Medicaid's mounting audit pressure

As more eligible people sign up for Medicaid in 2014 and a new auditing program that rewards contractors for identifying improper payments expands its reach, doctors and other health care professionals who treat Medicaid patients are being warned to prepare for increased audit activity.

The federal government in general has stepped up its scrutiny of claims and billing, said Angela Mattie, MPH, chair of the Health Care Management and Organizational Leadership Dept. at Quinnipiac University in Connecticut. “There's billions of dollars that escape each year from the federal [Dept. of the] Treasury due to upcoding and duplicate billing. Sometimes it's just haphazard issues, and sometimes it's out-and-out fraud. So there's a general landscape that has a significant focus on auditing and identifying fraud and abuse in the health care system,” she said.

According to the Government Accountability Office, the Medicaid program alone shelled out an estimated $21.9 billion in improper payments in 2011. With significantly more federal dollars about to flow to states to expand Medicaid under the Affordable Care Act, the pressure to prevent and recoup these improper payments will increase accordingly, some health care observers said. That will mean additional monitoring and auditing of government health programs.

Physician practices that already contend with the prospect of payment audits from multiple sources undoubtedly will face even greater administrative challenges, Mattie said. “We demand significantly more on the part of our physicians in this country, and they have my sympathies. However, this is the reality of the marketplace.”

What concerns Jeffrey J. Cain, MD, president of the American Academy of Family Physicians, is that more smaller practices might be targeted unfairly. Doctors aren't audited nearly as often as larger entities that pose a greater fraud risk or that regularly make claims for big-ticket medical services, such as device manufacturers and hospitals.

But when a physician does face an audit, it can be a distressing experience, he said. Physician practices that have undergone audits complain that the demands of compliance are time-consuming and costly, sometimes significantly out of proportion to the amount of the disputed payments.

“It's important that as shepherds of the health care resources of our country we make certain that the increased dollars for Medicaid are going to health care and not to fraud,” Dr. Cain said. But at the same time, “we have to make sure that efforts to prevent fraud aren't casting such a large net that the small family doctors who are providing good care to Medicaid patients aren't being overly burdened,” he said.

Multiple overseers at two levels

Medicaid's operation as a federal-state program means that health care professionals face the prospect of being audited at both of those levels. State programs have their own auditing operations, and several nationwide initiatives exist to identify improper payments. The latter include Medicaid integrity contractors, or MICs, and Medicaid recovery audit contractors, or RACs. A third program, the Payment Error Rate Measurement Program, measures and reports a national improper payment rate annually for Medicaid and the Children's Health Insurance Program.

MICs and RACs differ in fundamental ways. RACs, established in 2012 under the ACA, are paid based on the amount of money in improper payments they identify. MICs aren't paid a contingency fee. While MICs conduct postpayment auditing to identify overpayments, RACs are instructed to look for both overpayments and underpayments, said George Breen, a partner at the law firm Epstein, Becker & Green. RACs are overseen by the states, while the Centers for Medicare & Medicaid Services runs the MIC program.

Another feature that distinguishes the two audit efforts are the RACs' ability to extrapolate data, Breen said. “RACs will look at claims for a period of time, determine an error rate and then extrapolate and identify overpayments based on claims analysis that they did. So the [overpayment] numbers can be very significant.”

Peter Budetti, MD, who directs the CMS Center for Program Integrity, told a congressional panel in early 2013 that for fiscal 2012, the Medicaid RAC programs recovered a total of $95.6 million in improper payments and returned $57.5 million to the Dept. of Health and Human Services. In 2011, HHS had projected that RACs would save the program more than $2 billion over five years, returning a total of $900 million to the states.

The MIC program has been operating longer but has had less success. In 2012, the GAO reported that $102 million had been spent since 2008 to operate the program, but less than $20 million in overpayments had been identified during that time.

For the improper payments that go beyond waste, Medicaid fraud control units operate at the state level, investigating and prosecuting alleged fraud activity as well as patient neglect and abuse. Based on a recent surge in activity of these fraud units, “you're clearly seeing an increased focus on Medicaid claims and Medicaid beneficiaries generally,” Breen said.

