Audit Division

Audit Summary


Department of Human Resources

Division of Mental Health and Developmental Services

Nevada Mental Health Institute

Report LA00-25


Results in Brief

          The Nevada Mental Health Institute (NMHI) has opportunities to increase non-state revenues for inpatient mental health care.  The inherent complexity of medical billing and reimbursement requires well-designed and management controlled processes to ensure revenues are maximized.  These processes include:


·            Managing the various billing and reimbursement rules.

·            Defining billable doctor services with the appropriate billing codes.

·            Establishing billing rates to cover costs.

·            Ensuring appropriate documentation for billing.

·            Billing and collecting from payers.


          NMHI could increase billings and reimbursements by making improvements in each of the above areas.  For instance, a weak accounts receivable process and a limited understanding of Medicare hospital reimbursement rules caused an estimated $650,000 in bad debt reimbursements to go unclaimed from Medicare.  Likewise, the Institute may be able to greatly increase the number of inpatient doctor services it bills by defining all its billable services.  At the same time, NMHI could increase Medicare reimbursements for inpatient doctor services on average from 30% to 100% by using all the appropriate billing codes.  In addition, NMHI needs to evaluate its billing rates to ensure they cover costs.  Lastly, strengthening controls would help make sure doctor services are billed, and improving the billing and collections process could result in additional collections.


          The Division of Mental Health and Developmental Services has already begun an effort to improve mental health revenue collections.  The Division’s commitment should help NMHI establish management controls for all aspects of billing and collecting for inpatient care.  The efforts to improve are also timely because existing problems may have a larger financial impact as NMHI’s new inpatient hospital becomes operational.


Principal Findings

·            The Nevada Mental Health Institute has not sufficiently managed its Medicare inpatient hospital reimbursement process resulting in the agency not claiming bad debt reimbursements from Medicare.  We estimate NMHI did not claim in excess of $650,000 in bad debt reimbursements over the last 5 years.

·            NMHI does not have written policies and procedures or other management directives addressing the Medicare reimbursement process.  Moreover, the agency has limited institutional knowledge about the process.  These fundamental management control weaknesses decrease assurance that NMHI is maximizing Medicare reimbursements for inpatient hospital costs.  The weaknesses may also be contributing to the decline in Medicare reimbursements over the last 3 years.

·            The Institute can greatly increase the number of doctor services it bills. For the client files we reviewed, inpatient doctors recorded 167 services as billable.  However, inpatient doctors provided an additional 185 services that were not recorded as billable.  Because NMHI has not defined billable psychiatric services, it is not clear which of the 185 unbilled services could have been billed.

·             For the 35 client files reviewed, more than 25% of doctor services provided went unbilled.  Of the missed billings, hospital discharge services had the highest error rate with 57% going unbilled.  In addition, 4 of 35 client files did not have a billing log.  As a result, doctor services provided to these clients went unbilled.  We estimate a total of $4,500 in charges went unbilled for these 35 clients.

·            NMHI is not using all the appropriate billing codes.  Assigning the right billing code to doctor services ensures proper reimbursement.  NMHI has used five codes to bill for services, only one of which is a psychiatric billing code.  If NMHI used all available psychiatric billing codes plus other codes where appropriate, they could increase Medicare reimbursements on average from 30% to 100%.

·            NMHI may be able to reverse a steady decline in revenue collections from clients.  In the last 10 years, client and insurance revenue has fallen by more than $300,000.  While many factors may be causing this decline, several factors stand out: NMHI is not charging clients based on their ability to pay, and it is not routinely billing clients for outstanding balances.  In addition, the fee schedule used to charge clients has not been updated since the early 1990’s.

·            The Institute does not have reliable accounts receivable information to track basic billing activity such as who was billed, how much were they billed, and if they paid. Without accounts receivable information the agency has not been able to actively pursue collections.  Further, the Institute does not have policies and procedures for collections.

·         NMHI does not have adequate controls for its billing and collection process.  In particular, there is no technical manual outlining how to do the billing on the AIMS computer system and internal control procedures are outdated.  As a result, billing has been a constant difficulty and not always done timely.





Department of Human Resources

Division Of Mental Health and Developmental Services

Nevada Mental Health Institute


Agency Response

to Audit Recommendations



        Number                                                                                                                             Accepted    Rejected


            1               Seek clarification on Medicare’s bad debt rules and establish a policy

                             consistent with Medicare rules to identify and claim bad debt.                           ____X___   _______      


            2               Evaluate Medicare requirements to determine if the bad debt that was not  

                             claimed in past years can be reimbursed.  If allowed, seek reimbursement.       ____X___   _______


            3               Maintain readily available accounts receivable in-formation on Medicare

                             coinsurance and deductible charges.                                                             ____X___   _______                                                                                                                                                 

            4               Develop and implement policies and procedures for preparation of the

                             Medicare cost report including data collection and allocation methods.              ____X___   _______


            5               Evaluate current cost data and allocation methods to ensure the cost report

                             accurately represents inpatient hospital costs.                                                 ____X___   _______


            6               Define all inpatient doctor services and assign the appropriate billing codes.      ____X___   _______


            7               Bill for medical doctor and resident doctor services where appropriate.             ____X___   _______                


            8               Establish management controls including policies and procedures and

                             a review process to ensure inpatient doctor services are billed.                         ____X___   _______


            9               Discontinue applying Medicare Part B insurance rules to non-Medicare clients. ____X___   _______


          10               Develop and implement policies and procedures requiring the periodic

                             review of billing  rates.                                                                                   ____X___   _______


          11               Develop and implement management controls for the billing and collections

                             process including policies and procedures, timeframes for adjusting client

                             charges, monitoring of client charge adjustments, and reliable accounts

                             receivable information.                                                                                  ____X___   _______


          12               Bill clients monthly for outstanding balances.                                                   ____X___   _______


          13               Update the client fee schedule and establish a policy requiring periodic

                             review.                                                                                                         ____X___   _______


          14               Develop written procedures to carry out an internal control system as required

                             by NRS 353A.020, and perform periodic reviews of internal controls as

                             required by NRS 353A.025.                                                                           ____X___   _______


          15               Bill Medicare Part B beneficiaries for coinsurance charges according to

                             Medicare rules.                                                                                             ____X___   _______


                                  TOTALS                                                                                                  ___15___    ___0___