$50 Billion in Improper Payments Prompts Action

Inspector General Daniel R. Levinson testified before several U.S. House of Representatives committees about the Office of Inspector General’s (OIG’s) effort to monitor and make recommendations to reduce Medicare improper payments. His comments provide a clue as to which types of services and providers will come under increased OIG scrutiny in the coming months.

In 2010, the Centers for Medicare & Medicaid Services (CMS) reported Medicare improper payments totaling $47.9 billion, the inspector general said in his July 28 statement. Citing Executive Order 13520, which demands that the government make every effort to improve payment accuracy, Levinson promised that the OIG would continue its efforts to root out Medicare fraud and abuse.

The inspector general said, “Although the majority of health care providers are honest and well-intentioned, a minority of providers who are intent on abusing the system cost taxpayers billions of dollars per year.” He noted that the OIG’s enforcement efforts in 2010 resulted in more than 900 criminal and civil actions, and $3.8 billion in court-ordered fines, penalties, restitution, and settlements.

Levinson acknowledged that fraud was only one area that resulted in improper Medicare payments. Other areas singled out for mention were medically unnecessary claims, miscoded claims, eligibility errors, and insufficient documentation.

“Medically unnecessary services are particularly concerning, as beneficiaries may be subjected to tests and treatments that serve no purpose and may even cause harm,” Levinson said. “Because beneficiaries are generally responsible for a 20-percent copayment for items and services provided under Medicare Part B, beneficiaries may pay unnecessary or inflated copayments when they receive items or services that they do not need, or more expensive versions than they need.”

The inspector general also identified key areas of concern and investigation for the OIG. Among these:

• In 2009, just six provider types (inpatient hospitals, durable medical equipment suppliers (DME), hospital outpatient departments, physicians, skilled nursing facilities (SNFs), and home health agencies (HHAs)) accounted for 94 percent of improper Medicare payments.
• Insufficient documentation, miscoded claims, and medically unnecessary services and supplies accounted for approximately 98 percent of the improper payments attributable to the above six types of providers.
• During one review, 60 percent of Medicare claims for rehabilitation power wheelchairs did not meet all documentation requirements (accounting for $112 million in improper Medicare payments over a six-month period)
• The OIG found that, upon review, 82 percent of hospice claims for beneficiaries in nursing facilities did not meet all Medicare coverage requirements.

In response to these and other areas of concern, Levinson outlined a few particulars of the OIG’s strategy, moving forward, to combat improper Medicare payments. The OIG:

• Has recommended that CMS enhance pre-payment review of claims, including the use of specific adjustments to address identified payment errors
• Is currently conducting a series of audits of hospital compliance with Medicare requirements (Based on prior audit and enforcement work, the OIG has identified 27 “high risk” hospital billing practices. The OIG uses data mining to increase focus on potential problem areas in selected hospitals, and then selects claims for testing.)
• Is conducting hospital site visits to perform comprehensive reviews of billing and medical record documentation
• Is conducting in-depth reviews of claims for evaluation and management (E/M)  services, power wheelchairs, and Part A payments to SNFs to determine whether these payments met Medicare coverage requirements
• Is conducting data analysis to identify potential improper payments in a variety of areas, including lower limb prostheses, Part D drugs, and home health care
• Is planning audit work to follow up on “error-prone” providers, meaning, “individual providers with erroneous claims in each of the past four CERT cycles,” to test those providers’ claims and identify improper payments

In addition to audits and enforcement actions, provider education remains a part of the OIG’s strategy, Levinson noted. In particular, the OIG recommends that CMS work to educate providers on documentation requirements. In 2010, OIG published a Road Map for New Physicians to provide guidance on complying with fraud and abuse laws; and, this year, will conduct free training seminars in six cities to educate providers on fraud risks and share compliance best practices.

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