Final Tobacco Audit Report 1-12-05
22 Pages
English

Final Tobacco Audit Report 1-12-05

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SUMMARY REPORT ONTHE RESULTS OF THE INDIVIDUAL REVIEWSOF88 HOSPITAL FACILITIESRECEIVING EXTRAORDINARY EXPENSEPAYMENTS FROM THEDEPARTMENT OF PUBLIC WELFAREIN JUNE 2003TABLE OF CONTENTSPAGELetter from the Auditor General.................................................................................…...... 1Background ….…………………………………..…………………………………..….. 3Audit Scope, Objective and Methodology………………………………………………… 3Summary of Findings and Recommendations ..…...............................……………...……. 5Exhibit 1 …………...…........................................................................…………….....…. 7Exhibit 2 11Exhibit 3 13Department of Public Welfare’s Response ..…................................................…………… 15Pennsylvania Health Care Cost Containment Council’s Response ………………………. 17Report Distribution ...…........................................................................…………….....…. 19January 12, 2005The Honorable Edward G. RendellGovernorCommonwealth of PennsylvaniaHarrisburg, Pennsylvania 17120Dear Governor Rendell:The Tobacco Settlement Act of 2001 (Act 77) mandated the Department of Public Welfare(DPW) to make payments to hospitals for a portion of uncompensated care services provided bythese facilities. In June of 2003 the Department of Public Welfare calculated payment entitlementsof $14,352,130 for 88 facilities under an approach to funding hospitals for uncompensated carecalled extraordinary expense. The payments ...

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SUMMARY REPORT ON THE RESULTS OF THE INDIVIDUAL REVIEWS OF 88 HOSPITAL FACILITIES RECEIVING EXTRAORDINARY EXPENSE PAYMENTS FROM THE DEPARTMENT OF PUBLIC WELFARE IN JUNE 2003
TABLE OF CONTENTS
PAGE
Letter from the Auditor General.................................................................................…...... 1
Background ….…………………………………..…………………………………..….. 3
Audit Scope, Objective and Methodology………………………………………………… 3
Summary of Findings and Recommendations ..…...............................……………...……. 5
Exhibit 1 …………...…........................................................................…………….....…. 7
Exhibit 2 …………...…........................................................................…………….....…. 11
Exhibit 3 …………...…........................................................................…………….....…. 13
Department of Public Welfare’s Response ..…................................................……………
Pennsylvania Health Care Cost Containment Council’s Response ……………………….
Report Distribution ...…........................................................................…………….....….
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January 12, 2005
The Honorable Edward G. Rendell Governor Commonwealth of Pennsylvania Harrisburg, Pennsylvania 17120 Dear Governor Rendell: The Tobacco Settlement Act of 2001 (Act 77) mandated the Department of Public Welfare (DPW) to make payments to hospitals for a portion of uncompensated care services provided by these facilities. In June of 2003 the Department of Public Welfare calculated payment entitlements of $14,352,130 for 88 facilities under an approach to funding hospitals for uncompensated care called extraordinary expense. The payments were based on claims data submitted by the hospitals to the Pennsylvania Health Care Cost Containment Council. The Department of the Auditor General performed reviews at all 88 facilities receiving the June 2003 extraordinary expense payments. The purpose of our reviews was to determine whether the hospitals could substantiate that the claims they had submitted as extraordinary expense-eligible were in fact not paid by the patient or third party payors such as Medicare, Medicaid or Blue Cross. The results of our review determined that $7,270,877 of the payments received by the hospitals should be returned to the Commonwealth. The Department of Public Welfare can now pay facilities for 100 percent of their unreimbursed costs eligible for extraordinary expense reimbursement, i.e. $7,081,253 rather than only a percentage of such eligible costs as was paid originally. Once the redistribution is completed, the Department of Public Welfare will have available for reuse $7,270,877 from the $14,352,130 originally calculated payment entitlements under the extraordinary expense program. This report is a summary of our findings from the 88 reviews and includes our recommendations for improving the program and addressing the overpayment issue. We will be sending a copy of this report to Navigant Consulting, Inc. (formerly Tucker Alan Inc.), the firm hired by the Department of Public Welfare to evaluate the current payment methodology in place to determine the extent to which payments under the Tobacco Settlement Act of 2001 (Act 77) are made to hospitals with the greatest uncompensated care burden. Sincerely, Robert P. Casey, Jr. Auditor General
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BACKGROUND Beginning in June 2002, hospitals that qualified for payments under the Tobacco Settlement Act of 2001 (Act 77) could receive funds using either an uncompensated care approach or an extraordinary expense approach. This was a change from the initial payments to hospitals made in August 2001 from the Tobacco Settlement Act of 2001 (Act 77), which utilized only the uncompensated care approach. The level of uncompensated care at each hospital was determined by using three-year averages from five main data elements (for a total of fifteen data elements). These data elements were uncompensated care costs, net patient revenues, Medicare supplemental security income days, Medical Assistance days and total inpatient days. The other method to qualify for reimbursement would be if a hospital qualified for an extraordinary expense payment based on its number of qualified claims. Qualified claims were those claims in which the cost of the claim exceeded twice the average cost of all claims for that particular facility and for which the facility never received payment for the services provided. The Department of Public Welfare used the claims data submitted by the hospitals to the Pennsylvania Health  Care Cost Containment Council to calculate the payment entitlements it made to the 88 facilities in June 2003 for extraordinary expense. AUDIT SCOPE, OBJECTIVE AND METHODOLOGY The Department of the Auditor General performed reviews at all 88 facilities that received the June 2003 extraordinary expense payments. The purpose of our reviews was to determine whether the hospitals could substantiate that they received no compensation from the patient or third party payors such as Medicare, Medicaid or Blue Cross for the claims submitted as extraordinary expense-eligible. In conducting our reviews we allowed hospitals to replace invalid claims with valid claims that had not initially been reported. The methodology in support of our objective included:  Reviewing Chapter 11 of the Tobacco Settlement Act of 2001 (Act 77) and other pertinent information.  Reviewing hospital charity care and bad debt policies and procedures.  Interviewing hospital personnel about the procedures followed to determine the patient’s payor classification status.  Verifying receipt of the tobacco payment by the hospital.  Verifying the accuracy of the claims data submitted by the hospitals to the Pennsylvania Health Care Cost Containment Council and subsequently by the Pennsylvania Health Care Cost Containment Council to the Department of Public Welfare, as well as the cost to charge ratios utilized by the Department of Public Welfare.
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AUDIT SCOPE, OBJECTIVE AND METHODOLOGY (Continued)
 
