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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Oversight and Evaluation of the Fiscal Year 2005 Hospital Payment Monitoring Program," (A-03-05-00007)

November 10, 2005

Complete Text of Report is available in PDF format (548 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Our objectives were to determine whether CMS ensured that its Hospital Payment Monitoring Program (HPMP) contractors:  (1) had appropriate controls to ensure that sampling procedures, admission-necessity and DRG validation screenings, and quality control reviews followed established procedures and operated effectively; (2) implemented our prior recommendation; and (3) calculated and reported all error amounts that the Quality Improvement Organizations (QIOs) identified in the 10 percent sample.  CMS generally ensured that its HPMP contractors had appropriate controls; however, CMS and its HPMP contractors incorrectly sampled long term care hospital claims and did not complete the follow-up process for obtaining medical records.  CMS did not ensure that an HPMP contractor implemented our recommendation to use CMS PRICER software to accurately calculate error amounts for claims with DRGs revised by the QIOs.  Also, prior to the conclusion of our fieldwork, CMS did not calculate and report any error amounts for errors identified and reported by the QIOs during their quality control reviews of 10 percent of the claims that had passed the initial review.

We recommended that CMS direct its HPMP contractors to:  (1) establish appropriate controls to select a long term care hospital sample in compliance with criteria, (2) use CMS PRICER software, and (3) include in future rate calculations the error amounts identified by the QIOs during their quality control reviews.  In response to our draft report, CMS concurred with our first and third recommendation and stated that it would investigate the cost benefits of the second.  We continue to believe that the HPMP contractor should use CMS’s PRICER software.