Audit Contractors Recover $440 million in Improper Medicare Payments

The Centers for Medicare & Medicaid Services is getting aggressive about reigning in improper payments to health care providers. The agency said recently that it collected $371.5 million last year in improper payments – mostly overpayments – as part of a demonstration program using recovery audit contractors in California, Florida and New York. Since the demonstration program began in 2005, CMS has recovered nearly $440 million in improper payments.

“We need to ensure accurate payments for services to CMS beneficiaries and by taking this important step, people with Medicare can be assured they are being charged correctly for their share of their health care services,” Kerry Weems, acting CMS administrator said in a press release. 

The recovery audit contractors program (RAC) is designed to find and correct improper Medicare payments to health care providers. It will be implemented nationwide beginning next January, said Peter Ashkenaz, a CMS spokesman.

CMS originally selected three firms in March 2005 to perform as its audit contractors, with each RAC having jurisdiction for a single state, California, Florida, or New York. Those three states account for about 25 percent of Medicare payments each year.

The contractors are Connolly Consulting, which audited claims in New York; Health Data Insights, which processed claims in Florida; and PRG-Schultz, which processed claims in California. Last year, Connolly was awarded the Massachusetts contract, Health Data added South Carolina, and PRG-Schultz picked up Arizona. 

CMS said about 96 percent of the improper payments made last year, for about $357 million, were overpayments to health care providers. Underpayments accounted for the remaining $14.9 million.  

Common errors that led to improper payments included billing Medicare multiple times for a single procedure, filing duplicate claims, incorrectly coding a procedure, and submitting claims based on outdated fee schedules, according to audit contractors reviewing the program for CMS.

Since it began its comprehensive error rate testing program, CMS’ error rate for improper payments has dropped from 14.2 percent in 1996 to 3.9 percent in 2007, the agency said. And CMS has collected over two years $134.4 million in overpayments from Florida, $149.3 million in overpayments from California, and $138.1 million in overpayments from New York.

The collections have allowed CMS to return $247 million to the Medicare Trust, operate the RAC demonstration program, and make repayments to health care providers.