Review of the Health Care Financing Administration's Regional Office Accounts Receivable in Region IV

EXECUTIVE SUMMARY:

Medicare accounts receivable represent funds owed to the Health Care Financing Administration (HCFA) by: (1) Medicare providers that HCFA's contractors overpaid for a variety of reasons; and (2) other entities who should have paid the claims as primary insurer when Medicare was the secondary payer.

The Medicare contractors are responsible for managing, including reporting and collecting, the majority of the accounts receivable balances. The HCFA's Central Office (CO) and Regional Offices (RO) are responsible for managing the remaining balances. For financial reporting purposes, HCFA's non-contractor accounts receivable balances are taken from the: (1) Provider Overpayment Reporting (POR) system; (2) Physician/Supplier Overpayment Reporting (PSOR) system; and (3) Regional Office Status of Accounts Receivable Reports (HCFA Forms R751A and R751B).

We reviewed non-contractor and non-central office accounts receivable. The HCFA RO IV POR at September 30, 1998 totaled $89,620,513 in accounts receivable. At March 31, 1999, the accounts receivable increased to $183,775,666.

The HCFA RO IV PSOR at September 30, 1998 totaled $106,327,967 in accounts receivable. At March 31, 1999, the balance increased to $121,504,854.

Our objectives for this review were to:

• reconstruct/confirm and establish proper ending balances at September 30, 1998;

• reconstruct/confirm accounts receivable activity for the first 6 months of Fiscal Year (FY) 1999;

• recommend improvements to procedures to account for accounts receivable; and,

• recommend adjustments, if necessary, to fairly present the ending balances of the accounts receivables at FY 1998 and at the end of the first 6 months of FY 1999.

We concluded that HCFA's accounts receivable balances in Region IV were overstated at September 30, 1998 and March 31, 1999 for various reasons. The HCFA RO IV staff adjusted some of the overstatements as a result of their write-off decisions. However, in our opinion, additional adjustments are necessary to fairly present the accounts receivable balances.

To improve its procedures to account for its accounts receivable activity, we recommended that RO IV:

• establish a system to systematically track and facilitate the RO monitoring the status of collection activities that account for cases transferred or referred to other locations, such as the Office of General Counsel, Department of Justice, etc.;

• maintain case files on all accounts receivable, including those where collection responsibility is at another location, in a systematic and retrievable manner; and

• establish a system to periodically review accounts receivable to identify balances that have aged to a point where they are unrealizable including instances where reliable evidence indicates the non-existence of assets involving bankruptcies.

The HCFA RO IV staff generally, but not always, agreed with our conclusions regarding the accounts receivables and our recommendations. In their response, they stated the HCFA CO is developing a new system for tracking accounts receivable.