_ ;, \

/i 

.; 

Department of Health and Human Servces 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE CREDIT BALANCES 

SKILLED NURSING FACILITY PATIENT 

ACCOUNTS


.. s RVlc.u . V: 

Richard P. Kusserow 

INSPECfOR GENERA 

,,:w JUY 199 
OFFCE OF INSPECTOR GENERA


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

amended, is to protect the integrity of the Department of Health and Human Servces' (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carred out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Offce of Audit Servces, the 

Office of Investigations, and the Offce of Evaluation and Inspections. The OIG also informs 

the Secretary of HHS of program, and management problems, and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICE 

The OIG's Offce of Audit Servces (OAS) provides all auditing servces for HHS, either by 

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

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

carryng out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and effciency throughout the Department. 

OFFCE OF INTIGATIONS 

The OIG's Offce of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and 

unjust enrichment by providers. The investigative effort of 01 lead to criminal convictions 

administrative sanctions, or civi money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AN INSPECfONS 

The OIG's Offce of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. 

This report was prepared in the Kansas City Regional Office under the direction of Don 

McLaughlin, Regional Inspector General, and Jim Wolf, Deputy Regional Inspector General. 

Project staff: 

Kansas City Headquarers 

Ray Balandron, Team Leader 

Dennis Tharp, Project Leader 

Thomas Noplock, Program Specialist 

Barbara Tedesco, Statistician 

Phil O'Hare 

Tim Dold 

To obtain a copy of this report, call the Kansas City Regional Offce at (816) 426-3697. 
\

Department of Health and Human Services


OFFICE OF


INSPECTOR GENERAL


MEDICARE CREDIT BALANCES 

SKILLED NURSING FACILITY PATIENT


ACCOUNTS


.. S~RVIC 

'0 

Richard P. Kusserow 

INSPECfOR GENERA 

~~".a OEI-07-90-0010 
EXECUTIVE SUMMAR 


PUROSE 

The purpose of this national inspection is to determine the dollar amount of Medicare 

credit balances that exist at skilled nursing facilties (SNFs), and the time used by 

SNFs and Medicare intermediaries in reporting and adjusting credit balances. 

BACKGROUN 

Whenever a Medicare payment is made to a provider (e. , skilled nursing facility) in 

excess of the amount of payment that is due, a credit balance is created. The SNFs 

as well as the Medicare intermediaries, have a responsibility to resolve these credit 

balances. 

In previous reviews, the OIG has identified significant credit balances in hospitals. 

1985 inspection estimated $164 milion in Medicare credit balances in hospitals 

nationwide. A more recent audit of 76 hospitals servced by nine intermediaries found 

$266 milion in unrecovered hospital credit balance overpayments nationally. As a 

result of our reviews of hospital credit balances, we decided to determine if similar 

problems exist in nursing homes. 

METHODOLOY 

We selected a random sample of 50 SNFs in two stages. In the first stage, five States 

were sampled. Subsequently, 10 SNFs were sampled within each State for an on-site 

examination of patient account records. 

We requested the 50 SNFs to provide a listing of all credit balances as of March 31 

1990. We determed the existence of an actual credit balance based upon a review 

of the patient ledgers and Medicare log maintained at the facility. Our review 

determined the amount of the credit balance, the date the SNF notifed the Medicare 

intermediary of the existence of the credit balance, and the length of time it took the 

intermediary to adjust the amount of the credit balance. 

We recognize that the Medicare Catastrophic Coverage Act (MCCA) of 1988 was in 

effect during our sample period. Although the exact impact of the repeal of MCCA 

of 1988 on our sample cannot be determined, we believe the impact is negligible. 

FIINGS 

Projected Medare Cred Balances are Substantil We estimate nationwide that 

overdue credit balances in SNFs could be as much as $12.7 milion as of March 31 

1990. 
Credit Balances Are Not Reported Tunly 5 milion dollars, when projected 

nationwide, in Medicare credit balances in SNFs were not reported after 1 year had 

elapsed (as of March 31, 1990). 

Interri Are Not Adjustig Cred Balances Tunly Fifty-eight percent of the 

Medicare credit balances reported to the intermediaries were not adjusted within 60 

days of notice by the SNF. 

RECOMMATIONS 

The HCFA Should: 

Require Intermediaries to Take Action to Adjust Credit Balances; 

Require PJtermediaries to Timely Process Adjustment of Credit Balances; 

Work With Intermediaries to Increase the Awareness of Program Providers to 

Timely Identify and Report Credit Balances; and 

Seek Authority To Penalize Providers which Do Not Timely Report Credit 

Balances. 

