Medicare contractors rejecting pay for some legitimate services

Washington -- A government watchdog's audit of improper payment determinations for Medicare services showed that contractors had denied payments for some valid services in 2010.

The Centers for Medicare & Medicaid Services uses contractors to manage a comprehensive error-rate testing program that determines the frequency of improper payments in Medicare fee-for-service. In 2010, that error rate was 10.5% and represented an estimated $34.3 billion in improper payments, according to a February report by the Dept. of Health and Human Services Office of Inspector General. However, a review of those audits showed that the error rate would have been lower if contractors had taken extra steps to obtain records showing that billed services were medically necessary.

"Additional efforts to obtain missing documentation could more clearly reflect the true status of improper payments" in the error rate estimate, the OIG said. The error rate in 2010 would have been 10.2%, a total of nearly $1 billion less in improper payments.

The error rate review process begins with a contractor sending letters and faxes requesting documentation for services billed by physicians, health care facilities and suppliers. The contractor will follow up with up to three more requests by phone, letter or fax and ask for additional records when a health professional submits insufficient documentation.

For those who don't reply to the requests or fail to meet billing criteria, a review contractor will classify claims as no documentation, insufficient documentation, incorrectly coded, or medically unnecessary improper payments. Those determinations result in the Medicare program recouping what it has determined to be any overpayments.

The 2010 error rate was projected from a sample of nearly 80,000 claims valued at $57.8 million. The review contractor found problems with more than 20,000 claims that had paid $5.3 million.

The OIG attempted to obtain additional medical records for 136 claims that had been denied because of missing documentation. Investigators called, sent letters and visited offices to try to procure supporting materials that could overturn the claims denials. Through the reviews, the OIG was able to overturn 46 of the original 136 payment denials. In one instance, a physician claim for a chest procedure had been denied due to a problem with a signature on a medical record. A signature attestation was obtained, and the contractor returned the $1,476 payment for the procedure.

The remaining 90 rejected claims were upheld, because requested documentation did not support the medical necessity of the service billed. Five of the claims may have involved billing fraud and were referred for further investigation.

The OIG recommended that CMS use the report to identify claims payment denials that would benefit from additional requests for medical records. However, CMS disagreed with the recommendation, because the agency already makes additional calls for missing documentation. "Throughout 2011, CMS continued this effort and refined it to focus on claims that have the greatest impact on the error rate," the agency said in a Nov. 23, 2011, memo.

Auditors also suggested that CMS follow established procedures to obtain attestations when signatures are illegible or missing from medical records. CMS noted that it monitors its error rate contractors to ensure that they follow guidelines established in their statement of work.