESRD providers. 
While on-site visits were not made to Medicare contractors, nor were contractor systems 
tested, the extent of the overpayments identifed can indicate a lack of operational effec
tiveness. Weaknesses or problem areas are reported in the specic fidings and recom
mendations of this report. 
MEDICARE OVERPAYMENTS 
Finding, 
Out of the 498 ESRD beneficiares entitled to Medicare in the sample, 282 (56. 
percent) were identifed as havig coverage under an EGHP. Of this number, 135 
beneficiares were found to be covered by an EGHP which should have been the
priar 
payer for ESRD servces durig the coordiation period but was not. The 
total overpayment of $926 526 was calcuated for servces reimbursed by the 
Medicare intermediar and/or carer for the beneficiares in the sample. The 
overpayment calcuation does not include overpayments for 
beneficiares with on
sets prior to 1985 nor onsets in 1985 with payments in 1986. A breakdown of the 
overpayment is shown on the followig char. 
MEDICARE OVERPAYMENT: 
EGHP Should Have Been Primary Payer 
Medicare Payments to: 
Sample Facilities  $504 833 
Other Facilities  $221 195 
Other Providers  $146,693 
Beneficiaries 
so  $2 $3 $4 $5 $6 
$100 
JUount of  ent  -- 
.-' 
Table I in the appendix identifes the source of overpayment 
by intermediar, by 
category of sampled facilties and other facilties, and by carer for assigned and 
clai. 
nonassigned 
Projecting the sample overpayment results to al ESRD providers for the period 
of the review, the inpection team estimates potential national savigs of 
$19 563, 181 for the Medicare program (Table II). This calculation takes into con
sideration only entitlement in 1985 and is lited to payments made for servces in 
1985. 
Recommendation 
The HCF A should intrct Medicare contractors to recover overpayments and, if 
, 1985. 
applicable, to pursue subrogation to recover identifed overpayments from third-
par 
payers. Because of the substantial size of the projected overpayment, con
sideration should also be given to a special review of servces on or after January
ADMISSION PROCEDURES 
Finding 
Thir-
four percent of the sampled beneficiares had EGHP coverage based upon 
another household member s (primary the spouse s) EGHP. In the overpay
ment cases, the provider had not pursued or fully developed inormation on 
employment of the spouse and/or coverage under the spouse s or other person 
bilg 
EGHP for correct  to Medicare. Because of the study design this percent
age does not reflect "potential coverage" where beneficiares with an EGHP also 
have workig spouses with an EGHP. 
In order to improve the identifcation of such EGHP payment sources, HCF A 
developed a supplemental decision document which proceeds through varous 
steps that cover MSP factors. The document includes a step for determng 
whether: (1) the spouse or other person is employed, (2) an EGHP exists in these 
cases, and (3) the beneficiar is covered under its provisions. The capabilty to 
detect these MSP situations appeared to be enhanced where the providers' admis
sion forms required this information, or when the providers used a decision docu
ment or their admission procedures called for a systematic 
review process. 
Recommendation 
The HCF A should reemphasize the importance of providers' use of systematic ad
mission procedures which query al factors, including a workig spouse, that relate 
to MSP. The HCFA can do this through instructions to contractors, who should 
then produce newsletters, conferences, or other communications to providers, and  by revision of its regulations to require the use of an admission form which fully 
develops MSP sources. 
Providers that consistently are found to ignore the MSP provisions should be con
sidered for application of appropriate sanctions, to include civi monetar penalty 
clai 
where false  have been submitted. 
DEVELOPMENT OF INFORMATION SOURCES TO IDENTIFY 
EGHP COVERAGE 
Finding 
The extent of the Medicare overpayment, which averaged $6,863 for each iden
tifed ESRD beneficiar covered under an EGHP, indicates a substantial weak
ness in the identifcation of EGHPs which would make Medicare the secondar 
payer. 
