OIG audit finds nearly one-third of HCFA claims incorrect

Report spurs new claims crackdown

Investigators found errors in 30% of all claims paid by the Health Care Financing Administration (HCFA) in fiscal year 1996 during the Washington, DC-based Office of Inspector General’s (OIG) first-ever comprehensive financial audit of HCFA.

These errors account for approximately $23.2 billion annually, or 14% of total Medicare fee-for-service payments, according to auditors. "Errors could range from inadvertent mistakes to outright fraud and abuse," the report concludes. "We cannot qualify what portion of the error rate is attributable to fraud," notes the OIG’s report. But, "considering the significance of the error rate, we conclude that HCFA’s oversight of the Medicare program does not provide reasonable assurance of detecting and preventing improper Medicare payments."

In response, HCFA will implement a "corrective action plan" immediately to address billing and payment questions raised in the audit. HCFA Administrator Bruce Vladeck admits this action plan will create a "level of tension" between the agency and the medical community, but says he feels strongly that the actions are essential to reduce the high costs of provider overpayments found in the OIG audit.

These changes could mean slower payments for some providers as HCFA examiners increase the number of random invoices they review before payment. Additionally, providers should make sure to provide documentation to back up their claims and written justification of a procedure’s medical necessity. These are two of the key points highlighted in the OIG audit.

"Providers should expect stepped-up efforts on behalf of HCFA to prevent, identify, and punish health care fraud," says Fred Abbey, a partner in Ernst & Young’s Washington, DC, office. "This report should convince most providers that now is the time to act and take the steps needed to ensure they are operating within all applicable laws, rules, and regulations."

About half the errors identified "resulted from insufficient or lack of documentation from providers; and one-third of the documentation errors were associated with providers who failed to respond to repeated requests to submit documentation," Vladeck told the House Ways & Means healthcare subcommittee on July 17 (see related story on p. 131 for more details of this breakdown). "This lack of response from the medical community raises some important questions" that HCFA plans to investigate more thoroughly, Vladeck noted. Areas to be investigated include:

Why do so few providers properly document the reason for the health services provided?

Why do so many providers ignore repeated HCFA requests for additional documentation?

Answers to these questions "will be key to our future program integrity strategy," Vladeck told Congress.

In addition to finding out the answers to these plans, HCFA will focus its energies on an action plan intended to correct the problems identified in the OIG report. Among these actions are more prepayment reviews and edits of claims — which could mean payment delays for some providers — and additional postpayment "look behind" reviews of medical necessity and claim documentation. "We recognize that a level of tension will be created by a program that scrutinizes provider billing and requires the medical community to substantiate billing with medical documentation," Vladeck told the Ways and Means subcommittee.

Other measures in the action plan include:

Taking steps to recoup overpayments. HCFA already is working to recover overpayments identified by auditors. Meanwhile, providers spotlighted for filing improper claims have been targeted for more extensive investigation. To prepare its employees to handle this extra scrutiny, HCFA is giving its contractors additional training in processing claims and recouping overpayments. HCFA says the long-term solution to identifying potential provider overpayments is to implement a single integrated accounting system to track and report receivables, which will be part of the new Medicare Transaction System.

Increasing review of E/M claims. HCFA plans to increase the number of random prepayment reviews of evaluation and management claims as of October 1998. Based on its initial analysis of the results, "HCFA will then further expand the scope of services subject to prepayment review of medical documentation," says the OIG report.

Demanding greater documentation from providers who submit claims. "Despite anticipated controversy and protest, we will maintain and continue to reinforce the position that those providers who bill the Medicare program are accountable for the documentation to support the payment of a claim," stresses Vladeck.

Tightening security measures to help prevent claims from improper providers. To help uncover these providers, HCFA will propose legislation requiring providers to disclose their employer identification numbers and social security numbers, while prohibiting anyone convicted of a felony from participating in either the Medicare or Medicaid program.

Claim testing. By October 1998, HCFA plans to have a new computerized program in place that will significantly increase the number of claims it is able to review before they are paid. Meanwhile, auditors "will make every effort possible to ensure that paid claims are appropriately documented," promises Vladeck.

The bottom line is that effective compliance programs to prevent your practice from being the target of fraud and abuse allegations, and to help your practice respond to requests for further documentation from HCFA, may be more important than ever. (See story on tips for improving your compliance program, p. 141.) Providers should expect more scrutiny and documentation than ever when it comes to dealing with HCFA.