The postpayment claims review process involves selection of the claims  to be reviewed, the review itself, communicating with providers during and  about the review, and a process for assuring quality of the contractor’s  reviews and decisions. If the contractor requires additional  documentation, the provider must submit the requested documents within  a specified time frame. Other contractors that review claims are given a set amount of funding to  conduct reviews. Changes in Medicare’s Contracting Authority Resulted in Four Medicare FFS Contractor Types

Although contractors have been used for Medicare since the beginning of  the program, several statutory changes since the 1990’s increased CMS’s  resources and authority to use new types of contractors—MACs, RAs,  ZPICs, and CERT contractors—to conduct postpayment claims reviews in  order to help detect and recoup overpayments or repay underpayments,  and to investigate potential fraud. Although HHS had begun estimating the extent of improper payments  in Medicare FFS claims in 1996, the Improper Payments Information  Act of 2002 (IPIA) requires executive-branch federal agencies to  annually review all programs and activities to identify those that are  susceptible to significant improper payments, estimate the annual  amount of improper payments for these programs and activities, and  report these estimates along with actions taken to reduce improper  payments for programs with estimates that exceed $10 million. In  fiscal year 2003 as part of its IPIA compliance efforts, CMS  established the CERT program to measure improper payment rates  for Medicare FFS claims, including one CERT contractor that is  responsible for reviewing a random sample of claims nationwide, with  their related medical records and other documentation to determine if  they are proper. ZPICs. not make recoupments or repayments. RAs. As in the demonstration,  under the national program the RAs are paid on a contingency fee basis,  but CMS officials indicated that the percentage is smaller. The RAs  conducted nearly five times as many complex reviews in fiscal year 2012  as the other three contractors combined—over 1.1 million complex  postpayment claims reviews and nearly 1 million automated review  denials. However, the  2.3 million reviews performed by these contractors accounted for less  than 1 percent of the over 1 billion FFS claims paid annually, and about  1.4 million were complex reviews. Many CMS Requirements for Postpayment Claims Review Differ across Contractor Types, Which Can Impede Effectiveness and Efficiency

CMS has different requirements for postpayment claims reviews across  different contractor types, and some of these differences can sometimes  impede effectiveness and efficiency by increasing administrative burden  on providers. Due in part to CMS’s experience with the RA demonstration  and issues raised by providers during the demonstration, CMS sets more  limits through claims review requirements on RAs than on other  contractors. CMS has begun an effort to examine  whether its claims reviews activities add administrative burden for  providers. Other requirements unique to the  RAs include  submitting to CMS for review and approval descriptions of the billing  issues that they propose to review and the basis for assessing  whether the claims for those services are proper prior to widespread  use, posting notice of billing issues targeted for postpayment review on  reimbursing certain providers for the expense entailed in providing  requested medical records, making claims reviewers’ credentials available upon provider request, providing access to RA staff physicians for discussion of claim denials  upon provider request, and giving providers 40 days to request an opportunity to provide  additional documentation to the contractor and informally discuss any  revision prior to having to file an appeal. Other Differences in CMS Requirements across Contractors Can Impede Effectiveness and Efficiency by Complicating Providers’ Responses to and Understanding of Claims Reviews

Many of the other requirements CMS developed for postpayment review  activities, including documentation submission, staffing, and quality  assurance, vary across the four contractor types. According to CMS officials, differences in  requirements generally developed because the contracts or requirements  were written at different times by staff within different parts of CMS, or the  contractors’ functions and activities have changed over time. In  addition, ensuring consistency in common processes is consistent with  OMB guidance on streamlining service delivery and a strong control  environment. Conclusions

Differences in CMS’s postpayment claims review requirements for the  four types of contractors may reduce the efficiency and effectiveness of  claims reviews by complicating providers’ compliance with the  requirements. In addition, some of  these differences could have come about because different types of  contractors and associated requirements are managed by different parts  of CMS. We recommend that the Administrator of CMS:  1.  examine all postpayment review requirements for contractors to  determine those that could be made more consistent without negative  effects on program integrity,  2.  communicate publicly CMS’s findings and its time frame for taking  3.  reduce differences in postpayment review requirements where it can  be done without impeding the efficiency of its efforts to reduce  improper payments. In its comments,  HHS concurred with our three recommendations and agreed to take steps  to reduce differences in postpayment review requirements where  appropriate. HHS  indicated that standardizing the minimum number of days a contractor  must give a provider to respond to an ADR before the contractor has the  authority to deny the claim could help minimize provider confusion. Appendix I: List of Provider Associations GAO Interviewed

