Report | Nov. 25, 2014

Defense Health Agency Did Not Have Adequate Controls in the North Region to Detect Improper Payments for Claims Submitted by Skilled Nursing Facilities

DODIG-2015-040

Objective

Our objective was to determine whether the Defense Health Agency had adequate controls to detect improper payments for TRICARE claims submitted by skilled nursing facilities (SNFs).

Finding

The Defense Health Agency did not have adequate controls to detect improper payments for TRICARE claims submitted by SNFs in the North region. Our review showed 67.4 percent of FY 2013 SNF claims in the TRICARE North region had insufficient documentation to support the claims submitted by the SNFs. Since these payments were made with insufficient or no documentation, they are considered improper payments.

These improper payments occurred because Defense Health Agency personnel:

  • considered TRICARE claims processing to be low-risk and therefore did not perform comprehensive reviews of SNF-related claims, and
  • implemented inadequate controls to determine whether the 3-day inpatient stay requirement was met before paying SNF claims.

As a result, the Defense Health Agency lacked assurance that SNF payments were accurate and appropriate. We estimate that in FY 2013, the Defense Health Agency did not detect 1,322 SNF improper payments, valued at $8.8 of $13.2 million paid by the TRICARE North region contractor. Specifically, we identified potential monetary benefits totaling $718,400 for the SNF claims in our audit sample where the SNFs did not provide sufficient documentation. See Appendix B for a summary of potential monetary benefits.

Recommendations

We recommend that the Assistant Secretary of Defense (Health Affairs) conduct comprehensive medical reviews on a statistically valid number of SNF claims to ensure an adequate number of claims are reviewed. Additionally, the Assistant Secretary of Defense (Health Affairs) should review and pursue appropriate action on the claims in our sample where we did not receive documentation from the SNF, the SNF provided insufficient documentation, or we were unable to determine whether the SNF claims were appropriately paid. We also recommend that the Assistant Secretary of Defense (Health Affairs) revise system controls to ensure that a qualifying 3-day inpatient stay is met before payments are made for SNF claims. Further, the Assistant Secretary of Defense (Health Affairs) should identify and take action to collect improper payments made that did not meet the 3-day inpatient qualifying stay requirement.

Management Comments and Our Response

Comments from the Director, Business Support Directorate at the Defense Health Agency addressed all specifics of the recommendations, and no further comments are required.