Follow-up Audit Report on the Collection Practices and Procedures of the Health and Hospitals Corporation Related Medicaid Managed Care/ Heath Maintenance Organizations

SUMMARY OF FINDINGS AND CONCLUSIONS

This is a follow-up audit to determine whether the New York City Health and Hospitals Corporation (HHC) implemented the recommendations made in an earlier audit, Audit of the Health and Hospitals Corporation’s Collection Practices and Procedures Related to Medicaid Managed Care (MMC) / Health Maintenance Organizations (HMOs), issued October 6, 1997 (Audit No. ME96-081A). The earlier audit determined the extent to which HHC collects payments from HMOs for services provided by HHC to MMC patients. This follow-up report discusses the details of the recommendations of the previous audit report and the status of each recommendation.

The previous audit made 22 recommendations to HHC. Of the 22 recommendations, 11 were implemented, three were partially implemented, one was not implemented, and seven were no longer applicable. Those recommendations and their current implementation status are as follows:

• HHC should ask the City, through the Mayor’s Office of Medicaid Managed Care, to consider exercising the local option in the New York State Medicaid Managed Care plan, whereby a locality can require Medicaid managed care providers to contract with local public hospitals.
• HHC should regularly prepare a statistical report on emergency and clinic services provided to MMC patients who are enrolled in plans that do not contract with HHC. Using this information, HHC and other public health providers throughout the State should define a statistical threshold for identifying plans that receive an excessive amount of free services from local public hospitals or Health Department clinics. HHC can then use the information in the regular reports to pressure HMOs to make payments for legitimate HMO services.
• HHC, in conjunction with the City and with other local public hospitals or Health Department clinics, should pursue passage of New York State legislation requiring that Medicaid managed care plans reimburse them for legitimate, unreimbursed services provided to their members at the Medicaid fee-for-service rate. HHC should then use the information developed pursuant to Recommendation #2, above, to specifically target those HMOs with excessive uncontracted services for which reimbursement has not been received.
• The President of HHC should appoint a high-level individual to take charge of a task force or committee that would be responsible for further pursuing the problems and recommendations discussed in this report.
• The task force should test the billing process by entering dummy bills into its data processing system over a period of time, to see whether bills are actually being mailed out and arriving at their destinations.
• HHC should develop formal procedures requiring that hospitals be more aggressive in pursuing collection efforts for payments due from HMOs. These procedures should:

• Ensure that HMOs are billed within 30 days of the date of service.
• Ensure that HMOs that do not pay are billed again within 30 days of the first billing.
• Define collection efforts to be made in situations where HMOs do not pay after receiving the first two bills from HHC.

• HHC should consider reducing its standard from 30 days to seven days of the date of service—the non-governmental hospital standard—to increase its chances of securing payments from the HMOs.
• HHC should provide extensive training on Siemens Medical Solutions (SMS) and the procedures discussed above to all HHC personnel responsible for billing and collecting amounts owed to HHC from HMOs.
• HHC should closely monitor the hospital’s compliance with the above-mentioned procedures and determine if the collection rate has significantly improved.
• HHC should program SMS to automatically generate repeat bills to HMOs for unpaid services.
• HHC should consider using a private collection agency to pursue collection efforts for amounts owed to HHC by HMOs if the HHC collection rate does not significantly improve.
• Prior to transferring services to bad debt, HHC should require that hospitals review all relevant billing records to ensure that all required collection efforts were initiated.
• HHC should track individual hospital collection rates, hold each hospital accountable, and require that each report on why it is not collecting.
• The high-level task force discussed in Recommendation #4 should be directly responsible for ensuring that the necessary steps are taken to overhaul the billing system and to implement the recommendations made in this report.
• HHC should arrange for SMS to be programmed to indicate the Medicaid reimbursable rate for the appropriate service, as opposed to the current practice of posting a different rate, to ensure that SMS and the MMC accounts receivable reflect the true amount due from the HMOs.
• HHC should establish a data field in SMS to record the effective date that a patient enrolls in a MMC plan. This data field should also allow HHC to record dates when a patient transfers from one HMO to another, to ensure that the appropriate HMO is billed.
• HHC should review the computer tapes provided by private vendors on ancillary service to ensure that the information they provide corresponds to the information on SMS.
• HHC should ensure that the HHC’s MMC Accounts Receivable contains only HMO-billable services; thus, HHC should:

• Immediately review its MMC Accounts Receivable and program SMS to write-off all services that do not belong on the MMC Accounts Receivable because they are not eligible for any reimbursement—especially such services identified by the auditors as ancillary charges, contractual balances, capitated charges, and ambulance charges—to prevent the MMC Accounts Receivable from being cluttered and inflated by such data.
• Incorporate, for the long-term, monthly reviews of the MMC Accounts Receivable in HHC standard operating procedures. HHC should also program SMS to automatically write off services that do not belong to the MMC Accounts Receivable (such as ancillary charges, capitated charges, and ambulance charges that are not due from HMOs) to prevent MMC Accounts Receivable from being cluttered and inflated by such data.

• HHC should conduct periodic reviews of the data contained on SMS to ensure that services specifically covered by Medicaid (even though the patient is HMO-eligible) are billed to Medicaid and not the HMO.
• HHC should issue a memorandum to all hospitals reminding them about HHC’s bad debt policies.
• HHC should routinely monitor HHC hospitals’ adherence to the above policies.
• HHC should require that hospitals collect and analyze the following information to determine whether the HMOs are properly reimbursing HHC for services provided to their patients.

Specifically, HHC hospitals should:

• Obtain valid authorization numbers and referral slips from the HMOs for all emergency room and specialty care visits, and record this information on SMS.
• Keep a record of all attempts made on SMS to obtain valid authorization numbers and referral slips from HMOs.
• Where appropriate, post on SMS all payment denials and the reasons for such denials received from HMOs. HHC hospitals should also maintain copies of such denials, and record on SMS the services for which pre-authorization was obtained from HMOs and for which no payment or response was received.
• Conduct monthly analyses of services that were approved by the HMOs for which payments were denied. For these services, the staff should follow up with the HMO and attempt to obtain reimbursement.
• Review the above information to identify and take the necessary action against any HMO that routinely denies payment to HHC after HMOs pre-authorized these services.

This follow-up audit found that HHC has improved its billing and collection procedures. Also, HHC’s increasing use of electronic submission of claims data should further expedite the submission, review and payment process. However, HHC still needs to improve its posting of initial payments into its computer system and the timeliness of its initial billings to HMOs. Also HHC patient account directors and managers should monitor outstanding accounts and ensure that hospital care investigators promptly follow up to ensure payment from managed care plans.

To address the problems noted in this report, HHC should implement the recommendations of the previous audit that were not fully addressed. We believe that upon implementation of these recommendations HHC will have corrected the conditions cited in both the previous report and this follow-up report. The recommendations are repeated below, somewhat revised according to the findings of this report.

HHC should:

• Develop procedures to ensure that outpatient bills are mailed and arrive at their destinations.
• Develop formal collection procedures for inpatient accounts like those for outpatient accounts, as described in the Third Party Policy-Ambulatory Care Manual. Ensure that hospitals adhere to these procedures.
• Consider using private collection agencies to pursue collection efforts for amounts owed to HHC by HMOs.
• Prior to transferring services to bad debt, require that hospitals review all relevant billing records to ensure that all required collection efforts were initiated.

The matters covered in this report were discussed with HHC officials during and at the conclusion of this audit. A preliminary draft report was sent to HHC officials on April 15, 2003 and was discussed at an exit conference held on May 15, 2003. We submitted a draft report to HHC officials on May 19, 2003, with a request for comments. We received a written response from HHC officials on June 5, 2003.

In their comments, HHC officials agreed with the recommendations, stating, ‘The Corporate Facilities, with guidance and assistance from Revenue Management, will take the necessary steps to implement the recommendations cited in the audit report."