Audit Report - A-01-97-82005

Office of Audit

Consultative Examination Costs Claimed by Maine`s Disability Determination Services - A-01-97-82005 - 9/10/97

This final report presents the results of our review of consultative examination (CE) costs claimed by Maine`s Disability Determination Services (DDS) for reimbursement from the Social Security Administration (SSA) (A-01-97-82005). The objective of this review was to determine what portion of SSA CE payments claimed by Maine`s DDS during State Fiscal Years (SFY) 1993, 1994, and 1995 exceeded allowable amounts.

In its Single Audit of the State of Maine for SFYs 1993 and 1994, Maine`s Department of Audit reported that a portion of the payments made to hospitals in SFYs 1993 and 1994 by Maine’s DDS were unallowable. However, the Department of Audit did not quantify the exact amount of unallowable payments made by the DDS. SSA requested that the Office of the Inspector General (OIG), Office of Audit (OA) review the hospital payments and quantify the amount of unallowable expenses related to these hospital payments. Maine’s Department of Human Services (DHS) officials have stated that it was the policy of the DDS to pay "usual and customary" fees to hospitals rather than using a fee schedule. This policy of paying for CE services is contrary to Federal regulations which require the DDS to pay no more than the highest rate paid by Federal or public agencies in the State for the same or similar types of service. These overpayments to hospitals, in turn, led to the DDS making excessive claims to SSA.

During SFYs 1993, 1994, and July through November 1994, the DDS overpaid hospitals for CE procedures about 95 percent of the time. Our review of the more than 3,500 hospital invoices paid during this period found $197,261 in unallowable expenses claimed by the DDS. These unallowable expenses are comprised of approximately $85,853 for SFY 1993, $93,405 for SFY 1994, and $18,003 for the period July 1, 1994 through November 30, 1994 (SFY 1995).

In addition to the DDS paying for procedures in excess of allowable fees, we also found several instances where the DDS reimbursed hospitals for questionable and duplicative medical procedures. During our 29-month audit period, we found that 15 questionable medical procedures and 7 duplicative medical procedures were paid by the DDS. The cost of these procedures (already included in the unallowable amounts discussed above) amounted to $599 in claims by the DDS.

We recommend that SSA:

• disallow $197,261 in CE costs claimed by the DDS during SFYs 1993, 1994, and 1995; and
• instruct the DDS that it should not claim payments made to medical providers for unallowable or duplicative procedures.

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BACKGROUND

During its Single Audits of the State of Maine for SFYs 1993 and 1994, Maine`s Department of Audit questioned medical costs paid by the State`s DDS and later claimed from SSA. The medical costs in question related to fees paid to hospitals conducting consultative examinations at the request of the DDS. The Single Audit report for SFY 1993 questioned $135,822 in hospital charges, while the SFY 1994 Single Audit report questioned another $132,488 in charges. The auditors did not quantify the exact amount of unallowable costs charged to SSA. Instead, the reports questioned the entire amount paid to hospitals for CEs for each fiscal year.

Regulations for the purchase of medical examination, laboratory, and other services are outlined in Title 20 of the Code of Federal Regulations (CFR) Section 404.1519k. This section states:

". . . the rate of payment to be used for purchasing medical or other services necessary to make determinations of disability may not exceed the highest rate paid by Federal or public agencies in the State for the same or similar types of service."

Any amount in excess of this "highest rate" is an unallowable cost.

In response to the Single Audit finding, DHS officials did not dispute the fact that overpayments occurred. Further, DHS officials stated that the questionable practice was discontinued in December 1994 and requested that the State be absolved of any repayment obligation. Maine’s DDS is now reimbursing hospitals using the Southern Maine Medicare fee schedule.

Since the Single Audits did not determine the exact amount of SSA’s excessive reimbursements to the State of Maine, SSA`s Associate Commissioner for Disability requested assistance from the OIG’s OA to determine the full amount that should have been disallowed during SFYs 1993 and 1994. This information will be used in preparing the Commissioner of Social Security`s final determination letter on the disallowed costs.

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SCOPE AND METHODOLOGY

Our audit was conducted in accordance with generally accepted government auditing standards. The objective of the review was to determine what portion of SSA CE payments claimed by Maine`s DDS during SFYs 1993, 1994 and 1995 exceeded allowable amounts.

