Department of Health and Human Servces


OFFICE OF


INSPECTOR GENERAL


MEDICAID CREDIT BALANCES 

NURSING FACILITY PATIENT ACCOUNTS 

.. stRVICtn 

'0 

Richard P. Kusserow 

INSPECfOR GENERA 

lfcl.a OEI-07-90-011 
EXECUTIVE SUMMAR 


PUROSE 

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

credit balances that exist at Medicaid-participating nursing facilities, and the time used 

by nursing facilities and State Medicaid agencies in reporting and adjusting credit 

balances. 

BACKGROUN 

Whenever a Medicaid payment is made to a provider (e. , nursing facility) in excess 

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

facilities, as well as the State Medicaid agencies, have a responsibility to resolve these 

credit balances. 

In a previous orG review of hospitals conducted in 1989, we found substantial 

amounts of Medicaid credit balances in hospitals. The Medicaid credit balances in the 

five sampled States projected to a total of $16 milion ($8 970 198 federal share). The 

review allowed the Health Care Financing Administration (HCFA) to pursue and 

recover most of the overpayments. This earlier review suggested a potential also for 

Medicaid credit balances in nursing facilities nationwide. 

METHODOLOGY 

We selected a random sample of 50 nursing facilties in two stages. In the first stage 

five States were sampled. Subsequently, 10 nursing facilities were sampled within each 

State for an on-site examination of patient account records. 

We requested the 50 nursing facilties 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 maintained at the facilty. Our review determined the 

amount of the credit balance, the date the nursing facilty notifed the State agency of 

the existence of the credit balance, and the length of time it took the State agency to 

adjust the amount of the credit balance. 

FIINGS 

Projecte Medaid Cred Balaes are Substantl We estimate nationwide that 

overdue credit balances could be as much as $32 miion ($18 miion federal share) as 

of March 31, 1990. 

Cred Balaes Are Not Report Tily Ten milion dollars in identified Medicaid 

credit balances were not reported after 1 year had elapsed (as of March 31, 1990). 
State Medaid Agen Are Not Adjustig Cred Balances Tunly Fifty-six percent of 

the Medicaid credit balances were not adjusted by the State Medicaid agencies within 

60 days of notice by the nursing facilities. 

RECOMMATIONS 

The HCF A Should: 

Encourage State Medicaid Agencies to Take Action to Adjust Credit Balances; 

Require State Medicaid Agencies to Timely Process Adjustment of Credit 

Balances; 

Work With State Medicaid Agencies to Increase the Awareness of Program 

Providers to Timely Identify and Report Credit Balances; and 

Seek Legislation to Penalie Providers which Do Not Timely Report Credit 

Balances. 

AGENCY COMMNf 

The HCF A concurred with our recommendations to encourage State Medicaid 

agencies to take action to adjust credit balances and to require State agencies to 

process adjustments in a timely manner. The HCF A identified actions it is taking 

towards these ends. The HCF A also agreed with our overall recommendation to work 

with State Medicaid agencies to increase the awareness of program providers to 

identif and report credit balances in a timely manner, and identifed actions it is 

takg to address this. 

However, HCF A disagreed with our recommendation to penalize providers who do 

not timely report credit balances because they deal priarily with States rather than 

with individual providers. We have elected to retain this recommendation since 

believe that a penalty placed on program providers would be a potent incentive to 

report credit balances, and there are ways HCF A can achieve this through the States. 

Finally, the HCF A questioned the accuracy of our savigs estimate. While we agree 

at our estimate has a wide confdence interval, there is no doubt that the problem of 

credit balances is serious and warrants enhanced action to collect them. 
INTRODUCTION


PUROSE 

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

participating nursing facilties credit balances that exist at Medicaid- , and the time used 

agencies in reporting and adjusting credit by nursing facilties and State Medicaid 

balances. 

BACKGROUN 

1903 (a)(13)(A) provides for payments to eligible , Section The Social Security Act

needing that level of medical patients certifed by physicians as nursing facilties for 

such a payment for servces is made to a Medicaid provider and care. Whenever , for

excess of the correct payment amount various reasons the payment is in , a credit balance exists and monies are due back to that State Medicaid program. Also, at least

monies are federal financial participation dollars half or more of these , monies from

assist or match State Medicaid dollars. This is called the federal government used to 

the federal share of the credit balance.


