Medicaid: CMS Oversight of Provider Payments Is Hampered by Limited Data and Unclear Policy
Highlights
What GAO Found
GAO's assessment of Medicaid payments to government and private hospitals in three selected states was hampered by inaccurate and incomplete data on payments. States must capture but are not required to report all payments they make to individual institutional providers, nor are states required to report ownership information. For example, large supplemental payments states often make to hospitals are not reported by hospital. GAO assessed data for hospitals in two of three selected states, Illinois and New York; the third state, California, did not have accurate or complete payment data that would allow an assessment of total payments made to individual hospitals. In the two states, GAO's estimates of average daily payments—total payments adjusted for differences in patient health, divided by patient days—made to government and private hospitals showed inconclusive trends, but also identified that a small number of government hospitals were receiving high payments that warrant oversight.
In Illinois, average daily payments for inpatient services were comparable for government and private hospitals, but these averages masked wide variations in daily payments for both types of hospitals. Daily payments ranged from less than $600 to almost $10,000 for local government hospitals and from $750 to over $11,000 for private hospitals. For seven hospitals with high daily payments, GAO examined how payments compared to each hospital's costs of providing Medicaid services as reported by the hospital in cost reports and found that six of the seven hospitals' Medicaid payments exceeded their Medicaid costs.
In New York, average daily payments were higher for government hospitals than private hospitals, but as with Illinois these averages masked wide variations, with daily payments ranging from about $200 to over $9,000 for local government hospitals and from less than $200 to $3,400 for private hospitals. Four of nine selected government and private hospitals with high daily payments had Medicaid payments that exceeded Medicaid costs: two were local government hospitals that, all together, received payments exceeding their costs by nearly $400 million.
One selected hospital in Illinois and two in New York had Medicaid payments that exceeded the local government hospitals' total operating costs, including costs associated with all services provided to all patients they served.
Oversight of Medicaid payments to individual hospitals and other institutional providers, which is the responsibility of the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS), is limited in part by insufficient information on payments and also by the lack of a policy and process for assessing payments to individual providers. CMS does not collect provider-specific payment and ownership information. CMS also lacks a policy and standard process for determining whether Medicaid payments to individual providers are economical and efficient. Excessive state payments to individual providers may not be identified or examined by CMS. For example, CMS's oversight mechanisms did not identify large overpayments to two New York hospitals until they were identified by GAO. CMS began reviewing the appropriateness of these payments during the course of GAO's review.
Why GAO Did This Study
Under Medicaid, a joint federal-state program, states pay health care providers and receive federal matching funds for their payments. States may have incentives to make excessive Medicaid payments to certain institutional providers such as hospitals operated by local governments. Medicaid payments are not limited to providers' costs, but federal law requires they be economical and efficient. Large payments that exceed costs raise questions as to whether the payments are for Medicaid purposes.
GAO was asked to review state Medicaid payments to government providers compared to private, that is, for-profit and non-profit providers. GAO examined (1) in selected states, how state Medicaid payments to government hospitals compare to those made to private hospitals, and, for selected hospitals, to their Medicaid costs and total hospital operating costs; and (2) CMS oversight. GAO assessed hospital payments by ownership for three states selected in part based on size and geographic diversity, reviewed laws, regulations, guidance, and other documents, and interviewed CMS and state officials.
Recommendations
GAO recommends that CMS take steps to ensure states report provider-specific payment data, establish criteria for assessing payments to individual providers, develop a process to identify and review payments to individual providers, and expedite its review of the appropriateness of New York's hospital payments. HHS concurred with the recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Centers for Medicare & Medicaid Services | To improve CMS's oversight of Medicaid payments, the Administrator of CMS should take steps to ensure that states report accurate provider-specific payment data that include accurate unique national provider identifiers (NPI). |
As of February 2024, this recommendation remains partially addressed. In May 2021, CMS officials reported on a recent effort to validate the NPI--a unique 10-digit identification number assigned to health care providers--for each provider a state reports. At that time, officials said that they had recently implemented checks to validate the accuracy of provider-specific payment data, including the unique national provider identifiers states submit. According to CMS officials, some of these checks had identified data quality issues that had subsequently been resolved, while the results of other checks were still being reviewed. In December 2021, CMS issued guidance to states on new supplemental payment reporting requirements beginning with information about payments made on or after October 1, 2021. In January 2024, CMS informed GAO that while states are including NPIs in this new reporting, it has identified some other data quality issues with states' reporting and has not been able to validate the accuracy of provider-specific data. GAO will monitor the results of CMS's validation efforts and the implementation of these new reporting requirements.
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| Centers for Medicare & Medicaid Services | To improve CMS's oversight of Medicaid payments, the Administrator of CMS should develop a policy establishing criteria for when such payments at the provider level are economical and efficient. |
As of February 2024, this recommendation remains not addressed. CMS confirmed it is not currently engaged in any efforts to address payment at the individual provider level. In December 2020, Congress passed and the President signed into law legislation requiring additional state reporting on Medicaid supplemental payments, including requiring states to describe how these payments are consistent with economy and efficiency. In December 2021, CMS issued guidance on these new supplemental payment reporting requirements beginning with information about payments made on or after October 1, 2021. However, in January 2022, CMS officials said that neither the law nor the guidance establish criteria for economy and efficiency for Medicaid supplemental payments at the provider level. GAO maintains that criteria for determining the economy and efficiency of payments to individual providers will improve the agency's ability to identify excessive payments.
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| Centers for Medicare & Medicaid Services | To improve CMS's oversight of Medicaid payments, the Administrator of CMS should, once criteria are developed, develop a process for identifying and reviewing payments to individual providers in order to determine whether they are economical and efficient. |
As of February 2024, this recommendation remains not addressed. CMS confirmed it is not currently engaged in any efforts to address payment at the individual provider level. In December 2021, CMS issued guidance on new supplemental payment reporting requirements beginning with information about payments made on or after October 1, 2021. However, in January 2022, CMS officials said that neither the law nor the guidance establish criteria for economy and efficiency for Medicaid supplemental payments at the provider level. GAO maintains that developing a process, once criteria are developed, for identifying and reviewing payments to individual providers to determine whether they are economical and efficient will help ensure that CMS reviews all state Medicaid payment arrangements, including supplemental payments, and enhance CMS's ability to identify and curtail excessive payments in a systematic manner across all states.
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| Centers for Medicare & Medicaid Services | To ensure the appropriateness of Medicaid payments to providers in New York, the Administrator of CMS should expedite the formal determination of the appropriateness of New York's payment arrangements and ensure future payments to local government hospitals are consistent with all Medicaid requirements. |
CMS concurred with our recommendation. In response, CMS reviewed the large Medicaid payments made to certain institutional providers we identified in New York and took action to reduce the payments significantly for recent years. Specifically, the agency required New York to retroactively reduce Medicaid payments to three hospitals by a total of more than $1.5 billion, of which, the federal share was about $771 million.
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