Senate panel puts CMS in hot seat over onerous audits

In response to complaints about burdensome and costly Medicare audits and reviews, a Senate committee convened a roundtable July 9 to dissect the problem and issued recommendations to streamline the process in the future.   

The U.S. Senate Committee on Aging invited the Centers for Medicare & Medicaid Services (CMS) and other witnesses to discuss the high rates of claims audited and appealed. A total of $50 billion of the approximately $604 billion paid on claims in 2013 was found to be improperly reimbursed.

After years of steady decreases in improper payment rates, CMS reported an increase in improper payments from 8.5 percent in 2012 to 10.1 percent in 2013 for fee-for-service claims. However, according to reports from the Department of Health and Human Services’ Office of the Inspector General, at least 72 percent of denied claims are overturned in appeals.

In testimony to the Senate, the American Hospital Association expressed concern that patients and hospitals pay a price through lower quality of care and solvency when funds are tied up in audits and appeals. The Senate committee cited one small independent hospital whose disputed Medicare funds made up a significant portion of its operating budget; another hospital that had to terminate several positions; and yet another that hired an employee expressly to handle the denied claims paperwork.

Providers’ complaints included overlapping efforts between Medicare contractors and confusion over which contractor receives what in the denial process.

Medicare has put into place programs such as the National Correct Coding Initiative and Medically Unlikely Edit program, but lack of standardization and local variation have hindered its effectiveness.

The Senate committee also noted that pursuit of claims does not seem to cover all areas identified by comprehensive error rate testing evenly, instead encouraging contractors to focus duplicative attention to aspects that are often not where the most errors lie. Additionally, CMS has not developed techniques to review which providers have higher compliance, which could determine frequency of audits, instead of bearing the burden of excessive audits.

The Senate committee and witnesses pointed out that Recovery Audit Contractors are paid contingent on the number of claims denied, which has created incentives to delay reviews of claims until after payment has been made. The payment structure also gives contractors and CMS no reason to educate providers on how to avoid improper claims from the beginning.

The Senate panel made a series of recommendations, including educating providers more thoroughly to avoid payment issues from the outset, proactively ensuring proper payments. To address concerns about auditor payments, they suggested incentivizing reduction of improper payment rates rather than paying per identified claims repayment.

They further recommended that CMS review local coverage decisions, determine which can be applied nationwide and ensure that others are not penalizing beneficiaries for living in one region over another. Other recommendations included ensuring databases are made up-to-date to avoid overlapping audits, clarifying objectives and goals across review programs, and consolidation of post-payment review activities as much as possible.