AGENCY COMMNT 

The HCFA generally concurred with the recommendations presented in our draft 

report. As a result of HCF A's comments regarding our last recommendation, we have 

modified our language to indicate that HCFA should seek authority, rather than 

legislation, to penalize providers which do not timely report credit balances. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

TABLE OF CONTENTS


EXCU SUMY


INRODUCTION. . . 


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


APPENDICES:


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


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


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


RECOMMNDATIONS . . . . . . . . . 5


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


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


PUROSE 

The purpose of this national inspection is to determine the dollar amount of Medicare 

credit balances that exist at skilled nursing facilities (SNFs), and the time used by 

SNFs and Medicare intermediaries in reporting and adjusting credit balances. 

BACKGROUN 

The Social Security Act, Section 1814 (a)(2)(B) provides for Medicare payments to 

eligible SNFs for patients certified by physicians as needing that level of medical care. 

Whenever such a payment for servces is made to a Medicare provider and for various 

reasons the payment is in excess of the correct payment amount, a credit balance 

exists and monies are due back to the Medicare program (Social Security Act, Section 

1866 (a)(l)(C)). 

When credit balances are created, certain responsibilties rest with the SNF and the 

Medicare intermediary. Even though no formal time frames exist for reporting, the 

SNF must notify the intermediary of the amount of the credit balance after its 

identifcation. Subsequently, the Medicare intermediary must adjust future SNF 

payments in the amount of the credit balances. 

In previous reviews, the OIG has identified significant credit balances in hospitals. 

1985 inspection estimated $164 millon in Medicare credit balances in hospitals 

nationwide. A more recent audit of 76 hospitals servced by nine intermediaries found 

$266 milion in unrecovered hospital credit balance overpayments nationally. As a 

result of our reviews of hospital credit balances, we decided to determine if similar 

problems exist in nursing homes. 

MElHODOLOY 

We selected a random sample of SNFs from the universe of all Medicare-participating 

SNFs using a modified Rao, Hartly, Cochran method. A two stage cluster sample was 

selected where States were chosen in the first stage with probabilty proportionate to 

size. These States are: California, Florida, Missouri, Pennsylvania, and Wisconsin. 

In the second stage, a simple random sample of SNFs within each State was selected. 

In each State, 10 SNFs were chosen for review. One SNF, however, was out of 

business at the time our on-site visit was made, making a total of 49 SNFs. 

We requested each SNF in the sample to provide the OIG with listings of outstanding 

Medicare credit balances as of March 31, 1990 for our review. If there were no credit 
balances identifed by the facilty, all patient balances as of March 31, 1990, were 

examined. We recognize that the Medicare Catastrophic Coverage Act (MCCA) of 

1988 was in effect durig our sample period. According to a June 1991 OIG Report 

Influences on Medicare s Skilled Nursing Facilty Benefit" (#OEI-05-89-01590), 

increased SNF payments are continuing even after repeal of the MCCA in May 1990. 

Although the exact impact of the MCCA of 1988 on our sample cannot be 

determined, we believe the impact is negligible. 

We determined the existence of an actual credit balance based upon a review of the 

patient ledgers and other documentation maintained at the facility. To ensure validity 

of the credit balances, we requested the facilties to veri the existence of each credit 

balance and credit balance amount. Our review determined the amount of the credit 

balance, the date the SNF notified the Medicare intermediary of the existence of the 

credit balance, and the length of time it took the intermediary to adjust the amount of 

the credit balance. 

We conducted a subsequent review several months later of all the SNFs which had 

outstanding credit balances at the time of our on-site visits. This follow-up review was 

performed to verify dollar amounts and the current disposition of the credit balances. 

We also determined which SNFs had stil not reported those credit balances to the 

appropriate intermediaries. 
FINDINGS


Projecte Medare Cred Balances are Substntl 

Projecting to the national universe of Medicare SNFs, overdue credit balances of 

approximately $12.7 milion are due back to Medicare (See Appendix A). As 

discussed in the next finding, we define a balance as overdue if it was outstanding after 

45 days. 

Credit Balances Are Not Report Tunly 

Based upon information from nursing facilty personnel that they reconcile balances 

monthly and allowig 15 days afterwards to report credit balances, we believe 45 days 

is a reasonable time frame for reporting credit balances to the intermediaries. 

We found that 36 of the 74 credit balances in our sample were reported after 45 days 

but before 1 year had elapsed. Of these 36 credit balances, only 3 were reported 

within 100 days. Half of the 36 were not reported until at least 200 days had elapsed. 

Only about one-fifth (14 of 74) were reported timely, according to our defiition. 