, certain responsibilties rest with the nursing facilities When credit balances are created

agencies. Even though a formal time frame does not exist and the State Medicaid , the

Medicaid agency of credit balances in notif the State nursing facilties must 

accordance with the Social Security Act 1903 (d). Subsequently, the , Section 

1985 (Public Law 99- Consolidated Omnibus Budget Reconcilation Act of 272)

agency/fiscal agent to adjust future requires the State Medicaid nursing facilty

balances within 60 days. payments in the amount of the credit 

Medicaid credit balances in hospital inpatient accounts A prior OIG inspection of 

, an OIG national report identified large credit balances. In March 1989

00470) noted that projected credit balances in the five States 88- 07- (#OEI- reviewed 

simar problems 198 federal share). If 970 967 ($8 369 were $16 existed in all States 

balances could equal as much as $34 the projected Medicaid credit 098 104 

673 federal share). The report also 663 ($20 indicated that the hospitals were not

timely or not reporting credit balances at all. reporting credit balances The OIG 

' procedures should enable them to make notification of a found that the hospitals

days of the date the balance occurred. withi 45 credit balance suggested Ths review 

balances in nursing facilties nationwide. a potential for Medicaid credit 
METHODOLOGY 

all Medicaid- We selected a random sample of nursing facilities from the universe of 

A two , Hartly, Cochran method. participating nursing facilties using a modified Rao

fist stage with stage cluster sample was selected where States were chosen in the 

, Missouri , Florida size. These States are: Californa probabilty proportionate to 

, and Wisconsin. Pennsylvania

, a simple random sample of nursing facilties within each State was In the second stage

, 10 nursing facilties were chosen for review. One nursing selected. In each State

, making a was made , at the time our site visit , however facilty was out of business

facilities. total of 49 nursing 

listings of sample to provide the OIG with We requested each nursing facility in the 

, 1990 for our review. If there outstanding Medicaid credit balances as of March 31

were no credit balances identified by the facility, all patient balances as of March 31 

1990 were examined. 

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

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

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

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

nursing facilty to notify the State Medicaid , the period of time it took the balance

, and the length of time it took the State agency of the existence of the credit balance

the credit balance. Medicaid agency to adjust its payments for the amount of 

facilties al the nursing We conducted a subsequent review several months later of 

follow-up visits. Ths which had outstanding credit balances at the time of our site 

dollar amounts and the current disposition of the veri review was performed to 

stil had not reported credit balances. We also determned which nursing facilties 

agencies. those credit balances to appropriate State Medicaid 
FINDINGS


Substantl Balances are Project Medaid Cred 

Projecting the amount of Medicaid credit balances for each sampled State to all 

participating nursing facilities in each State resulted in total estimated credit Medicaidfederal mion balances overdue in the five States of approximately $8 millon ($4 

, the Assuming all conditions relative to the five States exist in the other States share). 

projected credit balances to the Medicaid program could be as much as $32 millon 

As discussed in the next share)iSee Appendix nationally ($18 milion federal 

as overdue if it was outstanding after 45 days. defie a balance finding, we 

Report Tunly Balances Are Not Cred 

balances nursing facility personnel that they reconcile Based upon inormation from 

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

is a reasonable time frame for reporting credit balances to the State Medicaid 

135 of the 416 credit balances in our sample were reported agencies. We found that 

fifth (73 of the 416) were , but before 1 year had elapsed. Less than one- after 45 days

reported timely, according to our definition. 

Medicaid agencies (208) had not half of the credit balances due back to the State Onethese credit elapsed. The national projection for been reported after 1 year had 

Appendix B 6 milion federal share) miion ($5. balances is $10 iSee 

timely, When asked why these credit balances were not reported comments tyical from staff at nursing facilities were: 

We are only concerned with debit balances. 

credit balances is of lesser priority than other business and Resolvig 

administrative operations. 

the State Medicaid Only half (208 of 416) of the credit balances were reported to 

agencies Appendix C iSee 

, we determined that 95 percent (197 of 208) of the follow-up review As par of our 

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

over 6 months later. 

was there an established State Medicaid In only one State reviewed (Pennsylvania) 

In that State, agency incentive to timely report and resolve Medicaid credit balances. 

