FY 2017 HHS Agency Financial Report
Topics in this Section: Other Financial Information | Reduce the Footprint | Summary of Financial Statement Audit and Management Assurances | Civil Monetary Penalty Adjustment for Inflation | Grants Oversight & New Efficiency Act Report | Payment Integrity Report (Section 1-10 | 11 | 12-13) | FY 2017 Top Management and Performance Challenges Identified by the Office of Inspector General
12.0 Superstorm Sandy Reporting Information
Superstorm Sandy was a major hurricane that struck the United States’ eastern seaboard in October 2012 and caused extensive damage from Florida to Maine. In response to this disaster, Congress passed the Disaster Relief Act, which provided HHS $747 million allocated among multiple programs across five Divisions. Because funding of this type and magnitude often carries additional risk, the Disaster Relief Act and OMB guidance require all federal programs or activities receiving funds to calculate and report an improper payment estimate. Once a program’s Superstorm Sandy funding has been spent, agencies are no longer required to report improper payment information. In FY 2017, HHS halted reporting error rate information for three programs—NIH Research, SAMHSA, and ASPR Research—that expended all Disaster Relief Act funding. HHS expects FY 2017 will be the last year that improper payment information will be reported for any Disaster Relief Act programs. Information on the remaining Disaster Relief Act programs’ improper payment methodologies, results, and corrective actions can be found on subsequent pages.
12.10 Head Start
12.11 Head Start Statistical Sampling Process
Head Start received approximately $95 million in Disaster Relief Act funding to provide services, training and oversight, and construction assistance to affected grantees. Every Superstorm Sandy grantee receives an erroneous payments onsite monitoring visit in the quarter following the quarter when funds are spent, or as soon thereafter as possible. Superstorm Sandy transactions for each quarter are reviewed using a standard onsite monitoring tool to identify potential and actual erroneous payments. Additional information on Head Start’s statistical sampling process can be found on page 232 of HHS’s FY 2016 AFR.
During FY 2017 grantees continued to complete significant facilities projects, primarily completing rebuilding of facilities substantially destroyed by Superstorm Sandy. A major challenge to grantees was the expenditure of funds within 2 years of award, particularly as project timelines were extended to reflect unforeseen delays (like permitting delays and scarcity of needed materials). Grantees made significant expenditures as projects concluded and grantees made final payments to contractors by August 31, 2017.
The Head Start gross and net improper payment estimate for FY 2017 is 0 percent or $0.
12.12 Head Start Root Causes and CAP
Corrective Actions to Address Root Causes
No improper payments were identified for the review period. HHS worked closely with grantees to ensure that projects finished on time and associated funds were spent within their two year expenditure period.
12.20 Social Services Block Grant (SSBG)
12.21 SSBG Statistical Sampling Process
The SSBG program received $474.5 million in Disaster Relief Act funding to address necessary expenses resulting from Superstorm Sandy, including services for individuals; and repair, renovation and rebuilding of eligible facilities. HHS awarded the SSBG Disaster Relief Act funds to five states affected by Superstorm Sandy, and three states (Connecticut, New Jersey, and New York) were reviewed under the improper payment methodology as their allocations represented 99 percent of all SSBG Disaster Relief Act funds.
Because the states determine the types of services and eligibility for these services, as permitted by the SSBG law and regulations, there was considerable variation in states’ use of these funds. To account for this variation, HHS developed a two-fold (bifurcated) improper payment methodology to review the use of SSBG Disaster Relief Act funds in three states. The two methodologies are a case record review (that examined payments or benefits provided to or on behalf of individuals, families and households based on specific eligibility criteria) and a vendor payment review (that examined payments to service vendors to assess if the vendors met the eligibility requirements for the payments).
For the FY 2017 review period (July 1, 2016 to June 30, 2017), HHS reviewed 245 records. HHS completed case record reviews in New Jersey only since it was the only state still making payments eligible for that review (HHS reviewed 98 case records in New Jersey). Also, HHS completed vendor payment reviews in Connecticut, New Jersey, and New York (HHS reviewed 147 vendor payments across the three states—15 payments in Connecticut, 48 payments in New Jersey, and 84 payments in New York). HHS consolidated its review findings and calculated a national SSBG Disaster Relief Act improper payment estimate from the aggregate findings across all three states.
The SSBG gross and net improper payment estimate for FY 2017 is 0.014 percent or $8,674.02.
