Viewpoints

Grabbing the Medicaid Tiger by the Tail

Gerald Archibald

Originally Published In:
ROCHESTER BUSINESS JOURNAL
March 2007
Author: Gerald J. Archibald, CPA

“Conservatives are satisfied with present evils; Liberals want to replace them with new ones.”   Unknown

If you are a Medicaid service provider, read this column.

If you are a taxpayer, read this column.

Read this column, from both perspectives.

Governor Spitzer recently released his first State budget with a focus on cost control and reduction in New York State’s burgeoning Medicaid program.  The State budget for Medicaid is approximately $50 billion, the most significant component of a total State budget, representing 35% of every State dollar expenditure (www.budget.state.ny.us).  Seventy-five percent of Medicaid spending is consumed by 20% of the Medicaid recipients.

During his election campaign, Spitzer made it quite clear that, if not controlled, Medicaid spending would consume the vast majority of State spending.  In his view, this would be catastrophic for New York’s economy, with decaying infrastructure and draconian cuts in other necessary government services.

What can be done?  Read on for a bird’s eye view of actions taken and what can be expected from a government trying to grab the Medicaid tiger by the tail.

Essentially, the strategy appears to be focused on five key areas:

• Eligibility requirements – The Medicaid “lookback” rule was recently increased from three years to five years for the asset qualification test for Medicaid eligibility
  
• Capacity realignment – With the recent release of the Berger Commission (Base Closing Commission – www.nyhealthcarecommission.org) Report, reductions in hospital and nursing home bed capacity are intended to reduce Medicaid spending, or, at a minimum, the rate of growth in spending.
  
• Medicaid rate adjustments – Spitzer’s budget proposal calls for significant savings through hospital and nursing home rate adjustments totaling approximately $1 billion.
  
• Provider compliance requirements – The Federal Deficit Reduction Act (DRA, March 2006) and the Office of the Medicaid Inspector General (OMIG, July 2006) Legislation significantly increase the expectations of government regulators with respect to provider compliance with Medicaid regulations.
  
• Provider auditing and Medicaid recoupments – The Federal-State Health Reform Partnership (F-SHRP, September 2006) significantly increases the spending and effort toward provider audit recoupments with the annual expectation increasing from approximately $100 million last year to over $600 million in 2011, a six-fold increase.

The focus of this column is on the specific requirements for Medicaid provider compliance with the DRA and OMIG legislation.  If these requirements have not been met in your organization, tomorrow would be a good starting point.  In the absence of Medicaid regulatory compliance, the message of government is quite clear.  Audit recoupments for non-compliance, regardless of whether services were provided, will be initiated.

The Federal DRA included provisions requiring all Medicaid service providers receiving in excess of $5 million annually to implement policies and procedures to reduce, if not eliminate, the possibility of fraud, waste and abuse in the Medicaid program.  Keep in mind that the Federal government reimburses the State for approximately 50% of all Medicaid expenditures.

Also of importance is that fraud, waste and abuse from the government perspective involves both intentional and unintentional errors or omissions in Medicaid billing and service documentation.

The New York State legislature, in passing the OMIG legislation, further expanded the requirements for all Medicaid service providers to implement policies and procedures designed to reduce or eliminate fraud, waste and abuse.  The following discussion, in a FAQ format, provides an effective summary of the OMIG requirements.

Q: What were the primary objectives of the OMIG legislation?

A: Chapter 442 of the Laws of 2006 established the New York State Office of the Medicaid Inspector General (OMIG) in statute.  It specified the following:

Chapter 442, section 363-d

1. “The legislature finds that medical assistance providers may be able to detect and correct payment and billing mistakes and fraud if required to develop and implement compliance programs…”

2. “Every provider of medical assistance program items and services that is subject to subdivision four of this section shall adopt and implement a compliance program…”

3. “Upon enrollment in the medical assistance program, a provider shall certify to the department that the provider satisfactorily meets the requirements of this section…”

4. “The Medicaid Inspector General, in consultation with the DOH, shall promulgate regulations establishing those providers that shall be subject to the provisions of this section, including, but not limited to, those subject to the provisions of Articles 28 and 36 of the Public Health Law, Articles 16 and 31 of the Mental Hygiene Law, and other providers of care, services and supplies…for which the medical assistance program is a substantial portion of their business operations…”

Q: What was the purpose of establishing the requirements?

A: To define clearly in statute that it is the provider’s primary responsibility to detect and correct payment and billing mistakes and fraud.

Q: Who must comply with the OMIG requirements?

A: 

• Medicaid providers of care, services and supplies, for which the Medicaid program “constitutes a substantial portion of their business operations.”  Note the elimination of the DRA $5 million threshold.
  
• Effective January 1, 2007, the OMIG is authorized to define the coverage of applicability of this new law to Medicaid providers generally.

Q: What are the Minimum Plan requirements for a Compliance Plan?

A:

• Programs shall, at a minimum, be applicable to billings to and payments from the medical assistance program (Medicaid).
  
• Effective January 1, 2007, the OMIG, in consultation with the DOH, is authorized to impose additional requirements for compliance plans beyond the basic statutory requirements, which are as follows:
  
• Written policies and procedures
  
• Designate an employee with responsibility for the day-to-day operation of the compliance program
  
• Training and education of all affected employees and persons associated with the provider
  
• Communication lines to the responsible compliance position
  
• Disciplinary policies to encourage good faith participation in the compliance program
  
• A system for routine identification of compliance risk areas
  
• A system for responding to compliance issues as they are raised
  
• A policy of non-intimidation and non-retaliation

Q: What is the current status of the issuance of OMIG regulations?

A:

• Effective January 1, 2007, the OMIG, in consultation with the Department of Health, is authorized to develop implementing regulations for provider compliance plans.
  
• The OMIG intends to develop effective regulations in a timely manner; however, the date by which these regulations will be established is uncertain.

Q: What are the possible consequences to providers for failure to comply?

A: Failure to implement a compliance program within ninety days after the effective date of the regulations will subject the providers to any sanctions or penalties permitted by federal or state laws and regulations, including, but not limited to, the revocation of the provider’s agreement to participate in the Medicaid program.
For more information on the impact of Medicaid reform initiatives, please visit www.observer.com. 

And, finally, for an excellent report entitled “Administration of Medicaid in New York State: Key Players and Their Roles”, contact the United Hospital Fund at 212-494-0771.

The future fiscal viability of your organization may be dependent upon prompt action taken now to address the increasing expectations of State and Federal regulators of the Medicaid program.

Disclaimer: The Bonadio Group provides the information in Viewpoints for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in Viewpoints are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.