, the nursing facilties withi 180 days balances if the State does not resolve the credit 

determine verication process to must go through a more stringent credit balance 
credit balance delinquency. This takes a much greater expenditure of nursing facility 

credits had been reported timely. staf hours than if the 

Tily Balances Adjusg Cred Are Not Agen Medaid State 

The review showed that 56 percent (116 of 208) of the Medicaid credit balances 

of notice by withi 60 days Medicaid agencies reported were not adjusted by the State 

Medicaid , the State . In various instances See Appendix Ct. 

day provision of the Consolidated compliance with the 60- agencies were not always in 

the nursing facilty 


of 1985. Omnbus Budget Reconciliation Act 
RECOMMENDATIONS


Adjust Credit Actin to to Take Agen Medaid State Shoul Encourage HCF A Th 

Balances 

The HCF A should instruct State Medicaid agencies to adjust actual credit balance 

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

Nationally, the projected Medicaid program overdue credit balances could be as much 

Ar. Appendix as $32 millon ($18 milion federal share) fSee 

Adjustmnt of Process 1'ly To Agen Medaid State Reqe HCFA Shoul 

Balances Cred 

Th 

Consolidated The HCF A should require State Medicaid agencies to adhere to the 

(Section 9512) requiring States to adjust Omnibus Budget Reconcilation Act provision 

any outstanding Medicaid credit balances within 60 days after notification by the 

exists. nursing facilty that a credit balance 

Awarens of to Incease the Agen Medaid State Shoul Work Wih HCF A 

Balances Cred and Report Ide to Tunly Provi Progam 

Th 

with State Medicaid agencies to emphasize to providers that The HCFA should work 

credit balances should be reported within a reasonable time. 

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

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

the federal share A might also consider assessing interest on responsibilty. The HCF 

of credit balances not reported within a reasonable time. 

Report whih Do Not Tunly Pen Provi Lelatin To Seek HCFA Shoul 

Balances Cred 

Th 

The HCF A should seek legislation that would impose a penalty on program providers 

for failing to timely identify and report credit balances. 
COMMENTS
 AGENCY 

The HCF A concurred with our recommendations to encourage State Medicaid 

agencies to agencies to take action to adjust credit balances and to require State 

The HCF A has issued a memorandum to all process adjustments in a timely manner. 

identif and adjust direct State Medicaid agencies to HCF A regional offces to 

, and to adhere to the requirements outlined in credit balances on a continuing basis

section 9512 of COBRA. 

recommendation to work with State Medicaid The HCFA also agreed with our overall 

agencies to increase the awareness of program providers to identify and report credit 

achieve this. , and identifed actions it is taking to balances in a timely manner

suggestion to consider assessing interest , HCFA disagreed with our specifc However

against State agencies on the federal share of credit balances not reported within a 

statute lited by HCF A disagreed with this suggestion because it is reasonable tie. 

, we believe this in assessing interest against Medicaid State agencies. Nevertheless

will consider it again as part of an overall approach has merit and hope HCF A 

strategy to increase State efforts in this area. 

penalie providers which do The HCF A also disagreed with our recommendation to 

priarily with , because their role deals not report credit balances in a timely manner

States rather than with individual providers. We have elected to retain this 

incentive fidings demonstrate a potent fial report since our recommendation in our 

, and we believe that a penalty placed on program is needed to report credit balances

, we believe that HCF A could In addressing this providers would serve this purpose. 

develop a legislative proposal to require State agencies to assess penalties against 

sensitive to the remaing intent of our recommendation while fulf the providers and 

State Medicaid partnership. federalagree Whe we savings estimate. Finally, the HCF A questioned the accuracy of our 

, there is no doubt that the problem of that our estimate has a wide confdence interval

credit balances is serious and warrants enhanced action to collect them. 
APPENDIX A


CRIT BALCE NATIONAL AN STATE ESTITED 

ected Total Proj Average NFs with *NFs in 

Dollars Found Per NF Cr. Bal. sample ST. 

183. 051 $2, $1829. 

560. 152 $6636. 

073. 992 $3830. 

319. 052 $1, $1762. 

825. 495 $2406. 

963. 743 5 state Projection 

SHA MEDICAID FEDERAL 

ected Total proj Average NFs wi th *NFs in 

Dollars Found Per NF Cr. Bal. sample ST. 

591. 025, $1, 914. 

450. 724 630. $3, 

109. 587 266. $2, 

299. 598 002. $1, 

924. 293 426. $1, 

375. 229, 5 state federal share 

Federal share Medicaid 

932 719, $17 546 714, $31, National Estimate Total 

90% Confidence interval


699 468, $10 369 803, $10, (lower)

165 971 $24, 723 625 $52, (upper) 

*Nursing facility

APPENDIX 

REPORTE UNY BALCE CRDIT 

# of Credit


Avq. Amt. per $ Amt. of Reported Bal' s Not 

Credit Bal. Credi t Bal. s days 45 thin wi state 

343 029 $10, 

499 452 $34 

431 648 $11, 

860 043 $12, 

566 448 $12, 

597 620 $80, 135 Total 

# of Credit 

Avq. Amt. per $ Amt. of Bal' s Not Reported 

Credit Bal. Credit Bal. after 1 yr. period state 

373 224 $ 5, 

224 865 $22, 102 

204 534 $16 

416 497 $ 2, 

796 981 $ 3, 

246 101 $51, 208 Total 

share) 365 fed. 571, 152 ($5, 983, Medicaid National Estimate: $9, until for the 208 credit balances which were not reported 

after one year had elapsed. 

