Hospital Groups Object To Expansion Of Medicare Auditing Program, Saying Contingency Fees Encourage Auditors To Be Too Aggressive
The program relies on private-sector auditing firms to examine claims filed by hospitals and other medical providers and then pays them contingency fees based on how much money they save the government. In FY 2007, auditors identified $357 million in overpayments, $17.8 million or 7.1% of which were overturned on appeal, according to CMS. Payments for contingency fees and other administrative expenses totaled $77.7 million. Auditors also found $14.3 million in Medicare underpayments.
While supporters of the program say the contingency fees serve as an incentive, critics say it encourages auditors to rely on a "'bounty hunter' payment mechanism." Don May, vice president for policy at the American Hospital Association, said, "Any kind of question is a reason for denial," even in subjective decisions such as determining medical necessity. May added, "Going at it from this kind of perspective really isn't, I don't believe, in the best interest of taxpayers."
The Journal reports that the "program has encountered problems," including inconsistencies in auditors' findings in California inpatient rehabilitation facilities. Hospital groups also say that the program does not allow providers to fix errors, that many claims reviews were not conducted by qualified medical personnel and that auditors have not been required to publicize what areas they are targeting.
CMS Acting Administrator Kerry Weems last month wrote to California lawmakers that the agency believes "recovery auditing is a valuable tool in the Medicare program" as a way to recover past improper payments and to deter future overbilling. According to supporters of the program, once it is expanded nationwide, auditing firms will be required to have a medical director and medical-coding experts, return contingency fees for claims upheld on appeal and notify CMS if they identify new kinds of problem claims (Francis, Wall Street Journal, 1/26).
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