To accomplish our objective, we:

• reviewed applicable Federal laws, regulations, and program guidelines;
• reviewed the State of Maine’s Single Audit reports for the SFYs ended June 30, 1993 and June 30, 1994;
• reviewed the DDS’s procedures in place to reimburse hospitals for medical costs during SFYs 1993 and 1994;
• reviewed the DDS’s cash reports showing the amount of CE fees paid by the DDS during SFYs 1993 and 1994 and later submitted to SSA for reimbursement;
• reviewed relevant Medicare fee schedules in force for Southern Maine during Calendar Years (CY) 1992, 1993, and 1994;
• reviewed 3,221 medical transactions paid by Maine’s DDS between the period of July 1, 1992 and June 30, 1994;
• reviewed an additional set of 335 medical transactions paid by Maine’s DDS between the period of July 1, 1994 and November 30, 1994; and
• calculated the difference between the amount paid by the DDS and the Medicare rates in effect from July 1, 1992 to November 30, 1994.

We discussed the Single Audit findings with the auditors from Maine’s Department of Audit who were responsible for conducting the Single Audits for SFYs 1993, 1994, and 1995. We did not review internal control procedures since both the State of Maine and SSA were in agreement that the controls in place did not prevent the overpayments during the audit period.

Since Medicare reimbursement procedures are defined by the American Medical Association’s (AMA) Current Procedural Terminology (CPT), and not all of the invoices we reviewed were consistently using this coding, we discussed the procedures with DDS officials in order to establish a mutually agreeable CPT code that could be used in determining the appropriate cost for the procedures involved. We still could not identify 15 medical procedures reimbursed by DDS since in most cases the CPT code used was not found in either the AMA manual or the relevant Medicare fee schedule. These 15 procedures, amounting to $870, were allowed in full since we could not make a determination on their allowability.

We also found differences between what the DDS claimed as reimbursement in its fiscal year cash reports and the amount shown on the invoices provided by DDS to support these cash report amounts. We could not find $228 in costs associated with SFY 1993 expenditures, but found an additional $17,309 in costs for SFY 1994 beyond the expenditures noted in the Single Audit report for that period. We reviewed all costs supported by invoices and paid during SFYs 1993 and 1994 regardless of whether those costs were included in the amounts questioned in the Single Audits. As a result, we reviewed costs of $285,391 for the 2-year period rather than the $268,310 in costs questioned by the Single Audits, a difference of $17,081.

We conducted our audit during June and July 1997 at the DDS in Augusta, Maine and in our Boston, Massachusetts office.

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RESULTS OF REVIEW

Maine’s DHS has agreed that DDS was not utilizing the appropriate fee schedules when reimbursing hospitals for consultative examinations during SFYs 1993 and 1994. In fact, DDS officials told us they questioned the hospital reimbursement policy before the Single Audit report was issued. To correct the weakness, on December 1, 1994, DDS began utilizing the Southern Maine Medicare fee schedule to determine the maximum allowable fee for consultative examination services. Although we did not review the DDS’s practices after December 1, 1994, a review of these practices was part of the SFY 1995 Single Audit of the State of Maine. Maine’s Department of Audit found that the DDS was complying with Federal regulations when reimbursing hospitals for consultative examination services after December 1, 1994.

We reviewed 3,556 medical service charges covering July 1, 1992 to November 30, 1994. This period covered SFYs 1993 and 1994, as well as the first 5 months of SFY 1995. We added these 5 months to our review in order to determine whether additional overpayments occurred prior to the DDS’s change to using a Medicare fee schedule to reimburse hospitals. We compared the actual amount paid by the DDS during this period to the highest rate allowed under the Medicare fee schedules in force at that time. The amounts paid by the DDS in excess of the Medicare fees were considered to be unallowable costs.

Overpayments to Hospitals

Our review concluded that $197,261 in unallowable costs were paid to hospitals by the DDS and claimed by the State of Maine for reimbursement from SSA during our audit period. This represents $179,259 in unallowable costs during SFYs 1993 and 1994, or about 63 percent of the amount paid by DDS to hospitals during this 2-year period. It also includes $18,003 in unallowable costs paid to hospitals during the first 5 months of SFY 1995.

Dollar Amounts Audited at Maine DDS

Note: See methodology section for an explanation for the difference between the audited amount and the Single Audit questioned amount.

Transactions Audited at Maine DDS

Period Reviewed	Number of Transactions Reviewed	Number Overpaid	Percent of Transactions Overpaid	Percent Overpaid By More Than 200%
SFY 1993	1,540	1,500	97.4%	40.3%
SFY 1994	1,681	1,572	93.5%	43.5%
First 5 Months of SFY 1995	335	303	90.4%	38.2%
Total	3,556	3,375	94.9%	41.6%

SFY 1993 Claims

We reviewed 1,540 hospital charges from SFY 1993 and found that a total of 1,500 (97.4 percent) involved payments to hospitals in excess of the Southern Maine Medicare fees allowed during CY 1992 and 1993. In all, the DDS made approximately $85,853 in excessive payments to hospitals during SFY 1993. Over 40 percent of these overpayments were at least three times the fee allowed under the Medicare schedule. For example, Medicare allowed reimbursement of only $30.10 for a chest x-ray costing the DDS $95 in late 1992. This difference ($64.90) was an unallowable expense. These excessive payments represented about 63 percent of the $135,594 in payments claimed by DDS during SFY 1993.

