Spotlight on Recovery Audits as Medicare and Medicaid Improper Payments Increase

by | Last updated Jul 4, 2023 | Published on Jun 20, 2017 | Medical Billing

Audits Medicare
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According to a recent Health and Human Services Office of Inspector General (OIG) report, Medicare and Medicaid improper payments exceeded the 10 percent regulatory compliance limit in 2016, and in some cases, were higher than in 2015. It can therefore be expected that health care providers will be under increasing scrutiny and that there will be an uptick in Medicare recovery audits in 2017. They should therefore take proactive steps to prepare for compliance audits. Physicians, practice administrators, and medical billing and coding service providers, all have a role in preparing a practice for audits.

Recovery auditors are contracted by the federal government and also by private insurance companies to ensure that appropriate medical services are being rendered and billed appropriately. Medical billing companies help providers prepare for these audits by reviewing existing medical records to detect possible red flags in a practice’s billing patterns that may be considered fraudulent.

The key findings of the OIG-contracted audits are as follows:

  • Improper payment rate for Medicare fee-for-service reimbursement surged to 11 percent in 2016
  • The Medicaid improper payment rate was 10.48 percent last year
  • HHS did not reach improper payment reduction goals for Medicare Advantage and the Children’s Health Insurance Program (CHIP)
  • HSS failed to award a recovery audit contract for Medicare Advantage in 2016

Auditors identified the main reasons for the high Medicare improper payment rate were identified as:

  • Insufficient documentation and medical necessity errors
  • Post-acute care reimbursement
  • Inpatient rehabilitation facility claims, which rose from 45.5 percent in 2015 to 62.39 percent in 2016

The Government Accountability Office (GAO) reported that improper Medicaid reimbursements made to providers and suppliers in 2016 was approximately $36 billion, a 9.8 percent increase from 2015. HSS said that the Medicaid improper payment rate rose above the legislative threshold in 2016 due to the challenges faced by states with updating systems to comply with program integrity requirements.

Revenue Cycle Intelligence reported in May that HSS has agreed to comply with the OIG’s recommended actions on Medicaid and Medicare improper payments, which are as follows:

  • Focus on addressing the root causes of Medicare improper payments and develop measures to reduce the rate below 10 percent
  • Create a plan to help states with their compliance efforts by targeting the key reasons for Medicaid improper payments
  • Work with Medicare Advantage plans and providers to communicate documentation requirements and validate adherence
  • Collaborate with states to update respective systems to avert CHIP improper payments
  • Identify a Recovery Audit Contractor (RAC) for Medicare Advantage and finalize the award in a timely manner to ensure recovery audits are performed 2017

These findings indicate that audits will likely increase and medical providers will be under increasing scrutiny as the federal government invests more resources in fighting inappropriate health care practices. Practices should focus on developing an effective compliance and auditing program involving their medical billing company, administrators, and medical records personnel. Knowing what triggers an RAC audit and taking measures to prevent them is important.

  • Coding practices: Upcoding and undercoding come in for scrutiny. Partnering with an expert medical coding service provider can help practices track patterns of coding and identify variations in the norm. Documentation should support the code use.
  • Modifier use: Modifiers inform payers in greater detail about the services delivered. Incorrect use of modifiers could trigger a fraud and abuse audit.
  • Patient complaints: Patient complaints to payers about billing and charges can also attract unwanted scrutiny. To prevent this, practices should watch out for medical billing and coding errors, and also deal with patient complaints in a timely manner.
  • EHR data entry errors: Completing medical records using the “cut and paste” function should be avoided as it can lead to errors. The clinical documentation pertaining to each patient should be unique.
  • Compliance plans and internal audits: Practices should have a proper compliance plan in place. Conducting periodic internal audits of coding and documentation will help ensure that medical services rendered are being coded and billed appropriately.

All medical practices will likely face some kind of audit through preauthorization processes, claims denials, automated post-pay audits, or complex medical chart reviews. Medical billing outsourcing to a reliable service provider can help providers stay alert to these potential triggers to avoid an audit or face audit challenges with confidence.

  • Natalie Tornese
    Natalie Tornese
    CPC: Director of Revenue Cycle Management

    Natalie joined MOS’ Revenue Cycle Management Division in October 2011. She brings twenty five years of hands on management experience to the company.

  • Meghann Drella
    Meghann Drella
    CPC: Senior Solutions Manager: Practice and RCM

    Meghann joined MOS’ Revenue Cycle Management Division in February of 2013. She is CPC certified with the American Academy of Professional Coders (AAPC).

  • Amber Darst
    Amber Darst
    Solutions Manager: Practice and RCM

    Hired for her dental expertise, Amber brings a wealth of knowledge and understanding of the dental revenue cycle management (RCM) services to MOS.

  • Loralee Kapp
    Loralee Kapp
    Solutions Manager: Practice and RCM

    Loralee joined MOS’ Revenue Cycle Management Division in October 2021. She has over five years of experience in medical coding and Health Information Management practices.