Report Template Update: 04-03-08 

 Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

Daniel R. Levinson 

Inspector General 

May 2009 

OEI-07-06-00540 

 

MEDICAID MANAGED CARE 

ENCOUNTER DATA: 

COLLECTION AND USE 

 
Report Template Update: 04-03-08 

 

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 OIG’s 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. 
Report Template Update: 04-03-08 

OBJECTIVE

To determine the extent to which States and the Centers for Medicare 

& Medicaid Services (CMS) are collecting and using Medicaid managed 

care encounter data. 

BACKGROUND 

From 2000 to 2006, combined Federal and State Medicaid expenditures 

increased from $207 billion to $322 billion. In response to this growth, 

States have increasingly used Medicaid managed care to deliver 

services to beneficiaries. As of 2006, 65 percent of the 45.6 million 

Medicaid beneficiaries were receiving all or part of their health care 

services through Medicaid managed care. Encounter data are the 

primary records of Medicaid services provided to beneficiaries enrolled 

in capitated Medicaid managed care. 

The Balanced Budget Act of 1997 requires that Medicaid claims 

submitted to CMS “on or after January 1, 1999, provide for electronic 

transmission of claims data in the format specified by the Secretary [of 

Health and Human Services] and consistent with the MSIS [Medicaid 

Statistical Information System] (including detailed individual enrollee 

encounter data and other information that the Secretary may find 

necessary).” As the only national database of Medicaid claims and 

beneficiary eligibility information, the MSIS is used by CMS to manage, 

analyze, and disseminate information on Medicaid beneficiaries, 

services, and payments. The MSIS data are also widely used for 

research and policy analysis by both public and private organizations, 

and may be used for detecting fraud, waste, and abuse. The MSIS must 

include encounter data to be representative of Medicaid beneficiaries 

and services. 

This study is based on (1) a review of the most recent complete MSIS 

quarterly data submission for each State at the time of our review, 

(2) 1998 State MSIS Application Forms, and (3) structured interviews 

with State Medicaid agency staff in the 40 States providing services 

through capitated Medicaid managed care and with CMS officials. 

FINDINGS 

States reported collecting and using encounter data. State Medicaid 

agency staff in all 40 States with capitated Medicaid managed care 

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Δ EXECUTIVE SUMMARY 
 

E X E C U T I V E S U M M A R Y 

reported that they collect encounter data from managed care 

organizations (MCO). To ensure successful collection, all 40 States have 

established reporting requirements that dictate the format, frequency, 

and/or validation expectations for the data. Almost all States have 

established incentives and/or sanctions to encourage MCOs to report 

encounter data. Most States are using the encounter data that they 

collect to manage their Medicaid managed care programs and reported 

that they would welcome additional guidance and technical assistance 

from CMS, collaboration with CMS and other States, and information 

about how other States are using the data. 

reported that they collect encounter data from managed care 

organizations (MCO). To ensure successful collection, all 40 States have 

established reporting requirements that dictate the format, frequency, 

and/or validation expectations for the data. Almost all States have 

established incentives and/or sanctions to encourage MCOs to report 

encounter data. Most States are using the encounter data that they 

collect to manage their Medicaid managed care programs and reported 

that they would welcome additional guidance and technical assistance 

from CMS, collaboration with CMS and other States, and information 

about how other States are using the data. 

Usefulness of the MSIS is limited because CMS does not enforce 

encounter data requirements. CMS accepted the most recent MSIS 

submissions without encounter data from 15 of the 40 States, despite the 

Balanced Budget Act of 1997 and “State Medicaid Manual” requirements. 

CMS staff indicated that they have provided all States with the MSIS 

reporting requirements, which include the requirement to submit 

encounter data. Reporting practices mostly mirror the 1998 MSIS 

Application Forms that provided a description of States’ intent with regard 

to MSIS submissions, including reporting encounter data. CMS has taken 

no formal action specific to encounter data since that time and has no 

graduated sanctions or penalties against States that do not fully comply 

with MSIS reporting requirements. The absence of encounter data from 

States with Medicaid managed care limits the usefulness of the MSIS. 

Usefulness of the MSIS is limited because CMS does not enforce 

encounter data requirements. CMS accepted the most recent MSIS 

submissions without encounter data from 15 of the 40 States, despite the 

Balanced Budget Act of 1997 and “State Medicaid Manual” requirements. 

CMS staff indicated that they have provided all States with the MSIS 

reporting requirements, which include the requirement to submit 

encounter data. Reporting practices mostly mirror the 1998 MSIS 

Application Forms that provided a description of States’ intent with regard 

to MSIS submissions, including reporting encounter data. CMS has taken 

no formal action specific to encounter data since that time and has no 

graduated sanctions or penalties against States that do not fully comply 

with MSIS reporting requirements. The absence of encounter data from 

States with Medicaid managed care limits the usefulness of the MSIS. 

RECOMMENDATIONS 

We recommend that CMS: 

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Clarify existing Federal requirements that States include encounter 

data in MSIS submissions. CMS could accomplish this by first issuing 

comprehensive guidance that emphasizes Federal requirements for 

including encounter data in the MSIS, issuing national standards for 

encounter data included in the MSIS, and outlining its expectations 

regarding MSIS submissions with regard to encounter data 

(e.g., inclusion, format, frequency, and validation). CMS could also 

provide States with technical assistance and/or facilitate encounter data 

discussions among States to ensure that States understand the Federal 

requirements and submit data that meet quality expectations. Technical 

assistance may assist States with regard to successful encounter data 

collection and reporting practices, quality control measures, and ways to 

overcome any systems limitations.
 

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EXECUTIVE SUMMARY 

Enforce existing Federal requirements that States include encounter 

data in MSIS submissions. Once CMS has provided States with 

encounter data guidance and technical assistance, it could develop edit 

checks to ensure the completeness and quality of encounter data. 

Seek legislative authority to impose sanctions against States that 

fail to meet the MSIS reporting requirements for encounter data. 

CMS could seek legislative authority to withhold Federal financial 

participation for capitated payments and/or levy graduated fines and 

penalties against States that fail to meet MSIS reporting requirements 

for encounter data.

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our first two recommendations and outlined the 

actions it would take to clarify and enforce existing Federal encounter 

data reporting requirements. CMS stated that it did not concur at this 

time with our third recommendation to seek legislative authority to 

impose sanctions against States that fail to meet the MSIS reporting 

requirements for encounter data. 

CMS stated that it will (1) issue a State Medicaid Director letter to 

States that use managed care to clarify Medicaid managed care 

encounter data reporting requirements, (2) inform States that CMS 

staff will be available to provide technical assistance, (3) utilize State 

Technical Advisory Groups to collaborate with States on best practices, 

and (4) establish an Encounter Data Workgroup. 

CMS also stated it intends to increase efforts to consistently enforce all 

Federal encounter data reporting requirements and will review current 

authorities to determine areas where it can strengthen authorities to 

improve encounter data reporting. 

