Health Law Daily CMS capitation payment policies generally effective
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Monday, October 16, 2017

CMS capitation payment policies generally effective

By Jeffrey H. Brochin, J.D.

The Office of Inspector General (OIG) has conducted a review of CMS’ policies and procedures intended to prevent the payment of capitation payments to Medicare Advantage (MA) organizations on behalf of deceased beneficiaries, and has found that the existing policies and procedures were generally effective in ensuring that capitation payments to MA organizations for Medicare Parts A and B services were not made on behalf of deceased beneficiaries after the individuals’ dates of death. During CYs 2012 through 2015, CMS received updated beneficiary date-of-death information and made approximately 1.8 million adjustments to capitation payments, thereby recouping $2.96 billion from MA organizations for Parts A and B capitation payments that had been made for beneficiaries who had died (OIG Report, No. A-07-16-05087, October 12, 2017).

Background. The Medicare Access and CHIP [Children’s Health Insurance Program] Reauthorization Act of 2015 (MACRA), signed into law in April 2015, requires CMS to establish policies and implement claim edits to ensure that payments are not made for Medicare services ostensibly rendered to deceased individuals. The policies and procedures include steps to prevent improper payments from occurring, as well as steps to detect and recoup payments that have been made (including prior-year payments) for Medicare services rendered after the individuals’ dates of death. Although MACRA does not mandate a review of capitation payments made to MA organizations, the OIG evaluated CMS’s policies and procedures and reviewed capitation payments made to MA organizations.

Why the OIG conducted the review. Section 201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P.L. No. 108-173, revised Medicare Part C and renamed the program the MA program. The law permits beneficiaries to receive health care coverage from MA plans (such as health maintenance organizations, preferred provider organizations, and provider-sponsored organizations) offered by MA organizations.

At the beginning of each month, CMS makes a capitation payment to each MA organization to cover any medical services provided to each beneficiary in that month. To calculate a capitation payment, CMS considers each beneficiary’s most currently available demographic and health status information. If CMS receives changes to beneficiary information that would alter previous monthly payments, it adjusts the applicable capitation payment. Such adjustments are processed retroactively to the effective date of the change and reported to the MA organizations on monthly payment reports. CMS makes only one capitation payment per month for each Medicare beneficiary.

Previous OIG reviews examined this type of Medicare payment, and their current objective was to determine whether CMS’s policies and procedures ensured that capitation payments were not made to MA organizations for Medicare Parts A and B services on behalf of deceased beneficiaries after the individuals’ dates of death.

How the OIG conducted the audit. The OIGevaluated the policies and procedures that CMS had in place as of November 2015 in order to determine whether they were effective in ensuring that capitation payments to MA organizations for Parts A and B services were not made on behalf of deceased beneficiaries. They also evaluated the policies and procedures to determine whether they were effective in ensuring that improper payments were identified and recouped. Because recoupment could involve payments made in prior years, the OIG reviewed Medicare payments for CYs 2012 through 2015.

Audit findings. During CYs 2012 through 2015, CMS effectively received updated beneficiary date-of-death information and made approximately 1.8 million adjustments to capitation payments, thereby recouping $2.96 billion from MA organizations for capitation payments that had been made for beneficiaries who had died. CMS did not, however, identify and recoup all improper capitation payments: as of March 7, 2017, CMS had not recouped $2.4 million associated with 1,817 capitation payments that were made on behalf of 978 beneficiaries.

Review recommendations. The OIG has recommend that CMS recoup the $2.4 million in capitation payments made to MA organizations for Medicare Parts A and B services on behalf of deceased beneficiaries, and, implement system enhancements to identify, adjust, and recoup improper capitation payments in the future. CMS concurred with both of those recommendations and described corrective actions that it had implemented.

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