Medicare’s recovery audit program is more accurate in detecting overpayments to providers than its critics allege but it’s not as effective as it could be at spotting fraud, HHS’ Office of Inspector General (OIG) reports in its second look at CMS’ recovery audit contractors (RACs).
 
Only 6% of the 1.1 million cases in which a recovery auditor recommended denial of Medicare payments in 2010 and 2011 were appealed, a review of Medicare’s recovery-audit claims database shows. Hospitals won just 44% of their appeals, the OIG says. The auditors requested records on 2.6 million patient encounters that occurred during the two-year period and found errors in 50% of them; most involved care provided in settings that were too costly or were billed using incorrect codes, the report says. The average payment denial amount was $507.
 
On the other hand, auditors are also required to report cases that point to intentional health care fraud. But, in 2010 and 2011, only six of these types of cases were reported throughout the United States and most were in Florida and Texas, which are considered to be fraud “hot spots.” As a result, the OIG’s report criticizes the auditing firms for not detecting enough fraud and CMS for not investigating the leads it receives or providing training and updates that could boost the number of fraud tips. In addition, although CMS made 28 specific changes to its billing rules to remedy these “vulnerabilities,” it did not evaluate their efficacy. As a result, high amounts of improper payments may have continued, OIG says.
 
CMS agreed with three OIG recommendations – that it ensure RACs refer all appropriate cases of potential fraud; that it develop additional performance evaluation metrics to improve RAC performance; and that it take appropriate action on vulnerabilities that are awaiting corrections.
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