CMS did not concur, at this time, with our recommendation to seek 

legislative authority to impose sanctions against States. CMS stated 

that it wants to first pursue efforts that address our first two 

recommendations before considering seeking sanction authority. We 

agree that CMS should address our first two recommendations as an 

initial step, but continue to support our third recommendation should 

CMS efforts not result in States’ reporting encounter data as required. 
 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 

 States reported collecting and using encounter data. . . . . . . . . . . . 7 

Usefulness of the MSIS is limited because CMS does not enforce 

encounter data requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 

 Agency Comments and Office of Inspector General Response . . . 14

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 

A: States’ Medicaid Managed Care Enrollment and ........ 

Plan Types as of June 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . 15 

B: States’ Reporting Requirements for Medicaid Managed Care 

Encounter Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 

C: States’ Established Incentives and/or Sanctions for Medicaid 

Managed Care Encounter Data . . . . . . . . . . . . . . . . . . . . . . . . 19 

 D: States’ Most Common Uses of Medicaid Managed Care 

Encounter Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

 E: States’ MSIS Submissions of Medicaid Managed Care 

Encounter Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 

 F: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 

 Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ΔEXECUTIVE SUMMARY TABLE OF CONTENTS 
 

OBJECTIVE 

To determine the extent to which States and the Centers for Medicare 

& Medicaid Services (CMS) are collecting and using Medicaid managed 

care encounter data. 

BACKGROUND 

The Growth of Medicaid Managed Care 

From 2000 to 2006, Federal Medicaid expenditures increased from 

$118 billion to $180 billion and State Medicaid expenditures increased 

from $89 billion to $142 billion.1 In 2006, Medicaid expenditures 

accounted for almost one-quarter of all States’ expenditures.2 In 

response to the growth in Medicaid expenditures, States have 

increasingly used Medicaid managed care to deliver services to 

beneficiaries.3 From 2000 to 2006, enrollment in Medicaid managed 

care grew 59 percent, from 18.8 million to 29.8 million beneficiaries. 

As of 2006, 65 percent of the 45.6 million Medicaid beneficiaries were 

receiving all or part of their health care services through Medicaid 

managed care.4 See Appendix A for States’ Medicaid managed care 

enrollment and plan types.5 

Capitated Medicaid Managed Care 

States utilize a variety of managed care arrangements to provide 

Medicaid services to eligible beneficiaries. In the most common 

arrangement (i.e., capitated Medicaid managed care), State Medicaid 

programs pay managed care plans a fixed rate per enrolled Medicaid 

beneficiary in exchange for services included in the plan. States receive 

Federal financial participation (FFP) for these capitated payments 

1 Department of Health and Human Services, “Budget in Brief,” 2002, and “Budget in 

Brief,” 2008. Available online at http://www.hhs.gov/budget/docbudget.htm. Accessed on 

June 3, 2008. 

2 National Association of State Budget Officers, “2006 State Expenditure Report,” 2007. 

Available online at http://www.nasbo.org/publications.php. Accessed on June 3, 2008. 

3 Managed care is a health care delivery system that aims to maximize efficiency by 

negotiating rates, coordinating care, and managing use of services. 

4 At the time of our review, all States had enrolled at least a portion of their Medicaid 

population in managed care, with the exception of Alaska and Wyoming. 

5 CMS surveys States annually to collect Medicaid managed care enrollment statistics 

and program characteristics and publishes that information in the “Medicaid Managed Care 

Enrollment Report” and the “National Summary of State Medicaid Managed Care 

Programs.” 

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Δ INTRODUCTION 
 

INTRODUCTION 

rather than for each individual service, which is how FFP is determined 

for fee-for-service claims. FFP is the Federal Government’s share of an 

approved State cost for operating a Medicaid program. 

Encounter data are detailed information regarding the services provided 

to Medicaid beneficiaries enrolled in capitated managed care. Like 

Medicaid claims for services provided on a fee-for-service basis, 

encounter data are the primary record of services provided to Medicaid 

beneficiaries enrolled in capitated Medicaid managed care. However, 

unlike Medicaid fee-for-service claims, States do not receive FFP for 

encounter data claims. States receive FFP for capitated payments for 

services provided through Medicaid managed care. 

Managed care organizations (MCO) that contract with States to provide 

Medicaid services are required to maintain health information systems. 

These systems must be able to collect data on Medicaid beneficiaries, 

provider characteristics, and services using encounter data or other 

State-specified methods. MCOs are required to ensure that data 

received from Medicaid providers are accurate and complete.6

The Medicaid Statistical Information System 

The Medicaid Statistical Information System (MSIS) was created to 

establish a primary source of Medicaid data at the Federal level for 

maintaining a single, accurate, and comprehensive Medicaid database 

that may be used to: 

• produce regular statistical reports; 

• support research into important policy, quality and effectiveness of 

care, and epidemiological issues; and 

• support detecting fraud, waste, and abuse regarding the Medicaid 

program.7

The Balanced Budget Act of 1997 amended section 1903(r) of the Social 

Security Act to require that Medicaid claims submitted to CMS “on or 

after January 1, 1999, provide for electronic transmission of claims data 

in the format specified by the Secretary [of Health and Human Services] 

and consistent with the MSIS (including detailed individual enrollee 

encounter data and other information that the Secretary may find 

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6 42 CFR § 438.242(b)(2). 

7 53 Fed. Reg. 26674 (July 14, 1988). 
 

INTRODUCTION 

necessary).”8 The MSIS is the only national database of Medicaid 

claims and beneficiary eligibility information. CMS uses MSIS to 

manage, analyze, and disseminate information on Medicaid 

beneficiaries, services, and payments. The MSIS data are also widely 

used for research and policy analysis by both public and private 

organizations, and may be used for detecting fraud, waste, and abuse.9 

The CMS “State Medicaid Manual” provides guidance and requires that 

States meet the MSIS systems and data specifications.10 To implement 

the MSIS, CMS issued the “MSIS Tape Specification and Data 

Dictionary” and the “MSIS Participation Guide,” which contain 

instructions on the files that States are required to report.11 More 

specifically, the data dictionary requires that claim files include 

encounter claims to the extent that they are routinely received by the 

State. The “MSIS Participation Guide” included an MSIS Application 

Form that each State was required to complete and submit to CMS by 

September 30, 1998. The information required in the application 

generally outlined States’ claims data systems, the fields that they 

would use, and a description of the types of data that they would 

provide in their MSIS submissions. Although the applications did not 

serve as an approval mechanism, they did describe States’ intentions 

with regard to MSIS submissions, including any exceptions to 

comprehensive reporting (e.g., the absence of encounter data).12 

Medicaid Integrity and Program Management 

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As mandated by the Deficit Reduction Act of 2005, CMS established a 

Comprehensive Medicaid Integrity Plan (CMIP) to combat Medicaid 

fraud, waste, and abuse.13 In the CMIP, CMS notes that it must 

determine how to calculate return on investment for program integrity 

strategies aimed at managed care. CMS also notes that it must provide 

guidance on how to ensure Medicaid integrity in a managed care 

delivery system and help States develop more sophisticated approaches 

8 Balanced Budget Act of 1997, P.L. No. 105-33, § 4753(a)(1) 

(codified at 42 U.S.C. § 1396b(r)). 