The error rate for the case record reviews is 0.16 percent, while the error rate for the vendor payment reviews is 0 percent.
12.22 SSBG Root Causes and CAP
Two of the 245 records reviewed had an improper payment. HHS categorized both errors (representing 100 percent of the estimated improper payments) as administrative or process errors due to state or local agency. These errors included: (1) an incorrect payment to a previous landlord after a beneficiary moved to a new rental residence; and (2) an incorrect payment amount of the maximum allowable benefit for 1 month, instead of the rental amount stated on the lease.
Corrective Actions to Address Root Causes:
New Jersey completed recoupment efforts for the two overpayments identified. As the grants ended on September 20, 2017, HHS will work with New Jersey and other states to continue to gather lessons learned and apply those to any similar future efforts.
13.0 Recovery Auditing Reporting
HHS developed a risk-based strategy to implement IPERA’s recovery auditing provisions. Specifically, HHS focuses on implementing—or providing a framework for states to implement—recovery audit programs in Medicare and Medicaid, which accounted for 86 percent of HHS’s outlays in FY 2017. The use of RACs is one of the tools HHS uses to enforce Medicare requirements. HHS believes RACs help reduce improper payments and help educate providers on Medicare policies. HHS also believes there is a sentinel effect in the provider community with more providers billing accurately because of the possibility of a RAC audit in the future. HHS is progressing in recovering improper payments in Medicare and Medicaid and, most importantly, implementing corrective actions to prevent improper payments, as described above and below. In addition, in FY 2017 HHS began reviewing and cataloging additional opportunities to utilize RACs outside of Medicare and Medicaid with a few programs. HHS will consider lessons learned from these experiences as it continues to implement this requirement.
Medicare FFS RACs
Section 302 of the Tax Relief and Health Care Act of 2006 required HHS to implement the Medicare FFS RAC program in all 50 states no later than January 1, 2010. RACs are approved to review a variety of claim types, except for inpatient hospital patient status reviews, which are limited to only those providers referred by the Quality Improvement Organizations for exhibiting persistent noncompliance with Medicare policies. On October 31, 2016, HHS awarded five new Medicare FFS RAC contracts that incorporated several program enhancements developed in response to industry feedback:
- Reducing the complex review timeframe to 30 days and withholding the contingency fee if the RAC does not meet its review deadline;
- Requiring the RAC to wait 30 days to allow for a discussion request from the provider after identifying an improper payment before sending the claim to the MAC for adjustment;
- Confirming receipt of a discussion request and other written correspondence within one business day;
- Broadening review topics to all provider types and requiring reviews of topics referred by HHS; and
- Enhancing the information available on the provider web portals.
In FY 2017, the Medicare FFS RAC program identified approximately $33.78 million in overpayments and recovered $24.33 million. Policy changes regarding the payment and treatment of inpatient hospital claims and a delay in awarding new contracts resulted in fewer reviews in FY 2017 compared to previous years. Meanwhile, amounts that HHS identified in previous years continue to be collected. During FY 2017, the majority of Medicare FFS RAC collections were from Diagnosis Related Group validations and outpatient therapy reviews.
In addition to using the Medicare FFS RACs to identify overpayments, HHS also uses Medicare FFS RAC findings to prevent future improper payments. For example, in FY 2017, HHS released quarterly Provider Compliance Newsletters that offered detailed information on seven findings identified by the Medicare FFS RACs. Also, HHS used these findings to implement local and/or national system edits to prevent improper payments. More information can be found at Medicare FFS RAC program.
Medicare Secondary Payer (MSP) RACs
The MSP RAC, known as the MSP Commercial Repayment Center (CRC), reviews information collected by HHS regarding beneficiaries that had or have primary coverage through an employer-sponsored Group Health Plan (GHP) and situations where a Non-Group Health Plan (NGHP), such as a Workers’ Compensation entity or No-Fault insurer, has or had primary payment responsibility. When GHP information is incomplete, Medicare FFS may mistakenly pay for services as the primary payer. The CRC recovers these mistaken payments from the entity that had primary payment responsibility (typically the employer or other plan sponsor, insurer, or claims processing administrator). At the end of FY 2016, the CRC workload expanded to include the recovery of certain conditional payments made by Medicare FFS until HHS identifies an NGHP with primary payment responsibility, when the CRC initiates recovery of these conditional payments. During FY 2017, HHS phased in the implementation of this new recovery program and fully implemented the program by March 2017.
