Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE’S CURRENTLY 

NOT COLLECTIBLE 

OVERPAYMENTS 

Daniel R. Levinson 

Inspector General 

June 2013 

OEI-03-11-00670 
 

EXECUTIVE SUMMARY: MEDICARE’S CURRENTLY NOT COLLECTIBLE 

OVERPAYMENTS 

OEI-03-11-00670 

WHY WE DID THIS STUDY 

The Centers for Medicare & Medicaid Services (CMS) identifies billions of dollars in 

Medicare overpayments to health care providers each year. In fiscal year (FY) 2010, 

overpayments totaled $9.6 billion. However, not all overpayments are recovered. 

Overpayments for which the provider has not made a repayment for at least 6 months 

after the due date on the Medicare demand letter are classified as “currently not 

collectible” (CNC) and are not reported on CMS’s annual financial statements. These 

overpayments are not reported on the financial statements because they are not likely to 

be recovered. This report provides information about CNC overpayments. 

HOW WE DID THIS STUDY 

We requested details from CMS about CNC overpayments in FY 2010 and summary 

financial data for FYs 2007 to 2010. CMS provided most of the data from its Healthcare 

Integrated General Ledger Accounting System (HIGLAS). We also surveyed CMS and 

all its claims processing contractors to identify (1) hindrances to debt collection and 

(2) strategies to reduce the number and dollar amount of overpayments that become 

CNC. 

WHAT WE FOUND 

CMS reported $543 million in new CNC overpayments across all contractors in FY 2010. 

However, CMS provided detailed information on $69 million in CNC overpayments for 

only seven contractors. Citing contractor transitions, CMS did not provide detailed data 

for the remaining 32 contractors. For 54 percent of CNC overpayments associated with 

the seven contractors, the provider type was missing in HIGLAS. For the seven 

contractors, 97 percent of FY 2010 CNC overpayments were not recovered. According 

to contractors, inaccurate provider contact information delays or prevents some 

overpayment demand letters from reaching providers. In addition, CMS and contractors 

reported that expanding the types of provider identifiers used to recover payments could 

improve debt collection efforts. 

WHAT WE RECOMMEND 

CMS should: (1) ensure that the HIGLAS variable for provider type is populated for all 

overpayments, (2) ensure that demand letters are mailed to the contacts and addresses 

identified by the provider, and (3) use tax identification numbers and provider transaction 

access numbers in addition to national provider numbers for the collection of 

overpayments. CMS partially concurred with our first recommendation, did not concur 

with our second recommendation, and concurred with our third recommendation. 
 

 

TABLE OF CONTENTS 

Objectives ....................................................................................................1 

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

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

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

CMS reported $543 million in new CNC overpayments across all 

contractors in FY 2010, but only provided detailed information on 

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

Ninety-seven percent of CNC overpayments were not recovered 

for the seven contractors with recovery information and newly 

classified CNC overpayments were over half a billion dollars 

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

Contractors reported that some demand letters do not reach 

providers, or reach providers late, because of inaccurate contact 

information .....................................................................................11
 

CMS and contractors reported that expanding the types of 

provider identifiers used to offset payments could improve 

could improve debt collection efforts ............................................11
 

Conclusion and Recommendations ............................................................13 

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

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

A: Contractor Recommendations Regarding Currently Not 

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

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

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

 

 

 

 

 

 

 

OBJECTIVES 

1.	 To describe details of Medicare Part A and Part B overpayments 

identified in fiscal year (FY) 2010 and classified currently not 

collectible (CNC) as of December 31, 2011. 

2.	 To identify the annual dollar amount of new CNC overpayments from 

FY 2007 to FY 2010. 

3.	 To identify issues that hinder efforts to reduce the number and dollar 

amount of overpayments that become CNC. 

4.	 To identify strategies for reducing the number and dollar amount of 

overpayments that become CNC. 

BACKGROUND 

In FY 2010, the Centers for Medicare & Medicaid Services (CMS) 

identified $9.6 billion in Medicare overpayments.1 Overpayments are 

improper payments to providers that need to be returned to the Medicare 

program, e.g., payment for a noncovered service. An overpayment 

becomes a debt owed to the Federal Government when CMS makes a 

determination of overpayment.2 It is recognized as an account receivable 

in Medicare’s financial system once a demand letter is issued.3 

CNC is a financial accounting classification for any accounts receivable 

for which the provider4 has not made a repayment for at least 6 months 

after the due date on the first Medicare letter requesting repayment.5 CNC 

debt continues to be referred for collection but is not reported on CMS’s 

financial statements because collection is unlikely.6 

This is the first OIG study on all Medicare Parts A and B CNC 

overpayments. 

Contractor Responsibility 

CMS contracts with private companies known as carriers, fiscal 

intermediaries, and Medicare Administrative Contractors (MAC) to fulfill 

Medicare administrative functions such as processing claims, making 

1

 CMS response to January 27, 2012, Office of Inspector General (OIG) data request. 