9 “MSIS Overview.” Available online at 

http://www.cms.hhs.gov/MSIS/01_Overview.asp#TopOfPage. Accessed on June 3, 2008. 

10 CMS, “State Medicaid Manual” (Pub. No. 45), Chapter 2, § 2700.2(B). 

11 CMS, “MSIS State Participation Procedures Manual.” Available online at 

http://www.cms.hhs.gov/MSIS/. Accessed on June 3, 2008. 

12 CMS, “State Medicaid Manual” (Pub. No. 45), Chapter 2, § 2700.2(D). 

13 Deficit Reduction Act of 2005, P.L. No 109-171, § 6034(a) (codified at 

42 U.S.C. § 1396u-6). 
 

INTRODUCTION 

to addressing fraud and abuse in the managed care environment.14 As 

part of CMIP, CMS announced plans to use the MSIS data as a source 

of Medicaid information to maximize fraud, waste, and abuse detection 

activities by providing a single, integrated source of timely and quality 

Medicaid data. 

Other Studies 

Thomson Medstat, an organization that contracts with CMS to conduct 

analyses and provide guidance on a broad range of policy issues, 

reviewed 2001 and 2002 encounter data from MSIS submissions and 

indicated that the absence of encounter data prevents CMS, States, and 

even MCOs from determining Medicaid service utilization by 

beneficiaries.15 A 2006 report from the Government Accountability 

Office found that CMS has not incorporated the MSIS into its oversight 

of States’ claims or other systems projects intended to improve its 

analytic capabilities.16 

METHODOLOGY 

Scope 

This study focused on Medicaid managed care encounter data for 

services provided in 39 States and the District of Columbia (hereinafter 

referred to as States) that have capitated Medicaid managed care 

arrangements. We excluded Alaska and Wyoming because they do not 

offer Medicaid managed care. We excluded an additional nine States 

(Arkansas, Idaho, Louisiana, Maine, Mississippi, Montana, New 

Hampshire, Oklahoma, and South Dakota) that provided Medicaid 

managed care services only through primary care case management 

arrangements or prepaid ambulatory health plans because these 

14 CMS, Center for Medicaid and State Operations, Medicaid Integrity Group, 

“Comprehensive Medicaid Integrity Plan of the Medicaid Integrity Program,” 

FY 2007-2011, August 2007. Available online at 

http://www.cms.hhs.gov/DeficitReductionAct/Downloads/CMIPupdateaugust2007final.pdf. 

Accessed on June 4, 2008. 

15 Thomson Medstat, “Cross-State MSIS Encounter Data Quality Feedback Report,” 

March 28, 2006. 

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16 Government Accountability Office, “Medicaid Financial Management: Steps Taken To 

Improve Federal Oversight but Other Actions Needed To Sustain Efforts,” GAO-06-705, 

June 2006. 
 

INTRODUCTION 

entities are not subject to the same administrative requirements as 

other capitated managed care plans.17 

The mixed methods used to conduct this evaluation included the review 

and analysis of data in States’ MSIS submissions, States’ MSIS 

Application Forms, structured interviews with State Medicaid agency 

staff, and structured interviews with CMS staff. This evaluation did not 

assess the completeness, accuracy, or timeliness of the encounter data 

collected by the States and/or reported to CMS in MSIS. 

Data Collection and Analysis 

Medicaid Managed Care Encounter Data. We obtained the most recent 

complete quarterly MSIS data submissions from CMS for the 40 States 

that provide Medicaid services through capitated Medicaid managed 

care.18 The claims data varied by time period based on the most recent 

complete data submission in the MSIS for each State. We determined 

the extent to which States included encounter data in their most recent 

MSIS submissions to CMS by searching for a “3” in the claim type 

field.19 

MSIS Application Forms. We obtained State MSIS Application Forms 

required by and submitted to CMS in 1998 by each of the 51 States. 

We limited our review to the 40 States that provided Medicaid services 

through capitated Medicaid managed care at the time of our review. 

We reviewed State responses to application questions and compared the 

information provided in the applications to current MSIS encounter 

data reporting practices. 

Interviews with State Medicaid agency staff. We conducted structured 

telephone interviews with State Medicaid agency staff in all 40 States 

with capitated managed care to determine why States did or did not 

include Medicaid managed care encounter data in their most recent 

MSIS submission. We also determined: 

17 See 42 CFR § 438.242 (describing health information system requirements that apply 

only to MCOs and Prepaid Inpatient Health Plans). 

18 MSIS complete files as of June 1, 2007. There are no edit checks specific to encounter 

data. To be considered complete, submitted MSIS data files (i.e., eligibility, long-term care, 

pharmacy, inpatient, and other) must meet CMS’s edit criteria for fee-for-service claims. 

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19 Encounter data are to be reported in the MSIS with a “3” in the claim type field as 

specified in the “MSIS Tape Specification and Data Dictionary,” updated February 2007. 

Available online at http://www.cms.hhs.gov/MSIS/Downloads/msisdd05.zip. Accessed on 

September 8, 2008. 
 

INTRODUCTION 

• the extent to which States required or encouraged MCOs to report 

encounter data to the States, 

• any barriers that States experienced in collecting encounter data 

from MCOs, 

• whether nonreporting States anticipated including encounter data 

in their MSIS submissions to CMS and when, 

• the extent to which States use encounter data, and 

• how encounter data could be improved to meet States’ needs.

Interviews with CMS staff. We conducted structured interviews with 

CMS staff responsible for implementation and oversight of the MSIS 

and with CMS’s Office of Research, Development, and Information. 

Through these interviews, we determined how CMS is using Medicaid 

managed care encounter data, whether reported data meet its needs, 

what potential uses exist for the data, and how encounter data could be 

improved to meet current and future needs. 

Standards 

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This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 
 

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State Medicaid agency staff in 

all 40 States with capitated 

Medicaid managed care reported 

that they collect encounter data from MCOs. To ensure successful 

collection, all 40 States have established reporting requirements that 

dictate the format, frequency, and/or validation expectations for the 

data. Almost all States have established incentives and/or sanctions to 

encourage MCOs to report encounter data. Most States are using the 

encounter data that they collect to manage their Medicaid managed 

care programs and would welcome additional guidance from CMS and 

information about how other States are using the data. 

All 40 States have established reporting requirements for MCOs 

States’ contractual agreements with MCOs dictate the format, 

frequency, and/or validation expectations for encounter data. See 

Table 1 for the number of States that have each type of reporting 

requirement. See Appendix B for an overview of reporting requirements 

established by each State for Medicaid managed care encounter data. 

Table 1: Reporting 

Requirements for Medicaid 

Managed Care Encounter Data 

Type of Requirement Number of 

States 

Format 40 

Frequency 38 

Validation 33 

 Attestation only 21 

 Edits only 4 

 Attestation and edits 8 

Source: Office of Inspector General (OIG) analysis 

of interview responses, 2008. 