In FY 2017, the CRC identified approximately $560.06 million and collected $160.78 million in mistaken payments. More information can be found at CRC.
Medicare Part C and Part D RACs
Section 1893(h) of the Social Security Act expanded the RAC program to Medicare Parts C and D. As discussed in Section 11.22, HHS is exploring a Medicare Part C RAC program that will fit into the larger Medicare Part C program integrity efforts.
The Part D RAC program became fully operational in FY 2012. Since its launch, the Part D RAC has recouped overpayments made as a result of prescriptions written by excluded or unauthorized providers and improper refills of Drug Enforcement Agency scheduled drugs. The Medicare Part D RAC contract ended in December 2015, but an administrative and appeals option period allows the RAC to complete work on outstanding audit issues until the end of December 2017. Because the option period does not permit new audit work, no new improper payments were identified by the Part D RAC during FY 2017. HHS is committed to ensuring program integrity for the Part D program and is exploring options for the Part D RAC. The Part D RAC recouped approximately $0.30 million in overpayments in FY 2017 that were identified in previous years. More information can be found at Medicare Part C and Part D RAC programs.
State Medicaid RACs
Section 1902(a)(42)(B) of the Social Security Act required states to submit assurances by December 31, 2010 that their programs meet the statutory requirements to establish State Medicaid RAC programs. States were required to implement RAC programs by January 1, 2012. Thus, FY 2017 is the fifth full federal FY of reporting State Medicaid RAC recoveries. In FY 2017, State Medicaid RAC federal-share recoveries totaled $32.52 million. State Medicaid RAC federal-share recoveries include overpayments collected, adjusted, or refunded to HHS, as reported by states on the CMS-64.
From inception of the Medicaid RAC program in FY 2012 to the end of FY 2017, 47 States and the District of Columbia had cumulatively implemented Medicaid RAC programs to identify and recover overpayments and identify underpayments in their Medicaid programs. However, each state has the flexibility to tailor its RAC program where appropriate with guidance from HHS. For example, several states that had implemented Medicaid RAC programs ended their RAC programs when HHS approved an exception due to the high proportion of beneficiaries enrolled in Medicaid managed care compared to FFS. As a result, 12 states currently have time-limited HHS-approved exceptions to Medicaid RAC implementation due to high managed care penetration, resulting in a total of 38 states and the District of Columbia that currently have RAC programs.
Recovery Auditing Reporting Tables
OMB Circular A-136 requires agencies to provide detailed information on their recovery auditing programs, as well as other efforts related to the recapture of improper payments. Some of our programs have results to report in this area and those results are included in the following tables. If HHS excluded a program from a table, it is because it does not have results in that area.
Table 3
Overpayments Recaptured with and without Recapture Audit Programs
FY 2017 (in Millions)
| Overpayments Recaptured through Payment Recapture Audits | Overpayments Recaptured Outside of Payment Recapture Audits |
||||
|---|---|---|---|---|---|
| Program or Activity | Amount Identified | Amount Recaptured Note (1) | CY Recapture Rate | Amount Identified | Amount Recaptured |
| CMS Error Rate Measurements Note (2) |
$24.57 | $19.38 | |||
| Medicare FFS Recovery Auditors | $33.78 | $24.33 | 72% | ||
| Medicare Secondary Payer Recovery Auditor | $560.06 | $160.78 | 29% | ||
| Medicare Contractors Note (3) |
$14,210.77 | $11,410.06 | |||
| Medicare Part C and Part D Note (4) |
$81.54 | $81.54 | |||
| Medicare Part D Recovery Auditors | N/A | $0.30 | N/A | ||
| Medicaid Integrity Contractors - Federal Share Note (5) |
$21.60 | $10.69 | |||
| State Medicaid Recovery Auditors - Federal Share Note (6) |
N/A | $32.52 | N/A | ||
| ACF Error Rate Measurements and Eligibility Reviews Note (7) |
$1.16 | $1.26 | |||
| ACF OIG Reviews | $0.305 | $17.06 | |||
| ACF Single Audits Note (8) |
$59.29 | $13.99 | |||
| HRSA National Health Service Corps | $5.19 | $12.24 | |||
| TOTAL | $593.84 | $217.93 | 37% | $14,404.43 | $11,566.22 |
Notes:
- The amount reported in the Amount Recaptured column is the amount recovered in FY 2017, regardless of the year HHS identified the overpayment.