If the intitution, physician or other provider does not identif Medicare as secon
dar payer to an EGHP, the Medicare contractor must detect EGHP coverage as 
clai 
par of the Medicare  adjudication process. The contractor, in turn must 
rely upon a screenig process whereby the beneficiar is targeted for MSP review 
because he or she is workig or has previously been identifed for MSP. It is im
portant that the Medicare contractors have the abilty to screen individual claims 
and take action to recover any overpayments from the payees or to subrogate, as 
applicable, from the inurance companes. 
Two factors in ESRD reimbursement should be considered in such detection and 
recovery processes. 
Institutional and noninstitutional providers may file for conditional 
Medicare payents. However, in dicussions with fadlities, the inspection 
team found that facilities do not routinely bill Medicare unless the EGHP 
payent is less than the amount payable for Medicare-covered services or 
a denial is received from the partcular employer's plan. 
As refected in the finding on adission procedures, over one-third 
b. 
of the beneficiaries were covered under an EGHP as a function of the 
spouse's employment or the employment of one or both parents. 
An effective contractor detection process should also include the capabilty to 
reference and analyze all coverage factors pertinent to that beneficiar. Factors 
include the application for ESRD benefits and any direct contact with the 
beneficiar prior to processing claims.  The application form for end-stage renal disease is the HCF A-43. While the form 
asks for inormation about the claiant's work status, it does not require informa
tion about the claimant's EGHP benefits. liewise, the HCF A-43 does not re
quest inormation concerng coverage under a spouse s or other person 
(parent' s) EGHP. Presently, the inormation provided in HCFA- , as with So
cial Secuty Admistration (SSA) application form, is confdential and is not dis
closeable for MSP reference. 
A pilot project is being conducted by HCF A and SSA to obtain additional MSP re
lated inormation at the time the SSA application is taken. The pilot involves a 
sample of States and SSA District Offces. The inormation is obtaied on an ad
ditional form and forwarded to the servcing Medicare carier. The HCF A is 
presently evaluating the results of the project. 
Presently, HCF A does not require the Medicare 
contractors to routinely follow a 
separate process to obtain information directly from beneficiares on whether they 
are employed and covered by their own EGHP, or are covered under another 
person s EGHP. 
Recommendation 
The HCF A-43 is a valuable "lead document" to assist in identifg where MSP 
provisions apply to Medicare entitlement based upon ESRD. The HCF A should 
coordinate with SSA to develop the necessar agreements and mechansms for in
formation or computer edit transfer. Furher, HCF A should expand the informa
tion obtained in the HCF A-43 to include whether the claimant is a member of the 
employer s EGHP and whether the spouse or other person is a member of an 
such coordiation can be worked out, the SSA would provide HCFA
EGHP. 
43 inormation to HCF A for claiants who have been approved for ESRD 
benefits. 
HCF A determes that expanion of the HCF A-43 is not possible, then HCF A 
should develop procedures to require that contractors obtain potential MSP infor
mation from al newly entitled ESRD beneficiares. The newly entitled 
beneficiares average approxiately 10 000 per year, and MSP workups would 
amount to an annual average work load for each contractor of less than 210 
beneficiar contacts. 
COORDINATION BElWEEN INTERMEDIARIES AND CARRIERS 
Finding 
In the analysis of overpayments made by the Medicare contractors, the inpection 
team found intances in which the intermediar or the carrer, but not both, had 
identified the existence of EGHP coverage and correctly processed the claims as  .. 
... 
~~~~~
........................... ........,".'. ....,,.",.'."..,....,.:_.....:..: ........ .......... . .".".:":'))):.."'.$........ ...."....."....."......".....,.... ."....'.'..'..'.'.".."".'' "''."."'..".""..":.:  :.:.:.:..:.::,.:,:""::,":::"::":.::::..:::" .. ........ ....... """.".".".""..""."."".," "."".,,,".".",.,."..-,.,.."..." ..'...".."''.'."'.... ...
secondar. An indication of the extent of the lack of coordination for servces 
reimbursed is noted as follows: 
... n.. 
::J)Y rn3ym Jit  f9j  d$fAi 
:::::AriiouJJf  $#rt*g  9ij..(p
. """,,,,"""''''''..'''''', ......n",... 