2

 CMS, Medicare Financial Management Manual, Pub. No. 100-06 (Manual), ch. 3, 

§ 10.
 3

 Ibid., ch. 5, § 400.21.
 4

 In this report, provider refers to any type of Medicare provider or supplier 

(e.g., hospital, physician, durable medical equipment, prosthetics, orthotics, and supplies
 

(DMEPOS) supplier) unless otherwise indicated.
 5 Manual, ch. 5, § 400.20. 6

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

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 1 
 

 

 

payments, recovering overpayments, and reporting on all financial 

activities. These contractors process over a billion Medicare claims each 

year. 

Contractor Identifiers 

Some administrative contractors are responsible for more than one type of 

claim activity, e.g., Parts A and B. CMS uses contractor identifiers to 

identify the contractor and type of claim activity in a particular geographic 

area. In this report, we use the term “contractor” to refer to these 

contractor identifiers. There were 39 contractors in FY 2010. 

Overpayment Recovery Activities 

The Manual contains requirements for contractors regarding overpayment 

recovery activities. Once overpayments are identified, contractors are 

required to take timely and aggressive efforts to collect the debts.7 CMS 

has stated that “although the term ‘aggressive’ may not be defined 

specifically in the Manual, CMS considers the collection processes 

outlined in the Manual to be aggressive.”8 

Contractor overpayment recovery activities required by CMS include:9 

	 creating and managing the accounts receivables for the overpayments, 

	 mailing demand letters to providers for repayment, 

	 making phone calls to providers that have not responded to demand 

letters, 

	 implementing offsetting of providers’ future payments to recover 

overpayments, 

	 establishing and managing providers’ extended repayment plans, 

	 mailing notices to providers of intention to refer the overpayment to 

the Department of the Treasury (Treasury) for collection, and 

	 referring eligible overpayments to Treasury for collection. 

Contractors send demand letters to providers with overpayments. 

Typically, the first demand letter states that the provider was overpaid, and 

that if the overpayment is not repaid in full within 30 days, the debt will 

become delinquent on day 31 and interest will begin to accrue. The letter 

7

 45 CFR § 30.10(a); Manual, ch. 3, § 10. 8

 CMS response to OIG survey, March 2012. 

9 Manual, ch. 3, 4, and 5. 

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also explains methods the provider can use to repay the debt and the 

provider’s right to appeal the overpayment determination.10 

When a provider has not responded by day 45 to a Part A demand letter or 

by day 60 to a Part B demand letter, the contractor must telephone the 

provider to seek recovery of the overpayment.11 

Although providers are responsible for updating their addresses with 

CMS, if letters are returned as undeliverable, the contractor must attempt 

to locate the provider through various means, including checking with 

State and local medical societies.12 

Contractors send a final demand letter, known as the “Intent to Refer 

Letter,” if the provider has not responded to earlier contacts before the 

debt becomes 90 days delinquent. It informs the provider that the 

overpayment will be referred to Treasury for collection if the provider 

does not repay within 60 days or request an extended repayment plan. 

Recovering Overpayments. Contractors must begin recovering 

overpayments by offsetting payments unless the provider sends a check 

for the full amount of the overpayment or requests an extended repayment 

plan within a certain timeframe.13 Contractors collect the majority of 

overpayments through offsetting. Offsetting is the process whereby funds 

are deducted from a future payment to repay a current debt. Contractors 

use the provider number to identify the provider payments that are to be 

offset. 

In 2012, CMS issued instructions to contractors to implement provider 

requests for immediate offset.14 Immediate offset prevents interest from 

accruing on the overpayment if the debt is recovered in full before day 31. 

A request for immediate offset is considered a voluntary repayment by the 

provider. 

In 2012, CMS also issued instructions to contractors to collect 

overpayments owed by suppliers of DMEPOS that maintain surety 

bonds.15 DMEPOS suppliers must maintain a surety bond of at least 

$50,000 to enroll and remain enrolled in the Medicare program. 

10 Upon receiving a demand letter, if a provider submits a timely request for a first- or 

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

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

“Limitation on Recoupment (935)” in the Manual, ch. 3, § 200.
 11 Manual, ch. 4, §§ 10 and 80.2. 12 Ibid. 

13 Ibid. 

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

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

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 3 
 

 

 

 

 

 

 

 

Overpayments up to the full value of the bond can be collected from the 

surety bond company. 

In addition, contractors can refer outstanding overpayments to Treasury 

for “cross servicing,” i.e., for collection through one of Treasury’s 

programs.16 An example is the Treasury Offset Program, which may offset 

eligible Federal and State payments to recover the Medicare overpayment. 

Treasury uses a provider’s tax identification number to identify the 

payments to be offset. 

Contractors have the option of referring overpayments to Treasury before 

the debt is 180 days delinquent.17 However, if the overpayment is more 

than 180 days delinquent, contractors must refer it to Treasury. Debts are 

not eligible for referral to Treasury if they are less than $25, in bankruptcy 

status, in appeal status, under investigation by a law enforcement agency 

and the investigating agency has instructed the contractor not to attempt 

collections, or the debtor is deceased.18 

Once a debt is referred to Treasury, the contractor ceases active collection 

efforts but maintains the accounts receivable in its accounting system for 

potential offset. The contractor also ensures that any collections by 

Treasury are posted to the account and entered into CMS’s Debt 

Collection System. 

