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«Recovery Auditing in Medicare for Fiscal Year 2013 FY 2013 Report to Congress as Required by Section 1893(h) of the Social Security Act Table of ...»

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Recovery Auditing in Medicare for Fiscal

Year 2013

FY 2013 Report to Congress as Required by Section 1893(h) of

the Social Security Act

Table of Contents

Executive Summary

Medicare FFS Recovery Audit Program



Improper Payments in Medicare

Statutory Authority for Recovery Auditors

The Use of Recovery Auditors

How Recovery Auditors are Paid

Recovery Audit Review Process



Collection and Repayment


Prepayment Review

Key Program Components

Ensuring Accuracy

Ensuring the Program Operates Efficiently and Effectively

Maximizing Transparency

Minimizing Provider Burden

Developing Robust Provider Education

FY 2013 Results


Table 1

Figure 1: FY 2013 Corrections by Type of Claim


Short-Stay Inpatient Hospital Admission Claims

Prepayment Review Demonstration

Outpatient Therapy Reviews

Corrective Actions

ii Summary of FY 2013 Vulnerabilities

Corrective Actions for Automated Vulnerabilities

Corrective Actions for Complex Vulnerabilities

Continuous Improvement

Program Development

OIG Oversight

GAO Oversight

Procurement and Contract Modification


iii Executive Summary The mission of the Recovery Audit Program is to identify and correct Medicare and Medicaid improper payments through the efficient detection and collection of overpayments made on claims for health care services provided to Medicare and Medicaid beneficiaries, and the identification of underpayments to providers so that the Centers for Medicare & Medicaid Services (CMS) and States can implement actions that will prevent future improper payments.

The CMS oversees several different Recovery Audit Programs, such as those for fee-for-service (FFS) Medicare and Parts C and D. States oversee their own Medicaid Recovery Audit Programs in accordance with federal guidelines set by CMS. The FFS Medicare Recovery Audit Program is authorized under Section 1893(h) of the Social Security Act (the Act). This report focuses only on the FFS Medicare Recovery Audit Program. Information on the other Recovery Audit Programs will be reported separately.

Medicare FFS Recovery Audit Program The Medicare FFS program consists of a number of payment systems. It has a network of contractors that process more than one billion claims each year, submitted by more than one million healthcare providers, including hospitals, physicians, skilled nursing facilities (SNF), labs, ambulance companies, and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers. These Medicare contractors, called Medicare Administrative Contractors (MACs), process claims, make payments to providers in accordance with Medicare regulations, and educate providers on how to submit accurately coded claims that meet Medicare guidelines.

The CMS uses several types of contractors to ensure that paid claims are paid based on Medicare guidelines. One type of contractor used is a Recovery Auditor, also known as a Recovery Audit Contractor (RAC). A Recovery Auditor’s primary task is to review Medicare claims data and determine if a claim was appropriately paid. Section 1893(h) of the Act authorized the Recovery Audit Program expansion nationwide by January 2010. Prior to this, the Recovery Audit program operated as a demonstration in six states from March 2005 to March 2008. The national Recovery Audit Program was established in early 2009 after conducting a full and open competition. Four contracts were awarded for four distinct regions. Each Recovery Auditor is responsible for identifying overpayments and underpayments in a geographically defined area that is roughly one-quarter of the country. In addition, the Recovery Auditors are responsible for highlighting common billing errors, trends, and other Medicare payment issues to CMS.

In Fiscal Year (FY) 2013, Recovery Auditors collectively identified and corrected 1,532,249 claims for improper payments, which resulted in $3.75 billion dollars in improper payments being corrected. The total corrections identified include $3.65 billion in overpayments collected and $102.4 million in underpayments repaid to providers and suppliers (see Table 1). After taking into consideration all fees, costs, and first level appeals, the Medicare FFS Recovery Audit Program returned over $3.0 billion to the Medicare Trust Funds (Appendix B). These savings do not take into account program costs and administrative expenses incurred at the third and fourth levels of appeal (Office of Medicare Hearings and Appeals (OMHA) and Medicare Appeals Council within the Departmental Appeals Board (DAB), respectively), as these components do not receive Recovery Audit Program funding for those appeals.

iv In late FY 2012 CMS implemented a demonstration to use Recovery Auditors for the purpose of reviewing claims before they are paid. FY 2013 was the first full year of the Recovery Auditor Prepayment Review Demonstration. The demonstration started on September 1, 2012 and is scheduled for three years in the following 11 states: Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina, and Missouri. The goal of the demonstration is to lower the number of improper payments for those claims, which are shown through Comprehensive Error Rate Testing (CERT) reports and other data analysis to have high rates of improper payments. Through this demonstration, the Recovery Auditors have prevented $22.3 million in improper payments by reviewing claims before they were paid. After a successful first-year, CMS has started evaluating the effectiveness of the demonstration and including additional error-prone services for review.

The CMS uses the results of audits performed by the Recovery Auditors to identify program vulnerabilities and take appropriate corrective actions to prevent future improper payments. The CMS hosts regular meetings with the Recovery Auditors, MACs, and CMS staff to discuss best practices, as well as particular vulnerabilities and future corrective actions ranging from CMS educational articles, local and national system edits, and additional review by other entities. The CMS continues to analyze the results of the Recovery Audit program to determine what corrective actions can be implemented to help reduce improper payments in the future.