111 868 $ 1 (lower) 90% Confidence interval 

193 098 $18, (upper) 
APPENDIX C


AGENCIE STATE ADmSTMNT BY UNLY 

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

of Adj. Adjust. of Adj. Adjust. Notices Credi t 

60 60 60 60 issued Balances ST. 

244 $11 

923 $27 267 $15, 187 

893 $ 9, 876 $11, 126 

326 $ 9 029 $ 6 

620 $ 9 589 $11, 

006 $68 116 761 $44 208 416 TOTAL 

C - 1

I - a


SlawOJ NOlL SINav DNIJNVNId ffJ HL'I 

G XIGN3ddV

Healtn I.are 

Financing Administration
 &. HUMAN SERVICES DEPARTMENT OF HEALTH 

Memorandum 

I 19 APR Date	

J. Michael Hudson From 

Acting Administra 

Medicaid Credit Balances in Nursing Facility Patient Accounts OIG Draft Repori: " Subject	

00911) 90- 07- (OEIInspector General 

Secretary Offce of the 

above-referenced report which summarizes the results We have reviewed the 

s (NF). Based patient accounts at nursing faci1ti s review of credit balances in OIG' 

($18 milion Federal share) much as $32 millon , OIG projects that as on the review

credit balance accounts. could be outstanding in NF 

, we are s recommendations. However We agree with the majority of OIG'

produced a reliable used by OIG has not concerned that the sampling methodology 

sample of , 49 facilty balances. We believe a 5 State estimate of total NF credit 

nOt It also does national NF credit balances. accurately retlect NFs does not 

individuals served) as the , number of differences across the States (e. capture NF 

, we are conditions are the same across other States. Therefore report assumes all 

projections both the methodology and the actuarial requesting that OIG descnoe 

sampled NFs to all NFs in the State and used to generalize the findings from 

comments are attached. detailed nationally. Our 

Please advise opportunity to comment on this draft report. Thank you for the 

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

earliest convenience. 

Attachment 

060/51112 -522- P'IINT:S:; CFFICE; '!S2 - us cnvFR"'MENT 
Financin(! Administration Comments of the Health Care 

Medicaid Credit Balances s Draft Report: " on OIG'

in Nursin(! Facilitv Patient Accounts 

009 90- 07 - (O EX -

OIG Recommendation 

credit agencies to take action to adjust encourage State Medicaid HCF A should 

balances. 

HCFA Resuonse 

memorandum to all HCFA recommendation. In a We concur with this regional 

18, we directed Medicaid State agencies to identify offices (ROs) dated February 

basis. balance accounts on a continuing and adjust nursing facility (NF) credit 

interim or suspense accounts Where provider-maintained credit balances are held in 

adjust these credit balances and other properly action should be taken to identified 

presence of a credit balance does not , the mere credit balances. However

financial of Federal overpayment requiring the return necessarily indicate there is an 

accounting and the Reimbursement policies of the States participation by the State. 

balance problem determine the extent of the credit practices of individual providers 

why the provide the reasons are requesting that OIG in any particular State. We 

Medicaid notify the State providers surveyed did not remit the credit balances or 

this information were provided in the final report existence. If agencies of their , it 

necessary corrective action. would assist us in implementing the 

OIG Recommendation 

require State Medicaid agencies to timely process adjustment of HCF A should 

credit balances. 

