OIG: Room to improve Medicare audits

'High amounts of improper payment may continue'

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.