Thirty-four States have implemented incentives and/or sanctions regarding 

MCOs’ reporting of encounter data 

Thirty-four States have established various incentives and/or sanctions 

to encourage MCOs to submit encounter data to the States. Incentives 

may include rewards for plans meeting all encounter data reporting 

requirements. Sanctions may serve as punitive measures or as 

deterrents for failure to meet encounter data reporting requirements. 

States described efforts to encourage MCOs to report encounter data as 

States reported collecting and using 

encounter data 

Δ FINDINGS 
 

FINDINGS 

incentives and/or sanctions. For example, a plan could receive full 

capitated payments for reporting encounter data (described as an 

incentive by some States) or reduced payments for failing to report 

encounter data (described as a sanction by some States). See Table 2 for 

the incentives and/or sanctions that States have established. 

Financial incentives and sanctions described by Medicaid State agency 

staff include withholding a percentage of the capitated payments for 

failure to report encounter data, charging managed care plans a daily 

fee for failure to report encounter data, and basing pay for performance 

on the receipt and quality of encounter data. Automatic enrollment 

assignments include enrolling or suspending enrollment of beneficiaries 

into a managed care plan based on the plan’s submission of encounter 

data. Performance measures include publishing performance 

information on State Web sites and publishing report cards based on 

managed care plan performance. See Appendix C for an overview of 

incentives and sanctions established by each State. 

Thirty-nine States use the encounter data that they collect 

State Medicaid agency staff reported using the encounter data received 

from MCOs in a variety of ways to meet State-established goals. 

Thirty-nine of the forty States reported using encounter data to better 

understand and administer their Medicaid programs. See Table 3 for 

the most common State uses. 

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Table 2: State-Established Incentives and/or 

Sanctions 

 

Number of 

States 

Financial inducements and/or penalties 26 

Rate setting 13 

Automatic enrollment/assignment 7 

Performance measures 7 

Medicaid Fraud Control Units referral 4 

Suspension or termination of contract 3 

Other (nonspecific) 3 

Source: OIG analysis of interview responses, 2008. 
 

FINDINGS 

Table 3: States' Most Common Uses for Medicaid 

Managed Care Encounter Data 

 Number of States 

Quality assurance 34 

Rate setting 33 

Service utilization 33 

Early and Periodic Screening, Diagnosis, 

and Treatment reporting 29 

Program trending 25 

Healthcare Effectiveness Data and 

Information Set measures 23 

Monitoring immunizations 18 

Monitoring expenditures 16 

Source: OIG analysis of interview responses, 2008. 

See Appendix D for an overview of each State’s most common uses of 

Medicaid managed care encounter data. 

States reported using encounter data for additional purposes, including 

measuring managed care plan and physician performance, producing ad 

hoc reports, detecting fraud and abuse, formulating and implementing 

health care policies, comparing Medicaid managed care and commercial 

managed care plan performance, gathering beneficiary demographic 

information, and/or capturing health outcomes (e.g., laboratory results). 

State Medicaid agency staff in 28 States reported successfully using 

encounter data. The staff in one State remarked that they “cannot 

imagine living without encounter data; the data are the lifeblood of the 

agency.” State Medicaid agency staff in another State reported that 

“Encounter data are the foundation for our State to achieve its 

objectives across the board.” 

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In contrast, Medicaid agency staff in 11 States reported difficulty in 

using encounter data. Staff in six States attributed this difficulty to 

State system limitations. Staff in four States noted receiving 

inconsistent and/or flawed data (e.g., problems with particular fields, 

such as the provider or beneficiary identification) from MCOs. 
 

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FINDINGS 

One State provided no specific reason for its difficulty in using 

encounter data. 

Twenty-five States want additional guidance for encounter data 

State Medicaid agency staff reported a desire to know how other States 

are using the data and how those uses might transfer to their own 

programs. They noted that working with other States that are more 

advanced in collecting, reporting, and using encounter data could 

improve their understanding and use of the data. Additionally, State 

Medicaid agency staff in 25 States noted that they would welcome more 

guidance from CMS (e.g., national standards regarding encounter data), 

and/or collaboration with CMS and other States. However, State 

Medicaid agency staff in a few States indicated that any new guidance 

or requirements should not hinder State flexibility and that reporting 

encounter data should be optional. See Table 4 for the number of States 

that want additional guidance and/or collaboration. 

Table 4: Twenty-Five States Want 

Additional Guidance and/or Collaboration 

 Number of 

States 

 Guidance only 12 

 Collaboration only 4 

 Guidance and collaboration 9 

Source: OIG analysis of interview responses, 2008. 

CMS accepted the most recent 

MSIS submissions without 

encounter data from 15 of the 

40 States, despite the Balanced Budget Act and “State Medicaid 

Manual” requirements. CMS staff indicated that they have provided all 

States with the MSIS reporting requirements, which include the 

requirement to submit encounter data. Reporting practices mostly 

mirror the 1998 MSIS Application Forms, and CMS has taken no formal 

action specific to encounter data since that time. The absence of 

encounter data from some States with Medicaid managed care limits 

the usefulness of the MSIS. 

Usefulness of the MSIS is limited because CMS 

does not enforce encounter data requirements 
 

FINDINGS 

Not all States submit encounter data as required 

Fifteen States did not include encounter data in their most recent MSIS 

submissions at the time of our review (June 1, 2007). 

 State Medicaid 

agency staff for 11 of these nonreporting States indicated that they were 

not aware of any requirements to include encounter data in the MSIS. 

For 9 of the 15 nonreporting States, staff anticipate including the data 

in future submissions but offered no timeframes for when this reporting 

might occur. In the remaining six nonreporting States, staff do not 

anticipate including the data in their MSIS submissions. 

For the 25 States that did report encounter data in their most recent 

MSIS submissions, State Medicaid agency staff said that they included 

the data based on Federal requirements (e.g., “MSIS Operations 

Manual,” specific waiver requirements, or the direction of CMS) and/or 

individual State initiatives. 

CMS does not enforce encounter data reporting requirements and its 

enforcement options are limited 

CMS staff indicated that they are not satisfied with the completeness, 

quality, or usefulness of encounter data submitted by States, yet they 

accept MSIS submissions that do not include the encounter data, as 

required. CMS does not enforce the current MSIS reporting 

requirements or subject encounter data to the same edit checks and/or 

quality reviews as fee-for-service claims data. CMS staff indicated that 

unlike fee-for-service claims and capitated payments, encounter data 

are not linked to FFP, making enforcement difficult. Further, CMS 

does not have graduated sanctions or penalties against States that do 

not fully comply with MSIS reporting requirements (e.g., absence of 

encounter data). 

States’ 1998 MSIS Application Forms mostly mirror current reporting 

practices 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 11 

The 1998 MSIS Application Forms for all of the 15 nonreporting States 

indicated that these States would not include encounter data in their 

MSIS submissions. Of the 25 reporting States, 23 indicated that they 

would include encounter data on their 1998 MSIS Application Forms. 

