New York County Health Services Review Organization 50 West 23rd Street, New York, New York 10010 691-4300 PHYSICIAN ORGANIZATION FIGHTS WASTE IN MEDICAID PROGRAM New York County Health Services Review Organization (NYCHSRO), the federally mandated Professional Standards Review Organization (PSRO) for Manhattan, received confirmation this week from the City Comptroller's office that millions of dollars of Medicaid overpayments were made to Manhattan hospitals in 1977 and 1978. The Comptroller's audit, performed at NYCHSRO's request, showed that NYCHSRO's review determinations were being disregarded by the City's Human Resources Administration (HRA). The HRA, according to the report, had been paying for thousands of hospital inpatient days which NYCHSRO had identified as medically un necessary. The loss of city, state, and federal funds is estimated by the Comptroller to be $2.2 million for Manhattan and $11 million City-wide. Based on these findings, the Comptroller recommends that the HRA "institute recoupment actions to recover overpayments" and that the HRA "coordinate with NYCHSRO" in the future to prevent a recurrence. NYCHSRO commended the Comptroller's office for conducting the audit and for making recommendations to improve public accountability in the Medicaid program. NYCHSRO is one of approximately 200 physician "peer review" organizations in the United States funded by the federal government. Its objectives include quality and cost control of Medicaid and Medicare reimbursed services. NYCHSRO is presently carrying out other essential review activities in Manhattan hospitals, shared health facilities, and--planned for 1979--long-term care facilities. For further information contact: -30 Eleanore Rothenberg, Ph.D., November 27, 1978 RECE November 2, 1978 NOV 10 NYCH Office of the Comptroller Bureau of Audit and Control Re: Report on the Failure of Hospitals to Take Action Summary of Significant Observations Background The Professional Standards Review Organization (PSRO) program was authorized by Public Law 92-603. The purpose of the program is to assure that health care services paid for by Medicare and Medicaid conform to appropriate professional Standards and are delivered in the most effective and economical manner possible. Under the law, the Federal Department of Health, Education and Welfare (HEW) contracts with local nonprofit professional associations to evaluate patient medical care and determine whether the care is medically necessary, meets professionally recognized standards and is appropriately provided in the most economical setting. While the legislative mandate of the PSRO program is to review all institutional services, PSROS were directed by HEW to give priority to the review of inpatient hospital care. The New York County Health Services Review Organization II (NYCHSRO) is a PSRO which received about $2 million from HEW for the period January, 1977 to May, 1978 (the period covered by our audit) to review the appropriateness of various aspects of health care. NYCHSRO spent about $900,000 during this period for reviews of inpatient hospital care in the Borough of Manhattan. HEW has arrangements with other PSRO groups for similar reviews in the other boroughs of the City. The PSROS maintain resident staffs at various hospitals. New York City spends over $2 billion annually on Medicaid. The Federal Government pays one-half of the costs of Medicaid, with the State and City sharing the balance equally. Hospital and nursing home care account for 65 percent of Medicaid expenditures. To obtain Medicaid payments hospitals prepare a multi-copy Form W220B (Hospital Care Authorization and Claim) when a patient is admitted. One copy is retained by the hospital as its billing copy, with the balance of the form forwarded to the Bureau of Medical Assistance (BMA) a unit of the City's Human Resources Administration (HRA). BMA confirms whether the patient is Medicaid-eligible and returns the Form W2208 to the hospital. The PSROS certify the medical necessity of every Medicare, Medicaid and potential Medicaid-eligible patient's hospital stay. This certification is noted by the PSRO in Box 84 of Form w2203. The hospital is supposed to transcribe the FSRO certification onto the billing copy of Form 2208 and send it III to HRA's hospital control section for payment. Form W220B also provides space for the notation of periods of hospital stay which are not billable. To illustrate: A patient stayed 21 days in a hospital, but the PSRO determined that the patient should have been hospitalized for no more than 15 days. The form should show the actual stay of 21 days (Box 68), but also that 6 days are non-billable (Box 70); the bill would be only for 15 days (Box 71). Should the hospital bill for the entire 21 days, HRA is supposed to limit its payment to 15 days because Federal and State regulations prohibit reimbursement for days disallowed by a PSRO. The PSRO notation on Box 84 and the supporting notice of adverse determination (where applicable) provides HRA with the basis for paying only for the 15 days cited in the example. Thus, while Box 71 shows the number of billable days, HRA must make certain that the notation in Box 84 has been considered in determining the number inserted in Box 71. A "Notice of Adverse Determination" is prepared by PSRO when it takes exception to the medical necessity of a patient's hospitalization. Copies are distributed to the patient, the hospital and the attending physician. determination is disputed, a physician-consultant engaged by the PSRO arbitrates. If the PSRO's Should the hospital and/or patient continue to disagree with the PSRO's decision, a further appeal may be made to the Statewide Professional Standards Review Council IV for a bearing before an administrative law judge. An additional appeal can be made to REW. If HEW finds that a documented complaint against a PSRO is justified, the PSRO's authority can be suspended pending a full investigation. This audit was requested by NYCHSRO officials; they allege that the Human Resources Administration has been ignoring its determinations. Major Observations Our review disclosed that HRA overpaid more than $2.2 million (including about $550,000 in City funds) during the 17 months ended May, 1978 to various voluntary and municipal hospitals in Manhattan for hospital stays exceeding NYCHSRO determinations respecting reasonable periods of treatment. If this situation exists City-wide (and there is no reason to conclude that it does not), losses could exceed $11 million (including $2.75 million in City funds). We found widespread lack of control to assure that hospital bills are reduced to reflect adverse determinations by NYCHSRO. We found that some hospitals simply ignored NYCHSRC determinations and billed for the patient's full stay. Thus, a major initiative by the Federal Government to contain unreasonable hospital costs is simply not working. We noted the following deficiencies in our review of 204 out of 2,398 adverse determinations of the NYCHSRO. In only |