The Department of Health and Human Services Office of the Inspector General (HHS-OIG) was established by Congress in 1976 to identify and eliminate fraud, abuse, and waste in HHS programs and to promote efficiency and economy in departmental operations. The OIG is responsible for conducting audits, evaluations, and both criminal and civil investigations for all HHS agencies. These functions are performed by the OIG's Office of Audit Services (OAS).

Feeley & Driscoll's OIG Update is a compilation of the latest and greatest additions from the OIG's website, listed in approximate order of greatness rather than lateness.

A biweekly publication from the Healthcare Group at Feeley & Driscoll, P.C. This email is also accessible from the F&D website by clicking through to our OIG Updates Archive.

In this issue

1. Comparison of Third-Quarter 2007 Average Sales Prices to Average Manufacturer Prices:  Impact on Medicare Reimbursement for First-Quarter 2008  (OEI-03-08-00130)

2. Review of Excessive Payments for Carrier Services Processed by TrailBlazer Health Enterprises for the Period January 1, 2003, Through December 31, 2003 (A-06-07-00056)

3. Review of Duke University Medical Center's Reported Fiscal Year 2006 Wage Data (A-01-07-00511)

4. Review of the Centers for Medicare & Medicaid Services Grant Closeout Procedures (A-02-06-02001)

5. Medicaid Payments for Services Provided to Beneficiaries With Concurrent Eligibility in Two States During August 2003 (A-05-06-00057)

6. Review of Indiana Medicaid Disproportionate Share Hospital Eligibility for July 1, 2000, Through June 30, 2003 (A-05-06-00045)

7. Review of Expenses and Revenues Presented in Congressional Testimony by Touro Infirmary (A-06-08-00012)

8. Review of Pension Costs Claimed for Medicare Reimbursement by The Regence Group for Fiscal Years 1997 Through 2006 (A-07-08-00257)

9. Review of Nursing and Allied Health Education Payments to St. John's Riverside Hospital for Calendar Year 2004 (A-02-06-01022)

1. Comparison of Third-Quarter 2007 Average Sales Prices to Average Manufacturer Prices:  Impact on Medicare Reimbursement for First-Quarter 2008  (OEI-03-08-00130)

Pursuant to section 1847A(d)(3) of the Social Security Act (the Act), OIG must notify the Secretary of the Department of Health and Human Services (the Secretary) if the average sales price (ASP) for a particular drug exceeds the drug's average manufacturer price (AMP) by a threshold of 5 percent.  If that threshold is met, section 1847A(d)(3) of the Act grants the Secretary authority to disregard the ASP for that drug and substitute the payment amount for the drug code with the lesser of the widely available market price for the drug (if any) or 103 percent of the AMP.  This review is the sixth such comparison conducted by OIG and considers both the current ASP payment methodology and a revised ASP payment methodology recently mandated by section 112(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007, P.L. 110-173. 

Using CMS's current ASP payment methodology, the OIG identified 41 of 369 drug codes with ASPs that exceeded AMPs by at least 5 percent in the third quarter of 2007.  Of the 41 codes, 31 also met the threshold for price adjustments in at least one of the prior OIG studies comparing ASPs to AMPs.  If reimbursement amounts for all 41 codes were based on 103 percent of AMP, the OIG estimates that Medicare expenditures would be reduced by $16 million during the first quarter of 2008 alone.  Under the revised payment methodology, ASPs for 35 of 369 drug codes would have exceeded AMPs by at least 5 percent.  Of these 35 codes, 32 also met the 5-percent threshold under CMS's current method for volume-weighting data.  An additional three codes would have met the 5-percent threshold using the revised ASP payment methodology but not the current methodology.

To view the full report, click here: http://www.oig.hhs.gov/oei/reports/oei-03-08-00130.pdf

2. Review of Excessive Payments for Carrier Services Processed by TrailBlazer Health Enterprises for the Period January 1, 2003, Through December 31, 2003 (A-06-07-00056)

Of the 382 payments of $10,000 or more (high-dollar payments) that TrailBlazer Health Enterprises (TrailBlazer) made to providers in 2003, 270 were appropriate.  TrailBlazer was the Medicare Part B carrier for about 65,000 providers in Texas, Delaware, the District of Columbia, Maryland, and parts of Virginia.  TrailBlazer incorrectly paid providers for 103 of the remaining claims, which resulted in net overpayments totaling $236,523.  Also, providers were unable to locate any records for the beneficiaries on three claims totaling $46,903.  The OIG was unable to determine whether five claims were paid correctly based on available information and did not review one claim because the provider had filed for bankruptcy. 