We found that 24 of the credit balances due back to the Medicare program had not 

been reported after 1 year had elapsed. The national projection for these credit 

balances is $2.5 milion (See Appendix B). 

According to provider personnel, no incentive exists for the SNFs to identify and 

report credit balances. Therefore, the facilties gave little priority to identifyng and 

adjusting credit balances.


As part of our follow-up review, we determined that 79 percent (19 of 24) of the 

credit balances outstanding at the time of our on-site review were stil credit balances 

over 6 months later. 

Intenniari Are Not Adjustig Credit Balances Tunly 

The Part A Medicare Intermediary manual (Sect. 2220.3) states that the actual costs 

of servces cannot be determned until the end of the accounting period. This 

because providers are paid on an estimated cost basis during the year with a final 

settlement adjustment based on actual costs being made at the end of the reporting 

period. Although there are no established time frames or promulgated procedures 

regarding the period of time which an intermediary must adjust a credit balance, we 

used 60 days as a reasonable time frame. This is consistent with Medicaid 

overpayment recovery provisions for State Medicaid agencies. 
Using this gauge of timeliness, our review found 58 percent (29 of the 50 Medicare 

credit balances which were reported) were not adjusted by the intermediaries within 

60 days of notice by the SNF (See Appendix C). 
RECOMMENDA TIONS


Th HCF A Shoul Take Actin to Adjust Cred Balances 

The HCF A should instruct Medicare intermediaries to adjust actual credit balance 

amounts identifed by this inspection and to adjust credit balances on an ongoing basis. 

If projected to the universe, overdue credit balances to the Medicare program would 

be approximately $12.7 milion nationally (See Appendix A). 

Th HCF A Shoul Reqe Interiari to Tunly Proces AdjustTent of Credit 

Balances 

The HCF A should require Medicare intermediaries to timely adjust outstanding credit 

balances. A time frame of 60 days, after notification by the SNF that a credit balance 

exists, would correlate with Medicaid program overpayment recovery provisions for 

State agencies (Public Law 99-272, the 1985 Consolidated Omnibus Budget 

Reconcilation Act Section 9512) to facilitate prompt resolution of credit balances. 

Although, in some instances, time frames may need to be extended to verify disputed 

Medicare claim amounts and to determine actual credit balance status, we recommend 

that HCF A work with intermediaries to establish 60 days as a goal for the resolution 

of credit balances. 

Th HCFA Shoul Worl Wit Intri To Incease th Awaren of Prgram Provi to Tunly Ide and Report Cred Balances 

The HCF A should work with intermediaries to emphasize to providers that credit 

balances should be reported within a reasonable time. As a result of awareness 

programs and discussions with intermediaries, the HCF A may choose to develop their 

own definition of reasonable time. 

Efforts to encourage provider awareness could include newsletters, training sessions, or 

on-site visits and/or reviews that establish a priority emphasis to this provider 

responsibility. The HCF A might also consider assessing interest on those credit 

balances not reported within a reasonable time.


Th HCFA Shoul Seek Autri to Penlie Prvi whih Do Not Tunly Report 

Credit Balances 

The HCF A should seek authority that will allow it to impose a penalty on program 

providers for failng to timely identify and report credit balances. 
AGENCY COMMENTS


The HCFA concurred with the recommendations presented in this report. The HCFA 

agreed with the intent of the last recommendation which stated that HCF A should 

seek legislation to penalize providers which do not timely report credit balances. As a 

result of HCF A's comments regarding our last recommendation, we have modified our 

language to indicate that HCF A should seek authority, rather than legislation, to 

penalize providers which do not timely report credit balances. 

The HCF A believes that it will have the necessary authority to levy penalties once the 

Office of Management and Budget approves mandatory requirements for reporting 

credit balances. We agree that these mandatory reporting requirements, which would 

allow HCF A to suspend all payments to providers if providers do not timely report 

credit balances, is a suffcient penalty to provide an incentive for timely reporting. 
APPENDIX A


ESTITED STATE AN NATIONAL CRIT BAlCE 

No. No. with Average Tot. Project. ST. sample Cr. Bal. Per SNF Dollars Found 

$1976. 215 656. 

$ 208. 218. 

$2503. 648 403. 

$1948. 163 541.06 

$ 154. 810. 

MEDICAR NATIONAL ESTIMATE $12 733 830 

90% Confidence interval (lower) $ 2 747 720 

. (upper) $22 719 941 
APPENDIX 

CRIT BALCE UNY REPOR1ED 

# of Credit 

state Bal' s Not Reported 

wi thin 45 days 

$ Amt. of 

Credi t Bal. s 

Avg. Amt. per 

Credi t Bal. 

