HHS Financial Report for 2021 Identifies Increases in Home Health, Hospice Payment Error Rates

WASHINGTON, D.C. (December 7, 2021)—On an annual basis, the Department of Health & Human Services (HHS) issues a financial report that provides fiscal and high-level performance results that allow for the assessment of HHS’s performance over the previous fiscal year. Last week HHS issued its FY 2021 HHS Agency Financial Report containing an overview of programs, accomplishments, challenges and management’s accountability for the resources entrusted to it.

Financial projections for the report (which were largely taken from the 2021 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Insurance Trust Funds) are based on actual experience through 2019.

The report notes that Medicare was dramatically affected by the COVID-19 pandemic. The trust funds saw increased spending in areas related to testing and treatment of the disease as well as connected to legislative and regulatory waivers of existing policy (such as the waiver of the three-day hospital stay requirement to receive skilled nursing services and the 20% increase in payments for inpatient hospital admissions). However, these costs were more than offset by decreases in spending for non-COVID-19 care, particularly for elective services. The report notes that spending for certain services—including hospice—do not appear to have been materially impacted by the pandemic. While the public health emergency has impacted trust fund financing over the short term, it is not expected to have a large effect on the financial status of the trust funds after 2024.

While the report explores HHS’s management and financial operations in depth, information that may be of greatest interest to home health and hospice providers is housed in Section 3 of the report, which contains a listing of current individual civil monetary penalties, the Payment Integrity Report, FY 2021 Top Management and Performance Challenges facing HHS as identified by the Office of the Inspector General (OIG) and HHS’s response to the OIG report.

While hospice civil monetary penalties were authorized under the Consolidated Appropriations Act of 2021, those penalties will not become effective until Oct. 1, 2022, so they are not listed in the report. HHS has, however, published other provider-specific civil monetary penalties (including home health) along with the statutory authority for each penalty. This information was also recently published in the Federal Register and is available here.

Also included in Section 3 is the Payment Integrity Report, which outlines the department’s efforts to improve payment accuracy in all of HHS’s programs. Specifically, this section includes detailed information regarding improper payments, an area of significant focus by HHS and others. HHS uses the Comprehensive Error Rate Testing (CERT) program to estimate Medicare fee-for-service (FFS) improper payments. The CERT program reviews a stratified random sample of Medicare FFS claims to determine if HHS properly paid claims based on Medicare’s policies on coverage, coding and billing. In response to COVID-19, the CERT program suspended documentation requests and phone calls for a portion of the FY 2021 report period (claims submitted July 1, 2019, through June 30, 2020). As a result, the FY 2021 improper payment rate reflects a four-month pause.

The improper payment rate estimate for FY 2021 is 6.62% of total outlays, or just over $25 billion, nearly 70% of which is attributable to insufficient or no documentation. Improper payments for hospital outpatient, SNF, home health and hospice claims were major contributing factors to the improper payment rate, comprising just over 38% of the overall estimate. Following are comments from the report relative to the primary causes of improper payments relative to home health and hospice:

Home Health: Insufficient documentation for home health claims continues to be prevalent. The improper payment estimate for home health claims increased from 9.30% in FY 2020 to 10.24% in FY 2021; the change is not statistically significant. The primary reason for these errors is missing or insufficient documentation to support the certification of home health eligibility requirements. Medicare coverage of home health services requires physician certification of the beneficiary’s eligibility for the home health benefit (42 CFR §424.22).

Hospice: Insufficient documentation is the major error reason for hospice claims. The improper payment estimate for hospice claims increased from 6.69% in FY 2020 to 7.77% in FY 2021; the change is not statistically significant. The primary reason for these errors is missing or insufficient documentation to support certification or recertification. Medicare coverage of hospice services requires physician certification that the individual is terminally ill (42 CFR §418.22) and must meet all coverage criteria (42 CFR §418.200).

Action by HHS over recent years has led to reductions in the Medicare FFS improper payment rates since 2014. HHS has taken corrective action across services areas as well as corrective actions by service area to address improper payments. Actions across service areas include medical review/targeted probe and educate (TPE), Supplemental Medical Review Contractor (SMR) Reviews, and Recovery Audit Contractor (RAC) reviews. All of these corrective actions underwent a temporary pause, were limited, or altered during FY 2021 due to COVID-19. HHS also implemented sector-specific corrective actions, including the following:

*indicates actions that were temporarily paused, limited, or otherwise altered during FY2021 due to COVID-19