HHS-OIG Reports that Four Medicaid Audit Error Types Accounted For 95% of the Net Improper Medicaid Overpayments

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Four Medicaid Audit Error Types Accounted for 95% of Medicaid Overpayments

(April 20, 2010): The Department of Health and Human Services, Office of Inspector General (OIG) recently released its report on Medicaid Audits “HHS-Analysis of Improper Payments Identified During the Payment Error Rate Measurement Program Reviews in 2006 and 2007 (A-06-09-00079).” As set out in the report, four types of medical review errors accounted for 95% of the net improper Medicaid overpayments during 2006 and 2007. A breakdown of the Medicaid audit error findings are set out in the report is detailed below. OIG examined a total of 1,356 medical review errors and 202 data processing errors.

I. Medicaid Audit Error Findings:

Of the medical review errors analyzed by OIG, the agency found that four types accounted for 78% of the errors and 95% of the net improper Medicaid overpayments. The four error types included:

Error Type #1: Insufficient documentation (37.4%);

Error Type #2: No documentation (25%);

Error Type #3: Services that violated State policies (12.9%); and

Error Type #4: Medically unnecessary services (2.4%).

The 1,356 medical review errors included 23 service categories, six of which accounted for 67 percent of the errors and 95 percent of the net improper Medicaid overpayments. The six service categories included:

Category #1: Nursing facilities;

Category #2: Inpatient hospitals;

Category #3: Home and Community-Based Services waivers;

Category #4: Intermediate care facilities for the mentally retarded;

Category #5: Prescribed drugs; and

Category #6: Physician practices.

II. Medicaid Audit Error Types of Data Processing Problems:

Of the 202 data processing errors OIG analyzed, four types accounted for 78 percent of the errors and 64 percent of the net improper Medicaid overpayments. The four error types included:

Error Type #1: Pricing errors,

Error Type #2: Non-covered services errors,

Error Type #3: Rate cell errors for managed care claims, and

Error Type #4: Errors in the logic edits of claim processing systems.

The 202 data processing errors represented 18 service categories, six of which accounted for nearly 73 percent of the errors and 79 percent of the net improper Medicaid overpayments. The top six service categories included:

Category #1: Inpatient hospitals

Category #2: Nursing facilities,

Category #3: Capitated care,

Category #4: Prescribed drugs,

Category #5: Physicians, and

Category #6: Outpatient hospital.

III. Estimated Financial Impact (Federal Only):

For 2006, CMS estimated that the Federal share of the improper payments paid was $6.6 billion. This increased considerably, to $18.6 billion in 2007 (Federal share only). OIG has recommended that CMS provide States with similar analytical data to help them address these improper payments.

IV. Final Remarks:

With the passage of the recent Health Care Reform legislation, CMS has been authorized to expand the RAC program to Medicaid. Now, more than ever before, it is essential that providers carefully analyze their operations, coding and billing practices in order to ensure that Medicaid billings meet applicable regulatory and statutory requirements.

Robert W. Liles, Esq. serves as Managing Partner at Liles Parker. Robert and several of our other attorneys have extensive experience working on Medicaid cases. Should your physician practice or clinic find itself facing a Medicaid audit or investigation, give us a call for a complementary consultation. We can reached at: 1 (800) 475-1906.