Medical Device Daily Washington Editor

WASHINGTON — Medicare fraud has drawn the ire of policymakers and legislators alike, and a Feb. 28 announcement by the Centers for Medicare & Medicaid Services makes the claim that its fraud and abuse program is making record headway in stanching the financial bleeding. However, that effort is running upstream against congressional ire over repeated overturns of those claims upon appeal.

CMS reported last week that it has pinpointed $371.5 million in improper payments to providers in three states last year, a sum that includes underpayments as well as overpayments, in its demonstration program of recovery audit contractors (RACs) in three of the most populous states in the nation, California, Florida and New York.

Acting CMS administrator Kerry Weems said in the statement that the agency “need[s] to ensure accurate payments for services to Medicare beneficiaries and by taking this important step, people with Medicare can be assured they are being charged correctly for their share of their healthcare services.” Weems also said CMS will “use the lessons we learned from the demonstration program to help us implement the national RAC program next year.”

The RAC program was inked into the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and is geared toward fee-for-service providers. CMS noted in the announcement that it processes “more than 1.2 billion Medicare claims annually, submitted by more than one million healthcare providers, including hospitals, skilled nursing facilities, physicians and medical equipment suppliers.” The agency made the case that when data from all 50 states is analyzed, erroneous and fraudulent claims “can account for billions of dollars in improper payments each year.”

CMS pegged the ratio of overpayments to all erroneous payments in 2007 at roughly 96%, with the remainder being cases of underpayments. The field of overpayments includes at least one instance in which a provider “bills Medicare for conducting three colonoscopies on the same patient on the same day,” and multiple instances of duplicate claims and coding errors.

CMS said that since the inception the Comprehensive Error Rate Testing program in 1996, “the error rate dropped from 14.2% in 1996 to 3.9% in 2007.” As might be expected due to their surplus of elderly residents, warm-weather states accounted for a lion’s share of fraudulent and erroneous claims. According to CMS, overpayments collected from providers in Florida during fiscal 2007 totaled $124.6 million, a figure almost matched by the $120.1 million extracted from providers in California. Overpayments recouped from providers in those states the previous fiscal year tallied $9.8 million and $29.2 million, respectively.

As events in Detroit, Michigan, have clearly demonstrated, CMS also has to deal with patient participation in such fraud, with the FBI nailing a fraudulent billing ring that bilked the taxpayers out of $10 million (Medical Device Daily, Feb. 26, 2008).

While CMS touted the success of its antifraud program, the number of successfully appealed claims has raised eyebrows on Capitol Hill. By some accounts, 14% of Florida providers that were targets of the RAC program had filed appeals and the majority of those, coming to 8.9% of all RAC claims, were overturned. The number of successful appeals and the fact that the concentration of the fraud charges is for inpatient rehabilitation facilities – said to account for 88% of the CMS recoveries – has prompted action on Capitol Hill.

Sponsored by Rep. Lois Capps (D-California), H.R. 4105 is designed to impose a one-year moratorium on CMS’s efforts. Introduced by Capps in December, the Medicare Recovery Audit Contractor Program Moratorium Act of 2007 was spurred by reports that the RAC fraud claims are routinely overturned on appeal.

In a statement released at the time of the bill’s inception, Capps described the RAC effort as a “deeply flawed program [that] is already harming healthcare providers and threatening patient care in California, New York and Florida.” Capps said that inasmuch as CMS was a month late filing a report on the program and because the report does not “sufficiently addressed our serious concerns with the program, I plan to continue pursuing my legislation at this time.” H.R. 4105 is said to have 45 sponsors, 37 of them Democrats.

In response to the Feb. 28 CMS announcement, Capps responded that on the previous day, “CMS’ chief financial officer acknowledged in a Capitol Hill briefing that these claims have been so frequently overturned on appeal that they should be disregarded when considering the effectiveness of the RAC program.”

Capps added that as the claims are overturned on appeal, “we are finding a program that is wasting perhaps as much taxpayer money as it is purportedly saving” and that “this whole process of denying payment for legitimately provided services is placing an enormous financial burden on healthcare providers that jeopardizes their ability to care for their patients.” Capps cited the Rehabilitation Institute of Santa Barbara (Santa Barbara, California) as a provider that was “essentially driven out of business by this government program run amok.”