SFY 1994 Claims

We found another $93,405 in excessive payments to Maine’s hospitals when we reviewed 1,681 medical transactions from SFY 1994. Of these transactions, 1,572 (93.5 percent) involved overpayments to hospitals by the DDS, and at least 43 percent represented payments that were at least three times the allowed cost. In addition, the medical charges included about $17,000 more than was questioned by the Single Audit. When these additional charges were included, the excessive payments represented about 62 percent of the $149,797 in payments claimed by DDS during SFY 1994.

SFY 1995 Claims

We expanded our review to include July 1, 1994 to November 30, 1994, the 5 months in SFY 1995 during which the DDS was still using the "usual and customary" payment policy. Of the 335 hospital charges we reviewed, 303 (90.4 percent) involved overpayments to hospitals. These excessive payments represented another $18,003 in unallowable costs. These costs were not reported in the Single Audits.

Questionable and Duplicative Medical Procedures

We also found several instances where DDS reimbursed hospitals for either questionable medical procedures or duplicative procedures. For example, we found 9 cases where DDS was reimbursing hospitals $25 each time DDS scheduled an appointment with the hospital and the person then failed to show up. Medicare fee schedules do not contain a procedure code for missed appointments and Medicare regulations do not allow payment for missed appointments. As early as 1987, SSA agreed that the Agency should not pay for missed CE appointments.

In all we found 15 reimbursements for questionable medical procedures and 7 reimbursements where the hospital billed for duplicative medical procedures. New implementing instructions issued by the Health Care Financing Administration (HCFA) and effective January 1, 1994 limited reimbursement to only one overall procedure and not component parts. According to the instructions, "Medicare does not pay for this service because it is part of another service that was performed at the same time." The seven reimbursements for duplicative medical procedures cited above occurred in CY 1994, after HCFA issued these instructions.

When combined, the cost of these 22 questioned items, already included in the unallowable amounts above for the appropriate state fiscal year, amounted only to $599 in reimbursed costs. However, these are only the questionable and duplicative costs reimbursed to hospitals during our audit period. We did not determine whether such costs were reimbursed to physicians and other providers. Such reimbursements to those providers could be substantial but were beyond the scope of this review. See Appendix A for a detailed explanation of these questioned items.

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RECOMMENDATIONS

We recommend that SSA:

• disallow $197,261 in CE costs claimed by DDS during SFYs 1993, 1994, and 1995; and
• instruct the DDS that it should not claim payments made to medical providers for unallowable or duplicative procedures.

AGENCY COMMENTS

In response to our draft report, SSA requested that we provide additional support for our position regarding missed appointments and that we clarify when costs described in Appendix A were incurred.

OIG RESPONSE

To address SSA’s comments, we added further information to the section cited on missed appointments and added the specific SFY to the costs listed in Appendix A.

Pamela J. Gardiner

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APPENDICES

QUESTIONABLE AND DUPLICATIVE MEDICAL PROCEDURES

Notes:

As a result of a 1987 Department of Health and Human Services, Office of Inspector General (HHS/OIG) report, SSA agreed that the Agency should not pay for missed consultative examination appointments. See the HHS/OIG report Payments Under the Disability Determination Program for Medical Appointments Broken by Claimants of Disability Insurance and Supplemental Security Income Benefits, December 29, 1987, (A-01-87-02004).

Duplicative procedure under Medicare instructions issued by HCFA and effective January 1, 1994 because it was combined with CPT 73562 - radiological examination, knee; anteroposterior and lateral, with oblique(s), minimum of three views.

Duplicative procedure under Medicare instructions issued by HCFA and effective January 1, 1994 because it was combined with CPT 94010 - Spirometry, including graphic record, total and timed vital capacity, expiratory flow rate measurement(s), and/or maximal voluntary ventilation.

Duplicative procedure under Medicare instructions issued by HCFA and effective January 1, 1994 because it was combined with CPT 95819 - electroencephalogram (EEG) including recording awake and asleep, with hyperventilation and/or photic stimulation; standard or portable, same facility.

5. Not an allowable cost under the Medicare fee schedule.

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APPENDIX C

MAJOR CONTRIBUTORS TO THIS REPORT

Office of the Inspector General

Roger Normand, Director, Program Audits
Rona Rustigian, Deputy Director, Program Audits
Walter Bayer, Auditor-in-Charge
David Mazzola, Auditor