Posted by Medicare Cuts Back Work of Auditors Probing Improper Payments to Hospitals – Wall Street Journal
Updated Oct. 30, 2015 5:43 p.m. ET
The federal Medicare agency is sharply cutting back the work of auditors that review hospital claims and seek to recoup improper payments for the government, according to a letter reviewed by The Wall Street Journal.
Recovery audit contractors, as they are known, recouped $ 2.4 billion in improper payments in 2014, down from $ 3.7 billion in 2013 before the agency scaled back other audit activities and temporarily suspended the program for several months, according to a Medicare report.
Starting in January, the auditors will be able to review only 0.5% of the claims the agency pays to each hospital or provider every 45 days, according to an Oct. 28 letter to the contractors. That is a quarter of the prior threshold: 2% of claims.
The contractors say the new directive, in what is known as a “technical direction letter,” will further limit their ability to pursue undue payments. Medicare, and later Congress, have barred them from auditing hospitals for certain commonly scrutinized claims involving short patient stays since late 2013, among other restrictions.
The latest step is a sign of how the $ 600-billion-a-year Medicare program can struggle to effectively rein in improper payments, fraud and waste, sometimes under pressure from medical providers who argue that efforts such as the audits can disrupt patient care and impose undue burdens.
“There is a tension between wanting to make it as easy as you can for providers to participate, and for beneficiaries to make use of the services on the one hand,” said Gail Wilensky, a Medicare chief during the George H.W. Bush administration. “On the other hand, you want to be mindful of the taxpayers’ money,” she said.
The Medicare agency “is getting a lot of pressure from the provider community to scale back the [audit] program,” said Kristin Walter, spokeswoman representing the auditors’ advocacy group, the Council for Medicare Integrity. “The pressure has been getting results.” Ms. Walter said, describing the portion of claims auditors review under current rules as “a tiny, tiny drop in the bucket.”
Representatives of the four companies that hold contracts to perform the audits, including CGI Group Inc., Performant Corp., Cotiviti Corp. and HMS Holdings Corp. , either declined to comment or didn’t respond to requests for comment about Medicare’s rule change.
Hospital representatives welcomed further restrictions on the auditors. “The [audit] program has introduced misaligned financial incentives that drive the [auditors] to deny as many claims as possible,” said Joanna Hiatt Kim, vice president of payment policy at the American Hospital Association.
A Medicare spokesman said the agency made the changes “based on stakeholder feedback.” He said the new rules “help strike the right balance between [the Medicare agency’s] responsibility to ensure that Medicare claims are paid appropriately by enlisting the help of a medical billing company. This ensures that beneficiaries continue to have access to necessary services, and that program integrity efforts are focused on providers.”
The agency hasn’t publicly discussed the change.
Any move to curb the reach of the auditors can have a big financial impact on hospitals, which received about $ 125 billion in Medicare payments for in-patient services in 2013, according to Medicare claims records. About 94% of the monies recovered by the auditors that year were clawed back from hospitals, or around 2.7% of their total Medicare revenue. Half of the nations’ general hospitals had an overall profit margin of less than 5% that year, according to a Journal analysis of their financial filings.
The new rule limits the volume of records the auditors can request from hospitals after claims are paid by Medicare, the federal program that covers seniors and disabled people. The auditors request documentation—such as medical records—to determine whether providers accurately billed Medicare. Under the new rules, auditors can seek to review more claims in some circumstances, but must receive approval from a Medicare official to do so, the letter says.
The changes don’t affect reviews of claims from physicians.
Medicare pays the audit companies commissions based on the amount of overpayments they recover. Together, the recovery audit contractors received $ 301.7 million in contingency fees in 2013 and $ 274.6 million in 2014.
That “essentially makes them bounty hunters,” said Ms. Kim of the American Hospital Association. She said her group had “long urged” Medicare to address the amount of administrative burden the audits impose on hospitals.
Hospitals have also struggled with a large backlog—up to two years at one point—in appealing the auditors’ findings. When hospitals and other institutional providers have appealed such recoupments, they were victorious about 21% of the time in 2013, according to a Journal review of records of several different levels of appeals.
Those recoveries represent just a fraction of the total amount Medicare estimates it spends on incorrect payments. The Medicare program made $ 58 billion in improper payments to medical providers and health plans in 2014, according to PaymentAccuracy.gov, a federal website that tracks agencies estimates of waste.
Separate contractors and the Justice Department separately pursue fraudulent payments from the program.
Write to Christopher Weaver at christopher.weaver@wsj.com