The OIG recommended that TrailBlazer (1) ensure that identified net overpayments totaling $236,523 have been recovered (2) recover $46,903 for the three unsupported claims (3) identify and recover any overpayments related to system pricing errors (4) review internal controls related to updating system pricing for procedure codes (5) review internal controls related to manual processing and claim adjustment and (6) use the results of this audit in its provider education activities.

TrailBlazer agreed with the majority of the OIG’s findings.  For one finding, TrailBlazer agreed that the error had occurred but disagreed that it had affected all of the claims processed.  TrailBlazer also disagreed with some of the OIG’s calculations of overpayment amounts.

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region6/60700056.pdf

3. Review of Duke University Medical Center's Reported Fiscal Year 2006 Wage Data (A-01-07-00511)

Duke University Medical Center (the Hospital) overstated its wage data by $9,283,606 and 50,857 hours in its fiscal year (FY) 2006 Medicare cost report.  Correcting the Hospital's errors decreased the average hourly wage rate from $31.51 to $30.96.  Under the acute-care hospital inpatient prospective payment system, CMS adjusts the Medicare base rate paid to participating hospitals by the wage index applicable to the area in which the hospitals are located.  CMS updates the wage indexes annually based on hospitals' reported wage data. 

The OIG recommended that the Hospital submit a revised FY 2006 Medicare cost report to the fiscal intermediary to correct the wage data overstatements and implement review and reconciliation procedures to ensure that the wage data reported in future Medicare cost reports are accurate, supportable, and in compliance with Medicare requirements.

The Hospital agreed with most of the OIG’s findings but disagreed, in part, that it had included in its wage data unsupported costs for Part B services provided by nurse practitioners.  Because the Hospital provided additional information on these costs, the OIG revised this finding. 

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region1/10700511.pdf

4. Review of the Centers for Medicare & Medicaid Services Grant Closeout Procedures (A-02-06-02001)

The OIG found that the 197 grants that the Department's Division of Payment Management (DPM) had identified as eligible for closeout as of March 31, 2006, remained open in the Payment Management System for several reasons.  DPM is responsible for recording grant activity in the payment system and closing grants after receiving closeout instructions from CMS's Office of Financial Management.  CMS's program offices, the Center for Medicaid & State Operations and the Office of Acquisition and Grants Management, are responsible for initiating closeout of grants.  As a general rule, grants must be closed within 180 days after the end of the grant period (the cutoff date).

For 33 grants with unexpended balances totaling $1.2 billion, the program offices did not initiate closeout because they were awaiting the results of legislative proposals to use the expired funds for other purposes or because they lacked an adequate monitoring system to ensure that grants were closed by the cutoff date.  For 164 grants with unexpended balances totaling $104.2 million, the program offices did initiate closeout.  However, DPM did not complete closeout primarily because of differences (sometimes of $1 or less) among the grant award, expenditure, and drawdown amounts in the payment system.

The OIG recommended that CMS (1) ensure that the program offices close grants by the cutoff date by establishing an adequate monitoring system, (2) deobligate any unexpended balances on grants open past the cutoff date, and (3) work with DPM to establish a dollar threshold for differences in payment system balances and procedures for closing grants with differences below the threshold.  CMS generally concurred with the OIG’s recommendations.

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region2/20602001.pdf

5. Medicaid Payments for Services Provided to Beneficiaries With Concurrent Eligibility in Two States During August 2003 (A-05-06-00057)

For August 2003, the OIG estimates that States’ Medicaid agencies paid approximately $2 million on behalf of beneficiaries who should not have been eligible because of their Medicaid eligibility in another State.  The payments were made on behalf of these beneficiaries because the States’ agencies did not share all available Medicaid eligibility information.  Medicaid eligibility in each State is based on residency.  If a resident of one State subsequently establishes residency in another State, the beneficiary’s Medicaid eligibility in the previous State should end.  The States’ agencies must redetermine the eligibility of Medicaid beneficiaries, with respect to circumstances that may change, at least every 12 months.

Based on the results of this audit, the OIG plans to select specific State pairs for detailed audits of payments for services provided to Medicaid-eligible beneficiaries.