Two reporting States indicated on their applications that they would not 

include encounter data in their MSIS submissions, yet they included 

encounter data in their most recent submissions. See Appendix E for an 

overview of States’ current encounter data submissions in the MSIS and 

the 1998 MSIS Application Form responses regarding the inclusion of 

encounter data in the MSIS. 
 

FINDINGS 

The 1998 MSIS Application Forms served as the only formal CMS 

request for information from States as to how they intended to comply 

with MSIS reporting requirements, including encounter data. Despite 

the growth in Medicaid managed care since 1998, CMS has taken no 

formal action to request updated information from States, issue 

guidance to States, or develop edit checks for encounter data. 

The lack of encounter data in MSIS submissions from some States limits its 

usefulness 

The absence of encounter data in the MSIS creates an incomplete 

picture of Medicaid overall and Medicaid managed care specifically, 

thereby limiting the intended uses of the MSIS. CMS staff responsible 

for implementation and oversight of the MSIS and staff at CMS’s Office 

of Research, Development, and Information explained that the absence 

of encounter data in the MSIS restricts their use of the data. CMS staff 

would like to progress toward more useful data and explained that 

without encounter data, the Medicaid managed care picture is 

incomplete. CMS staff indicated that they “need encounter data to be 

able to measure what we are paying for.” 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 12 
 

All 40 States providing services through capitated Medicaid managed 

care collect encounter data, and almost all of these States use the data 

to administer their Medicaid programs. However, CMS accepted MSIS 

submissions from 15 States that did not include encounter data, thereby 

failing to enforce the MSIS encounter data reporting requirements for 

these States. As the only national database of Medicaid claims and 

beneficiary eligibility information, the MSIS data are widely used for 

research and policy analysis and may also be used for detecting fraud, 

waste, and abuse by both public and private organizations. However, to 

be used as intended, the MSIS must include encounter data to represent 

the more than 65 percent of the Medicaid population enrolled in 

Medicaid managed care. 

To strengthen enforcement of the MSIS requirements, we recommend 

that CMS: 

Clarify Existing Federal Requirements That States Include Encounter 

Data in MSIS Submissions 

CMS could accomplish this by first issuing (1) comprehensive guidance 

that emphasizes Federal requirements for including encounter data in 

the MSIS, (2) national standards for encounter data included in the 

MSIS, and (3) its expectations regarding MSIS submissions with regard 

to encounter data (e.g., inclusion, format, frequency, and validation). 

CMS could also provide States with technical assistance and/or 

facilitate encounter data discussions among States to ensure that 

States understand the Federal requirements and submit data that meet 

quality expectations. Technical assistance may assist States with 

regard to successful encounter data collection and reporting practices, 

quality control measures, and ways to overcome any systems 

limitations. 

Enforce Existing Federal Requirements That States Include Encounter 

Data in MSIS Submissions 

Once CMS has clarified existing Federal requirements that States 

include encounter data in MSIS submissions, it could develop edit 

checks to ensure that States comply with those requirements and that 

the data are complete and meet quality expectations. 

Seek Legislative Authority To Impose Sanctions Against States That Fail To 

Meet the MSIS Reporting Requirements for Encounter Data 

CMS could seek legislative authority to withhold FFP for capitated 

payments and/or levy graduated fines and penalties against States that 

fail to meet MSIS reporting requirements for encounter data. 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 13 

Δ RECOMMENDATIONS 
 

RECOMMENDATIONS 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our first two recommendations and outlined the 

actions it would take to clarify and enforce existing Federal 

requirements that require States to include encounter data in MSIS 

submissions. CMS stated that it did not concur at this time with our 

third recommendation to seek legislative authority to impose sanctions 

against States that fail to meet the MSIS reporting requirements for 

encounter data. 

CMS stated that it will issue a State Medicaid Director letter to all 

States that use managed care to clarify Medicaid managed care 

encounter data reporting requirements and inform States that CMS 

staff will be available to provide technical assistance with encounter 

data submissions. CMS will utilize State Technical Advisory Groups to 

collaborate with States on best practices for encounter data submissions 

and establish an Encounter Data Workgroup to address additional 

issues. 

CMS also stated that it intends to increase efforts to consistently 

enforce all Federal requirements for Medicaid managed care encounter 

data reporting and will review current authorities to determine areas 

where it can strengthen authorities to improve managed care encounter 

data reporting. 

CMS did not concur, at this time, with our recommendation to seek 

legislative authority to impose sanctions against States that fail to meet 

the MSIS reporting requirements for encounter data. CMS stated that 

it wants to first pursue efforts that address our first two 

recommendations before considering seeking sanction authority. We 

agree that CMS should address our first two recommendations as an 

initial step, but continue to support our third recommendation should 

CMS efforts not result in States’ reporting encounter data as required. 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 14 

We did not make any changes to the report based on CMS’s written 

comments. For the full text of CMS’s comments, see Appendix F. 
 

State Medicaid Managed Care Enrollment and Plan Types as of June 30, 200620 

Types of Managed Care Plans 

State 

Percentage of 

Beneficiaries in 

Managed Care 

Number of 

Commercial 

MCOs 

Number of 

Medicaid-Only 

MCOs 

Number 

of PIHPs 

Number 

of 

PAHPs 

Number of 

PACE 

Programs 

Number 

of 

PCCMs 

Number 

of HIOs 

Number 

of 

Others 

AK* 0.00% 0 0 0 0 0 0 0 1 

AL 63.30% 0 0 2 0 0 1 0 0 

AR 83.02% 0 0 0 1 0 1 0 0 

AZ 89.60% 0 25 1 0 0 0 0 0 

CA 50.34% 24 2 1 13 4 0 4 1 

CO 95.10% 0 2 6 0 1 1 0 0 

CT 75.59% 2 2 0 0 0 0 0 0 

DC 67.76% 0 3 1 0 0 0 0 0 

DE 76.48% 0 1 0 0 0 0 0 1 

FL 65.49% 13 1 3 5 1 1 0 2 

GA 97.67% 0 1 1 1 0 1 0 0 

HI 79.99% 2 1 2 0 0 0 0 1 

IA 86.51% 1 0 1 0 0 1 0 0 

ID 81.42% 0 0 0 0 0 1 0 0 

IL 7.26% 1 2 0 0 0 0 0 0 

IN 72.09% 0 5 0 0 0 1 0 0 

KS 57.03% 0 1 0 0 1 1 0 0 

KY 92.37% 0 1 0 1 0 1 0 0 

LA 71.15% 0 0 0 0 0 1 0 0 

MA 60.43% 2 2 1 0 6 1 0 0 

MD 69.96% 0 7 0 0 1 0 0 0 

ME 66.70% 0 0 0 0 0 1 0 0 

MI 84.85% 4 11 18 0 1 0 0 0 

MN 63.65% 6 3 0 0 0 0 0 0 

MO 99.53% 3 4 0 1 1 0 0 0 

MS 10.21% 0 0 0 1 0 0 0 0 

20 See Glossary on page 28 for terms and abbreviations used in Appendix A. 

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Δ APPENDIX ~ A 
 

APPENDIX ~ A 

State Medicaid Managed Care Enrollment and Plan Types as of June 30, 2006 

(Continued)

