Audit of Graduate Medical Education Reimbursements Claimed by the Methodist Hospital for FY 1999, A

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Audit of Graduate Medical Education Reimbursements Claimed by the Methodist Hospital for FY 1999, A

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~. \I&YIC"" DEPARTMENT OF HEALm & HUMAN SERVICES General Office of InspectorOffice of Audit Services (J 1100 Commerce, Room 686 Dallas, TX 75242-1027 June5, 2002 CommonIdentificationNumberA-06-02-00018 Mr. EdwardL. Tyrrell, Vice President MethodistHealthcareSystems 6565Fannin,M.S. MT 709 Houston,Texas77030-2707 DearMr. Tyrrell: Enclosedaretwo copiesof theU.S.Department of HealthandHumanServices(HHS), Office of InspectorGeneral(OIG), Office of Audit Services'(OAS) reportentitled "Audit of Gradua!e MedicalEducationReimbursements Claimedby theMethodist HospitalFor FiscalYear 1999." A copyof this reportwill be forwardedto theaction official notedbelow for review andanyactiondeemednecessary. Final determination asto actionstakenon all mattersreportedwill bemadeby theHHS actionofficial namedbelow. We requestthatyou respondto theHHS actionofficial within 30 daysfrom thedateof this letter. Your response shouldpresentanycomments or additionalinformationthatyoubelievemayhaveabearingon the final determination. In accordance with theprinciplesof theFreedomof InformationAct (5 V.S.C. 552,as amended by Public Law 104-231),OIG, OASreportsissuedto theDepartment'sgrantees andcontractors aremadeavailableto members of thepressandgeneralpublic to the extentinformationcontainedthereinis not subjectto exemptionsin theAct which the Department chooses to exercise.(See45 CFRPart5.) To facilitateidentification,pleasereferto CommonIdentificationNumber A-O6-02-00018 in all ...

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Direct Reply to HHS Action Official:

Dr. James R. Farris, MDRegional AdministratorCenters for Medicare and Medicaid Services1301 Young Street, Room 714Dallas, TX 75202

Department of Health and Human Services OFFICE OF INSPECTOR GENERAL

AUDIT OF GRADUATE MEDICAL EDUCATION REIMBURSEMENTS CLAIMED BY THE METHODIST HOSPITAL FOR FISCAL YEAR 1999

JANET REHNQUIST Inspector General

JUNE 2002 A-06-02-00018

Office of Inspector Generalhttp://oig.hhs.gov/

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components:

Office of Audit Services

The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations in order to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout the Department.

Office of Evaluation and Inspections

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management and program evaluations (called inspections) that focus on issues of concern to the Department, the Congress, and the public. The findings and recommendations contained in the inspections reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, and effectiveness of departmental programs.

Office of Investigations

The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment by providers. The investigative efforts of OI lead to criminal convictions, administrative sanctions, or civil monetary penalties. The OI also oversees State Medicaid fraud control units, which investigate and prosecute fraud and patient abuse in the Medicaid program.

Office of Counsel to the Inspector General

The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and operations and providing all legal support in OIG's internal operations. The OCIG imposes program exclusions and civil monetary penalties on health care providers and litigates those actions within the Department. The OCIG also represents OIG in the global settlement of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, develops model compliance plans, renders advisory opinions on OIG sanctions to the health care community, and issues fraud alerts and other industry guidance.

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BACKGROUND

Methodist Hospital

The MH is a 1,250 bed teaching hospital located in Houston, Texas. As the primary, private, adult teaching hospital for Baylor College of Medicine, MH is one of the nation’s leading centers for medical education and research. The MH is the anchor facility for Methodist Health Care System. The MH reported Medicare reimbursements totaling $193,203,980 for the period January 1, 1999 through December 31, 1999. Of the $193,203,980 reported, $20,247,545 was for medical education costs of interns, residents, and fellows (residents).

Graduate Medical Education Cost Reimbursement

Medical education costs are reimbursed separately by Medicare for two distinct activities; GME and IME. Medicare reimbursement is calculated differently for GME and IME.

The GME includes the direct costs of operating an approved medical resident training program such as the salaries and fringe benefits of the residents and expenses paid to teaching physicians for direct teaching activities. The GME reimbursement is based on a formula. A provider is reimbursed using a fixed per resident amount which varies from provider to provider. Medicare also makes a distinction between residents in primary care and non-primary care specialties. The per resident amount for primary care specialties is higher than the per resident amount for non-primary care specialties because the primary care specialty amount is updated annually for inflation. The per resident amount for non-primary care specialties was frozen as of 1996. The MH claimed GME payments of $3,634,734 during FY 1999.

The IME covers increased patient care costs such as the costs associated with the additional tests that may be ordered by residents which would not be ordered by a more experienced physician. The IME is anadd-onto a hospital’s Diagnosis Related Group payment. In other words, the greater the number of Medicare patients, the higher the 1 IME payments . The IME formula is designed to reimburse a hospital for its increased patient care costs and its calculation uses the resident to hospital bed ratio. The MH reported IME reimbursements of $16,612,811 during FY 1999.

Full Time Equivalent Considerations

A primary factor in the calculation of both the GME and IME reimbursements is the total count of FTE residents. During FY 1999, MH reported total weighted FTE counts of 167.79 residents for GME and 190.90 residents for IME. The hospital in which a resident works can include his/her time towards the FTE count. Some MH residents performed all of their duties at MH and some MH residents rotated throughout the year to other hospitals. In total, no resident can be counted for more than 1.0 FTE.