 
 
 
Examining patients’ records to verify self-pay status and to determine that no other payor made payments.
Verifying claims met the minimum claim charge to qualify as extraordinary expense.
Reviewing any additional hospital claims not originally submitted to determine eligibility.
Calculating the hospitals’ tobacco payments based on revised information.
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Summary of Findings 1.  Our reviews revealed that of 744 extraordinary expense claims reported by the hospitals, 438 claims were valid (including new claims allowed at the time of our reviews). This represents a 41 percent reduction to the number of claims initially reported and raises significant concerns about the integrity of the reported data. (See Exhibit 1.) We allowed 37 facilities to include 147 additional claims that were not originally reported for inclusion in the original universe of claims. (See Exhibit 2.) If we had not included these claims, the overall decrease to the original universe of claims would have been 61 percent compared to the 41 percent reduction noted above. 2.  Our review of all 88 facilities determined that the hospitals reported a total incurred cost of $14,527,177 for extraordinary claims but the total qualifying for extraordinary expense reimbursement was actually $7,081,253. This represents a 51 percent decrease in the value of the originally reported claims and again raises concerns about the integrity of the reported data. (See Exhibit 1.) 3.  Our individual reviews of the 88 facilities determined that $7,270,877 of the $14,352,130 payment entitlements calculated by the Department of Public Welfare for extraordinary expense in June 2003 should be returned to the Commonwealth because the facilities could not support their entitlement to the funds received. The key problem we uncovered when reviewing a facility’s extraordinary expense claims was the initial payor designation given these claims when patients began hospital stays was never updated to reflect changes which occurred in the patient’s initial payor designation during or after their stays in a hospital. This resulted in substantial disallowances at the time of our reviews. This situation can be improved if hospitals monitor changes in their extraordinary expense claim designations and the Pennsylvania Health Care Cost Containment Council, with the cooperation of the Department of Public Welfare, expands the verification process through which it would be willing to accept updated data. 4. The results of our review create the following situation: The Department of Public Welfare can now pay facilities for 100 percent of their unreimbursed costs eligible for extraordinary expense reimbursement, i.e. $7,081,253 (Exhibit 3) rather than only a percentage of such eligible costs as was paid originally. Once the redistribution is completed, the Department of Public Welfare will have available $7,270,877 from the $14,352,130 originally calculated payment entitlements under the extraordinary expense program.
Recommendations 1.  The Department of Public Welfare should continue to work closely with the Pennsylvania Health Care Cost Containment Council and hospital providers to develop an additional, electronic process for updating and verifying the hospital discharge (claims) data used to calculate the extraordinary expense payments. This will help reduce the error rates found during the course of our reviews.
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Recommendations – (Continued) 2.  The Department of Public Welfare should take the necessary steps to collect any overpayments or to reimburse any facilities for any underpayments based on our audited data. 3.  The Department of Public Welfare should make a prompt decision on whether any of the facilities will have to return interest in the case of overpayments or receive interest in the case of underpayments based on our audited data. 4.  We continue to believe the Tobacco Settlement Act of 2001 (Act 77) should be amended to clarify that the amounts reported for charity care claims submitted by hospitals to the Pennsylvania Health Care Cost Containment Council should be offset by any payments made by patients or on patients’ behalf in order to prevent facilities from receiving payments in excess of the cost of the claim. 5.  Based on the error rates encountered during our reviews, any future extraordinary expense payments should be considered interim in nature and not considered as a final payment until they are audited. 6.  The Department of Public Welfare should consider using $3,294,434 (the state share percentage of $7,270,877) to reduce the statewide AdultBasic waiting list of approximately 92,140 people as of December 2, 2004. AdultBasic provides health insurance for uninsured adults ages of 19 and 64 who meet certain income requirements. It is administered through the Insurance Department and offers basic benefits, including preventive care, physician services, diagnosis and treatment of illness or injury, in-patient hospitalization, out-patient hospital services and emergency accident and medical care. This action allows tobacco funds not needed for the extraordinary expense program to be redistributed to another tobacco related program in need of additional funds. DPW Response A draft copy of the summary report was made available to DPW on December 15, 2004, to give it an opportunity to comment on our findings and recommendations. DPW provided a written response to our draft report dated January 6, 2005. The complete response is included as part of this final report on Pages 15 and 16.
Pennsylvania Health Care Cost Containment Council Response A draft copy of the summary report was made available to the Pennsylvania Health Care Cost Containment Council on December 15, 2004, to give it an opportunity to comment on our findings and recommendations. The Pennsylvania Health Care Cost Containment Council provided a written response to our draft report dated December 22, 2004. The complete response is included as part of this final report on Page 17.
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