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 16 

Types of Managed Care Plans 

State 

Percentage of 

Beneficiaries in 

Managed Care 

Number of 

Commercial 

MCOs 

Number of 

Medicaid-Only 

MCOs 

Number 

of PIHPs 

Number 

of 

PAHPs 

Number of 

PACE 

Programs 

Number 

of 

PCCMs 

Number 

of HIOs 

Number 

of 

Others 

MT 66.86% 0 0 0 0 0 1 0 0 

NC 64.90% 1 0 2 0 0 2 0 0 

ND 55.62% 0 1 0 0 0 1 0 0 

NE 80.85% 1 0 0 0 0 1 0 1 

NH 74.87% 0 0 0 1 0 0 0 0 

NJ 69.41% 2 3 0 0 0 0 0 0 

NM 65.19% 2 1 1 0 1 0 0 0 

NV 82.39% 2 0 0 1 0 0 0 0 

NY 61.12% 20 19 12 1 4 4 0 1 

OH 39.91% 0 8 0 0 2 0 0 0 

OK 85.90% 0 0 0 2 0 1 0 0 

OR 90.34% 2 11 9 8 1 1 0 1 

PA 86.32% 11 0 28 1 4 1 0 0 

RI 65.84% 2 1 0 0 1 0 0 0 

SC 20.19% 0 2 0 2 1 1 0 0 

SD 98.25% 0 0 0 1 0 1 0 0 

TN 100.00% 4 4 2 0 1 0 0 2 

TX 68.55% 8 2 1 0 2 2 0 0 

UT 86.89% 0 0 12 1 0 1 0 0 

VA 63.22% 5 2 0 1 0 1 0 0 

VT 64.70% 0 1 0 0 0 0 0 0 

WA 86.64% 7 1 1 1 1 1 0 0 

WI 46.73% 34 3 2 0 1 0 0 0 

WV 46.31% 3 0 0 0 0 1 0 0 

WY 0.00% 0 0 0 0 0 0 0 0 

Total 65.34% 162 133 107 43 35 33 4 11 

Source: CMS, “2006 Medicaid Managed Care Enrollment Report.” 

*Alaska offers nonemergency medical transportation through a managed care waiver authority but uses a fee-for-service transportation broker. 
 

APPENDIX ~ A 

States’ Reporting Requirements for Medicaid Managed Care Encounter Data21

States With Reporting Requirements 

Capitated 

Medicaid 

Managed Care Format Frequency CEO/CFO Attestation Data Must Pass 

Edit Checks 

AL X X X 

AZ X X X X 

CA X X X 

CO X X X 

CT X X X X 

DC X X X 

DE X X 

FL X X X X 

GA X X X 

HI X X X 

IA X X X 

IL X X X 

IN X 

KS X X X 

KY X X X 

MA X X X 

MD X X X X 

MI X X X X 

MN X X X 

MO X X X X 

21 See Glossary on page 28 for terms and abbreviations used in Appendix B. 

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Δ APPENDIX ~ B 
 

APPENDIX ~ B 

States’ Reporting Requirements for Medicaid Managed Care Encounter Data 

(Continued) 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 18 

States With Reporting Requirements 

Capitated 

Medicaid 

Managed Care Format Frequency CEO/CFO Attestation Data Must Pass 

Edit Checks 

NC X 

ND X X 

NE X X 

NJ X X X 

NM X X X 

NV X X X 

NY X X X

OH X X X 

OR X X X X 

PA X X X 

RI X X 

SC X X X 

TN X X X X 

TX X X X 

UT X X X 

VA X X X 

VT X X X 

WA X X X 

WI X X 

WV X X X 

Total 40 38 29 12 

Source: Office of Inspector General analysis of interview responses, 2008. 

A blank field indicates that the State did not have the requirement or did not specifically indicate it in the 

interview. 
 

States’ Established Incentives and/or Sanctions for Medicaid Managed Care 

Encounter Data22

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 19 

Incentives and/or Sanctions States 

With 

Capitated 

Medicaid 

Managed 

Care 

Financial 

Inducements 

and/or 

Penalties 

Rate 

Setting 

Automatic 

Enrollment/ 

Assignment 

Performance 

Measures 

MFCU 

Referral 

Suspension 

or 

Termination 

of Contract 

Other 

Nonspecific

AL 

AZ X X X X 

CA X 

CO 

CT X X 

DC X 

DE 

FL 

GA X 

HI* X 

IA X X 

IL X 

IN X 

KS X 

KY X 

MA X X X 

MD X X X 

MI X X X X 

MN X X 

MO X X 

22 See Glossary on page 28 for terms and abbreviations used in Appendix C. 

Δ APPENDIX ~ C 
 

APPENDIX ~ C 

States’ Established Incentives and/or Sanctions for Medicaid Managed Care 

Encounter Data (Continued) 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 20 

Incentives and/or Sanctions States 

With 

Capitated 

Medicaid 

Managed 

Care 

Financial 

Inducements 

and/or 

Penalties 

Rate 

Setting 

Automatic 

Enrollment/ 

Assignment 

Performance 

Measures 

MFCU 

Referral 

Suspension 

or 

Termination 

of Contract 

Other 

Nonspecific

NC 

ND X 

NE* X 

NJ X X 

NM X 

NV X 

NY X X 

OH X X X X 

OR X X 

PA X X 

RI X X X X 

SC X 

TN X 

TX X X X 

UT X 

VA 

VT X X X 

WA X 

WI X 

WV X X 

Total 26 13 7 7 4 3 3 

Source: Office of Inspector General analysis of interview responses, 2008. 

A blank field indicates that the State did not have the incentive and/or sanction or did not specifically indicate it in the 

interview.

*State has incentives and/or sanctions outlined in contractual agreement but does not currently implement them. 
 

States’ Most Common Uses of Medicaid Managed Care Encounter Data23 

Uses of Encounter Data States With 

Capitated 

Medicaid 

Managed 

Care 

Rate 

Setting 

Quality 

Assurance 

Service 

Utilization 

EPSDT 

Reporting 

Program 

Trending 

HEDIS 

Measures 

Monitoring 

Immunizations 

Monitoring 

Program 

Expenditures

AL X X X X 

AZ* X X X X 

CA X X X X X X X 

CO X X X X X X 

CT X X X X X 

DC* X X X X X X 

DE X X X X X X 

FL X X X X 

GA X X X X X X X X 

HI X X 

IA X X X X X X 

IL X X X X X X 

IN X X X X X X X 

KS X X X X X 

KY X X X X X X X 

MA X X X X X X 

MD X X X X X X X 

MI X X X X X X X 

MN X X X X X X X 

MO X X X 

23 See Glossary on page 28 for terms and abbreviations used in Appendix D. 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 21 

Δ APPENDIX ~ D 
 

APPENDIX ~ D 

States’ Most Common Uses of Medicaid Managed Care Encounter Data (Continued)

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 22 

States With Uses of Encounter Data 

Capitated 

Medicaid 

Managed 

Care 

Rate 

Setting 

Quality 

Assurance 

Service 

Utilization 

EPSDT 

Reporting 

Program 

Trending 

HEDIS 

Measures 

Monitoring 

Immunizations 

Monitoring 

Program 

Expenditures 

NC X 

ND X 

NE X 

NJ X X X X X X X 

NM X X X X X X X 

NV X X X X X X X X 

NY X X X X 

OH X X X X X X X 

OR* X X X X X X X 

PA X X X X 

RI X X X X X X X 

SC 

TN X X X X X X 

TX* X X X X X X X 

UT* X X X X X 

VA* X X X X X 

VT X X X X X 

WA* X X X X 

WI* X X X X X X X 

WV X X X X X 

Total 33 34 33 29 25 23 18 16 

Source: Office of Inspector General analysis of interview responses, 2008. 

