CMS Pub. 100-06, ch. 1, § 480

Health Insurance Policies

(Rev. 38, 04-09-04)

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The transfer of title XVIII claims information to Medicare supplemental insurers is

required (under specified conditions) by §1842(h)(3)(B) of the Social Security Act, as

enacted by §4081 of OBRA 87.

• The physician or supplier involved must be a participating, physician or supplier,

• The beneficiary must assign Medigap benefits to the physician or supplier, and

• The policy named by the beneficiary must be a true Medigap policy to the

exclusion of employer coverage and plans operated by labor organizations.

Refer to Section 480.1 Exhibit for a list of Medigap insurers.

Carriers and DMERCs shall continue with claim-based Medigap crossovers until they

receive direction from CMS, via a future instruction, to do otherwise.

480.1 – Exhibits, Medigap Insurers - (Rev. 16, 04-11-03)

Refer to Section 480.1, Exhibits for a list of Medigap insurers.

490 - Establishing a Common Provider Audit Program. - (Rev. 1, 08-30-

02)

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The following material (sections 490 through 500) applies to providers on prospective

payment or cost reimbursement.

Title XVIII of the Social Security Act requires that participating health care institutions

(providers) be reimbursed on a reasonable cost basis and to achieve this a comprehensive

provider audit program has been established. Some grant-in-aid programs, namely title V

(the maternal child health services and crippled children's programs) and title XIX

(Medicaid), also require that hospitals and possibly some other providers be reimbursed

on a reasonable cost basis. Other third party payers may also have the same requirement.

The common provider audit program is established to reduce the cost of provider auditing

to participating third party payers and avoid duplicate auditing effort. The purpose then is

to have one audit of a participating provider, which will serve the needs of all

participating programs reimbursing the provider for services rendered.

490.1 - Policies for Implementation of a Common Provider Audit

Program for Titles V, XVIII and XIX of the Social Security Act - (Rev.

1, 08-30-02)

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Agreement has been reached between the Health Services and Mental Health

Administration, PHS (title V), the Medical Services Administration, SRS (title XIX), and

the Centers for Medicare & Medicaid Services, on basic policy governing the common

audit program. This common audit policy has four basic elements: (a) cost sharing, (b)

desk review, (c) field audit, and (d) final settlement.

490.2 - Cost Sharing - (Rev. 1, 08-30-02)

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The costs incurred in auditing providers performing services for more than one of the

above programs are to be shared on the basis of the amount of reimbursement (benefits

paid) to individual providers by the respective programs.

Any proposed modification to this method of sharing costs of audit will be evaluated on

the basis of its merits. Alternative methods proposed should adhere to the basic principle

that audit dollars are expended to protect the integrity of benefits paid.

Costs to be shared include all costs incurred from the point of securing the cost report

from the provider through the publishing and distribution of the audit findings (or cost

settlement data where no audit is performed). If final settlement is included in the

common audit program, these costs should also be shared.

There have been some questions concerning the definition of reimbursement (benefits

paid). Reimbursement by the program means the dollar amounts of payments made from

program funds at final settlement and should include payments to providers for inpatient

and outpatient services and, if applicable, combined physician billing.

490.3 - Desk Review - (Rev. 1, 08-30-02)

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The desk review capability of the intermediary will be used for the principal, intensive

review of the cost reports submitted by the providers. The purpose of the review will be

to determine (l) acceptability of the cost report, (2) need for a field audit, and (3) if an

audit is to be performed, the depth of the audit.

490.4 - Field Audit - (Rev. 1, 08-30-02)

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The participants shall evaluate the existing field audit capability of intermediary in-house

staff, State audit staff, or a subcontracted audit firm, in regard to their past experience

with the audit capabilities to be used. Every effort should be made to utilize qualified

field audit capability available from the State agencies. CMS expects intermediaries to

avoid the more costly audit firm subcontracts wherever possible.

490.5 - Final Settlement - (Rev. 1, 08-30-02)

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All participants in the common audit program are to receive copies of the audit findings

or cost settlement data where no audit is performed. The audit workpapers are also to be

available if needed to proceed with settlement. The final settlement may or may not be

undertaken jointly as agreed upon by the parties. Where independent settlements are to be

made, there should be coordination among the participants to review the findings, insure

consistent treatment, and discuss the effects of proposed settlements on each program.

490.6 - Implementing a Common Audit Program - (Rev. 1, 08-30-02)

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The CMS has contracted with intermediaries to perform certain functions required under

title XVIII. The title V and XIX programs, which use State funds in conjunction with

Federal funds, are administered by the States; therefore, an agreement should be executed

between the intermediaries and the State agencies or their fiscal agents, whoever has the

responsibility for auditing providers under titles V and XIX, to delineate the procedures

to be followed, costs to be shared, method of payment for services, coordination

necessary, and such other items as may be necessary for a complete understanding of

what is expected of each party.

A model agreement (Exhibit l) is furnished as a guide in the preparation of the agreement.

Where the intermediary is also the fiscal agent for the State and responsible for the audit

of providers under title V and/or title XIX, a common audit agreement is still necessary

and should be submitted to CMS for review before being effectuated.

