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The Health Care Financing Administration Office of the Inspector General (HCFA OIG) did a compliance review on the consolidated billing provision of the Prospective Payment System for Skilled Nursing Facilities (SNF PPS). This legislation, which became effective in 1999, requires nursing homes to bill Medicare for all services provided to residents in their facilities who are covered under Medicare Part A, and increased the reimbursement those facilities received to include a provision for the cost of those services. In the past, outside suppliers could have billed Medicare separately for services to these residents under Medicare Part B, if the services were not billed by the facility or included in the costs used to set the facility Medicare rate.

For over one-third of these SNF PPS claims reviewed, the OIG found that Medicare contractors paid outside suppliers under Part B for services which had been included in the PPS payment that Medicare made to the SNF. As a result, the Medicare program paid twice for the same service, once to the SNF under the Part A prospective payment, and again to an outside supplier under Part B.

The OIG report concluded that improper payments to outside suppliers occurred because Medicare edits have not been established to detect and prevent claims noncompliant with the consolidated billing provision. Also, some outside suppliers may not have been fully aware of the consolidated billing provision, and may have improperly billed fiscal intermediaries and carriers. HCFA officials stated that they are in agreement with the recommendations of the report, and are planning to implement the recommended solutions. HCFA officials also stressed that the overpayments were made to the outside suppliers, and the nursing homes were correctly reimbursed.