The second annual financial audit of HCFA's financial performance, released last week, found that 11% of Medicare claims, worth about $20 billion, were improperly paid in fiscal 1997.
The first audit, which was released in July 1997, found that 14% of claims, worth $23 billion, were improperly paid in fiscal 1996 (July 21, 1997, p. 13).
The largest share of inappropriate Medicare payments in fiscal 1997 went to hospitals for inpatient and outpatient care, the audit by HHS' inspector general's office found (See chart). That fueled the escalating war of words between hospital industry leaders, who want the feds to back off from investigations of hospital Medicare billing practices, and several lawmakers, who cited the audit findings as proof that the feds need to go even further in their fraud-fighting efforts (See related stories, below and p. 3).
The audit was required by a 1994 law called the "Chief Financial Officers Act."
Of the more than 8,000 Medicare claims reviewed as part of the audit, 1,907 were paid in error, the agency found. While the extrapolated total of $20.3 billion in errors is about $3 billion less than last year's audit, HHS Inspector General June Gibbs Brown said she "cannot conclude that the current error rate is statistically different" than last year's.
Medicare paid more than 800 million claims in fiscal 1997, totaling more than $200 billion.
As was the case last year, nearly half the errors found by this year's audit were flagged as such because they were not properly documented.
In fiscal 1997, documentation problems were responsible for 44% of all errors, down slightly from 46% in fiscal 1996.
An additional 37% of errors in fiscal 1997 resulted from Medicare payments to providers for services that were not medically necessary. Another 15% occurred because of coding mistakes. Other errors accounted for 4% of unwarranted payments.
The audit made no determination of whether any of the inappropriately submitted claims were done deliberately.
Last year, the inspector general said HCFA's books were in such disarray that the agency could not be properly reviewed. This year, the inspector general's office said the records were in better shape but still contained enough errors that it gave HCFA a "qualified" audit opinion.
A qualification means errors were found but not of sufficient seriousness to render the books unauditable.
HHS' inspector general's office, charged with enforcing Medicare and Medicaid payment regulations, recommended that HCFA enhance its payment controls by upgrading its information systems and performing more payment audits.
HCFA countered that it has requested nearly $400 million in user fees from hospitals to pay for more audits, but Congress has not enacted those user fees.