HCFA Response 

direct on February 18 to issued a memorandum to the ROs We concur. We 

section 9512 of Medicaid State Agencies to adhere to the requirements outlined in 

section requires States Budget Reconcilation Act. This the Consolidated Omnibus 

notification balances within 60 days after to adjust any outstanding Medicaid credit 

balance exists. by the NF that a credit 
Page 2


OIG Recommendation 

awareness of agencies to encourage the work with State Medicaid HCF A should 

balances. program providers to timely identify and report credit 

HCF A ResDonse 

, we issued a Financial Management Review Guide for , 1988 On September 29

party guide- explores third Medicaid. This provider-maintained credit balances in 

issue and , and cost-reimbursement policy affecting this liabilty, overpayment

reviews. conducting these provides procedures to the ROs for 

Comprehensive Test of State Performance Evaluation and As part of the 

collection efforts of the , we monitor the Reimbursement Under Medicaid program

, we have placed balances. In the past States in recovering known Medicaid credit 

1993 tinancial planning the fiscal year (FY) , in hospitals. However the emphasis on 

consider expanding our reviews of provider- , we wiI management reviews

weIl as hospitals if circumstances and include NFs as maintained credit balances to 

resources warrant such expansion.


consider assessing interest on the s comment that HCFA We disagree with OIG'

E'Xcept for balances not reported within a reasonable time. Federal share of credit 

assessing , HCF A is limited by statute in certain exceptions not applicable here

agency assess interest only if a State agencies. We interest against Medicaid State 

disallowance and the State result of a formal elects to retain funds in dispute as a 

(section 1903(d)(5) of the Appeals Board loses its appeal before the Departmental 

the NFs were to earn interest on the 38). If Social Security Act and 42 CFR 433.

Agency must return the Federal , then the State Federal share of credit balances

balances. Federal share of the credit share of interest earned in addition to the 

bearing accounts. In addition, existence of interest- The report does not identity the 

legislative enough to require a involved is not signifcant the smaI1 amount of dollars 

of interest on credit balances. change to permit the imposition 

OIG Recommendation 

pena1ize providers which do not timely report legislation to HCFA should seek credit balances. 
Page 3


RCF A Response


State Governments jointly financed by the Federal and is The Medicaid program 

, not with s relationship is with the State but administered by the States. RCFA'

inappropriate to Consequently, we believe it would be individual providers. 

legislative development recommendation during the formulation of our consider this 

program. 

General Comments 

address the deficiencies findings in this report indicate a need to We agree that the 

with regard to , but we have some reservtions was sampled in the population which 

verify OIG' Since we are unable to the validity of the actuarial projections. 

discovered and , and since the actual number of credit balances statistical projections

relatively small in dollar value, we believe OIG' the original amount for each is 

existing credit balances may be overstated. 6 milion) of national projection ($20.

the relationship between total medical The attached HCF A chart ilustrates 

credit balance amounts 1990 and the assistance payments made to NFs for FY 

figures for the average , OIG According to our calculations reponed untimely. 

balance represent approximately one patient-week claim per amount per credit 

the comparisons and projections shown in , it appears that the As a result facilty. 

conclusion reached may be questionable. , and the report may be overestimated

indicates that States have made some adjustments due to credit Appendix C 

report were not offset by overpayments in the , the estimates of balances. However

that the report include made. We recommend State adjustments that were 

estimates of statewide and national adjustments to facilty payments for credit 

estimate be used to offset the estimated , we recommend this balances. Further

balance projections. Also statewide and national credit address , the report does not 

to adjust for the reduced State grant awards . the extent to which the Secretary has 

a discussion of recommend the report include Federal share of overpayments. We 

this additional factor. 

Technical Comment 

for NF Medicaid statutory requirements that provide The report does not cite the 

Secretary to adjust State payments to account for payment and require the 

The correct references the Medicare statute. overpayments. This Medicaid report 

Medicaid sections 1903(a)(13)(A) of the Social Security Act for Medicaid cites are 

payments to States and adjustments to such 1903( d) for payment to NFs and 

. payments. 

Attachment 
................................................................ .... ................. ................ ........... ......... ..... ............................... ..... .......... .................. ..

,,_ 

. 

, ,

,

Comarison of Credit Balances Untlme'v Reported with Total Hedlea' Assistance Pavmnts (federal Share) . fY 1990 

OIG Draft Report: Hedlcald Credit Balances In Nursing facl'ltv Patient Accouts 

Dollar Amt. Credit Dollar Amt. Credit "edlcal Assistance Percentage State Bal. s not reported Bal. s not reported paymnts for NFs 

within 45 days after 1 yr. period in millions Total * 

$10 029 224 1610. O. OOOX 

. $34 452 $22 665 $354. 000" 

$11, 648 $16 534 $111. o. OOOX 

$12, 043 S2, 491 $555. OOOX $12, 448 961 $301. OOOX 

*Applles to 45-day and yr figures, separately and taken together.
Note that the credit balances reported by the OIG are less than 1/1000X


of the total medical assistance paymnts for each State , and approximate zero.