CNC Classification 

According to the Manual, the CNC classification of an overpayment does 

not stop collection efforts and has no bearing on whether the overpayment 

is eligible for referral to Treasury or whether future Medicare payments to 

the provider can be offset. CMS classifies overpayments as CNC because 

they are not likely to be collected. Overpayments classified as CNC are 

not reported on CMS financial statements.19 

An overpayment is eligible for CNC classification when it is in the amount 

of $25 or more and is at least 180 days delinquent, without any collection 

activity within the last 180 days. 

16 In a May 2010 report, Collection Status of Medicare Overpayments Identified by
 

Program Safeguard Contractors, OEI-03-08-00030, OIG reported that Treasury’s crossservicing program does not have a high rate of return. For each year between FYs 2003 

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

17 Manual, ch. 4, § 70.5. 18 Ibid., § 70.6. 

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

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A debt can be classified CNC regardless of referral to Treasury, 

bankruptcy, appeals, fraud and abuse investigation, or litigation, or 

whether the debtor is deceased.20 

The Manual instructs contractors to seek approval from the CMS regional 

office before classifying an overpayment as CNC.21 However, according 

to CMS staff, overpayments are classified CNC through an automated 

process in the Healthcare Integrated General Ledger Accounting System 

(HIGLAS) when they reach a certain age. CMS reviews the debts after 

CNC classification and will notify contractors if it disapproves of the 

classification. 

HIGLAS 

CMS began implementing HIGLAS in 2005 to meet provisions of the 

Federal Financial Management Improvement Act of 1996. Since 2005, 

CMS has been transitioning its Medicare Part A and Part B contractors 

into HIGLAS on a staggered basis. As of FY 2010, 17 of 39 contractors 

had yet to be fully transitioned to HIGLAS. 

CMS expects HIGLAS to enhance CMS’s “oversight of claims 

administration contractor financial operations ... [and] provide high 

quality, timely data for decision making and performance measurement.”22 

CMS Evaluation of Contractors’ Recovery Activities 

CMS reported that it monitors contractor timeliness on the following 

recovery activities: issuing demand letters, posting updates to debts, 

notifying providers of intention to refer debt to Treasury, and referring 

eligible debts to Treasury. 

CMS has stated that it reviews contractor performance through onsite 

visits, desk reviews, and analyses of financial reports. It uses review 

protocols and performance standards to monitor contractor performance. 

It also reviews contractors’ monthly status reports with details related to 

overpayment recovery. 

Previous OIG Work 

In a 2008 early alert memorandum, OIG described associations between 

selected DMEPOS suppliers that had CNC debts exceeding $50,000 and 

other closely associated businesses that received Medicare payments.23 

20 Manual, ch. 5, § 400.20. If the debt is less than $25 but otherwise eligible for CNC 

classification, contractors are required to recommend that CMS terminate collection 

activity. 

21 Ibid. 

22 CMS, Financial Report Fiscal Year 2011, p. 20. 23 OIG, Early Alert Memorandum: Payments to Medicare Suppliers and Home Health
 

Agencies Associated With “Currently Not Collectible” Overpayments, OEI-06-07-00080, 

November 2008.
 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 5 
 

 

The results of the study indicated that individuals associated with CNC 

overpayments could inappropriately receive Medicare payments by 

omitting owner/manager information on their enrollment applications and 

working through other DMEPOS suppliers and home health agencies. 

OIG stated that although, taken alone, the finding that certain suppliers 

with CNC debt were associated with other suppliers receiving payments 

did not establish improper activity, CMS may determine that such 

affiliations justify enhanced oversight. 

METHODOLOGY 

Data Collection and Analysis 

Financial Data From CMS. In January 2012, we requested that CMS 

provide detailed financial data about overpayments demanded in FY 2010 

and classified as CNC as of December 31, 2011. We received detailed 

data for 7 of 39 contractors. Details included the contractor’s identifier 

number, date the accounts receivable was created, name of the provider, 

provider type, claim type, amount of the overpayment when it became 

CNC, amount recovered on milestone dates before and after the 

overpayment became CNC, and amount owed on the overpayment as of 

December 31, 2011. CMS extracted the data from HIGLAS. 

We also collected summary financial data for FYs 2007 to 2010 on 

overpayments, CNC overpayments, and cumulative CNC overpayments. 

CMS extracted the data from HIGLAS for contractors using HIGLAS, and 

from its Contractor Administrative Budget and Financial System (CAFM) 

for contractors not using HIGLAS. 

We sent our original request for both detailed and summary financial data 

to CMS in January 2012. As of April 2012, we had not received the 

detailed data, and the summary information we received did not properly 

address our request. Therefore, we met with CMS to discuss these issues 

and subsequently revised our request for both the detailed and summary 

data. We received detailed data for seven contractors and summary data 

for all contractors in June 2012. We continued to request and receive 

clarifications regarding the data until September 2012. 

We reviewed the detailed financial data for FY 2010 to identify the 

number and dollar amount of CNC overpayments by contractor for the 

seven contractors. We also identified the types of providers with CNC 

overpayments and the amount of money recovered on CNC overpayments 

as of December 31, 2011, for these contractors. 