*State also uses encounter data for establishing DME payments and/or determining DSH payments. 

A blank field indicates “not applicable.”
 

States’ MSIS Submissions of Medicaid Managed Care Encounter Data24

MSIS Files Containing Encounter Data States With 

Capitated 

Medicaid 

Managed 

Care 

Most Recent 

MSIS 

Quarterly 

Submission 

Month/Year at 

the Time of 

Our Review 

Encounter 

Data Included 

in Most 

Recent MSIS 

Submission 

Application 

Indicates State 

Will Include 

Encounter 

Data in the 

MSIS 

Inpatient Other Pharmacy Long-Term 

Care Eligibility 

AL 04/2005 X X X X 

AZ 02/2007 X X X X X X X 

CA 01/2007 X X X X X X 

CO 01/2006 

CT 04/2006 

DC 02/2007 

DE 01/2007 

FL 02/2007 

GA 01/2007 X X X X 

HI 02/2007 X X X X X X X 

IA 03/2006 X X X X 

IL 01/2007 X X X X 

IN 02/2007 X X X X X 

KS 02/2006 X X X X X 

KY 04/2006 X X X X X X 

MA 04/2004 

MD 01/2005 X X X X X 

MI 04/2005 

MN 04/2006 X X X X X X 

MO 02/2007 X X X X X 

24 See Glossary on page 28 for terms and abbreviations used in Appendix E. 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 23 

Δ APPENDIX ~ E 
 

APPENDIX ~ E 

States’ MSIS Submissions of Medicaid Managed Care Encounter Data (Continued)

MSIS Files Containing Encounter Data

States With 

Capitated 

Medicaid 

Managed 

Care 

The Most 

Recent MSIS 

Quarterly 

Submission 

Month/Year at 

the Time of 

Our Review 

Encounter 

Data Included 

in Most 

Recent MSIS 

Submission 

Application 

Indicates State 

Will Include 

Encounter 

Data in the 

MSIS 

Inpatient Other Pharmacy Long-Term 

Care Eligibility 

NC 04/2006 X X X X 

ND 01/2005 X X X X 

NE 01/2007 X X X X 

NJ 04/2005 X X X X 

NM 01/2007 X X X X X 

NV 04/2005 X X X X X 

NY 02/2007 X X X X X X 

OH 04/2005 

OR 01/2006 X X X X 

PA 02/2005 

RI 03/2005 X X X X X 

SC 02/2007 

TN 04/2006 

TX 04/2006 

UT 04/2005 

VA 04/2006 X X X X X X X 

VT 04/2005 

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WA 02/2007 X X X X 

WI 01/2007 X X X X X 

WV 03/2006 

Total 25 23 23 22 15 10 7 

Source: Office of Inspector General analysis of the most recent and complete quarter of the State MSIS data submitted to the Centers for 

Medicare & Medicaid Services, 2008.

A blank field indicates “not applicable.”
 

Agency Comments

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 25 

Δ APPENDIX ~ F 

#,~f,f."'lt"l.'t.4\t

\. DEPARTME O'HEA :rII&HUMANSERVlCES

~S~ Centers for Medicare & Medicaid Services

200 Independence Avenue SW

Washinglon, DC 20201

SUBJECT:

i9

Office of Inspector General (OIG) Draft Rcport: "Medicaid Managed a;

Care Encounter Data: Collection and Use' (OEJ-07-06-00540)

DATE:

TO:

FRO

APR 1 '! 2009

Daniel R. Levinson

Inspector General

C~\.~~-'j~t.v- Charlcne Frizzera

Acting Administrator

"'->

==,,'"

::a .• J Cl "1:1 ~.,

r,.· :;u

:l: ')

'" en ;,;, 1

t>.

r- "

Thank you for the opportunity to review and comment on the ubject OlG Draft Report.

The purpose ofthis report was to determine the extent to which States and the Centers for

Medicare & Medicaid Services (CMS) are collecting and using Medicaid managed care

encounter data.

As of2006, 65 percent of tbe 45.6 million Medicaid beneficiaries werc receiving all or

part of their health care ervices through a Medicaid managed care program. Encounter

data are the primary records of Medicaid services provided to beneficiaries enrolled in

capitated managed care. Unlike claims data fTom fee-for-service providers, which is

reported directly from the States to CMS, encounter data concerning managed care

enrollees flows from the provider to the provider's group practice or other entity, to the

managed care organization to the State, and then finally from the State to CMS.

Section 4753(a)(I) ofthe Balanced Budget Act of 1997 (BBA), P.L. 105-33, amended

section 1903(r) ofthe Social Security Act (the Act) to require, 'effective for claims liled

on or after January I, 1999," that tates "provide for electronic transmission of claims

data in the format specified by the Secretary ofHealth and Human ervices and

consistent with the Medicaid Statistical Inforntation System (MSIS) including detailed

individual enrollee encounter data and other information that the ccrctary may find

necessary.' While the tenn "encounter data" is most commonly used to refer to managcd

care settings in which an individual claim for payment may not be submitted, neither

section 4753(a)( 1), nor any other provisions ofthe BBA, amendcd the statutory

provisions governing Medicaid managed care contract to reference this ncw

requirement. Moreover, the referencing of encounter data modifies a reference to

"transmission of claims data' suggesting that "claims data" is to include encounter data.

onethe1ess, ofthe 40 States providing Medicaid services through capitatcd managed

care programs all 40 collect some encounter data from the managed care organiZe"ltions

and usc it to manage their Medicaid managed care programs. We note M IS data are

lIsed by CMS and other public and private organizations for research and policy analysis.
 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 26 

APPENDIX ~ F 

Page 2 - Danicl R. Levinson

CMS accepted the most recent MSIS submissions from 15 ofthe 40 Statcs with managed

.care programs without encounter data being included. The absence ofthese encounter

data from States with Medicaid managed care programs limits the usefulness ofthe

MSIS.