- The CMS Error Rate Measurements row includes recoveries from Medicare FFS (via the CERT program), Medicaid, and CHIP. The actual overpayments identified by the CERT program during the FY 2017 report period were $21,280,789.91. The identified overpayments are recovered by the MACs via standard payment recovery methods. As of the report publication date, MACs reported collecting $18,218,737.10 or 85.61 percent of the actual overpayment dollars. For Medicaid and CHIP, HHS works closely with states to recover overpayments identified from the FFS and managed care claims sampled and reviewed. Recoveries of Medicaid and CHIP improper payments are governed by the Social Security Act and related regulations under which states must return the federal share of overpayments. States reimburse HHS for the federal share of overpayments. Section 1903(d)(d) of the Social Security Act allows states up to one year from the date of discovery of an overpayment for Medicaid and CHIP services to recover, or to attempt to recover, such overpayment before making an adjustment to refund the federal share of the overpayment. The actual overpayments identified by the PERM program during the FY 2017 report period were $2,528,749.13 for Medicaid and $757,063.35 for CHIP. The amounts recovered were $1,117,746.00 for Medicaid and $40,365.00 for CHIP.
- This total reflects amounts reported by the Medicare FFS Contractors excluding the amounts reported for the Medicare FFS Recovery Auditors program and the Medicare FFS Error Rate Measurement program, which HHS reports separately in this table.
- The values in the Medicare Part C and Medicare Part D row represent overpayments reported and returned by Medicare Advantage organizations and Part D sponsors. The actual overpayments identified and recovered during the FY 2017 report period were $78,705,010.00 for Medicare Part C and $2,833,663.00 for Medicare Part D.
- For Medicaid, the Medicaid Integrity Contractors identified total overpayments that include both the federal and state shares. However, HHS reports only the actual federal share across audits.
- For the State Medicaid Recovery Auditor row, states are only required to report the amount of recoveries, and not the amount of improper payments identified or recovery rates. The State Medicaid Recovery Auditors Amount Recaptured cell represents the federal share of the state recoveries as of the publication date of the AFR. The final amount recaptured for FY 2017 as a result of activities by State Medicaid Recovery Auditors will be reported in the Annual Medicare and Medicaid Program Integrity Report to Congress for FY 2017.
- The ACF Error Rate Measurements and Eligibility Reviews row contains information for Foster Care, Child Care, and Superstorm Sandy SSBG identified or recovered amounts during the current reporting year. As a result of conducting Foster Care eligibility reviews in 12 states between July 2016 and June 2017, HHS recovered over $1.11 million in Title IV-E improper payments (comprised of $791,744.00 in disallowed maintenance payments and $317,018.00 in disallowed administrative payments). For Child Care, states are required to recover child care payments that are the result of fraud and have discretion as to whether to recover misspent funds that were not the result of fraud, such as in cases of administrative error identified in the improper payments review. States reported identifying $0.048 million and recovering $0.051 million. For Superstorm Sandy SSBG, states recouped $102,892.45, which included overpayments identified in the FY 2017 sample ($1,275.00) as well as previous years. HHS will contact grantees to determine whether the funds will be allocated towards an allowable activity or repaid.
- The ACF Single Audits row includes information for all ACF programs subject to federal audit requirements.
Table 4A
Disposition of Funds Recaptured Through Payment Recapture Audit Programs
FY 2017 (in Millions) Note (1)
| Program or Activity | Amount Recaptured | Agency Expenses to Administer the Program | Payment Recapture Auditor Fees | Original Purpose Note (2) |
Returned to Treasury |
|---|---|---|---|---|---|
| Medicare FFS Recovery Auditors | $24.33 | $49.64 | $10.95 | ($62.44) Note (3) |
N/A |
| Medicare Secondary Payer Recovery Auditor | $160.78 | $4.02 | $24.98 | $131.78 | N/A |
| Medicare Part D Recovery Auditors | $0.30 | N/A | $0.08 | $0.21 | N/A |
| State Medicaid Recovery Auditors - Federal Share Note (4) |
$32.52 | N/A | N/A | N/A | $32.52 |
| Total | $217.93 | $53.66 | $36.01 | $69.55 | $32.52 |
Notes:
- HHS did not have any amounts that were used for financial management improvement activities or the OIG.