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We reviewed the summary financial data for FYs 2007 to 2010 to 

determine the level of CNC debt each year and how it trended over this 

period. 

CMS Survey. We surveyed CMS’s Division of Medicare Debt 

Management, Financial Services Group in March 2012 to identify its 

strategies, policies, and procedures for recovering overpayments and 

reducing CNC debt. We also used the survey to determine CMS’s 

perspective on the barriers that prevent overpayment collection and 

changes needed to overcome the barriers. 

Contractor Survey. We surveyed all CMS contractors in March 2012 to 

identify their strategies and procedures for collecting overpayments before 

they become CNC, issues they encounter that make it difficult to collect 

overpayments before they become CNC, and changes they believe are 

needed. 

We obtained from CMS a list of contractors’ corporate executives. We 

sent the executives instructions to complete one survey each for their 

Parts A and B MAC, durable medical equipment (DME) MAC, carrier, 

and fiscal intermediary lines of business. In total, they completed 23 

surveys. In our analysis, we counted each survey as one contractor, and 

we report the frequency of contractor responses to survey questions from 

the 23 surveys. Table 1 shows the number of each type of contractor that 

completed the survey. 

Table 1: Contractors Completing OIG Survey 

Type of Contractor Number of Surveys 

Parts A and B MAC 11 

DME MAC 4 

Carrier 4 

Fiscal Intermediary 4 

Total 23 

 Source: OIG survey, March 2012. 

Limitations 

We did not independently verify financial data that CMS provided, nor did 

we independently verify survey responses from CMS and its contractors. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency. 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 7 
 

 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 8 

 

 

FINDINGS 

CMS reported $543 million in new CNC overpayments

across all contractors in FY 2010, but only provided 

detailed information on $69 million in CNC 

overpayments for seven contractors 

For FY 2010, CMS reported $543 million in total new CNC overpayments 

across all 39 contractors. However, CMS provided detailed data for only 

seven. These seven contractors processed 22 percent of Medicare 

payments. CMS determined that these were the only contractors for which 

HIGLAS had detailed and consistent information on CNC overpayments. 

These seven contractors represented 13 percent or $69.4 million of the 

total overpayments classified as CNC in FY 2010. The number of CNC 

overpayments for these contractors ranged from 1 to 55,715, for a total of 

70,530. 

Citing contractor transitions, mergers, and splits, CMS could 

not provide data consistently for most contractors 

CMS stated that its inability to provide consistent detailed data for the 

remaining 32 contractors was caused in part by workloads being 

transitioned to a new contractor, being added to a contract involving a 

merger, or being split from a former workload. Since 2005, CMS has been 

transitioning contractors to meet the competitive contract requirements of 

contracting reform.24 Under this reform, CMS has been replacing carriers 

and fiscal intermediaries with MACs and the transitions were not yet 

complete as of December 2012. 

CMS decided not to transfer all overpayment details to HIGLAS 

when contractors made the transition from other systems 

Various types of financial data are maintained in HIGLAS. However, 

CMS stated that during contractor transitions to HIGLAS, it transferred 

only summary data for years prior to the transition because of the volume 

of data maintained by the contractor for those prior years. Therefore, at 

the time of transfer to HIGLAS, the current status of the overpayments 

was transferred but the original overpayment amounts and any collection 

activity were not transferred. Once the contractor transferred to HIGLAS, 

the detailed data for years prior to the transfer were not available in 

HIGLAS. 

24 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

required contracting reform. 
 

 

 

 

CMS and its contractors lack an automated method for 

extracting certain CNC overpayment information from its 

systems 

CMS reported that some of the detailed data OIG requested in 

January 2012 would have to be searched for manually and then manually 

entered into a spreadsheet. One contractor alone estimated that it would 

take 3,421 staff hours to look up and enter principal and interest on its 

account receivables that became CNC for the milestones requested by 

OIG. In April 2012, OIG sent a revised request to CMS that aimed to 

reduce the data collection burden. The revised request allowed CMS to 

provide available detailed data while not requiring extensive effort on the 

part of individual contractors. 

The details we requested included information on the dollar amount of the 

overpayment and the amount recovered on certain dates before and after 

the overpayment became CNC. Without this information for all 

contractors, CMS would not be able to determine the range of individual 

overpayments in demand letters, the percentage of overpayment dollars in 

a specific year that were classified CNC, and the number of days after 

which debt recoveries fall off. 

Even though CMS and contractors maintain automated systems, certain 

data can be retrieved and manipulated only manually. According to the 

independent auditors of CMS’s financial statements for FY 2011, 

Medicare contractors ... 

 continue to rely on a combination of claims processing 

 systems, personal computer-based software applications and 

 other ad hoc systems to tabulate, summarize and prepare 

 information that is reported to CMS. The accuracy of the 

 financial reports remains heavily dependent on inefficient, 

 labor-intensive manual processes that are also subject to an

 increased risk of inconsistent, incomplete or inaccurate 

 information being submitted to CMS.25 

Provider type was not available for 54 percent of the CNC 

overpayments with detailed data 

One of the variables in HIGLAS is provider type. For 54 percent (38,181) 

of the CNC overpayments with detailed data, CMS could not provide the 

provider type. When this information is missing, CMS cannot identify 

overpayments across provider type, and therefore cannot target its efforts 

to reduce CNC debt among certain types of providers. 