Appendix II: Comments from the Department of Health and Human Services

Related GAO Products

GAO’s 2013 High-Risk Update: Medicare and Medicaid.
Why GAO Did This Study

In fiscal year 2012, CMS estimated that $32.4 billion in Medicare FFS payments were improper. CMS uses several types of contractors to conduct postpayment claims reviews to identify improper payments. Recently, questions have been raised about the efficiency and effectiveness of these contractors' efforts and the administrative burden on providers. This report (1) describes these contractors and (2) assesses the extent to which requirements for postpayment claims reviews differ across the contractors and whether differences, if any, could impede effective and efficient claims reviews. GAO reviewed CMS's requirements for claims reviews in manuals and contracts, interviewed CMS officials and selected provider associations, and assessed the requirements against internal control standards and executive-agency guidance on streamlining service delivery. GAO also obtained data on numbers of claims reviewed, and appealed.

What GAO Found

The Centers for Medicare & Medicaid Services' (CMS) contractors that conduct postpayment reviews on Medicare fee-for-service (FFS) claims were established by different legislative actions; are managed by different offices within CMS; and serve different functions in the program. These contractors include (1) Medicare Administrative Contractors that process and pay claims and are responsible for taking actions to reduce payment errors in their jurisdictions; (2) Zone Program Integrity Contractors (ZPIC) that investigate potential fraud, which can result in referrals to law enforcement or administrative actions; (3) Recovery Auditors (RA) tasked to identify improper payments on a postpayment basis; and (4) the Comprehensive Error Rate Testing (CERT) contractor that reviews a sample of claims nationwide and related documentation to determine a national Medicare FFS improper payment rate. All four types of contractors conduct complex reviews, in which the contractor examines medical records and other documentation sent by providers to determine if the claims meet Medicare coverage and payment requirements. RAs are paid fees contingent on the amount of the claims that are found improper and recouped or adjusted, whereas the other contractors' reimbursement is not dependent on the amount of their claims reviews. The RAs conducted almost five times as many reviews as the other three contractors combined. Overall, compared to over one 1 billion claims processed in 2012, all four types of contractors combined reviewed less than one 1 percent of claims, about 1.4 million reviews, for which providers might be contacted to send in medical records or other documentation.
Although postpayment claims reviews involve the same general process regardless of which type of contractor conducts them, CMS has different requirements for many aspects of the process across these four contractor types. Some of these differences may impede efficiency and effectiveness of claims reviews by increasing administrative burden for providers. There are differences in oversight of claims selection, time frames for providers to send in documentation, communications to providers about the reviews, reviewer staffing, and processes to ensure the quality of claims reviews. For example, while the CERT contractor must give a provider 75 days to respond to a request for documentation before it can find the claim improper due to lack of documentation, the ZPIC is only required to give the provider 30 days. CMS places more limits on the RAs in its requirements for reviews conducted by them than by other contractors. For example, RAs must submit the criteria that they will use to determine if a service is paid improperly to CMS for approval. The additional requirements for RAs are due in part to CMS's experience during an initial demonstration testing the use of RAs. CMS officials indicated that other requirement differences across contractors generally developed due to setting requirements at different times by staff in different parts of the agency. Providers indicated that some differences hindered their understanding of and compliance with the claims review process. Having inefficient processes that complicate compliance can reduce effectiveness of claims reviews, and is inconsistent with executive-agency guidelines to streamline service delivery and with having a strong internal control environment. CMS has begun to examine differences in requirements across contractors, but did not provide information on any specific changes being considered or a time frame for action.

What GAO Recommends

GAO recommends that CMS (1) examine all contractor postpayment review requirements to determine those that could be made more consistent, (2) communicate its findings and time frame for taking action, and (3) reduce differences where it can be done without impeding efforts to reduce improper payments. In its comments, the Department of Health and Human Services concurred with these recommendations, agreed to reduce differences in postpayment review requirements where appropriate, and noted that CMS had begun examining these requirements.