CMS overhauling Medicare fraud audit process

The CMS has unveiled a major overhaul of how it pursues Medicare fraud and improper payment cases.

The agency plans to implement a new audit strategy in which Medicare administrative contractors, or MACs, will scan claims and only target providers and suppliers with the highest error rates or billing practices that vary significantly from their peers.

Currently, MACs largely flag and challenge claims at random, a process that has led to a high backlog in appeals that the agency is struggling to work its way through.

Earlier this year, the agency said there were more than 667,000 pending appeals, and it projects the number of pending appeals will rise 3% by the end of 2017 to about 687,000. That number could eventually rise 46% by the end of 2021 to just over 1 million claims.

In fiscal 2016, the CMS doled out $38.6 billion in improper payments, or 10.3% of its overall payments. Improper payments include situations where the funds go to the wrong recipient, the right recipient receives the incorrect amount of money, documentation is not available to support a payment or the recipient uses the payments in an improper manner. The tally also includes actual fraudulent claims.

The new approach represents a major change in the status quo in that many providers will no longer face audits, according to Dr. Ronald Hirsch, a vice president at R1 Physician Advisory Services, a consulting firm on billing matters for providers. "This takes the pressure off folks that are doing everything right."

Other experts viewed the change as a way to reduce regulatory burdens on providers who are now transitioning from fee-for-service to value-based care under MACRA.

"Overall this looks like an improvement over the existing system," said Dr. Michael Munger, president-elect of the American Academy of Family Physicians. "Physicians would only face payment reviews when their billing practices are flagged."

The new audit process builds off an effort that started in 2014 for select claims called probe-and-educate reviews. Under this effort, the CMS combined a review of a sample of claims with education to help reduce errors in the billing submission process.

"CMS believes results of this program have been favorable, based on the decrease in the number of claim errors after providers received education," the CMS said in a notice Monday.

The CMS said it plans to launch the audit effort in all MAC jurisdictions before the year's end.

The Government Accountability Office recently questioned the CMS' use of so-called probe-and-educate reviews, as it could find no evidence it actually saved Medicare any money. The watchdog agency said it appeared the agency was basing it claims of success "on anecdotal feedback from providers."

An​ edited​ version​ of​ this​ story​ can​ also​ be​ found​ in​ Modern​ Healthcare's​ Aug.​ 21​ print​ edition.