The CMS continues to make improvements to the Recovery Audit program to help alleviate provider burden, ensure the accuracy of Recovery Auditor determinations, and promote transparency within the program. All Recovery Auditors have increased their use of the Electronic Submission of Medical Documentation (esMD) system to facilitate the transmission of medical documentation and help eliminate the costly and time-consuming need for providers to mail paper records for contractor review. The CMS is increasing collaboration between the Recovery Auditors and the MACs on many program elements such as data sharing and reporting, policy and coverage interpretation, appeals, and general operational issues and improvements. To aid in the appeal process, CMS has also been working with the Recovery Auditors to encourage further involvement in the appeals process, specifically at the Administrative Law Judge (ALJ) level of appeal. The Recovery Auditors are involved in appeals meetings between other CMS review entities, such as MACs and Zone Program Integrity Contractors (ZPICs) and CMS appeals contractors such as the Qualified Independent Contractors (QICs) and the Administrative QIC (AdQIC) to discuss trends in appeals, as well as best practices for creating position papers to use at ALJ hearings.

Involvement by Recovery Auditors in ALJ appeals aids in contractor and provider education, as it presents a forum for discussion, and can identify erroneous billing practices to the provider and policies that need clarification.

In accordance with the President’s initiative to eliminate waste and improper payments across federal programs, the Medicare FFS Recovery Audit Program has proven to be a valuable tool to reduce improper payments.

v Introduction Background Faced with increasing national health expenditures and a growing beneficiary population, the importance and challenges of safeguarding the Medicare program are greater than ever.

The CMS uses a comprehensive strategy to prevent and reduce improper payments. Each year, CMS publishes a national error rate for Medicare FFS, Part C, Part D, Medicaid, and the Childrens Health Insurance Program (CHIP) in accordance with the Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and Recovery Improvement Act of 2013 (IPERIA). 1 As part of its efforts to implement the IPIA, the CMS uses the CERT program to identify areas that may be vulnerable for improper payments in Medicare FFS. CMS uses these results to direct future work by the Medicare FFS Recovery Audit program and the MACs 2.

In addition, each MAC is required to complete an Error Rate Reduction Plan (ERRP) that includes jurisdictional level strategies to reduce improper payments. These plans include the standard additional review and clarification of local and national policies as well as new and innovative ideas for reducing improper payments. These plans are targeted to potential claims that, based on data analysis, may be improper. Additional provider education, widespread or localized, is included, as well as clarifications and modifications to local coverage policies. These plans have proven to be successful in helping to reduce each MAC’s error rate. The ZPICs provide additional protections for reducing improper payments by identifying and investigating areas of potential fraud, including those referred to them by MACs and Recovery Auditors. When warranted, ZPICs report providers and claims to law enforcement authorities who specialize in fraud, waste, and abuse prevention.

While several Medicare contractors are responsible for auditing Medicare claims, CMS has processes in place to ensure the work is collaborative and not duplicative. A claim that has been reviewed by one entity is not available to another entity for review, absent potential fraud. Any claim or provider currently being reviewed for potential fraud is usually not available for review by a Recovery Auditor and the contractors work together to ensure they all are not reviewing the same issues for the same providers.

CMS is continuously working to improve the collaboration between auditing contractors to ensure accurate and efficient auditing of Medicare claims while reducing provider burden and ensuring beneficiary access to health care/health services.

Improper Payments in Medicare Claims submitted to Medicare are screened by thousands of system edits prior to payment; however, due to the large volume of claims submitted, most are generally paid without requesting and reviewing the Additional information about the Medicare Fee-for-Service national error rate can be found at go.cms.gov/CERT Additional information about the Medicaid national error rate can be found at go.cms.gov/PERM Effects of Recovery Auditor reviews may not be immediately realized in the CERT report, due to differences in the Recovery Auditor look back period and the CERT reporting period.

medical records to support the services billed. As a result, claims may be paid inappropriately, resulting in improper payments.

The most common reasons for improper payments are the following:

• Payment is made for services that do not meet Medicare’s coverage and medical necessity criteria,

• Payment is made for services that are incorrectly coded, and

• Payment is made for services where the documentation submitted does not support the ordered service.

Given the volume of claims submitted to Medicare on a daily basis, CMS is not able to perform 100 percent medical review prior to payment, commonly referred to as prepayment review. CMS must rely on conducting medical record review after payment, commonly referred to as postpayment review.

Overall, CMS manually reviews less than 0.3 percent of submitted claims each year through programs such as the Recovery Audit Program.

Statutory Authority for Recovery Auditors The Medicare FFS Recovery Audit Program began as a demonstration required in the Medicare Prescription Drug, Improvement and Modernization Act of 2003 3. The demonstration was conducted from March 2005 to March 2008 in six states, to determine if Recovery Auditors could effectively be used to identify improper payments for claims paid under Medicare Part A and Part B. This demonstration allowed for additional review of Medicare claims for payment by utilizing Recovery Auditors on a contingency fee basis to identify and investigate claims with calculated risk. The Recovery Audit demonstration established Recovery Auditors as a successful tool in the identification and prevention of improper Medicare payments.

Section 1893(h) of the Act authorized the Recovery Audit Program expansion nationwide by January 2010 (Appendix A). This requires an annual Report to Congress, including information on the performance of such contractors in identifying underpayments and overpayments and recouping overpayments, including an evaluation of the comparative performance of such contractors and savings to the program. This report satisfies that requirement.

The Use of Recovery Auditors The Recovery Audit Program is an important initiative in CMS’s goal to reduce improper payments and pay claims accurately. The CMS established the Recovery Audit Program in early 2009 and fully implemented the program by September 2010. Each Recovery Auditor is responsible for identifying overpayments and underpayments in a geographically defined area that is roughly one-quarter of the country. In addition, the Recovery Auditors are responsible for highlighting to CMS common billing errors, trends, and other Medicare payment issues. Recovery Auditors are unique and distinct from other contractors due to their ability to conduct widespread post-payment review.

For more information on the Recovery Audit program demonstration see http://www.cms.gov/Research-StatisticsData-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-AuditProgram/Historical_Programs.html

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