OIG survey finds Medicaid overpayments

A recent survey conducted by the Office of the Inspector General (OIG) found that some nursing facilities in Missouri failed to reconcile their invoice records with credit balances and report the overpayments to the state Medicaid agency within the time allotted. The scenario could play out similarly in other care settings and in other states.

For the study, OIG surveyed eight nursing facilities in Missouri along with a random sample of 30 invoice records from four Medicaid providers for a total of 143 invoice records in the amount of $67,310. “Of the 143 invoice records with both Medicaid payments and credit balances in our sample, 101 contained Medicaid overpayments, but 42 did not,” OIG reported.

According to OIG, the Medicaid overpayments totaled $33,000, and equaling $21,000 in the federal share of the bill. OIG researchers said based on their findings, they estimated the Missouri Medicaid agency -- the Missouri Department of Social Services -- could realize an additional statewide recovery of $573,000 ($363,000 in federal share) if it enhanced its efforts to recover overpayments in provider accounts.

Credit balances may occur when a provider’s reimbursement for services exceeds the allowable amount or when the reimbursement is for unallowable costs, resulting in an overpayment, according to OIG. Credit balances also may occur when a provider receives payments from Medicaid and another third-party payer for the same services.

States have up to one year from the date of discovery of an overpayment for Medicaid services to recover, or attempt to recover, the overpayment before making an adjustment to refund the federal share.

Charla Prillaman, regional director of physician services at the American Academy of Professional Coders said this kind of thing could easily happen in any state and is not limited to nursing facilities.

"Overpayments occur through a number of payment mechanisms and if they’re not routinely monitored and refunded, you could errantly retain funds to which you are not entitled," she explained.

"We’ve known that this is an area of identified risk since 1998, when OIG guidelines for compliance planning were published in the Federal Register (Vol. 63, No. 243, Friday, December 18, 1998, page 5), and specifically cited inadequate resolution of overpayments," said Prillaman.

According to OIG, the audited providers did not identify and report Medicaid overpayments because the state agency did not require providers "to exercise reasonable diligence" in reconciling invoice records. "The reconciliation process was at the discretion of the providers, and some providers did not reconcile invoice records for more than one year," the OIG reported.

Brian Kinkade, Interim Director of the Missouri Department of Social Services responded to OIG in a letter following the report, saying the state's Third Party Liability (TPL) Fund Recovery contractor has been performing credit balance audits on nursing facilities since May 2011.

"Based on the detail provided by the OIG, the state has determined that $14,780 has been recovered through the TPL Fund Recovery audits and returned to CMS," Kinkade wrote. "For the remaining overpayments of $18,639, the state will request a check from the provider. After the state recovers these payments, the appropriate adjustment will be made to [CMS]."

As far as OIG’s recommendation for Missouri to bump up its audits, Kinkade said the state intends to continue pursuing credit balance audits through the TPL.

"It seems reasonable to continue vigilant inspection of known risk areas with appropriate recovery of incorrectly paid funds," Prillaman said of the OIG's recommendation. "I would recommend that providers and suppliers routinely self-monitor and resolve over-payments."

Click here to read the entire OIG report.