James Carroll, for HealthLeaders Media, May 17, 2012

A recent spate of Office of Inspector General audit reports calls into question some programs from the Centers for Medicare & Medicaid Services. It remains uncertain why the release of these audit reports have come within such a short window of time, but the fact that they are occurring should be an indication that CMS’s methods and processes are far from perfect.

The following is a look at some of the recent OIG critiques of CMS.

Audit MIC performance

An early assessment of the efforts of Audit Medicaid Integrity contractors to identify overpayments in Medicaid, generated this report. Released on March 20, it indicates that only 11% of the study-assigned audits were completed with findings of $6.9 million in overpayments, $6.2 million of which resulted from seven completed collaborative audits involving Audit MICs, Review MICs, states, and CMS.

This leaves 81% of audits in which the MICs were unable or unlikely to identify any underpayments or overpayments. The OIG deduced that problems with the data used and analyses conducted by Review MICs and CMS to identify audit targets hindered the performance of the Audit MICs.

In addition to showing the ineffectiveness of the Audit MICs, this report also may provide an early look at what to expect with Medicaid RACs. William Malm, ND, RN, CMAS, senior data projects manager at Craneware, Inc., based in Edinburgh, Scotland with a US office in Atlanta, suggests that the report essentially verifies CMS concerns about the Medicaid RAC proposed and final rules.

"States are having difficulty auditing on the Medicaid side due to the diversity and complexity of the regulations, and the lack of billing specifics in the individual state guidelines," Malm says. "These business practices have not been well documented and there is no defensible source authority to proclaim that something is an overpayment or an underpayment."

Report on CERT errors overturned through appeals 

On March 9, the OIG published a review of the comprehensive error rate testing errors overturned through the appeals process for fiscal years 2009 and 2010. The report details the OIG’s review of the Medicare fee-for-service error rate, which is calculated by CMS and used in the estimate of improper payments that CMS submits to Congress each year.

CERT claim payment denials overturned after the cutoff date for determining the error rate for each fiscal year would have reduced the reported error rates from 7.8% to 7.2% for FY 2009 and from 10.5% to 9.9% for FY 2010, according to the report.

Approximately 5.5% of the CERT claim payment denials for FY 2009 and 7.6% for FY 2010 were overturned during one of the first three levels of the appeals process, but if these overturned CERT claim payment denials had been included in the initial error-rate calculations, the estimated value of reported errors for FYs 2009 and 2010 would have decreased by approximately $2 billion each year, according to the report.

In other words, the OIG report determined that the methodology used by CMS in calculating the error rate is flawed, which led to CMS overstating the amount of improper payments by approximately $2 billion in both 2009 and 2010. CMS failed to account for some providers’ successful appeals from denials issued by the CERT contractor, which led to the overstating.

Good news for providers

In an odd way, this is good news for providers in the sense that the OIG has publicly announced that the error rate is flawed, but unfortunately this information is unlikely to reach the audience that it should, according to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.

"In general, the public hears so much from the media about how providers have bilked the Medicare and Medicaid system out of billions of dollars," she says. "We rarely hear a follow-up story like this that shows that what was originally published is not accurate. A $4 billion error is a considerable overstatement by any account."

The other good news for providers is that this report shows that provider appeals are successful, which should add a little fuel to their fire, according to Mackaman.

"Providers should be encouraged by this report and continue to appeal denials when appropriate and cost-effective to do so," she says. "It also might not be a bad idea for providers to lobby their own local media and congressional members to make sure that this side of the story is also told."

CMS’s Medi-Medi program

Though it’s not a CMS audit program, the Medicare-Medicaid data match program (Medi-Medi program) was also reviewed by the OIG in a report released on April 17. This program enables program safeguard contractors and participating state and federal government agencies to collaboratively analyze billing trends across the Medicare and Medicaid programs to identify potential fraud, waste, and abuse.

In the report, the OIG analyzed data from 2007 and 2008 that was collected from CMS, PSC, State Medicaid program integrity agencies, and other federal and state agencies participating in the program. The review found that the Medi-Medi program produced limited results and few fraud referrals.

During 2007 and 2008, the 10-state voluntary program received $60 million in appropriations and avoided and recouped $57.8 million. It produced 66 referrals to law enforcement and law enforcement accepted 27 of these referrals. Among the 10 participating states, each State averaged 2.8 Medicare referrals to law enforcement per year and law enforcement accepted an average of 1.15 referrals per state per year.

Few fraud referrals

In comparison, each state averaged 0.5 Medicaid referrals to law enforcement per year; law enforcement accepted an average of 0.2 referrals per state per year, according to the report. As a result of these findings, the OIG recommended that CMS reevaluate the goals, structure and operations of the Medi-Medi program to determine what aspect of the program, if any, should be part of CMS’ overall program integrity strategy.

CMS agreed with the OIG’s assessment, stating that since the period of the review, it has made significant strides in enhancing the effectiveness of the Medi-Medi program, but the OIG states that CMS has yet to provide any data to illustrate the enhanced effectiveness of the program.

Providing this data would enable Congress to make an informed decision whether to continue to fund the program and enable State and Federal agencies to make an informed decision on whether to participate.