Sharpen Medicaid Integrity auditing, OIG advises

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Medicaid Integrity Contractors failed to find overpayments in the majority of their audits for the first half of 2010, leading the Office of Inspector General to recommend that the Centers for Medicare & Medicaid Services revise its audit process.

Eighty-one percent of the 370 audits assigned to MICs in the first half of 2010 did not identify overpayments, according to the OIG's “Early Assessment of Medicaid Integrity Contractors,” which was released this week.

Among the reasons: Audit MICs reported that “problematic audit targets” caused duplication of efforts; audit targets were misidentified because state program policies were applied incorrectly; and audit targets were poorly identified. For example, out of 157 audits that identified no overpayments, 111 were targeted at the wrong provider, either because of problems with Medicaid claims data or errors in interpreting the data, the report states.

Among the 42 providers that were found to have overpayments, two were long-term care facilities, and both involved hospice service overpayments.  Other reasons for overpayment for hospitals, mental health and pharmacy providers included duplicate billing, early refills, upcoding, or inappropriate service settings.

Both CMS and the OIG agree that more collaborative audits are needed, and CMS has said it has initiatives underway to improve audit target selection.

The Medicaid Integrity Program was established under the Deficit Reduction Act (DRA) of 2005. CMS spent approximately $30.5 million on review and audit MICs in fiscal 2010, $17.2 million of which went to audit MICs, the report states.