1 This is also true for direct GME, which uses as part of its formula the Medicare utilization for the particular hospital.

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Federal regulations govern the FTE count for GME. Factors to be considered when counting GME FTEs include:

2 Residents must be in an approved program.

All residents in their “initial residency period” are eligible to be counted as 1.0 FTE. All residents who have exceed their initial residency period are weighted only as 0.5 FTE. “Initial Residency Period” is the minimum length 3 of time that it takes the resident to be eligible for board certification.

All residents who graduated from a foreign medical school must pass a Foreign Medical Graduate Examination in order to be counted in the GME 4 reimbursement count.

RIf a residentesidents’ time in inpatient and outpatient settings is allowable. works in an outpatient setting which is not part of the hospital, the hospital can claim the time as if the resident worked in a part of the hospital provided an appropriate written agreement exists between the hospital and the non-hospital provider. The agreement should state that the costs of training the 5 residents will be borne by the hospital.

6 Research performed must be part of the approved residency program.

OBJECTIVE, SCOPE, and METHODOLOGY

The objective of our review was to determine the accuracy of the FY 1999 resident FTE counts used by MH for GME and IME. Our audit was conducted in accordance with generally accepted government auditing standards. To test compliance with the criteria referred to previously and to determine the correct amount of medical education payments that MH is entitled to, we:

9Identified all residents who were claimed on the MH FY 1999 Medicare cost report for GME and IME and reconciled the FTE counts to Medicare cost report Worksheet E-3 Part IV for GME and Worksheet E, Part A for IME.

9Identified the specialty of each resident included on the Medicare cost report and determined if the specialty was approved in accordance with Federal Regulations.

9Identified the length of the “initial residency period” per specialty and determined if FTEs were properly weighted for residents who exceeded the “initial residency periods”.

2 42 CFR 413.86(c) 3 42 CFR 413.86(g) 4 42 CFR 413.86(h)(1)(i) 5 42CFR 413.86(f)(4) 6 42 CFR 413.86 (f)

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9Identified all residents that graduated from a foreign medical school and determined if they should be included in the FTE count.

9Identified where the residents worked throughout the year to determine if an adjustment was required because the resident: 1) spent time in research which was not allowable for the purposes of calculating FTEs, 2) rotated to another hospital, or 3) worked in a non-hospital setting without an appropriate written agreement between the MH and the non-hospital provider.

9Discussed the results of our audit with MH.

9Determined the net dollar effect of our audit adjustments to the GME FTE count by recalculating the MH FY 1999 Medicare cost report Worksheet E-3, Part IV for GME. Our audit adjustment had no effect on IME, therefore, Worksheet E, Part A for IME was not recalculated.

Our review of the internal control structure was limited to obtaining an understanding of the internal controls over reporting FTEs. This was accomplished through interviews and testing pertaining exclusively to GME and IME FTE counts. Our audit fieldwork was conducted at the Methodist Hospital from December 2001 through January 2002.

FINDINGS IN DETAIL

The MH claimed $20,247,545 for medical education cost reimbursements on its FY 1999 Medicare cost report; $3,634,734 related to GME and $16,612,811 related to IME. Our audit showed that the MH calculations of GME reimbursements were excessive. We identified a cost reporting error involving a misclassification of non-primary residents as primary residents. As a result, the MH overclaimed GME reimbursement on the FY 1999 Medicare cost report by $30,230. There was no effect on the GME/IME FTE count or IME reimbursement. Our results are summarized in the following chart.

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MEDICARE COST REPORT CLASSIFICATION ERROR

For reimbursement of GME costs, Medicare makes a distinction between residents in primary care residencies and residents in non-primary care residencies.

The 42 CFR 413.86(b) states that primary care residents are those enrolled in approved medical residency training programs in family medicine, general internal medicine, general pediatrics, preventive medicine, geriatric medicine, or osteopathic general practice. In addition, CMS clarified which residencies are considered primary care in a letter addressed to the Fiscal Intermediary dated September 30, 1996.

The average reimbursement per FTE is higher for primary care residents than for non-primary care residents because the average cost per resident for primary care specialties is updated annually by applying an inflation factor. The average reimbursement per resident for non-primary care residents was frozen as of 1996 and therefore is not updated annually.

The MH erred in calculating its GME reimbursement on the FY 1999 Medicare cost report by improperly classifying, as primary care residents, 25.57 GME FTE’s. Because of this error, the higher primary care average cost per resident rate was applied to these residents. This error resulted in an overstated GME reimbursement calculation of $30,230 on the MH FY 1999 Medicare cost report.

CONCLUSION

The MH overclaimed GME reimbursement on the FY 1999 Medicare cost report by misclassifying non-primary residents as primary residents. As a result, MH was overpaid $30,230.

RECOMMENDATIONS

We recommend that MH revise its claims for FY 1999 by using our audit results. This would reduce the MH claim for GME by $30,230.

We also recommend that MH review subsequent Medicare cost reports for the cost classification error identified in our review and make any necessary financial adjustments.

In addition, we recommend that MH strengthen controls to ensure that future GME reimbursements are calculated in accordance with Federal requirements.

To facilitate identification, please refer to the referenced common identification number in all correspondence related to this report.