HHS IG Audit: Review of Contractors Who Conducted Medicaid Fee-for-Service Claim Reviews for Selected States Under Payment Error Rate Measurement Program

WASHINGTON, Nov. 19 (TNSrep) -- The Health and Human Services Inspector General issued the following audit report (No. A-04-21-00132) on the review of contractors who conducted Medicaid Fee-for-Service claim reviews for selected states under the Payment Error Rate Measurement Program in accordance with federal and state requirements filed under the Centers for Medicare and Medicaid Services.

Here are excerpts:

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Report in Brief

Why OIG Did This Audit

The Centers for Medicare & Medicaid Services (CMS) is responsible for overseeing States' design and operation of their Medicaid programs and ensuring that Federal funds are appropriately spent. CMS developed the Payment Error Rate Measurement (PERM) program to measure improper payments in Medicaid and the Children's Health Insurance Program (CHIP). This is the second in a series of three OIG audits that will assess the adequacy of the PERM program by reviewing the accuracy of determinations for each of its three components.

The objective of this audit was to assess the adequacy of the PERM program by determining whether CMS's contractors conducted Medicaid fee-for-service (FFS) reviews in accordance with Federal and State requirements.

How OIG Did This Audit

Our audit covered 1,653 Medicaid FFS claims reviewed by CMS's PERM contractors, totaling over $2.9 million (Federal share), included in the Medicaid FFS component of the Reporting Year 2019 PERM program for 3 States. We judgmentally selected these States based on various factors, including total Medicaid payments, individual State FFS error rates, and the types of errors identified by CMS's review contractors. We reviewed a random sample of 100 Medicaid FFS claims (total) for the 3 States.

What OIG Found

CMS's contractors generally conducted Medicaid FFS reviews in accordance with Federal and State requirements. Of the 100 sampled Medicaid PERM FFS claims we reviewed, 90 claims were correctly determined and adequately documented. However, claim review determinations for the remaining 10 claims were not documented and therefore may be incorrect. Based on our sample results, we estimated that 10 percent of the sampled Medicaid FFS claims reviewed by CMS's contractors were not documented and claim review determinations for these claims may not have been correct. We also estimated the total amount paid related to these claims to be $6,411 (Federal share) during our audit period.

CMS's contractors did not always maintain documentation of their claim review determinations because CMS did not include specific contract language requiring its contractors to maintain all documentation to support the contractors' Medicaid FFS claim review determinations for non-error claims.

We are not making recommendations because CMS took action to address the deficiencies we identified. Additionally, our sample estimates indicated that these potential errors were immaterial when applied to our sampling frame.

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TABLE OF CONTENTS

INTRODUCTION ... 1

Why We Did This Audit ... 1

Objective ... 1

Background ... 2

Medicaid Program ... 2

Medicaid Payment Error Rate Measurement Reviews ... 2

Medicaid Payment Error Rate Measurement Fee-For-Service Reviews ... 3

How We Conducted This Audit ... 3

FINDINGS ... 4

APPENDICES

A: Audit Scope and Methodology ... 5

B: Statistical Sampling Methodology ... 7

C: Sample Results and Estimates ... 8

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INTRODUCTION

WHY WE DID THIS AUDIT

The Centers for Medicare & Medicaid Services (CMS) is responsible for overseeing States' design and operation of their Medicaid programs and ensuring that Federal funds are appropriately spent. In response to the Improper Payments Information Act of 2002 (P.L. No. 107-300), CMS developed the Payment Error Rate Measurement (PERM) program to measure improper payments in Medicaid and the Children's Health Insurance Program (CHIP) and estimate national improper payment rates for each program based on reviews of the fee-for-service (FFS), managed care, and eligibility components of Medicaid and CHIP in the year under review. CMS recently made substantive changes to its PERM program that incorporated various changes, including those mandated by the Affordable Care Act./1

CMS used PERM FFS review contractors (review contractors) to perform Medicaid PERM FFS reviews (FFS reviews). This is the second in a series of three OIG audits/2 that will assess the adequacy of the PERM program by reviewing the accuracy of determinations for each of its three components./3

OBJECTIVE

The objective of this audit was to assess the adequacy of the PERM program by determining whether CMS's contractors conducted FFS reviews in accordance with Federal and State requirements./4

BACKGROUND

Medicaid Program

The Medicaid program provides medical assistance to low-income individuals and individuals with disabilities. To participate in Medicaid, States must cover certain population groups. The Federal and State Governments jointly fund and administer the Medicaid program.

States operate and fund Medicaid in partnership with the Federal Government through CMS. CMS reimburses States for a specified percentage of program expenditures, called the Federal medical assistance percentage (FMAP), which is developed from criteria such as States' per capita income./5

The standard FMAP for our selected States during our audit period ranged from 50 to 71.13 percent./6

States may offer Medicaid benefits on an FFS basis, through managed care organizations (MCO), or both. Under the FFS model, States directly pay providers for each covered service received by a Medicaid beneficiary. In general, States may set provider payments under the FFS model. Section 1902(a)(30)(A) of the Social Security Act requires that such payments be consistent with efficiency, economy, and quality of care, and are sufficient to provide access equivalent to the general population in the geographic area. Under the managed care model, States contract with MCOs to make services available to enrolled Medicaid beneficiaries, usually in return for capitation payments.

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FINDINGS

CMS's review contractors generally conducted FFS reviews in accordance with Federal and State requirements. Of the 100 sampled PERM FFS claims we reviewed, 90 claims were correctly determined and adequately documented. However, claim review determinations for the remaining 10 claims were not documented and therefore may be incorrect./10

Based on our sample results, we estimated that 10 percent of the PERM FFS claims reviewed by CMS's review contractors were not documented and claim review determinations for these claims may not have been correct. We also estimated the total amount paid related to these claims to be $7,529 ($6,411 Federal share) during our audit period./11

The Office of Management and Budget (OMB) provides guidance to Federal agencies on estimating improper payments. According to OMB M-18-20, Circular A-123, Appendix C, when designing their internal control framework for managing payment integrity, Federal agencies should consult the GAO Green Book, which states that documentation is a necessary part of an effective internal control system. CMS's review contractors did not always maintain documentation of their claim review determinations because CMS did not include specific contract language requiring its review contractors to maintain all documentation to support their Medicaid FFS claim review determinations for non-error claims.

We concluded that CMS's review contractors adequately conducted FFS claim reviews for three States (Arkansas, Connecticut, and New Mexico) under CMS's PERM program in accordance with Federal and State requirements.

We are not making recommendations because CMS took action to address the deficiencies we identified. After our audit period, in October 2019, CMS added contract language requiring the contractors to maintain relevant documentation for non-error (i.e., correct) claims. Thus, CMS took action to mitigate such errors going forward. Additionally, our sample estimates indicated that these potential errors were immaterial when applied to our sampling frame.

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The report is posted at: https://oig.hhs.gov/oas/reports/region4/42100132.pdf