On May 13, 2016, the U.S. Government Accountability Office (“GAO”) released a report on the review activities of the different Medicare claim review contractors that CMS uses to help reduce improper payments and protect the integrity of the Medicare program.  The GAO report, available here, found that claim review programs could be improved with additional prepayment reviews and better data.  The GAO report specifically recommended that CMS (1) request legislation to allow the Recovery Audit Contractors (“RACs”) to conduct prepayment claim reviews, and (2) provide written guidance on calculating savings from prepayment reviews. 

CMS uses different types of claim review contractors to conduct prepayment and post-payment reviews of Medicare fee-for-services claims at high risk for improper payment.  GAO was asked to examine the review activities of the various Medicare claim review contractors.  The GAO report examined (1) differences between prepayment and post-payment reviews and the extent to which contractors use them; (2) the extent to which the claim review contractors focus their reviews on different types of claims; and (3) CMS’s cost per review and amount of improper payments identified by the claim review contractors per dollar paid by CMS. 

The GAO report found that Medicare Administrative Contractors (“MACs”) conduct prepayment and post-payment reviews; RACs generally conduct post-payment reviews; and the Supplemental Medical Review Contractor (“SMRC”) conducts post-payment reviews in connection with studies directed by CMS.  CMS also pays its contractors differently: the agency is required by law to pay RACs contingency fees from recovered overpayments, while other contractors are paid based on cost. 

The GAO report indicated that questions had been raised about the focus of RAC reviews because of the incentives associated with the contingency fees.  Because CMS is required by law to pay RACs contingency fees from recovered overpayments, but no such provision is made for prepayment reviews, RACs can only conduct prepayment reviews under a demonstration.  From 2012 through 2014, CMS conducted a demonstration in which the RACs conducted prepayment reviews and were paid contingency fees based on claim denial amounts.  CMS considered the demonstration a success.  However, the GAO report stated that because CMS has not requested legislation that would allow for RAC prepayment reviews, CMS may be missing an opportunity to better protect Medicare funds.

The GAO report also found that the contractors focused their reviews on different types of claims: RACs focused on inpatient claims; MACs focused their reviews on physician and durable medical equipment claims; and the focus of the SMRC’s claim reviews varied.  The report stated that the RACs’ focus on inpatient claims was consistent with the financial incentives from their contingency fees, but the focus was not consistent with CMS’s expectation that RACs review all claim types. 

The GAO report noted that HHS disagreed with GAO’s first recommendation that CMS request legislation to allow the RACs to conduct prepayment claim reviews, but concurred with GAO’s second recommendation that CMS provide written guidance on calculating savings from prepayment review.  GAO explained that it continues to believe the first recommendation is valid.

The GAO report is available here.

Reporter, John Whittaker, Sacramento, +1 916 321 4808, jwhittaker@kslaw.com