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Hospitals Object To Expansion Of Medicare Auditing Program

Armen Hareyan's picture

Hospitalgroups have launched a campaign against expanding a pilot program to auditMedicare claims, saying that it is "riddled with flaws" and thatcontingency fees provided to auditors encourages them to be too aggressive, theWall Street Journal reports. The program -- which was launched in California, Florida and New York and is to beexpanded nationwide this year -- recouped $247.4 million in overpayments infiscal year 2007.

The program relies on private-sector auditing firms to examine claims filed byhospitals and other medical providers and then pays them contingency fees basedon how much money they save the government. In FY 2007, auditors identified$357 million in overpayments, $17.8 million or 7.1% of which were overturned onappeal, according to CMS. Payments for contingency fees and otheradministrative expenses totaled $77.7 million. Auditors also found $14.3million in Medicare underpayments.

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While supporters of the program say the contingency fees serve as an incentive,critics say it encourages auditors to rely on a "'bounty hunter' paymentmechanism." Don May, vice president for policy at the American Hospital Association, said, "Any kind of question is a reasonfor denial," even in subjective decisions such as determining medicalnecessity. May added, "Going at it from this kind of perspective reallyisn't, I don't believe, in the best interest of taxpayers."

The Journal reports that the "program has encounteredproblems," including inconsistencies in auditors' findings in California inpatientrehabilitation facilities. Hospital groups also say that the program does notallow providers to fix errors, that many claims reviews were not conducted byqualified medical personnel and that auditors have not been required topublicize what areas they are targeting.

CMS Acting Administrator Kerry Weems last month wrote to California lawmakers that the agencybelieves "recovery auditing is a valuable tool in the Medicareprogram" as a way to recover past improper payments and to deter futureoverbilling. According to supporters of the program, once it is expandednationwide, auditing firms will be required to have a medical director andmedical-coding experts, return contingency fees for claims upheld on appeal andnotify CMS if they identify new kinds of problem claims (Francis, WallStreet Journal, 1/26).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.