The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a report September 3 that reviewed the Centers for Medicare & Medicaid Services (CMS) oversight of its Recovery Audit Contactors (RACs) during fiscal years (FYs) 2010 and 2011. The objective of the study was to determine the extent that:
- RACs identified improper payments.
- CMS took corrective action to address vulnerabilities.
- RACS referred potential fraud to CMS and CMS took action on these referrals.
- CMS evaluated RACs on all performance requirements.
The OIG found that in FYs 2010 and 2011, RACs identified half of all claims they reviewed as having resulted in improper payments totaling $1.3 billion; of this, $768 million was recovered from providers and $135 million was returned to providers. Claims from two provider types accounted for 93 percent of all recovered or returned improper payments: inpatient hospitals, 88 percent; and physicians or nonphysician practitioners, 5 percent. About 94 percent of claims identified as overpayments were not appealed, but of those appealed almost half were overturned. Other study findings show that CMS took corrective actions to address the majority of vulnerabilities (improper payments exceeding $500,000 that result from a specific issue) it identified in FYs 2010 and 2011; however, it did not evaluate the effectiveness of these actions. As a result, high amounts of improper payments may continue. Additionally, CMS did not take action to address the six referrals of potential fraud that it received from RACs. Further, CMS’ performance evaluations did not include metrics to evaluate RACs’ performance on all contract requirements.
OIG recommended that CMS take action, as appropriate, on vulnerabilities that are pending corrective action and evaluate the effectiveness of implemented corrective actions; ensure that RACs refer all appropriate cases of potential fraud; review and take appropriate, timely action on RAC referrals of potential fraud; and develop additional performance evaluation metrics to improve RAC performance and ensure that RACs are evaluated on all contract requirements. CMS concurred with OIG’s first, second, and fourth recommendations. CMS did not indicate whether it concurred with OIG’s third recommendation but noted that it has reviewed the six RAC referrals of potential fraud in this review.