Medicare Watchdogs

     Once upon a time, Medicare Carriers and Intermediaries were in charge of addressing fraud and abuse issues as part of their contract functions. But, since many overpayments are a result of the Carrier's or Intermediary's improper payment in the first place (an OIG investigation a few years ago found that many did not have edits in place when they should have--edits being computer flags designed to prevent overpayments), that was like asking them to draw attention to their own failures. As part of the Health Insurance Portability and Accountability Act (HIPAA), Congress determined that the program integrity portion of Medicare should be bid as a separate contract. In 1999, CMS began to transfer these program integrity functions from the Carriers and Intermediaries to Program Safeguard Contractors (PSCs). As of 2006, all program integrity functions had been placed in the hands of PSCs.

The Report Said...
     In July, the Department of Health and Human Services' Office of Inspector General (OIG) released a study on these Medicare Program Safeguard Contractors. The study was conducted in order to assess specific activities performed by the PSCs, including how many cases they initiated and how many they referred to the OIG. Not all cases should be referred to the OIG, as many end up being referred back to the Carrier or Intermediary for overpayment recovery. The study found that about one-third of the money identified as being improperly paid was referred back to the Carrier/Intermediary; the other two-thirds went to the OIG for further investigation of possible criminal action. However, the report also pointed out that only cases referred to the OIG were counted as "cases" for purposes of CMS reporting. Out of the 15 PSCs in the study that did both Part A and Part B reviews, there was a wide range of investigation and referral activity, with one PSC having only 99 total investigations for the year 2005 and another with more than 3,700 for the same time frame. There was also a wide variation in the number of referrals to the OIG, with a low of four cases referred and a high of 44.

     In the report, the OIG stated that CMS expects a significant part of PSC's activities to be based on data analysis initiated by the PSC. This means that CMS expects the PSC to be proactive in searching for fraud and abuse by conducting random audits of suppliers and providers, instead of waiting on tips or complaints to come in from patients or other sources. However, the study found that such proactive audits were the exception to the rule. Out of 17 PSCs reviewed, 13 had few, if any, new investigations arising out of proactive measures.

The OIG Replied...
     The OIG made two recommendations to CMS. First, they suggested that PSCs with little or no activity in investigations and case referrals be reviewed and provided guidance regarding their level of detection and deterrence. The OIG went so far as suggesting that "remedies" against the less active PSCs be considered, up to and including terminating their contracts. The second recommendation was that CMS require more detailed monthly reports from the PSCs on their activities and referrals. This will allow CMS to better monitor the PSCs' activities and their progress with ongoing investigations.

     So what does all of this mean to you? The report seems to praise the "proactive" manner in which a few PSCs are conducting their fraud and abuse activities, even suggesting contract termination for PSCs that do not follow suit. One effect of this study will no doubt be a dramatic increase in the number of random audits that the vast majority of PSCs are not currently conducting. The report also noted that CMS has "begun allocating funds to PSCs based on PSC performance, workload and Medicare program vulnerabilities." With budgets ranging from $2 million-$9 million per year, this may well act as an incentive for the PSCs to increase their level of fraud and abuse audits in order to justify or increase their budgets. Also, since the report points out that only cases referred to the OIG will be reported to CMS, the PSCs, in order to be considered active, may have an incentive to refer cases to OIG rather than to Carriers/Intermediaries. So, it is foreseeable that we will notice a significant increase in fraud and abuse investigations. It is also likely that many of these investigations will start out as random audits, and that many of these audits will result in large overpayment assessments or even referrals to the OIG for civil or criminal prosecution.

     After handling dozens of PSC-initiated fraud and abuse cases, as I have often said in the past, good medical documentation is one of the keys to success in these cases. Don't think this is something that happens only to the bad guys. Random auditing by PSCs can lead to huge overpayment assessments against the most conscientious ambulance services. Maintaining organized medical records and keeping up with Medicare changes is necessary if you are going to be on the winning end of any audit.

     This article is not intended to be legal advice.

G. Christopher Kelly is an attorney practicing in Atlanta, GA. Chris focuses on federal laws and regulations as they relate to the healthcare industry and specifically to the ambulance industry. He also lectures and advises ambulance company clients across the U.S. Contact him at chris@emscltd.com.