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Audit (A-06-08-00050)

03-02-2010
Review of California’s Department of Health Care Services Fiscal Year 2007 Payment Error Rate Measurement Universes

Executive Summary

California’s Department of Health Care Services (DHCS) was unable to reconcile the fiscal year (FY) 2007 Payment Error Rate Measurement (PERM) universes to the quarterly Forms CMS-64 and CMS-21. CMS developed the PERM program to comply with Federal requirements for measuring improper payments made in the fee-for-service (FFS), managed care, and eligibility components of Medicaid and SCHIP in FY 2007 and future years. The Office of Management and Budget requires CMS to include the PERM results in its annual accountability report.

We could not determine whether DHCS’s managed care and FFS universes were complete and accurate. We were unable to reconcile the managed care and FFS universes to the Forms CMS-64 and CMS-21.

CMS Regional Office officials stated that they had performed a reconciliation of the Forms CMS-64 and CMS-21 to the accounting records that DHCS used to support the Forms CMS-64 and CMS-21. However, those accounting records did not include the detailed claim information. DHCS officials stated that they could not reconcile the Forms CMS-64 and CMS-21 to the managed care or FFS universes, and the California State Auditor found that the Form CMS-64 was not traceable to individual claims.

We recommended that CMS (1) instruct DHCS to reconcile its PERM universes to the Forms CMS-64 and CMS-21 it submits to CMS and ensure that its universes are complete and accurate, (2) instruct DHCS to implement a payment system that produces information that is readily available, and (3) include steps in the California Financial Management Review to annually reconcile various expenditures on the Forms CMS-64 and CMS-21 to detailed claim information.

In its comments on our draft report, CMS did not agree to implement our first two recommendations and did not specifically address our third recommendation. Without reconciling the PERM universe to the Forms CMS-64 and CMS-21, CMS is unable to show that it has complied with the requirements to produce a statistically valid estimate of improper payments.

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