Firm Recovers over $500,000 in Overpayments to Hospitals

In a recent audit of payments made by a regional HMO to hospitals, the firm performing the recovery audit (with analytical and data modeling contributions from Guss Ginsburg of Beechnut Consulting Services) identified and recovered over half a million dollars in overpayments.  The overpayments were often the result of one or more of the following:

  • Incorrect billing by the provider-hospitals
  • Application of incorrect rules or contract terms by the HMO
  • Duplicate claims filed for the same patient procedure
  • Payments to ineligible dependents

For example, on one of the contracts the HMO had with an employer, the HMO would pay $950 per day for a well-baby delivery, with a limit of 2 days and nights stay in the hospital.  The hospital might send a bill to the HMO for its retail rate, which is considerably higher than the contract amount.  Or the hospital might care for the patient and newborn for an extra day or two, beyond the limit of care that the HMO contracted to reimburse. 

Another type of overpayment occurred when a Doctors’ Group would file and get paid for a claim for a patient procedure, in addition to a claim that was paid to the hospital.   For instance, a hospital staff anesthesiologist who also practiced as part of a Doctors’ Group would file a claim to the HMO, and get paid for it, in addition to the payment made to the hospital which also included payment for his services.  

Planning the Audit
The audit plan encompassed the following:

  • Scope of the audit
  • Gathering data from the HMO’s information system
  • Identifying potential overpayments
  • Verifying the claims process
  • Recovering overpaid amounts
  • Addressing system control weaknesses

The Audit Scope was to include reviewing all payments made on behalf of patient subscribers to hospitals and provider groups, going back for a three-year period.  Since most plans are negotiated for a calendar year, we reviewed each year separately.  If overpayments were also paid to patient subscribers, those payments were not included in the review.  Also considered were payments made on behalf of subscribers involved in accidents, since those claims should be submitted to other carriers such as the patient’s automobile insurance company.

The data provided by the HMO consisted of claims and payments records, patient records, and contract information for the various plans.  The claims data tracked all the data that is entered into the various HCFA forms (1500, Medicare, etc), which also included the amounts being billed by the providers.  The payment data matched up the line items on the claims with the payments.  Patient information consisted of dates of birth for the subscribers and all eligible dependents, employment and residence information, etc.   The contract information consisted of procedure codes and terms for paying benefits, as well as policy limits, copayments, and deductibles.   They also had information to match up patients with the contract plans. 

We set up our auditing model to facilitate identification of the types of overpayments listed in the introductory paragraph above.  For each category we developed queries to interrogate the data, providing us with all the pertinent information to document any overpayments. 

As an example of the first category (incorrect billing by the provider-hospitals), one initial query was to show all the payments that were equal to or greater than the claim amounts, on the theory that providers usually billed their standard public amounts for procedures, which are generally higher than what they are able to negotiate with the HMO.  Although this was not always the case, we were able to identify certain hospitals and provider groups who always billed their public rates regardless of any contract agreements. 

For whatever overpayments we identified, we printed out or made copies of the appropriate claims and claim payment information, and gathered any medical records and patient information necessary to support the overpayment claim.  We then presented the information to the hospital or provider, and made arrangements to recover the overpaid amounts. 
Finally, when a control weakness in the HMO’s process was identified, such as when a claim might be approved for payment that was higher than the amount allowed by the terms of the contract, we would identify the deficiency to the HMO.  We would recommend appropriate action to correct the deficiency going forward, such as additional training or perhaps software modifications to capture the terms of the contract in the validation process.