Medicare Hospital Patient Transfers Incorrectly Paid as Discharges - January 1992 through December 1994

EXECUTIVE SUMMARY:

This report provides the results of our latest work in determining whether the Health Care Financing Administration's (HCFA) control system detects incorrectly reported transfers in Medicare's Part A prospective payment system (PPS). This work follows up on a prior HCFA and Office of Inspector General (OIG) joint recovery project. In that project the OIG identified incorrectly reported PPS transfers through November 1991, which resulted in approximately $227 million of recoveries and savings. Our new work has found that intermediaries continue to make payments for incorrectly reported transfers. The OIG identified another 43,012 incorrectly reported transfers and approximately $127.3 million of potential overpayments for the 3-year period ended December 31, 1994.

Our work to date indicates that the PPS transfer edit does detect incorrectly reported PPS transfers; however, fiscal intermediaries may not be processing these transfers according to HCFA's instructions. We are continuing our audit work to fully identify the cause(s) for incorrectly reported PPS discharges not being adjusted to transfers.

We are recommending that HCFA: (1) advise all intermediaries that the PPS transfer instructions must be followed when processing future transactions, (2) assist us in identifying the cause(s) of this problem, and (3) cooperate with the Department of Justice (DOJ) efforts to recoup past overpayments. The DOJ has informed us that it will assume responsibility for the recovery of overpayments related to incorrectly reported and paid PPS transfers occurring between January 1, 1992 and December 31, 1995, as part of its fraud investigation under the Civil False Claims Act. (We are in the process of obtaining the data for 1995 and will transmit it to DOJ when available.) Thus, HCFA should not recover incorrectly reported and paid PPS transfers occurring prior to January 1, 1996 under its usual procedures.

The HCFA Administrator responded to our draft report in a memorandum dated September 3, 1996. The HCFA agreed with our recommendations and will issue instructions to all intermediaries requiring them to utilize the edit to correctly process claims involving PPS transfers. The HCFA also agreed that it should assist the OIG in identifying the causes of this problem and that it should cooperate with the DOJ in its recovery efforts. The HCFA also included technical comments which we considered in finalizing this report.