Volume 25.02
MEDICARE ADMINISTRATIVE CONTRACTORS NOT MEETING MEDICARE COST REPORT OVERSIGHT REQUIREMENTS
The Office of Inspector General of the Department of Health and Human Services (“OIG”) Office of Audit Services has released “Medicare Administrative Contractors Did Not Consistently Meet Medicare Cost Report Oversight Requirements”.
CMS has developed specific performance requirements for MACs to carry out functions such as cost report settlement activities. As part of its MAC oversight, CMS developed the Quality Assurance Surveillance Plan (“QASP”). QASP provides a systematic approach to evaluate how well MACs are fulfilling contract requirements.
The OIG conducted their audit because:
- Medicare cost reports are a crucial component of the operation and oversight of the Medicare program and
- Cost reports are used to set future prospective payment rates and wage indexes and reimburse providers for the care that is provided to Medicare enrollees.
The OIG reported:
- For federal fiscal years 2019-2021, each of the twelve (12) Medicare Administrative Contractors (“MACs”) failed to comply with the contract requirements for audit and reimbursement desk review and audit quality for at least one (1) of the three (3) years. This contract requirement is that cost reports are settled accurately when a CMS review determines compliance with Medicare rules and regulations.
- CMS identified 287 total audit issues among all MAC jurisdictions during the audit period, including, not performing proper review, inadequate review of graduate medical education and indirect medical education reimbursement, improper review of allocation, grouping, or reclassification of charges to cost center, improper calculation and reimbursement for nursing and allied health programs, and inadequate review of bad debts.
- MAC officials from selected jurisdictions suggested multiple causes for the findings including unclear guidance from CMS, limited feedback on the cost report reviews, inadequate training, and staffing and workload issues.
The entire report is available here.
MEDPAC RECOMMENDATIONS
The Medicare Payment Advisory Commission (“MedPAC”) has released the March 2025 Report to the Congress. The report presents MedPAC’s recommendations. These are as follows:
Hospice Inpatient and Outpatient Services
- For 2026, update the 2025 Medicare base payment rates for general acute care hospitals by the amount specified in current law plus one (1) percent.
- Redistribute existing disproportionate-share-hospice and uncompensated-care payments through the Medicare Safety-Net Index (“MSNI”) using the mechanism described in the March 2023 report and add $4 billion to the MSNI pool.
Physician and Other Health Professional Services
- For the calendar year 2026, replace the current law updates to Medicare payment rates for physician and other health professional services with a single update to the projected increase in the Medicare Economic Index minus one (1) percentage point.
- Enact the March 2023 recommendation to establish safety-net add-on payments under the physician fee schedule for services delivered to low-income Medicare beneficiaries.
Outpatient Dialysis Services
For calendar year 2026, the Congress should update the 2025 Medicare base payment rate by the amount determined under current law.
Skilled Nursing Facility Services
For the fiscal year 2026, the Congress should reduce the 2025 Medicare base payment rates for skilled nursing facilities by three (3) percent.
Home Health Services
For calendar year 2026, the Congress should reduce the 2025 Medicare base payment rate for home health services by seven (7) percent.
Inpatient Rehabilitation Facility Services
For fiscal year 2026, the Congress should reduce the 2025 Medicare base payment rate for inpatient rehabilitation facility services by seven (7) percent.
Hospice Services
For the fiscal year 2026, the Congress should eliminate the update to the 2025 Medicare base payment rates for hospice service.
Eliminating Medicare’s Coverage Limits on Stays in Freestanding Inpatient Psychiatric Facilities
The Congress should eliminate both the 190-day lifetime limit on covered days in freestanding inpatient psychiatric facilities and the reduction of the number of covered inpatient psychiatric days available during the initial benefit period for new Medicare beneficiaries who received care from a freestanding inpatient psychiatric facility on and in the 150 days prior to their date of Medicare entitlement.
The March 2025 report is available here.