The Rhode Island Executive Office of Health and Human Services, Office of Medicaid could have saved about $1 million on selected durable medical equipment items by using cost control measures, according to a results of a study recently released by the Department of Health and Human Services Office of Inspector General.
Rhode Island Medicaid requested assistance from the Office of Inspector General (OIG) to determine cost control options for 16 durable medical equipment (DME) incontinence items, which accounted for 42% of the agency’s DME reimbursements. The state has a fee-for-service arrangement in place, in which the state pays providers directly for services. The payment fee structure was designed to enlist providers so eligible patients could receive medical care and services to the extent that they are available to the general population.
The OIG performance audit showed that from July 2010 to June 2011, Rhode Island Medicaid reimbursed 234 DME providers either the lesser of the Medicaid fee schedule payment amount or providers’ usual and customary charge. A “usual and customary charge” refers to “the lowest charge, fee or rate charged by a provider for any product or service at the time such product or service was provided,” according to the OIG report. Of the 234 providers, 97 providers received their usual and customary charges, which were less than the fee schedule payment amounts. Eighteen providers were reimbursed the fee schedule payment amounts because their usual and customary charges were equal to or greater than the fee schedule payment amounts.
“To identify potential cost savings for these 16 DME items, [the OIG] recalculated the amounts that the state agency would have paid if all payments were based on the most frequently reimbursed usual and customary charge and compared our results to the actual state agency reimbursement amounts,” according to the report.
The OIG found that the Rhode Island Medicaid could have saved $1,014,990 – or $608,258 federal share – for the selected 16 DME items if it had reduced the fee schedule payment amounts to match the most frequently reimbursed DME providers’ usual and customary charges.
According to the OIG report, “The state agency does not have a process for (1) identifying whether significant differences existed between the fee schedule payment amounts and the majority of DME providers’ usual and customary charges for the 16 DME items and (2) adjusting the fee schedule payment amounts if such significant differences existed.” In written comments on the draft report, Rhode Island Executive Office of Health and Human Services (EOHHS) officials stated the EOHHS agrees with the conclusions.
The OIG’s report noted a number of approaches are available for the state agency to reduce costs for the 16 DME items without causing providers to leave the program. The agency could confirm and utilize other state agencies’ fee schedule payments, use the state agency’s lowest or average provider claim amounts for specific DME items or limit reimbursement to more frequently reimbursed usual and customary charges.
Based on its findings, the OIG issued two recommendations to Rhode Island Medicaid. The state agency could develop a process to detect significant differences between fee schedule payments and the majority of providers’ usual and customary charges. Additionally, the state agency could adjust the fee schedule payment amounts for the cases in which differences are found.