In 2011, these units recovered roughly $1.7 billion in civil and criminal penalties, a figure that increased in fiscal 2012 to $2.9 billion. As roughly half of the states expand eligibility for Medicaid in 2014, Breen predicted that physicians and other health professionals will see more inquiries from these fraud units.

Doctors also will see continued growth in federal Medicaid audits as the program grows, with state and federal regulators eyeing medical necessity and quality-of-care determinations as two areas to conduct investigations and secure monetary recoveries, Breen said. “It ties into the whole issue of: Does documentation support the medical services that are being provided?” An increasing number of cases alleging the “worthless services” theory — that the services provided were so inadequate as to be equivalent to having no services at all — also can be expected, he said.

All of these activities bring up the potential for multiple auditors and investigations going on at the same time, Breen said. “You've got the federal government looking at Medicare and Tricare issues, for example, and you're got the states looking at claims on the Medicaid side. So I think it's unfortunate, but the reality that there's going to be increased investigations on both levels.”

More work to avoid scrutiny

Some areas of medicine continue to believe that they're not going to be the main focus of these audits. Larry Downs, CEO of the Medical Society of New Jersey, said he has yet to see any Medicaid RAC activity in the state. The state's low Medicaid payment rates and low participation by physicians could explain why the society hasn't heard much, he said. New Jersey will expand Medicaid in 2014, so it's possible that audits may increase once that takes effect, he added.

Auditors are tasked with looking for fraud, especially in areas involving higher-level codes for evaluation and management services that all family physicians bill, meaning such practices potentially are open to investigation, Dr. Cain said. But because Medicaid RACs in particular are paid based on the amount of dollars they recoup, “they will not be looking as much at family doctors,” he said.

Medicaid fraud investigations usually hone in on bigger fish than the small family physician practice, Dr. Cain said. Still, the mere possibility of a time-consuming and costly audit makes family physicians wary. “Our recommendation for family doctors is that they are very careful and they make sure that their documentation reflects the coding they do for E&M services,” he said.

Matthew Phillips, MD, a cardiologist and the governor of the American College of Cardiology's Texas chapter, said his specialty has been ahead of the curve in terms of giving physicians guidelines on how to practice appropriate medical care. But the problem with audits, he added, is that they often have little or nothing to do with the quality of medical care.

The threat of audits prompts physicians to do work such as creating multipage notes that describe a clinical visit, something that's “totally useless for the patient and for the doctor, and for the referring doctor, who throws most of it out. … But the RAC is not going sit down and ask me, 'Did you do the right test on a patient?' It's going to ask for a copy of my eight-page office note that basically has a half-page of useful information.”

As a result, physicians are becoming data inputters, spending a great deal of time at their computers instead of spending that time with patients, Dr. Phillips said. “My patients and I joke that the only thing that's improved with these RAC audits is my typing skills are much better than they used to be.”

Calls for more expertise, coordination

The process of anticipating audits is slowing physicians down, and there's no documented evidence that these investigations have been improving patient care, Dr. Phillips said. In his view, specialty-specific teams that understand the care being provided should be doing these types of audits instead of outside contractors. “They'd know exactly what's going on” and what to look for, he said.

In its final rule on the Medicaid RAC program, CMS granted a request from the American Medical Association and other medical organizations to have each Medicaid RAC hire a physician as a medical director.

“Physician medical directors serve as a unique resource of specialized and technical information and are vital to RACs' understanding of diverse medical claims,” the AMA and state and specialty societies wrote in a letter to CMS on the proposed RAC rule in 2011. But not all of the states have their own full-time physician medical directors for the RACs. Some share the same medical director, others were granted exceptions from or extensions to this provision, and some developed peer panels to take the place of a full-time director.

The RAC model has been criticized by doctors and hospitals for employing what some deem a “bounty hunter” approach. Being the subject of an audit doesn't necessarily mean a hospital has done something wrong, but it's very resource-intensive for the facility anyway, said Xiaoyi Huang, assistant vice president for policy with the National Assn. of Public Hospitals and Health Systems. “Even one of these audits could take over the operation of a hospital for the duration that they're there.” (See correction)

Huang said the NAPH would like to see better communication among the respective audit programs. “We would love it if everyone out there who has any audit authority could coordinate with each other so they're not auditing the same claims or not showing up at the exact same time at the hospital.”