EGHP identified by  $158 990  $3,355,000 
intermediar but 
carer 
payment made by 
EGHP identifed by  630  005 500 
payment 
carier but 
made by intermediar 
. n

..... '""0' 
TAtS 
:.:.:.tO 9;$99.....:: 
Lack of a system for coordinating MSP inormation between intermediares and 
carers is a contributory cause of improper contractor payment of ESRD claims 
totalg $206 620. 
Recommendation 
The HCF A should ensure that a "crossover" capabilty is in place to provide coor
dination of benefits/claims processing to and from Medicare intermediaries and 
carers. 
CROSS-REFERENCING BENEFICIARY ACCOUNTS 
Finding 
There are cases where the individual may be entitled as an ESRD cuently in
sured beneficiar (T suff) and subsequently be issued a fuy inured health in
surance number (A suff). In such cases, the contractors must cross-reference 
the numbers to ensure correlation of a total payment history profie for the 
beneficiary. 
The inpection team found that in a number of cases beneficiares have been en
titled under both an ESRD T-suff and ESRD A-suff without these being cross-
referenced to reflect the total Medicare payment amounts for both accounts. 
When the team requested a payment history, only one of the accounts was 
provided. If an overpayment would apply because Medicare improperly paid as 
primary when EGHP coverage existed, the total overpayment might not be deter
mined since both accounts had not been cross-referenced.  Recommendation 
The HCF A should ensure that Medicare contractors are properly cross-referenc
ing all accounts.  APPENDIX

TABLE 1 
MEDICARE SECONDARY PAYER PROVISION

ESRD OVERPAYMENT

MEDICARE CONTRACTORS  OVERPAYMENT 
Type of Contractor  Amount  Total 
Intermediaries 
Sample Facilities  $504 833 
Other Facilities  221  195 
Intermediaries  $726 028 
Carriers 
Assigned Payments  $146 693 
Nonassigned Payments  805 
CARRIERS  $200 498 
ALL CONTRACTORS  $926,526  TABLE 2 
MEDICARE SECONDARY PAYER PROVISION 
ESRD PROJECTION OF SAVINGS 
FOR 1985 SERVICES 
MEDICARE CONTRACTORS  PROJECTED SAVINGS 
Type of Contractor  Amount  Total 
Intermediaries 
Sample Facilities  $105,  625 
Other Facilities  294 230 
Intermediaries  $15,794 855 
Carriers 
Assigned Payments  $ 2 913 365 
Nonassigned Payments  854 961 
CARRIERS  $ 3,768 326 
ALL CONTRACTORS  $19 563 181 
Lre projections for this inpection, which represent only overpayments for beneficiaries 
with onset and servces in 1985, were arved at by multiplyig the findings for each 
facility by the inverse of the samplig probalties associated with the facilty. The States 
were selected with probabilty proportional to size, size being determed by the number 
of ESRD beneficiares withi each State. Facities withi each State were selected in 
the same fashion except that the sample was picked to reflect the proportion of hospital-
based and nonhospital-based facilities found in each State.  . , 
'''
;/ /.. 

Health Care
DEPARTMENT OF HEALTH & HUMAN SERVICES	
Financing AdministratIon 
D. 	 emOrandUm 
''.'''''0 
Date 
Adi19n87  istrator 11. (T/-av'l 
from  lllam L. Roper, d.
Subject	 OIG Draft Report: "r-edicare DoS a Secondary Pa 1Tent Source - End Stae:c

Rena Disease, " OAI-Oi-86-00092

The Inspector General

Office of the Secretary

We have reviewed the OIG's draft report detaili  the results of thc 
national inspection of program reimbursement to end stage renal discase
facili ties. 
We concur with the findings in the report, and our commen 
on the specific recommendations are attached for your consideration. 
Thank you for the opportunity to comment on this report.

At tachment  Coents of the Health Care Finacing Adinistration on the 
Soure -
01G Draft RepOrt "Meicare as a Secondary Payment 
End Stas:e Renal Disease" - OAI-07-86-00092 
OIG Reommendation 
nts for 
icare contractors to recover all identified overpa)

Require 
the 1985 revie\o period, and ensure compliance with HCFA instructions and

overpymnts.

