Cahaba Government Benefit Administrators, LLC, Did Not Always Refer Medicare Cost Reports and Reconcile Outlier Payments

Of 13 Medicare-participating hospital cost reports with outlier payments that qualified for reconciliation, Cahaba Government Benefit Administrators, LLC (Cahaba), referred 5 cost reports to the Centers for Medicare & Medicaid Services (CMS) in accordance with Federal guidelines. However, Cahaba did not refer eight cost reports that should have been referred to CMS for reconciliation. Of these, Cahaba had referred and reconciled the outlier payments associated with one cost report after we started our audit. The remaining seven cost reports had not been settled and should have been referred to CMS for reconciliation. We calculated that the financial impact to Medicare of the unreconciled outlier payments associated with these seven cost reports was approximately $8.5 million.

Medicare supplements basic prospective payments for inpatient hospital services by making outlier payments for unusually high-cost cases. Medicare contractors refer hospitals' cost reports to CMS for reconciliation of outlier payments. Effective April 2011, CMS gave Medicare contractors the responsibility to perform reconciliations upon receipt of authorization from the CMS Central Office.

Of the five cost reports that were referred to CMS with outlier payments that qualified for reconciliation, Cahaba had reconciled the outlier payments associated with three of these cost reports by December 31, 2011. However, Cahaba had not reconciled the outlier payments associated with the remaining two cost reports. The financial impact of the outlier payments associated with one of these two cost reports that were referred but not reconciled was approximately $602,000 that was due to Medicare. The remaining cost report had been settled and had exceeded the 3-year reopening limit. We calculated that the financial impact to Medicare of the cost report that was settled and had exceeded the 3-year reopening limit was approximately $533,000.

We are setting aside approximately $114,000 in outlier payments associated with claims that we could not recalculate.

We recommended that Cahaba (1) review the 7 cost reports that qualified for referral, reconcile the associated outlier payments, and refund the amounts due to Medicare; (2) reconcile the outlier payments associated with one cost report that was referred to CMS, finalize this cost report, and ensure the return of funds to Medicare; (3) determine whether the cost report that had been referred to CMS, had been settled, and had exceeded the 3-year reopening limit may be reopened and, if applicable, work with CMS to reconcile the associated outlier payments, finalize this cost report, and ensure the return of funds to Medicare; (4) work with CMS to resolve the $114,000 in outlier payments that we could not recalculate; (5) ensure that control procedures are in place so that all cost reports with qualifying outlier payments are referred and reconciled; and (6) review all cost reports submitted since the end of our audit period and ensure that those whose outlier payments qualified for reconciliation are referred and reconciled in accordance with Federal guidelines. Cahaba generally concurred with all of our recommendations and described corrective actions that it had taken or planned to take.