Senate Report Finds Medicare Audit Programs Have Failed to Reduce Improper Payment Rate

The Senate Special Committee on Aging recently issued a report addressing the current Medicare audit programs, the impact of these programs on reducing improper payment rates and the burden providers face when undergoing a Medicare audit. The report outlines inefficiencies related to the lack of coordination among the audit contractors and the failure to effectively target problem providers or problem areas. The report notes that in fiscal year (FY) 2013, CMS reported an estimated $50 billion in Medicare fee-for-service improper payments. This is an increase in the improper payment rate to 10.1 percent in FY 2013 from 8.5 percent in FY 2012 and the highest improper payment rate of the past five years.

The report outlines the various Medicare contractors, including Medicare Administrative Contractors (MACs), Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs), and Comprehensive Error Rate Testing (CERT) program, and the role each of these contractors play in the effort to reduce improper payments. Looking at HHS’ FY 2013 Agency Financial Report, the Senate Committee noted that while “reducing administrative and documentation errors by building the healthcare fraud prevention partnership; educating providers, and focusing Medicare’s contractor’s medical review efforts,” was included in the plan for reducing the improper payment rate, CMS did not emphasize improving the way that audits are executed or efforts to coordinate with other existing audit and review mechanisms within CMS.

The Senate Committee looked at the impact of the current audit programs on Medicare providers, including several hospitals and health systems and a Medicare Part B outpatient clinic. The provider experiences included the audit of thousands of claims, the recoupment of alleged overpayments from current Medicare payments and extended timeframes for appeal adjudication. One hospital reported having over $7 million tied up in the RAC appeals process. Managing the audits also creates a significant administrative burden on the providers, which reported having to hire coordinators to track and respond to record requests and handle paper correspondence from the contractors. Providers also described receiving documentation from the RACs sent to incorrect departments resulting in delays responding and the failure on the part of the RAC to document receipt of medical records sent by the provider, resulting in claim denials.

The Senate Report outlined inconsistencies in the post-payment review programs that increase the burden on providers and decrease efficiency, including varying requirements among the different audit contractors, inconsistent coverage requirements, and different payment tracking systems. In the context of pre-payment audits, the report found that pre-payment reviews do not consistently target CERT-identified areas of high improper payments. For example, while the improper payment rate for home health claims is almost double that for inpatient hospital claims, over 91 percent of the identified and corrected overpayments in FY 2012 were attributed to inpatient hospital claims. The report found that the distribution of RAC audits in particular “gives the appearance that such audits are focused on high dollar claims, rather than on service areas with high error rates.” Furthermore, the error rates range considerably among the various contractors, so that a few contractors with very high error rates could significantly impact the overall error rate.

The Committee also voiced concerns over the recent creation of the new Supplemental Medical Review Contractor, which is intended to review issues identified by CMS based on OIG, CERT and CMS national claims data. While the focus on CERT-identified errors may be positive, it was unclear as to why a new audit contractor was created rather than refining existing audit programs to incorporate this focus.

The Senate Report also points to miss opportunities to reduce improper payment rates through education for providers. While CMS issued comparative billing reports to certain groups of Medicare Part B providers, 58 percent of hospitals responding to the American Hospital Association’s (AHA) RACTrac Survey reported receiving no education regarding avoiding payment errors. Moreover, providers often spend time determining which contractor is initiating a particular audit, what timeframes and deadlines apply to the audit, and the guidelines for responding. The report concludes that effective education would involve guidance on how to avoid payment errors as well as information about the roles of the various contractors in the audit process. Furthermore, the fact that the Medicare RAC contractors are paid a contingency fee based on the amount of improper payments identified creates an incentive to keep improper payments high rather than to educate providers on reducing improper payments in the future.

Based on its findings, the Senate Committee made several recommendations to CMS:

  1. Consolidate post-payment review activities to the maximum extent possible;
  2. Consider financial incentives aimed more at the reduction of improper payment rates in a given contractor’s jurisdiction rather than solely on the amount of improper payments identified;
  3. Assess the reliability of the data in the RAC Data Warehouse and correct errors or omissions identified;
  4. Define the objectives and scopes of operation for each pre-payment review program, including how they will work together to achieve this goal;
  5. Strengthen its review contractor error rate reduction plans to ensure contractors target all CERT-identified problem areas in accordance with the OIG’s recommendation;
  6. Ensure local coverage decisions target high cost, highly utilized services or items and do not create inconsistent access to care for beneficiaries;
  7. Determine the effectiveness of the pre-payment review processes in terms of reducing improper payments;
  8. Emphasize provider education as a means of reducing improper payments, including a means for systematically gathering feedback from stakeholders to understand whether education efforts are reaching their intended audience.

 

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