OIG: Room to improve Medicare audits

'High amounts of improper payment may continue'
By Anthony Brino
10:06 AM
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OIG: Room to improve Medicare audits

Contractors hired by Medicare to audit the payment records of healthcare providers have a good track record spotting improper billing, the Department of Health and Human Services Inspector General concluded in a recent report, but legitimate concerns exist.

Recovery audit contractors identified about 1.1 million Medicare overpayments during fiscal years 2010 and 2011 — half of all claims they reviewed. Just over 6 percent of the overpayment determinations were appealed by providers, and less than half of those were overturned in the providers' favor.

The OIG did not determine the accuracy of the Medicare RAC’s improper payment decisions, but argued that the Centers for Medicare & Medicaid Services could do a better job evaluating it’s own efficacy. “As a result, high amounts of improper payment may continue,” the OIG wrote in the report.

[See also: Hospitals hammered by RAC audits.]

CMS did follow up on most vulnerabilities, defined as issues resulting in more than $500,000 in improper payments, the OIG said. In the 2010 and 2011 fiscal year, CMS found 46 vulnerabilities totaling $1.9 billion. Most of them, 26, were related to improper Medicare Part B payments and 20 were related to Part A or durable medical equipment payments.

Inpatient hospitals and physicians accounted for 93 percent of all the recovered or returned improper payments, and the five providers with the largest improper payments were hospitals — at about 2 percent of all improper payments for fiscal years 2010 and 2011, the OIG found. Almost 90 percent of those stemmed from services delivered in inappropriate facilities.

The Medicare RACs were authorized in 2003, with demonstrations aimed at identifying and recouping improper Part A and B payments, and then mandated nationally in 2009, with the four regions set up by 2009. Medicare RACs recouped $75 million in improper payments in 2010, and $2.3 billion in 2012.

At a time when CMS estimates Medicare fraud to be around 8 percent of the total program spending, the contractors could be doing more to track and refer cases of potential fraud, the OIG said. Although improper payments, not fraud, is the main task of the RACs, the OIG suggested that CMS require RACs to receive mandatory training on the identification and referral of fraud. CMS concurred with that and most of the OIG’s other suggestions.

As CMS looks to RACs as one tool to safeguard Medicare finances, some providers and lawmakers have recently criticized the Medicare RAC program for its commission system, with compensation calculated as a percentage of overpayments recovered or underpayments (by CMS) returned — suggesting the program may be considered for legislative tweaking.

“RACs must walk a fine line between chasing down every last dollar and putting an unnecessary burden on our nation’s caregivers,” Utah Republican Senator Orrin Hatch, co-chair of the Senate Finance Committee, said during a June hearing. The relatively high rate of successful provider appeals — about 50 percent — “raises questions as to whether RACs are being too aggressive or do not understand current medical practice,” he said.

[See also: Reports from the field: RAC audits aren't as bad as predicted.]

Outgoing Senate Finance Committee chairman Max Baucus, a Montana Democrat and health reform architect, also related the regulatory burden concerns of Kalispell Regional Medical Center, a 163-bed general and surgical hospital that has eight employees devoted to audits.

“There must be better ways to spend the government’s and hospitals’ time and money,” Baucus said.

Baucus said that’s Kalispell administrators cited several examples of Medicare RACs acting overzealously.

“One case involved a sixty-five year old man who had leg surgery and was fitted with a cast. Several weeks later he came to the emergency room with severe chest pain. A CT scan showed he had a blood clot in his lung. The doctor on duty admitted the man and prescribed medication. Almost three years later, a private contractor’s audit said this admission was unnecessary. The audit claimed the patient’s medical history did not support the admission. As a result, Kalispell Regional was forced to pay back Medicare.”

The hospital ended up appealing the decision successfully — as it has done with 50 percent of its appeals, Baucus said.