25 CMS, Financial Report Fiscal Year 2011, p. 119. 

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The overpayments with missing provider type were all for Part B. CMS 

reported that the Part A provider type is a mandatory field in HIGLAS, and 

that some of the Part B provider types were missing because of manual 

entry of the provider type into HIGLAS or data transfer into HIGLAS. 

The 7 contractors with detailed data were responsible for a total of 

70,530 CNC overpayments. Of the CNC overpayments with a provider 

type (32,349), the most common type was internal medicine physician 

(11,615). 

Ninety-seven percent of CNC overpayments were not 

recovered for the seven contractors with recovery

information and newly classified CNC overpayments 

were over half a billion dollars annually 

For the seven contractors with detailed data, 97 percent of FY 2010 CNC 

overpayments were not recovered as of December 31, 2011. The total 

amount of CNC overpayments for the seven contractors was $69.4 

million, with recoveries of $2.4 million. The individual CNC 

overpayment amounts for the seven contractors ranged from $25 to 

$2.8 million. 

As shown in Table 2, the annual amount of newly classified CNC 

overpayments for all contractors was over half a billion dollars from 

FY 2007 through FY 2010. New CNC debt was highest in FY 2008, when 

it was almost $1 billion. 

In the 4-year period from FY 2007 to FY 2010, new CNC overpayments 

for all contractors represented 6 to 9 percent of total overpayments each 

year.26 In FY 2010, the cumulative dollar amount of CNC overpayments 

was $10.3 billion. 

Table 2: New CNC Overpayments, FYs 2007–2010 

Fiscal 

Year Payments Overpayments New CNC Overpayments 

Cumulative CNC 

Overpayments 

2007 $300,079,271,648 $8,949,356,467 $645,773,093 $7,636,015,057 

2008 $308,018,573,321 $10,081,999,497 $919,048,278 $8,414,602,533 

2009 $311,435,787,217 $9,859,838,882 $896,945,631 $9,381,427,037 

2010 $335,866,123,715 $9,626,517,110 $542,528,449 $10,308,752,975 

Source: CMS, HIGLAS, and CAFM. 

26 These statistics are based on CMS summary financial data. The CNC classification for 

overpayments in a particular year could be based on overpayments identified and 

demanded in a previous year. Overpayments identified at the end of a FY may not be 

classified as CNC until the following FY. CNC overpayments may include 

overpayments that are under appeal. 

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Contractors reported that some demand letters do not 

reach providers, or reach providers late, because of 

inaccurate contact information 

Eight of twenty-three contractors surveyed said they do not encounter 

difficulties in trying to reduce debt before it becomes CNC. Of the 

remaining 15, more than half (9) reported issues with the accuracy of 

provider contact information. These contractors stated that provider 

names and addresses on demand letters are not necessarily correct or are 

not the ones that providers have requested be used to ensure prompt 

response. 

HIGLAS creates demand letters and inserts the providers’ contact 

information. Contractors reported that some letters are returned as 

undeliverable. Some contractors also noted that demand letters do not 

reach providers that have been terminated from Medicare or are out of 

business. Other letters do not reach the right contact person in a 

provider’s organization promptly. Part A providers, in particular, want 

letters sent to an address that is different from the facility address 

maintained in HIGLAS. 

CMS and contractors reported that expanding the 

types of provider identifiers used to offset payments 

could improve debt collection efforts 

In addition to national provider identification numbers, CMS and 

contractors reported that other identifiers, such as tax identification 

numbers and provider transaction access numbers (PTAN),27 would help 

with recoveries. 

CMS staff has stated that providers can escape offsetting when they 

change or receive additional national provider identification numbers. 

Identifying providers by tax identification number would be a more 

reliable way of collecting overpayments through offsetting. Two 

contractors also suggested using tax identification numbers to identify 

affiliated providers and offset their payments to repay providers’ 

overpayments. 

As mentioned earlier, Treasury uses tax identification numbers in its 

payment-offsetting programs. CMS reported that as of May 2011, 

Treasury’s Federal Payment Levy Program (FPLP) began collecting 

Medicare debts by offsetting Medicare payments for contractors related to 

the contractor for which the debt was originally identified. FPLP uses a 

27 Contractors assign PTANs to providers upon enrollment. A provider may have a 

different PTAN for each of its service locations. 

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provider’s tax identification number, not the provider number, to perform 

this offset. 

Currently, CMS pays fees to Treasury for collecting overpayments through 

offsetting and other means. CMS reported that collection fees are $17 per 

offset. For FY 2010, CMS paid fees of $6 million on collections of 

approximately $39 million. These collections included Treasury Offset 

Program collections as well as Treasury and private collection agency 

collections received directly from providers. 

CMS could save some of these fees if it used tax identification numbers 

internally for offsetting purposes. CMS has already begun this process in 

HIGLAS for certain debts. 

Regarding the use of PTANs, one contractor reported that it received CMS 

approval to cross-reference a provider’s PTANs. This allowed the 

contractor to collect overpayments from a provider who stopped billing 

under one PTAN but continued to obtain payment under another. 