After reviewing this report, CMS has the following comments in response to the report's

recommendations:

OIG Recommendation

Clarify existing Fedcral requirements lhat States include encounter data in MSIS

submissions.

eMS Response

The CMS concurs with this recommendation and intends to do the following: (I) issue a

State Medicaid Director leiter to all Statcs that use managed care entities to provide

services to their Medicaid beneficiaries that clarifies CMS' interpretation ofsection

1903(r) ofthc Act as requiring that managed care encounter data be submitted as part of

MSIS claims data submissions, and indicrlte that central office and regional officc staff

will be available to provide tcchnical assistancc to assist the States in submitting such

data; (2) utilize the various State Tcehnical Advisory Groups (rAGs) to bring togcther

appropriate State and CMS staffto collaborate on the best practices that States employ to

collect, use, and submit encounter data and to detennine what other types oftechnical

guidance or clarifications arc nceded by the Statcs and managed care entities; and (3)

establish an Encounter Data Workgroup comprised ofCentral Office staff, Regional

Office staff, and staff from States who arc most closely involved in submitting encounter

data to address issues related to the requirements for thc ongoing submission, accuracy,

completeness and uses of encounter data.

OIG Recommendation

Enforce existing Federal requirements that States include encountcr data in MSIS

submissions.

eMS Response

The CMS concurs that efforts should be made to ensure that States' submit managed care

encounter data to CMS and intends to increase our efforts to consistcntly cnforee all

current statutory, regulatory, and policy guidelines in this area. These enforcement

efforts would include reminding Statcs oftheir obligations as part ofthe State singleaudit process, eMS oversight reviews, and through ongoing diseussions with the State

officials, State staff, and managcd care entities during mectings, conferences, and other

forums that take place on an ongoing basis. Additionally, we are going to review our

current managed eare and MSIS data statutory and regulatory authorities to detcnnine
 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 27 

 

 O E I - 0 7 - 0 6 - 0 0 5 4 0 MEDICAID MANAGED CARE E NCOUNTER DATA : C OLLECTION AND US E 27 

APPENDIX ~ F 

Agency Comments 

Page 3 - Daniel R. Levinson

what changes may be lleeded and where we can strengthen current authorities to improve

the collection, submission, use, ofmanaged care encountcr data

DIG Recommendation

Scck legislative authority to impose sanctions against Slatcs thai fail to meet the MSIS

reporting requirements for encounter data.

eMS Response

We do not concur with this recommendation at this time. Rather than pursuing

lcgislative authority to impose sanctions we want to begin to more actively pursue thc

specific items we have outlined above to work with the States and managed care

organizations collaboratively to improve the collection, submission, and use of managed

care encounter dala. We believe thai by clarifying the existing requirements, Sharing best

practices, working together with the States and our managed care partners, and using our

current authorities to improve this process needs to be done before considcring an option

to get sanction authority.

"bc eMS thanks the 010 for the opportunity to review and comment on this draft report.
 

Centers for Medicare & Medicaid Services The Federal agency responsible for 

(CMS) administering Medicare, Medicaid, the State 

Children’s Health Insurance Program, Health 

Insurance Portability and Accountability Act, 

Clinical Laboratory Improvement Amendments, 

and several other health-related programs. CMS 

was formerly known as the Health Care 

Financing Administration (HCFA). 

 

Chief Executive Officer (CEO) In an organization that has a board of directors, 

the CEO is (usually) the singular organizational 

position that is primarily responsible for carrying 

out the strategic plans and policies as established 

by the board of directors. In this case, the CEO 

reports to the board of directors. In a form of 

business that is usually without a board of 

directors (sole proprietorship, partnership, etc.), 

the CEO is (usually) the singular organizational 

position (other than partnerships, etc.) that sets 

the direction and oversees the operations of an 

organization. 

Chief Financial Officer (CFO) CFOs direct the organization’s financial goals, 

objectives, and budgets. They oversee the 

investment of funds and manage associated risks, 

supervise cash management activities, execute 

capital-raising strategies to support a firm’s 

expansion, and deal with mergers and 

acquisitions. 

Disproportionate Share Hospital (DSH) A hospital with a disproportionately large share 

of low-income patients. Under Medicaid, States 

may augment payment to these hospitals. 

Durable Medical Equipment (DME) Medical equipment ordered by a doctor or other 

authorized medical professional for use in the 

home. DME includes reusable items, such as 

walkers, wheelchairs, and hospital beds. 

Early and Periodic Screening, Diagnosis, The child health component of the Medicaid 

and Treatment (EPSDT) Program program. It is required in every State and is 

designed to improve the health of low-income 

individuals under age 21 by financing 

appropriate and necessary pediatric services. 

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Δ GLOSSARY 
 

GLOSSARY 

Healthcare Effectiveness Data A set of standard performance indicators used 

and Information Set (HEDIS) to compare the quality of care, access, and cost of 

health care services provided through managed 

care plans. 

Health Insuring Organization (HIO) An entity that provides or arranges for the 

provision of care and that contracts on a prepaid 

capitated risk basis to provide a comprehensive 

set of services. 

Managed Care Organization (MCO) An entity that serves beneficiaries on a risk basis 

through a network of employed or affiliated 

providers. 

Medicaid Fraud Control Unit The mission of MFCUs is to investigate and 

(MFCU) prosecute Medicaid provider fraud and incidences 

of patient abuse and neglect. Currently, 49 

States and the District of Columbia have MFCUs, 

most of which are located within the Offices of 

State Attorneys General. 

Medicaid Statistical Information System The electronic system through which States 

(MSIS) submit all of their Medicaid eligibility and claims 

data to CMS on a quarterly basis. The purpose of 

MSIS is to collect, manage, analyze, and 

disseminate information on Medicaid-eligible 

beneficiaries, Medicaid utilization, and payments 

for services covered by State Medicaid programs. 

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Prepaid Ambulatory Health Plan (PAHP) An entity that provides ambulatory medical 

services to beneficiaries under contract with the 

State agency on the basis of prepaid capitation 

payments or other payment arrangements that 

do not use State plan payment rates. The entity 

does not provide, arrange for, or otherwise have 

responsibility for the provision of any inpatient 

hospital or institutional services for its 

beneficiaries. 
 

GLOSSARY 

Prepaid Inpatient Health Plan (PIHP) An entity that provides, arranges for, or 

otherwise has responsibility for the provision of 

inpatient medical services to beneficiaries under 

contract with the State agency on the basis of 

prepaid capitation payments or other payment 

arrangements that do not use State plan 

payment rates. 

Primary Care Case Management (PCCM) An entity or a provider that contracts with the 

State to furnish case management services 

(e.g., locating, coordinating, and monitoring 

covered primary care services) to Medicaid 

beneficiaries. 

Program of All-inclusive Care for A comprehensive program that combines medical, 

the Elderly (PACE) social, and long term care services that enable 

elderly beneficiaries to remain independent and 

live in their communities. 

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This report was prepared under the direction of Brian T. Pattison, 

Regional Inspector General for Evaluation and Inspections in the 

Kansas City regional office. 

Deborah Walden served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the 

Kansas City regional office who contributed to the report include 

Michael Barrett, Megan Buck, Lt. Mike Garner, and Amber Meurs; 

other central office staff who contributed include Jennifer Jones and 

Kevin Manley. 

Δ ACKNOWLEDGMENTS