The OIG recommended that the Centers for Medicare and Medicaid Services (CMS) share the results of the OIG’s audit with all States to (1) emphasize the need to ensure that beneficiary eligibility changes are identified and appropriate action is taken and (2) encourage States to identify opportunities to use existing eligibility data to minimize concurrent Medicaid eligibility periods.  CMS concurred with the recommendations.

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region5/50600057.pdf

6. Review of Indiana Medicaid Disproportionate Share Hospital Eligibility for July 1, 2000, Through June 30, 2003 (A-05-06-00045)

For the period July 1, 2000, through June 30, 2003, the State paid $142.3 million ($88.2 million Federal share) to three State-owned psychiatric hospitals that were not eligible to receive Medicaid disproportionate share hospital (DSH) payments.  The hospitals did not meet Federal Medicaid eligibility requirements because they did not comply with Medicare conditions of participation (CoP) requirements.  Generally, hospitals demonstrate compliance with basic Medicare CoP through an accreditation process performed by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO).  Psychiatric hospitals must also meet additional staffing and medical records requirements. 

The OIG recommended that the State refund $88.2 million to the Federal Government for the Medicaid DSH payments made to the three ineligible State-owned psychiatric hospitals for the audit period and ensure that Medicaid DSH payments are made only to eligible hospitals.  The State disagreed with the OIG’s finding and recommendations.  The State agency believed that Medicare and Medicaid CoP had been met for the facilities through a combination of JCAHO accreditation and the Medicaid survey and certification process, including the special CoP for psychiatric hospitals.  After reviewing the State agency’s comments, the OIG maintains that the OIG’s finding and recommendations are valid. 

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region5/50600045.pdf

7. Review of Expenses and Revenues Presented in Congressional Testimony by Touro Infirmary (A-06-08-00012)

In an audit conducted at the request of the House Committee on Energy and Commerce, the OIG found that Touro’s (the hospital) expenses presented in its congressional testimony were generally accurate and supported by its financial records.  However, the hospital’s revenue as described in the testimony for the first 5 months of 2007 did not include $3.9 million of revenue that it received during this period.  At an August 1, 2007, committee hearing, the hospital presented a summary of financial data comparing its pre-Katrina (January through May 2005) and post-Katrina (January through May 2007) expenses and revenues.  The hospital requested additional Federal financial assistance, including additional grant funds from the Department, to cover losses incurred as a result of Hurricane Katrina.

The hospital agreed with the results of the OIG’s review.  This was an informational report, and the OIG had no recommendations.  

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region6/60800012.pdf

8. Review of Pension Costs Claimed for Medicare Reimbursement by The Regence Group for Fiscal Years 1997 Through 2006 (A-07-08-00257)

The Regence Group (Regence), a Centers for Medicare and Medicaid Services contractor, underclaimed $260,000 of Medicare pension costs on its Oregon and Common Working File (CWF) Final Administrative Cost Proposals (FACP) for fiscal years (FY) 1997–2006.  Regence also underclaimed $665,000 of Medicare pension costs on its Utah FACPs for FYs 1998–2006.  Regence administered both Medicare Part A and Part B operations under cost reimbursement contracts with CMS until the contractual relationship was terminated November 30, 2005. 

The OIG recommended that Regence (1) revise its Oregon and CWF FACPs for FYs 1997–2006 to claim the additional allowable pension costs of $260,000 and (2) revise its Utah FACPs for FYs 1998–2006 to claim the additional allowable pension costs of $665,000.  Regence concurred with the audit results but stated that the “. . . scope of this audit is limited to the Medicare Part A and Part B cost reimbursement contracts that terminated on November 30, 2005 and does not include the Oregon Medicare Data Center contract which terminated on December 31, 2006.

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region7/70800257.pdf

9. Review of Nursing and Allied Health Education Payments to St. John's Riverside Hospital for Calendar Year 2004 (A-02-06-01022)

For calendar year 2004, St. John’s Riverside Hospital’s (the hospital) nursing education program met both Medicare eligibility and reimbursement requirements.  Pursuant to Federal regulations, Medicare shares in the cost of approved nursing education activities operated by providers.  Because the hospital’s program met Medicare requirements, this report contains no recommendations.

To view the full report, click here: http://www.oig.hhs.gov/oas/reports/region2/20601022.pdf