Senate Report on RACs Points to Possible Audit Reform

By Emily Evans
Original story posted on: July 10, 2014

Members of Congress traditionally have been loath to criticize Medicare audit programs out of fear they may be characterized as soft on the war against fraud, waste and abuse. 

However, with a recently released report, they did just that. The Senate Special Committee on Aging released a reporttitled “Improving Audits: How We Can Strengthen the Medicare Program for Future Generations” in conjunction with their hosting of a committee-sponsored roundtable discussion Wednesday afternoon. 

The report notes that even with a plethora of audit programs by Medicare Administrative Contractors (MACs), Zone Program Integrity Contractors (ZPICs), Recovery Auditors (RACs), and the new MSP audits, the Centers for Medicare & Medicaid Services’ (CMS’s) improper payment rate is the highest it has been in five years. The report identifies a number of reasons for the lack of improvement, including the overlapping and inconsistent methods of the various auditors and an incentive system that discourages education. The report also cites process improvements and other efforts being undertaken to reduce the error rate, as well as the lack of a relationship between a reduction in error rates and auditor effectiveness.

The report also makes a number of recommendations that should come as welcome news to the provider community. One such recommendation is that CMS strengthen its review of contractor error rate plans to ensure that they are targeting areas previously identified as having high rates of improper payments. This recommendation appears intended to address the fact that 91 percent of improper payments recovered by RACs are derived from inpatient claims, which suggests that other fraud-prone areas are being ignored.

Another recommendation appears to target the contingency payment method. The committee report suggests that CMS consider offering financial incentives aimed more at the reduction of improper payment rates rather than solely focused on the amount of improper payments identified. Congress included the contingency fee arrangement in the RAC law, so it is not likely to change unless it gets included in some larger legislative vehicle after the November 2014 elections.

Some of these recommendations were discussed at the roundtable meeting held Wednesday afternoon, hosted by Committee Chairman Bill Nelson (D-Fla.) and Ranking Member Susan Collins (R-Maine). The senators discussed the need to shift from a “pay-and-chase” audit model to a preventive system, pledging to introduce legislation to that effect. It is worth noting that there is also significant support in the House of Representatives for such a change. This legislative vehicle also could provide a pathway for a modification to the contingency arrangement. There was significant disagreement on whether the contingency fee system should remain, although most roundtable participants acknowledged that it has resulted in more claim audits.

There was broad agreement on the need for provider education, however. Kathleen King from the Government Accountability Office (GAO) reminded participants that the MACs are responsible for provider education. The disconnect created by one party performing the auditing and another educating the providers appears to be a significant problem, yet no conclusions were reached on Wednesday.

Probably the most interesting part of the discussion centered on whether or not, given the rise of Accountable Care Organizations’ (ACOs’) bundled payments, auditing would be as necessary in the future as it is today. The provider participants suggested that auditing would play a decreasingly significant role, as the emphasis on outcomes and quality creates its own restraints on improper use of the Medicare benefit.

The informality of the discussion, as compared to a typical Senate hearing, gave rise to a more informative discussion than that which is typical for these types of settings. 

What is clear is that there is some bicameral, bipartisan interest in making the audit system better.

About the Author

Emily Evans is a partner with the Obsidian Research Group.

Contact the Author

emily@obsidianresearchgroup.com

To comment on this article go to editor@racmonitor.com