Even as state Medicaid programs are faced with shrinking budgets and the prospect of adding thousands of beneficiaries, many states are overlooking millions of recoverable taxpayer dollars owed to them by hospitals and clinics.
The good news is that most hospitals are eager to repay the money; they just need help figuring out how much they owe and why they owe it. And, almost as good, Medicaid officials in North Carolina and other states can quickly take steps to recover these funds in a way that will strengthen, not strain, their valued relationships with the hospitals that serve Medicaid beneficiaries.
As elected officials wrestle with the best way to fund the massive federal and state health care entitlement program, which is managed by individual states, Medicaid agencies can take action immediately to shore up their beleaguered programs. By doing so, they can reward taxpayers, satisfy governors and legislatures that have stepped up their scrutiny, and avoid the politically incendiary steps of reducing benefits or cutting provider reimbursements.
How? By undertaking hospital-based "credit balance reviews," an arcane-sounding but easy-to-understand process - usually handled by a vendor partner on behalf of a Medicaid agency - that clears up the balance sheets of both Medicaid and participating hospitals on an ongoing basis.
Credit balance reviews address situations in which a health care provider, most commonly a hospital, is paid both by Medicaid and private insurers for the same patient visit or procedure. By law, if Medicare or private insurers pay for the care after Medicaid has paid the same bill, Medicaid, as the payer of "last resort," must be reimbursed. Conservative estimates put the total of credit balance overpayments due to Medicaid programs at more than $120 million nationwide. That's taxpayer money that should be repaid.
Fraud is sometimes a concern, but the majority of hospitals are not being dishonest or even cagey in the collection of these duplicate payments. Instead, overpayments mostly occur because of the timing of reimbursements, a hospital's reconciliation schedule or administrative error. Ideally, hospitals would realize on their own that they have been overpaid and remit those excess funds to Medicaid programs. But that normally doesn't happen; hospitals process thousands of daily transactions and few have resources to help them detect credit balance overpayments.
A small number of states are taking action. For example, Iowa recently announced that it had realized more than $23 million in total Medicaid program integrity savings for FY 2011, of which $6.5 million came from credit balance recoveries, the first time the state had implemented a hospital-based credit balance program for Medicaid.
Here's how the program works: a private company provides Iowa with onsite assistance at several major hospitals, using experts who work side-by-side with hospital staff to identify overages and duplicate payments for which Medicaid should be reimbursed. When overpayments are identified, the vendor's analysts handle the paperwork and the hospital staff signs off on the payback to the Medicaid agency.
This "on-site" credit balance program means no more demand letters from the Medicaid agency and no more disruptive audits. Companies successfully perform credit balance reviews for commercial payers at hospitals across the country, including many in North Carolina.
There is no public information on credit balance recovery statistics for the North Carolina Medicaid program, and while the state does perform credit balance audits, it does not engage in the more efficient and productive hospital-based staff approach to credit balance reviews - perhaps it should.
A comparison with Iowa bodes well for North Carolina. Both programs are entirely "fee-for-service," which means that providers are paid for each health care procedure or service they render on behalf of beneficiaries. Iowa spends about $3.5 billion per year and collected $6.5 million last year using hospital-based credit balance experts. If North Carolina, which has a $10.3 billion Medicaid program, recovered the same percentage as Iowa, it could realize anywhere from $12 million to $20 million in recoveries using the same hospital-based process.
A comprehensive credit balance review process produces a rare "everyone wins" situation in the health care system. The hospital rids itself of a remittance that, under federal regulations, must be returned within 60 days of its identification. The Medicaid program benefits by recovering much needed funds quickly. Taxpayer money is accounted for and redirected for proper program needs. Finally, Medicaid agencies can contract with credit balance vendors so the companies are paid only if they recover dollars for the state.
It's just one example of the low-hanging fruit available to strengthen the balance sheet, safeguard taxpayer dollars and improve the reputation of this ever-growing, often-criticized public health program.
Robert "Bo" Nowell, a former Medicaid program integrity director for the State of North Carolina, is currently a senior director for OptumInsight, a health information, technology and consulting company that provides services, including credit balance reviews, for state Medicaid agencies.