$13 188 648 

$ 1 , 158 193 

461 591 

$11 990 $2, 398 

537 537 

Total $36, 334 $1, 009 

# of Credit 

Bal' s Not Reported $ Amt. of Avg. Amt. per state after 1 yr. period Credit Bal. Credi t Bal. 

$ 4, 601 920 

308 154 

$ 8, 232 515 

948 948 

Total $14, 089 587 

Medicare National Estimate: $2, 518, 191

for the 24 credit balances which were not reported until after one year had elapsed. 

90% Confidence interval (lower) $ 319 778 

(upper) 716 603 
APPENDIX C


UNY ADmSTM BY INRMDIA 

# of # of # of $ Amt. # of $ Amt. 

Credi t Notices Adjust. of Adjus Adjust. of Adj us

ST. Balances issued .(60 da .(60 da 60 da 60 da 

$ 3, 612 $ 9 576


888 892


896 $ 9 906


279 $12 263


$ 1, 544


TOTAL 675 34 
 181


C - 1

APPENDIX D


HETH CAR FINANCIG ADMISTRTION COMMS


D - 1

..:n. 

DEPARTMENT OF HEALTH & HUMAN SERVICES 

APR I Date J. Michael Hudso 

From Actig Adm;n1!\ 

Health Care


Financing Administration


Memorandum 

OIG Draf Report: "Medicare Credit Balances in Skied Nursing Facilty Patient Subject Accounts " OEI-07-90-00910 

Inpector General 


Offce of the Secretar 

We have revewed the above-referenced report which sumares the results of 

OIG' s revew of credit balances in patient accounts at skied nursing facities 

(SNF. Based on the review, OIG projects that as much as $12.7 mion rould be 

outstandig in SNF credit balance accounts. 

. We agree with OIG's recommendations. Our detailed comments on each 

recommendation are attached. However, we are concerned that the samplig 

methodology used by OIG has not produced a reliable estimate of total SNF credit 

balances. We believe a 5 State, 49 facilty sample of SNFs does not accutely 

reflect national SNF credit balances, nor does it capture SNF dierences across the 

States (e.g., number of individuals served). . The report assumes al conditions are 

the same across other States. Therefore, we are requestig that OIG descdbethe 

methodology and the actuaral projections used to generae the fidigs from 

sampled SNFs to al SNFs in the State and nationaly. 

Than you for the opportnity to comment on this draf report. Please advie 

us whether you agree with our position on the report s recommendations at your 

ealiest convenience.


Attachment 
Comments of the Health Care Financin Administration 

on OIG's Draft Report: "Medicare Credit Balances 

in Skilled Nursing Faciltv Patient Accounts" 

(OEJ-07-90-009UD 

OIG Recommendation


RCF A should tae action to adjust credit balances.


RCF A ReSDonse 

We agree. We request OIG to provide HCFA with the documentation for the 

specifc situtions identifed in the review. We wi instruct the intermediares to 

recover these fuds though the remittance process. Regardig our ongoing effort 

the intermediares were diected in a memorandum dated September 26, 1991, to 

control provider adjustment requests and to ensure that necessar action is taen to 

adjust al reported credit balances. 

OIG Recommendation 

RCF A should require intermediares to tiely process adjustment of credit balances. 

HCF A RestJonse 

We agree that adjustment clai should be processed in a tiely maner. We are 

curentIy workig on specifcations for an electonic sytem to receive and process 

adjustment clai. Th sytem wi signcatly reduce the amount of tie needed 

to process adjustments. In the meantime, however, we instrcted the intermediares 

to reduce al pendig adjustment claims, regardless of source, to no more than a 

2-month workload by March 1, 1992. TI instruction was included in the 

September 26, 1991, memoradum. 

OIG Recommendation 

RCF A should work with intermediares to encourage the awaeness of program 

providers to tiely identif and report credit balances. 
Page 2


HCF A ReSDonse


We agree. In Apri 1991, we intiated a major effort to recover al credit balances. 

Each Medicae provider received three letters notig it of its responsibilty to 

identi and repay Medicae credit balance in a tiely maner. We alo developed 

mandatory reportg requiements, which we have submitted for approva under the 

Paperwork Burden Reduction Act. 

OIG Recommendation 

HCF A should seek legilation to penale providers which do not tiely report 

credit balances. 

HCF A Response


We believe that the intent of this recommendation ca be achieved though 

application of the mandatory reportg requiements. Once we have received 

approv of the requiements from the Offce of Management and Budget, 

intermediares wi be able to withold or suspend progr payments when a 

provider fa to 'provide the requied data