Appendix A lists contractor recommendations for overcoming hindrances 

to reducing CNC debt. 

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CONCLUSION AND RECOMMENDATIONS 

It is critical that CMS make efforts to reduce the number and dollar 

amount of overpayments that become CNC since these overpayments are 

unlikely to be recovered. In 2010, CMS reported $543 million in new 

CNC debt. However, CMS had difficulty retrieving detailed data about all 

CNC overpayments from a central source or from all of its contractors in a 

timely way. The financial data CMS was able to provide for 7 of 39 

contractors was too limited to use for a comprehensive contractor- or 

provider-level analysis of CNC overpayments. Such analysis could help 

CMS target its efforts to reduce the number and dollar amount of CNC 

overpayments. 

CMS could provide detailed data for only seven contractors, representing 

22 percent of Medicare payments. Moreover, no provider type was 

identified in 54 percent of CNC overpayments for these seven contractors. 

Without this detailed information, CMS cannot target its efforts to collect 

overpayments. 

Although the detailed overpayment data for seven contractors were too 

limited to allow an in-depth analysis of all CNC overpayments, CMS’s 

summary data across all contractors show that, each year, half a billion 

dollars will likely not be recovered. The detailed data for the seven 

contractors showed that 97 percent of FY 2010 CNC overpayments were 

never recovered. 

Contractors said undeliverable demand letters were a problem and that 

automated letters from HIGLAS were not always addressed to the location 

requested by the provider. CMS and some of its contractors said debt 

recovery would be improved if CMS used additional provider identifiers, 

such as tax identification numbers, to offset Medicare payments. 

We recommend that CMS: 

Ensure That the HIGLAS Variable for Provider Type Is 

Populated for All Overpayments 

CMS included the provider type variable in HIGLAS, yet OIG found a 

substantial number of records in which this variable was blank for Part B 

overpayments. CMS should ensure that all overpayments, regardless of 

claim type, have this information. When this variable is populated, CMS 

will be able to determine which provider types have the greatest CNC 

debt. 

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Ensure That Demand Letters Are Mailed to the Contacts and 

Addresses Identified by the Provider 

Contractors reported that HIGLAS does not necessarily send automatic 

demand letters to the address providers prefer, especially for Part A 

facilities. To provide contractors with an opportunity to make a voluntary 

repayment without incurring interest, CMS should take steps to ensure that 

demand letters are correctly addressed. 

Use Tax Identification Numbers and PTANs in Addition to 

Provider Numbers To Offset Payments and Collect 

Overpayments 

Treasury programs routinely use tax identification numbers to identify 

providers that are receiving Government payments. CMS has begun using 

this tool in HIGLAS for certain debts, and we recommend that it use this 

tool routinely for all debts. By using the tax identification number to 

identify affiliated Medicare providers whose payments can be offset, CMS 

can start offsetting without delay and potentially recover more 

overpayments. Moreover, CMS could save money by reducing the fees it 

pays to Treasury for certain collections. 

CMS should also require contractors to cross-reference PTANs to ensure 

overpayment collection from providers who stop billing under one PTAN 

but continue to obtain payment under another. If necessary, CMS should 

add PTANs as a data element in HIGLAS. 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 14 
 

 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with one of OIG’s three recommendations and stated that, 

aside from CNC overpayments, its debt collection efforts have been very 

effective. CMS noted that it collects approximately 80 percent of its debt 

before the debt becomes CNC and is referred to Treasury. 

CMS partially concurred with our first recommendation, that it ensure that 

the HIGLAS variable for provider type is populated for all overpayments. 

CMS noted that adding the provider type for all overpayments will not 

improve its recoupment efforts since the field is not used in the collection 

process, but stated that it will review the option of making the provider 

type field mandatory in HIGLAS. OIG continues to recommend that CMS 

ensure that the provider type field is complete, as CMS may use this 

information to identify provider types with the greatest CNC debt and to 

better target its debt collection efforts. 

CMS did not concur with our second recommendation, that it ensure that 

demand letters are mailed to the contacts and addresses identified by the 

provider. CMS stated that demand letters are already mailed to the 

addresses identified by providers in the Provider Enrollment, Chain, and 

Ownership System (PECOS). CMS also stated that it encourages 

contractors to educate providers on the importance of providing their 

correct billing address and contact person, and keeping this information 

updated. A number of CMS’s contractors reported problems with 

providers’ contact and address information on demand letters. In a May, 

2013 report entitled Improvements Needed To Ensure Provider 

Enumeration and Medicare Enrollment Data Are Accurate, Complete, and 

Consistent (OEI-07-09-00440), OIG assessed provider enrollment data 

and found significant problems with the accuracy of providers’ address 

information in PECOS. Therefore, OIG continues to recommend that 

CMS take additional steps to ensure that demand letters are delivered to 

correct provider contacts and addresses. 

