CMS Programs to Monitor the Payment Accuracy of Medicare FFS Claims

The objective of the CERT Program and the HPMP is to measure the  degree to which CMS, through its contractors, is accurately paying claims. 1.) 2.) Determinations of error were made by QIO physician reviewers. Estimation of the National Medicare FFS Error Rate

CMS estimated the national Medicare FFS error rate by combining the  three contractor-type error rates (carrier, DMERC, and FI) from the CERT  Program and the one contractor-type error rate (QIO) from the HPMP. 3.) CMS Methodology Adequate for Estimating the Error Rates in the CERT Program

The methodology used by CMS in the CERT Program to estimate error  rates by contractor type (carrier, DMERC, and FI) in fiscal year 2004 was  adequate. The CERT Program also had  adequate processes in place to collect medical records and to accurately  identify and categorize payment errors. The statistical methods that CMS  used to estimate the contractor-type error rates were valid. CMS Methodology Adequate for Estimating the Error Rate in the HPMP

We found that the methodology used by CMS was adequate to produce a  reliable estimate of the fiscal year 2004 Medicare error rate for the one  contractor type (QIO) in the HPMP. We found also that the methodology was adequate because the HPMP  contractors responsible for collecting the medical records for the sampled  claims, as well as for identifying and determining errors, had appropriate  controls in place to ensure that established procedures were followed. Sampling Methods

The sample size that CMS used for the HPMP, about 40,000 claims, was  sufficiently large to produce a reliable estimate of the fiscal year 2004  error rate for the QIO contractor type. Based on  our review, we found that the HPMP sample was representative of the  population from which it was drawn in terms of average dollar amount per  claim. CMS Methodology Adequate for Estimating the National Error Rate

CMS appropriately combined the error rates under the CERT Program and  the HPMP to estimate the fiscal year 2004 national Medicare error rate. CMS estimated the national Medicare error rate by averaging the error  rates of the four contractor types (carrier, DMERC, FI, and QIO), weighted  by each contractor type’s share of total Medicare FFS payments. HHS  also noted that CMS is continually committed to refining the processes to  estimate, as well as lower, the level of improper payments in the Medicare  FFS program. These changes primarily affected HHS’s processes for calculating an  annual error rate estimate for the Medicare FFS program. To conduct our analysis of CMS’s sampling methods, we reviewed work  performed by the Department of Health and Human Services (HHS) Office  of Inspector General (OIG) contractor that assessed these methods and  CMS documentation for the fiscal year 2004 Medicare error rate. To conduct our analysis of CMS’s statistical methods, we reviewed the  OIG contractor’s computer programming code, which replicated CMS’s  estimation of the error rates for carriers, durable medical equipment  regional carriers (DMERC), and fiscal intermediaries (FI), as calculated by  the CERT Program subcontractor responsible for statistical analysis of the  error rates for fiscal year 2004. Appendix II: Fiscal Year 2004 Error Rate Information by Contractor Type—Carriers, DMERCs, FIs, and QIOs

Appendix II: Fiscal Year 2004 Error Rate  Information by Contractor Type—Carriers,  DMERCs, FIs, and QIOs year 2004(in dollars)
CMS estimated paid  claims error rate  (percentage)
CMS estimated  standard error(percentage) precision(percentage) 13.5 year 2004(in dollars)
CMS estimated paid  claims error rate  (percentage)
CMS estimated  standard error(percentage) precision(percentage) 4.5 year 2004(in dollars)
CMS estimated paid  claims error rate  (percentage)
CMS estimated  standard error(percentage) precision(percentage) 23.8 year 2004(in dollars)
CMS estimated paid  claims error rate  (percentage)
CMS estimated  standard error(percentage) precision(percentage)
Carriers are health insurers and pay claims submitted by physicians, diagnostic laboratories and  facilities, and ambulance service providers. DMERCs are health insurers and pay claims submitted by durable medical equipment suppliers. FIs are almost exclusively health insurers and pay claims submitted by home health agencies, non- prospective payment system (PPS) hospitals, hospital outpatient departments, skilled nursing  facilities, and hospices.
Why GAO Did This Study

The Centers for Medicare & Medicaid Services (CMS) estimated that the Medicare program paid approximately $20 billion (net) in error for fee-for-service (FFS) claims in fiscal year 2004. CMS established two programs--the Comprehensive Error Rate Testing (CERT) Program and the Hospital Payment Monitoring Program (HPMP)--to measure the accuracy of claims paid. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 directed GAO to study the adequacy of the methodology that CMS used to estimate the Medicare FFS claims paid in error. GAO reviewed the extent to which CMS's methodology for estimating the fiscal year 2004 error rates was adequate by contractor type for (1) the CERT Program, (2) the HPMP, and (3) the combined national error rate (including both the CERT Program and the HPMP). GAO reviewed relevant CMS documents and reports related to the CERT Program and the HPMP. In addition, GAO reviewed work performed by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) and its contractor that evaluated CMS's fiscal year 2004 statistical methods and other aspects of the error rate estimation process. GAO also conducted interviews with officials from CMS, HHS's OIG, and their contractors.

What GAO Found

The methodology used by CMS for the CERT Program was adequate to estimate the fiscal year 2004 error rates by contractor type--carrier, durable medical equipment regional carrier (DMERC), and fiscal intermediary (FI). Carriers pay claims submitted by physicians, diagnostic laboratories and facilities, and ambulance service providers. DMERCs pay claims submitted by durable medical equipment suppliers. FIs pay claims submitted by hospitals, home health agencies, hospital outpatient departments, skilled nursing facilities, and hospices. The methodology was adequate because CMS used a large sample--about 120,000 claims--and an appropriate sample selection strategy. For these fiscal year 2004 error rate estimates, CMS made improvements in the collection of medical records that supported the sampled claims. These medical records were appropriately reviewed to determine whether there were errors in payment. CMS used valid statistical methods to estimate the fiscal year 2004 error rates for the carrier, DMERC, and FI contractor types. The methodology used by CMS for the HPMP was adequate to estimate the fiscal year 2004 error rate by quality improvement organizations (QIO), which are responsible for ascertaining the accuracy of coding and payment of Medicare FFS paid claims for acute care inpatient hospital stays. CMS's sampling methods were adequate because the agency used a large sample, approximately 40,000 claims, that was representative of the population from which it was drawn in terms of average dollar amount per claim. Also, the HPMP had adequate processes in place to ensure appropriate determinations of error. CMS used valid statistical methods to estimate the fiscal year 2004 error rate for the QIO contractor type. The fiscal year 2004 contractor-type error rate estimates for the CERT Program and the HPMP were appropriately combined to determine the national Medicare error rate through the use of a valid statistical method. CMS estimated the national Medicare error rate by averaging the carrier, DMERC, and FI contractor-type error rates in the CERT Program and the QIO contractor-type error rate in the HPMP, weighted by each contractor type's share of total Medicare FFS payments. In written comments, HHS noted that GAO found CMS's methodology adequate for estimating the fiscal year 2004 national Medicare FFS error rate. HHS also noted that CMS is continually committed to refining the processes to estimate, as well as lower, the level of improper payments in the Medicare FFS program.