Document Shows Bankruptcy of Medicaid Providers With Alleged Overpayments Viable State Strategy

US Capitol in WashingtonThis past week, the Texas Health and Human Services Commission published on their website a circular about the process for audits being done by the Centers for Medicare and Medicaid Services (CMS) on Medicaid providers in Texas. All Medicaid providers in the state can be subjected to federal Medicaid Integrity Program audits.

The circular is entitled “HHS Guidance for Resolution of CMS Medicaid Integrity Program Audits: Provider Appeals, Recovery of Provider Overpayments, and Return of Federal Funds”

Medicaid integrity contractors

The federal audits are done by companies or organizations CMS deems as “Medicaid integrity contractors.” These companies examine whether Medicaid payments were for covered services that were: (a) actually provided; and (b) properly billed and documented, and may identify overpayments to Medicaid providers.

Incentive to bankrupt

Although not the main point of the document, it makes very clear that provider bankruptcy absolves Texas from paying back federal Medicaid dollars identified as overpayments.

In fact, the state appears to have a great incentive to do so in both these federal audits and those audits HHSC-OIG itself conducts.

State must pay back full federal share whether it is collected or not, in one year

If the provider does not go bankrupt, the state must pay back the full amount of the federal share of the identified overpayment whether they collect it or not from the provider.  The money is due to Washington one year after finalization of the CMC audit report in the case of a federal audit.  The time line for a state investigation is apparently the same once HHSC-OIG finalizes its own overpayment amount on a provider.

From the horse’s mouth

The basic process is as follows from the circular:

During each audit, HHS[C] and the Medicaid provider are given the opportunity to provide feedback on preliminary drafts of the audit report.

Once the final report is issued, HHS[C] is expected to refund the federal share of the final identified overpayment amount within one year of the date of its discovery, usually represented by the date the final audit report is issued, regardless of whether the overpayment is recovered from the Medicaid provider.

An exception to this is when the Medicaid provider is bankrupt or out of business in accordance with Section 1903(d)(2)(D) of the Social Security Act.

HHS[C] distributes the final report to the Medicaid provider along with instructions for how to reimburse any overpayments identified in the audit. HHS[C] also gives the Medicaid provider an opportunity to appeal the audit findings.

In accordance with guidance contained in CMS’ Medicaid Program Integrity Manual, CMS does not dictate the appeals process, which is instead determined by HHS[C] subject to Texas Medicaid program requirements.

In the case of a Medicaid provider appeal of a Medicaid Integrity Program final audit report, HHS[C]  interprets the date of discovery to be determined by the result of the appeals process rather than the issuance of the final report.

CMS decides on a case by case basis whether to accept: (a) the appeal process results; and (b) the impact of the appeal results on the final overpayment amount and the resulting federal share amount HHS[C] must refund to CMS.

For full details download the circular.

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