CMS concurred with our third recommendation, that it use tax 

identification numbers and PTANs in addition to provider numbers to 

offset payments and collect overpayments. CMS noted that the offsetting 

function in the version of HIGLAS that it is using does not allow for 

offsetting across business entities. CMS stated that HIGLAS is based on a 

commercial off-the-shelf product and the most current version of the 

product has been upgraded to allow for this functionality. However, CMS 

has been directed by the Office of Management and Budget to not upgrade 

to the newer version of the software. CMS noted that it hopes to be 

allowed to implement the newer version, which would allow for faster 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 15 
 

 

 

collection of overpayments, increased collections through offset, and 

ultimately a reduction in CNC debt. OIG agrees that tax identification 

numbers should be used to offset overpayments across all business 

relationships and hopes that CMS will be granted the opportunity to 

upgrade to the newer system soon. 

CMS stated that it disagrees with OIG’s finding that CMS was able to 

provide detailed information on CNC overpayments for only seven 

contractors. CMS stated that it had decided not to transition to HIGLAS 

detailed information to support previous years’ overpayment data. Rather, 

the detailed information remained in former Medicare contractors' legacy 

systems. CMS stated that data for the remaining contractors were 

available, but that providing the detailed information for those 

32 contractors would involve an extensive amount of Medicare 

contractors’ and CMS resources to obtain the data. 

OIG requested that CMS provide detailed information regarding CNC 

overpayments for all 39 CMS contractors. However, as noted in the 

findings of this report, CMS indicated that detailed overpayment 

information for 32 contractors would have to be searched for and entered 

manually. One CMS contractor alone estimated that it would take 

3,421 staff hours to look up and enter the information that OIG requested 

regarding the contractor’s CNC overpayments. OIG only accepted from 

CMS detailed CNC overpayment information for the seven contractors 

because these were the only contractors with detailed data that CMS was 

able to provide in a timely way and without extensive staff resources. 

The full text of CMS’s comments is provided in Appendix B. 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 16 
 

 

 

APPENDIX A 

Contractor Recommendations Regarding Currently Not 

Collectible Debt 

Fifteen contractors said they encounter issues that make it difficult to 

reduce the number and/or dollar amount of currently not collectible (CNC) 

overpayments. The table below contains a list of issues identified by the 

contractors and their suggestions for addressing the issues. 

Issue 

Number of 

Contractors 

That Identified 

Issue (n = 15) 

Contractor Recommendations 

Inaccurate 

Contact 

Information for 

Provider 

9 Send demand letters to specific contacts and not to generic addresses at large 

facilities. 

Implement a programming change for the Healthcare Integrated General Ledger 

Accounting System (HIGLAS) to pull the appropriate address for demand letters from 

the provider file of the Part A claims processing system. 

Similar to the Do Not Forward process for undeliverable checks, if an overpayment 

demand letter is returned as undeliverable, make no further payments until the 

provider updates its address with Medicare. 

Conduct more frequent validation of provider address information. 

Bankruptcy 

Cases 

6 Pass legislation that clarifies bankruptcy rules regarding Government debts. 

Look at the bankruptcy process involving the Office of the General Counsel, the 

regional office, and the contractor community. Perhaps a central data repository 

would improve coordination. Contractors wait a considerable time for direction on 

disposition and status of various bankruptcy areas. 

Appealed 

Overpayments

 5 Allow offsetting of certain overpayments in appeal. This would require legislative and 

regulatory change regarding the limitation on recoupment provisions [§ 935 of the 

Medicare Prescription Drug, Improvement and Modernization Act of 2003]. 

Have HIGLAS wait to classify overpayment as CNC until the appeal process is 

completed. 

Overpayments 

Not Collected 

From Affiliated 

Providers, 

Terminated 

Providers, and 

Other Sources 

5 Establish an automated process similar to the Non Treasury Disbursing Office levy 

process as a way to recover overpayments. For example, a process could 

automatically offset a provider's tax refund or other Government payments if there are 

outstanding Medicare overpayments in HIGLAS. 

Provide contractors with Medicaid contact names for States within their jurisdiction to 

begin establishing processes for recoupment against Medicaid funds. 

Change the system to collect nondemanded Part A overpayments (i.e., those initiated 

by providers) by offsetting affiliated providers. Currently, Part A nondemanded 

overpayments are not collected from affiliated providers. 

Establish regulation, change manual, and change Statement of Work to allow 

collection from related organizations. Currently, if the debt is uncollectible for a 

provider that has a related organization, the contractor is not able to pursue recovery 

from the related organization. 

Provide contractors with the option of bypassing the automatic classification when 

they have knowledge that the debt is collectible. CNC classification is currently 

controlled by HIGLAS. 

Change the system to automatically recover overpayments based on shared tax 

identification number. 

Do not allow providers to reenroll in Medicare if they have past Medicare debts. 

continued on next page 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 17 
 

 

 

 

 

 

 

(Continued) 

Issue 

Number of 

Contractors 

That Identified 

Issue (n = 15) 

Contractor Recommendations 

Insufficient Use 

3 Automate the daily phone call list (for Part A overpayments delinquent 45 days and 

for Part B overpayments delinquent 60 days) within HIGLAS. 

of Automation 

and 

Technology 

Automatically generate notification to the overpayment area if an extended 

repayment loan is in default status. Currently, the overpayment staff has to manually 

look for defaulted loans. 