In all cases, two copies of the executed agreement should be forwarded to the CMS

regional office. The regional office will forward one of the copies to the Division of

Contractor Operations so the common audit program can be monitored on a nationwide

basis to assure consistent application of policy.

490.7 - Contacting State Agencies or Their Fiscal Agents - (Rev. 1, 08-

30-02)

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In those instances where the intermediary is also the State's fiscal agent and responsible

for audit of the providers, there should be no difficulty working out an agreement which

would be acceptable to the State and CMS. Where the intermediary has established

contacts with the State agencies responsible for grants-in-aid programs, the feasibility for

a common audit program should be explored with them. If the intermediary has not

established contact with the State agencies, they should request assistance from their

CMS regional office of their progress toward the establishment of a common audit

program. Multi-State intermediaries should contact the appropriate fiscal specialist in the

CMS central office for assistance and reporting progress.

490.8 - Points to Remember in Discussions with Other Parties - (Rev. 1,

08-30-02)

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Initially, we anticipate that State agencies will not be familiar with our comprehensive

desk review procedures and suggest that the intermediary arrange to meet with the State

agency to explain the title XVIII procedures. The intermediary should ask the Health

Insurance Regional Office to coordinate such a meeting with the titles V and XIX

Regional Offices.

In those instances where the intermediary is also the State's fiscal agent for one of the

titles other than title XVIII and also has the responsibility for auditing, there will be no

coordination problem. However, where the State agency does its own auditing or uses a

different fiscal agent, the State agency may decide to permit the intermediary to use the

title XVIII guides or they may wish, at least initially, to designate someone to review the

desk review determinations with the intermediary. In any event, the intermediary should

cooperate and attempt to resolve any conflict as to either the necessity or scope of audit

through explanation of the determination made. Note that any audit felt necessary should

benefit all titles in proportion to their share of the costs.

The agreement with the State agencies should specify that either party may request a

special audit of a provider or an abnormal exploration of a particular cost in a routine

audit, so long as the requesting party assumes responsibility for the additional cost.

490.9 - Release of Final Settlement Data for Periods Ending Prior to

January l, 1970 to State Agencies Signing Agreements - (Rev. 1, 08-30-

02)

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Final settlement data, whether audited or based on the decision to not audit, pertaining to

cost reports for periods ending prior to January l, 1970, with the exception of those

audited cost reports based on combined reporting forms, can be released without charge

to State agencies signing an agreement for a common audit.

It is expected that any cost reports for periods prior to January l, 1970, not yet audited,

will have the title XIX or V information added and the cost reports will then be handled

as a common audit.

490.10 - Release of Final Settlement Data for Periods Ending After

December 31, 1969 to State Agencies Signing Agreements - (Rev. 1, 08-

30-02)

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Final settlement data for periods ending after December 31, 1969,which contain only title

XVIII information will be released to States signing agreements as follows:

A. Data for final settlement based on comprehensive desk review information only

will be furnished with costs of acquiring and developing the information to be

shared on the basis of reimbursement by the respective programs.

B. Data for final settlement to be based on audited cost information will be furnished

with cost of the field audit only to be shared on the basis of reimbursement by the

respective programs. The desk review data will be included without charge.

490.11 - Treatment of Administrative Costs Accrued in the Operation of

a Common Audit Program - (Rev. 1, 08-30-02)

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Administrative costs accrued in the operation of a common audit program are to be

shared as indicated in §490.2 above and only that portion of the cost for which Medicare

is responsible should be shown on the Interim Expenditure Report (Form CMS 1527) and

the Final Administrative Cost Proposal (Form CMS 1615).

490.12 - Treatment of Receipts for Final Settlement Data Released to

State Agencies - (Rev. 1, 08-30-02)

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Amounts collected for furnishing final settlement data under Section 490.10 above are to

be deposited in the intermediary's Medicare bank account. Funds so deposited must be

clearly identified as to source and purpose to facilitate auditing. The funds must be

deposited in the Medicare account because the cash outlay for the cost of obtaining the

information was charged to Medicare. Funds received for this purpose should be shown

as a separate credit item on the Interim Expenditure Report (Form CMS-1527) and the

Final Administrative Cost Proposal (Form CMS 1615).

500 - Coordination of Final Settlement Data Without A Common Audit

Program - (Rev. 1, 08-30-02)

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There may be instances where a State agency or their fiscal agents may not find it

feasible to participate in a common audit program, yet desire the title XVIII final

settlement information.

It is recognized that the title XVIII final settlement data (whether it be audited data or

comprehensive desk review data) will not contain all the data required by State agencies

or their fiscal agents to make settlements under their programs. Title XVIII final

settlement information may be released to State agencies or their agents with charges for

the information to be determined as follows:

1. Release of final settlement data based on comprehensive desk review only - The

cost of acquiring and developing the information is to be shared on the basis of

reimbursement to the individual provider by the respective programs. Our review

and appraisal reveals that in the comprehensive desk review process little effort is

expended in verifying strictly title XVIII information and that most of the effort

would benefit all programs equally.

2. Release of final settlement data based on audited cost information - The cost of

field audit only is to be shared on the basis of reimbursement to the individual

provider by the respective programs. The desk review data will be included

without charge.