identif;\" and recover Meicare 
guidelines in order to 
Conts 
HCF A 
We will instruct contrators to recover those overpa  ents identified as a 
result of t.e study. This will require that the OIG furish us with a 
o..erpa:'  ents for each contractor reviewed. However I 
listing of identified 
1, 1985, 
e would note that with respect to servicesw oan  aosr  saifgtnerif iJcanauta ry 
as projected 
we do not believe the overpayment problem 
. end stage renal 
bdyi stehaes eO I(GE.S I)n ictliaaimllsy ,o nc oan ptrreapctaoyrms ncto ublad inso,t  thiduesn wtihfi le overpyments have 
been mae, ma)' were subsequently recovered upon post- 'JenEt Srev iew. 
claims
Contrators have since develo
 the capability to identify 
before payment.

OIG Recommendation

adission  ich fully

Revise regulations to require use of an  form  adission

developst-3edicare Secondary Payer (MSP) sources, and adopt 
procedures which identif)" beneficiaries covered b:.' an employee group

health plan (EGHP) that is a primy payer. Providers that consistently

are found to ignore the MSP provisions should be considered for

. penalt

application of appropriate sanctions, to include civil moneta 
where false claims have been submitted.

HCFA Comments

HCFA began an "outreach" progra in FY 1987 to educate providers,

secondar)"

beneficiaries, employers, and insurers about 1'3eEdiScar e as a 
have had particular success wi th the  providers, probably 
er.  \re 
population. 
because they are, as a group, an easily identified 
i th providers ha\"e 
Contractors that have discussed ESRD claims procedures \..
' to insurers rather than 
ad\"ised them that claims should be sent directl 
being submitted to Medcare contractors. In addition, we routinely sample 
pro\"der adssion procedures to identif)' and correct inappropriate 
practices. 
There is a generalized admission form that is used currently by all 
pro\"ders. To supplement that form, "e have included in both the provider 
maual and the intermediary maual a series of questions that develop HSP 
infonntion.  regulator;\' revision 

Therefore, we do not believe a 
necessary at this time.

\O:e currently are considering more i ntensi \"e bi 11 reviel" proctehd urps nnd. 
necessary, sactions against providers that do not comply ,.;1  f'1SP 
prov isions.  Pae 2

OIG Reommendation 
EG 
coverae ei ther 
Develop soures of informtion on beneficiaries with 
by: 
enlisting the cooperation of SSA in revising the HCFA-43

application form to obtain and transfer EGHP informtion, or

require Meicare contractors to establish  follo  separate EGHP 
and 
informtion-gathering process directly wi th the beneficiar 
Coents 
HCFA 
alternte  requiring 
We concur with your  recommendation. We are now 
contractors to develop the first claim received from any beneficiar:... The 
development letter requests data on the beneficiary s or spouse 
informtion that would pro'.ide
employment, insurance coverage, and other 
lead for 
MSP situations. The infonntion is entered into a data base to 
be share with 
other contractors. 
OIG Recommendation

Ensure that both Medicare intermediaries and carriers have a coordination

of benefi ts capability in place to provide for proper claims processing

and identification of EGHPs.

HCFA Comment

We have recently implemented a data exchange system among contractors 
which penn ts quarterly exchanes of MSP data. This s:rstem provides lead 
to the receiving contractor and limi ts the duplication in effort among 
contractors in developing claims. 
OIG Recommendation 
Enure Meicare 
contractors are cross-referencing their own beneficiary
suffix acount record to 
achieve a total payment history. 
Coents 
HCFA 
baes as a result of 
From an MSP aspect, as contractors improve their data 
describe 
the data exchane system  above, we e  ct that cross-referencing
of accounts will be less of a problem. 
We are no\.: de\Oeloping a purge 
s:,'stem which will remove extraneous data from the data base. Once this is 
installed, we will be better able to review the informtion and assure 
that cross-referencing is being used.