Medicare audits to be expanded

Obama directs all federal agencies to intensify claims review in a fraud-fighting effort. A separate proposal for physicians to pose as patients prompts AMA concerns.

By Chris Silva — Posted March 22, 2010

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The use of auditors who pore over physician Medicare claims -- as well as bills from other government contractors -- to identify and recover past overpayments will be expanded under the Obama administration's latest crackdown on fraud, waste and abuse.

The president on March 10 announced a new effort to improve federal payment accountability through the use of payment recapture audits. An executive memorandum directs the White House Office of Management and Budget to develop guidance within 90 days on actions agencies across the government should take to expand the use of these reviews.

"These are payments mostly made through Medicare and Medicaid that are sent to the wrong person, sent for the wrong reason, sent in the wrong amount," the president said March 10 during a speech on health care in St. Charles, Mo. "Sometimes they're innocent errors. Sometimes they're because nobody is bothering to check to see where the money is going, and they're abused by scam artists and fly-by-night operations."

Some physicians already have experience with these types of reviews. The Medicare recovery audit contractor program was pilot-tested in three states -- California, Florida and New York -- from 2005 to 2008. During the last year of the pilot, CMS expanded it to Massachusetts and South Carolina. Its claims reviews resulted in the program recapturing nearly $1 billion for taxpayers that the RACs found Medicare had overpaid or had otherwise paid out inappropriately.

It was not immediately clear how the latest action from Obama would impact the RAC program or Medicaid. Congressional legislation enacted in 2006 already has directed the Centers for Medicare & Medicaid Services to have permanent RACs in place by 2010 to review Medicare claims from all 50 states. The agency did not respond to repeated requests for comment by this article's deadline.

Obama projected that payment recapture audits would return at least $2 billion in taxpayer money over the next three years -- double the current amount of projected recovered costs from efforts targeting waste, fraud and abuse.

The American Medical Association participated in a federal summit on health care fraud earlier this year, at which it noted that waste is a concern for the medical community because it takes needed resources away from legitimate patient care. But the association has lodged complaints with the RAC program, saying it has caused administrative headaches for physicians in exchange for recovering a relatively low amount of overpayments from doctors.

A 2008 report by CMS on the three-year RAC pilot said that only about $20 million in overpayments was recovered by auditors looking at physician claims. The vast majority of recoveries came from hospitals. But physician practices that were audited still had to devote time and resources to comply, which some complained should have been spent on patient care. Because the auditors are paid based on how much money they return to federal coffers, the firms involved were characterized by some physicians as "bounty hunters."

Physicians as secret shoppers?

In his March 10 speech, Obama also said he supported legislation sponsored by Sen. Thomas Carper (D, Del.) that would require all government agencies with annual budgets of more than $1 million to perform recovery audits on all of their programs.

The president also expressed interest in a proposal by Sen. Tom Coburn, MD (R, Okla.), to have physicians and other health professionals go undercover by posing as patients to root out fraud. Obama included it among several other GOP ideas in a proposed revision of pending congressional health reform legislation. Dr. Coburn tried to amend the Senate health reform bill with a provision that would direct the Dept. of Health and Human Services to establish a demonstration project for the undercover investigations.

But the AMA has dismissed the idea of paying physicians to pretend to be patients in an effort to smoke out criminal activity.

"The AMA has zero tolerance for health fraud, but there's no evidence that the undercover-patient tactic would be effective or efficient in finding fraud," said AMA President J. James Rohack, MD. "We are partnering with HHS and the Justice Dept. to address fraud, and we strongly recommend the government target areas where fraud occurs most, instead of wasting physician time that could be better spent caring for real patients."

While generally supportive of Obama's call to expand payment recapture audits, Republican lawmakers used the opportunity to take another jab at Democrats' health system reform efforts.

"I applaud the president for taking this step, but everything he wants to do to combat fraud will be undone by a massively flawed health bill that will increase costs," Dr. Coburn said.

House Minority Leader John Boehner (R, Ohio) said the new proposal from the president may be worthy of bipartisan support. "But why can't we cut down on fraud without a big-government takeover of health care?"

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Targeting waste, fraud and abuse

Recent actions by President Obama to combat improper government payments build on an executive order he issued in November 2009. In it, he focused on reducing the roughly $100 billion in annual improper payments by:

Boosting transparency. An improper payment "dashboard," launching this spring, will allow the public to view improper payment details for federal agencies and programs.

Holding agencies accountable. Agencies will be required to designate Senate-confirmed appointees tasked with meeting targets for reductions of improper payments.

Creating incentives for compliance. States will be rewarded for reducing improper payments, and contractors who fail to disclose improper payments quickly will be penalized.

Reducing contracting costs. Contract spending will be lowered by $40 billion by the end of 2011.

Source: The White House

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