Create an automated flag within reports of Medicare Recovery Audit Contractor 

appeals if an account in appeal status has reached a problematic level of aging. 

Currently, collection staff has to look through reports using various report filters. 

Create a portal through which providers can look up how much they owe the 

Medicare program. 

Create a portal through which providers can input both their credit balance 

adjustments and their quarterly Comprehensive Error Rate Testing page. This would 

significantly lower administrative costs to the program. 

Further automate communication between the Centers for Medicare & Medicaid 

Services’ (CMS) Debt Collection System, Department of the Treasury (Treasury), and 

contractors. 

Part A Held 

Funds 

2 Make changes in HIGLAS to release held funds for the amount of overpayments 

without releasing the hold on payments. If a Part A provider is on full payment hold 

for any reason, including failure to submit a cost report, HIGLAS holds payments but 

does not apply them to outstanding debts. This lack of debt recovery leads to 

increased CNC debt. 

Threshold for 

Demand Letter 

and Treasury 

Referral1

 2 Reevaluate dollar threshold for referrals to Treasury. Currently, individual 

overpayments less than $25 are not referred to Treasury even if the demand letter 

involved multiple overpayments greater than $25 in the aggregate. CMS policy 

requests contractors to submit these debts for “write off—closed” instead of 

submitting the aggregate amount to Treasury. 

Raise Part B threshold amount for demand letter from $10 to $25 to be consistent 

with the $25 threshold for referring overpayments to Treasury. Currently, Part B 

overpayments less than $10 are considered under threshold and no demand letter is 

sent for these amounts. 

Other 3 Allow contractors to receive contingency fees for debts collected over a certain age 

based upon uncollectible status. This will give them an incentive to increase 

collections through various legal means such as offset through affiliated companies 

or collection through current employers. 

Allow contractors greater flexibility in approving requests for extended repayment. 

Source: Office of Inspector General survey, March 2012. 

1 CMS requires contractors to send demand letters to providers to collect Part A overpayments of $25 or more and Part B overpayments of 

$10 or more. Parts A and B debts under these thresholds can be aggregated to meet the threshold amount and then demanded. Debts 

under $25 are not eligible for Treasury referral and CMS does not require aggregation of amounts under this threshold. 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 18 
APPENDIX 8 

Agency Comments 

~#'4 ..."<<> .... 

( DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

'--.-~ Administrator 

Washington, DC 2020t 

MAR 2 7 2013 

DATE: 

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 Marilyn Tavenner 


Acting Administrator 


SUBJECT: 	 Office of Inspector General (OIG) Draft Report: "Medicare's Currently Not 

Collectible Overpayments," (OEI-03-11-00670) 

Thank you for the opportunity to review and comment on the OIG draft report referenced above. 

The OIG set out to describe details of a certain class of Medicare Part A and B overpayments 

that were identified in fiscal year (FY) 2010 and classified under financial accounting rules as 

"currently not collectible" (CNC) by December 31 , 2011. OIG also wanted to identify the 

annual dollar amount of new CNC overpayments from FYs 2007 and 2010. Additionally, OIG 

wanted to identify issues that hinder efforts to reduce the number and dollar amount of 

overpayments that become CNC, and to identify strategies for reducing the number and dollar 

amount of overpayments that become CNC. 

The Centers for Medicare & Medicaid Services (CMS) appreciates the time and resources OIG 

has invested in this review of CNC overpayments. CMS is committed to using its resources to 

collect overpayments in a manner that is cost effective, efficient, and ensures compliance with 

statutory and regulatory requirements . Outside of this class of overpayments, CMS ' debt 

collection efforts have been very effective. Based on an internal review of the Medicare 

contractor financial reporting for the past four fiscal years, CMS collects approximately 80 

percent of its debt prior to the debt becoming CNC and prior to its debt being referred to the 

Department of the Treasury (Treasury) . This percentage was calculated using the Medicare 

contractor's accounts receivable reports for FYs 2009 and 2012. 

The CMS uses various tools to aggressively pursue the collection of overpayments throughout 

the timeline of a debt. CMS uses the CNC accounting classification for debts that are over 180 

days delinquent. A CNC classification does not stop or hamper CMS collection strategies. CMS 

aggressively goes after all debts by issuing demand letters, making phone calls, recouping 

current payments, working with debtors who request an extended repayment schedule (ERS), 

issuing intent to refer letters, and referring debt to Treasury for collection. 

The CMS' most successful collection tool is internal recoupment, where the Medicare contractor 

recoups overpayments from subsequent payments to the debtor. Another successful tool CMS 

uses to collect debts is approving an ERS. An ERS can be granted for a period of up to 60 

Medicare's Currently Not Collectible Overpayments (OEI-03-11-00670) 19 
 

 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 20 
 

 

 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 21 
 

 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector General. 

Isabelle Buonocore served as the team leader for this study. Other Office 

of Evaluation and Inspections staff from the Philadelphia regional office 

who contributed to the report include Conswelia McCourt, Amy 

Henderson Riley, and Amy Sernyak; central office staff who provided 

support include Scott Manley and Debra Roush. 

Medicare’s Currently Not Collectible Overpayments (OEI-03-11-00670) 22 
Office of Inspector General

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for 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.