HHS OIG Report on MCO Institutional Status Patients

The Office of the Inspector General ("OIG") of the United States Department of Health and Human Services ("HHS") released on March 9, 2004 its report on the appropriateness of Medicare payments to managed care organizations (MCOs) for beneficiaries with institutional status. The OIG used a national sample of eight statistically selected MCOs and five other MCOs that were individually audited, and found $12.8 million in unallowable payments for beneficiaries incorrectly claimed as institutionalized. The payments were unallowable, the OIG claimed, because the MCOs did not verify that the beneficiaries met residency requirements, such as (1) 30-day residency; (2) residency in a Medicare- or Medicaid-certified facility; and (3) residency in the applicable institution during the claimed time period. The OIG recommended that the Centers for Medicare & Medicaid Services ("CMS") improve oversight procedures and instruct sampled and audited MCOs to repay the identified overpayments. CMS is considering these recommendations, along with a recommendation to instruct other MCOs to conduct self-audits and refund identified overpayments. Health plan liability in the millions has previously been incurred following allegations of improper institutional status reporting. The report does not delve into a topic on which there has been disagreement -- whether institutional status patients need to be in certified beds within an institution, or only need to be in an institution with certified beds.