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RAC Oversight Lacking, OIG Charges

 |  By Margaret@example.com  
   September 05, 2013

An OIG review of recovery audit contractor files covering a two-year span identified improper payments in about 50% of them, totaling $1.3 billion. Unless CMS takes action to develop additional performance evaluation metrics, high amounts of improper payment will continue, OIG says.

The Centers for Medicare & Medicaid Services needs to tighten up the oversight of its recovery audit program to evaluate its effectiveness in terms of improper payments identified, the referral of potential fraud cases, and the implementation of corrective action, according to a report from the Office of Inspector General at the Department of Health and Human Services.

In addition, the OIG report notes that recovery audit contractor performance metrics and evaluations are sorely lacking. "Given the critical role of identifying improper payments, effective oversight of RAC performance is important."

While providers, particularly hospitals, have criticized what are sometimes construed as overzealous efforts by RACs, this OIG report suggests that with additional training, RACs could identify even more fraud.

The OIG studied recovery audit contractor files for FY 2010 and FY 2011. During those years, RACs reviewed 2.6 million claims and identified improper payments in about 50% of them totaling $1.3 billion.

More than half of those payments involved billing code errors and care delivered in settings that were too intensive or expensive. About $903 million in improper payments were recovered from or returned to providers.

CMS identified some 46 vulnerabilities—including suppliers and providers billing separately for bundled services—that led to improper payments. While specific corrective actions were taken to remedy the issues, CMS never evaluated the effectiveness of those actions. "As a result, high amounts of improper payments may continue," according to the report.

The report notes that the Government Accounting Office identified similar vulnerabilities in a 2010 report.

While RACs focus on identifying payment errors, they are also required to report evidence of potential fraud. For FY 2010 and FY 2011 the RACs reported only six cases nationwide on the basis of "external notification," which typically means complaints from provider employees who were asked to submit false claims. The report notes that in November 2012, CMS still had not taken any action on the cases.

To remedy these and other issues, the OIG made these recommendations:

  • Assess the vulnerabilities pending corrective action and develop timeframes for addressing them to make sure they are resolved in a timely manner.
  • Improve education to ensure that RACs refer all appropriate cases of potential fraud by providing specific examples of fraud that should be referred and regularly communicating with RACs to share information about fraudulent coding or billing schemes.
  • Take appropriate and timely action on RAC referrals of potential fraud.
  • Develop evaluation metrics to improve RAC performance and to ensure that RACs are evaluated on contract requirements. "Metrics should include accuracy targets for RAC determinations of improper payments or similar measures (e.g., effectiveness ratings)," says the report.

In a written response included in the OIG report, Marilyn Tavenner, the CMS administrator, concurred with items 1, 2, and 4. Regarding item 3, Tavenner provided an update on CMS action taken on six cases in question but did not make any future commitment.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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