Medicare Home Health Agencies

The Health Care Financing Administration (HCFA) has been slow to identify amounts that closed home health agencies (HHA) owe Medicare, and it collects little of the overpayments due from them after they close. HCFA plans to implement the home health prospective payment system mandated by the Balanced Budget Act of 1997, which will involve predetermined payments for home health services. This system should reduce the potential for overpayments to HHAs because payment amounts would not be adjusted retrospectively to reflect allowable agency costs. GAO's estimate of the overpayments due from the 15 closed HHAs differs significantly from an estimate HCFA reported. Using the same definitions of overpayment, GAO estimated that these agencies could owe $68 million, one-third of HCFA's initial $209 million estimate. HCFA's inability to accurately record and track overpayments has been a consistent weakness, documented in its financial statement audits from fiscal year 1996 through fiscal year 1999. The fiscal year 1998 audit, for example, found that HCFA lacked an integrated financial management system to track overpayments and their collection and that its procedures to help ensure that overpayments were valid and supported were inadequate. HCFA's contractors record and track overpayment activity for HHAs and other providers using fragmented and overlapping computer systems but do not always reconcile the data from these various systems. For example, contractor staff incorrectly keyed data from one of the contractor's systems into a HCFA system, erroneously reporting $77 million in overpayments for one Texas HHA in 1998. HCFA implemented several interim measures in 1999 to improve the reliability of its overpayment information and is planning additional improvements, but they could take years to implement.

GAO noted that: (1) HCFA is slow to identify amounts closed HHAs owe Medicare and collects little of the overpayments due from such HHAs following their closure; (2) because HHAs receive interim payments based on estimates of what their allowable costs will be, Medicare claims administration contractors must retrospectively adjust the payments after receiving and reviewing a report of an agency's costs; (3) HHAs have 5 months after they close to submit their final cost report to the contractors; (4) contractors generally take 18 months to make a final determination of the amount, if any, a closed HHA owes; (5) contractors have been discouraged from making quicker determinations for closed HHAs because doing so would disrupt timely determinations in cost reports from operating HHAs; (6) GAO found that little has been collected from the 15 closed Texas HHAs that HCFA reported as owing the most money; (7) in late 2000, HCFA plans to implement the home health prospective payment system mandated by the Balanced Budget Act of 1997, which will involve predetermined payments for home health services; (8) HCFA's proposed home health prospective payment system should reduce the potential for overpayments to HHAs because payment amounts would not be adjusted retrospectively to reflect allowable HHA costs; (9) GAO's estimate of the overpayments due from the 15 closed HHAs differs significantly from the estimate HCFA initially reported; (10) using the same definition of an overpayment as HCFA, GAO estimated that these HHAs could owe $68 million--one-third of HCFA's initial $209 million estimate; (11) two factors accounted for the difference: (a) contractor staff made errors entering data into one of HCFA's overpayment recording and tracking system, such as a $4.6 million duplicate entry; and (b) HCFA's initial query of this overpayment recording and tracking system did not specify that superseded transactions be excluded from the reported overpayments; (12) about $43 million of GAO's $68 million overpayment estimate stems primarily from unfiled cost reports; (13) HCFA's inability to accurately record and track overpayments has been a consistent weakness documented in its financial statement audits from fiscal year (FY) 1996 through FY 1999; (14) HCFA's contractors record and track overpayment activity for HHAs and other providers using a variety of fragmented and overlapping computer systems but do not always reconcile the data from these various systems; and (15) HCFA implemented several interim measures in 1999 to improve the reliability of its overpayment information and is planning additional improvements, however, they could take years to implement.