- Funds included under the Original Purpose column were returned to the Medicare Trust Funds after taking into consideration agency expenses to administer the program and recovery auditor contingency fees. In addition, the Medicare FFS Recovery Auditors Original Purpose cell also takes into consideration underpayments to providers that were identified and corrected ($6.74 million) and amounts collected in prior years but overturned on appeal in FY 2017 ($19.44 million).
- The negative original purpose amount is composed of amounts returned to the Medicare Trust Funds in previous years and does not mean the program has an overall negative return on investment.
- The state Medicaid recovery auditors’ row only includes information on the federal share of recoveries, which are returned to Treasury. States do not report information to HHS on how the state portions of recoveries are used.
Table 4B
Aging of Outstanding Overpayments Identified in the Payment Recapture Audit Programs
| Program or Activity | CY Amount Outstanding (0 to 6 months) |
CY Amount Outstanding (0 to 6 months) % |
CY Amount Outstanding (6 months to 1 year) |
CY Amount Outstanding (6 months to 1 year) % |
CY Amount Outstanding (over 1 year) |
CY Amount Outstanding (over 1 year) % |
|---|---|---|---|---|---|---|
| Medicare FFS Recovery Auditors Note (3) |
$0.08 | <0.01% | $7.08 | 0.4% | $1,683.24 | 99.6% |
| Medicare Secondary Payer Recovery Auditor Notes (4) and (5) |
$355.11 | 80.7% | $84.79 | 19.3% | $0.00 | 0% |
| Medicare Part D Recovery Auditor Note (6) |
N/A | N/A | N/A | N/A | N/A | N/A |
| Total | $355.19 | 16.7% | $91.87 | 4.3% | $1,683.24 | 79.0% |
FY 2017 (in Millions)Notes (1) and (2)
Notes:
- The state Medicaid recovery auditors are not included in this table since states do not report information to HHS that would allow the Department to calculate the aging of overpayment amounts that are currently outstanding.
- HHS did not have any amounts that were determined not to be collectable.
- Under the Medicare FFS recovery auditors program, recovery of identified overpayments cannot begin until the overpayment is at least 41 days old. Therefore, the CY Amount Outstanding (0-6 months) includes identified overpayments that HHS cannot begin collecting.
- The MSP recovery auditor maintains debts established under prior MSP recovery programs; consequently, collections exclusively related to mistaken payments identified by the MSP recovery auditor does not directly correlate to the amount outstanding.
- The amount of outstanding payments identified by MSP recovery auditor included in this table reflects the outstanding balances on debts identified in FY 2017.
- Recoupments of FY 2017 Part D overpayments will not begin until the appeals process is complete. The appeals process is ongoing, but is expected to be completed during FY 2018. However, as stated in Section 13.0, HHS recovered $0.30 million in overpayments that the Part D RAC identified in previous years.
FY 2017 TOP MANAGEMENT AND PERFORMANCE CHALLENGES IDENTIFIED BY THE OFFICE OF INSPECTOR GENERAL
The Reports Consolidation Act of 2000, Public Law 106-531, requires the Office of Inspector General (OIG) to identify top management challenges, assess the Department’s progress in addressing each challenge, and submit this statement to the Department annually.
The OlG’s top management and performance challenges for fiscal year 2017 are:
- Ensuring Program Integrity in Medicare
- Ensuring Program Integrity in Medicaid
- Curbing the Opioid Epidemic
- Improving Care for Vulnerable Populations
- Ensuring Integrity in Managed Care and Other Programs Delivered Through Private Insurers
- Improving Financial and Administrative Management and Reducing Improper Payments
- Protecting the Integrity of Public Health and Human Services Grants
- Ensuring the Safety of Food, Drugs, and Medical Devices
- Ensuring Program Integrity and Quality in Programs Serving American Indian and Alaska Native Populations
- Protecting HHS Data, Systems, and Beneficiaries from Cybersecurity Threats
See the full report on the OIG site at: https://oig.hhs.gov/reports-and-publications/top-challenges/2017/
Also see these sections of the Agency Financial Report:
- Section I: Management, Discussion and Analysis
- Section II: Financial Section
- Section III: Other Information - Subsection 1
- Section III: Other Information - Subsection 2
- Section III: Other Information - Subsection 3
- Section III: Other Information - Subsection 4
- Appendices
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