Recovery audit contractors working on behalf of the Centers for Medicare & Medicaid Services recovered $2.4 billion in overpayments to providers in 2014 and refunded $173 million in underpayments.
The total $2.6 billion in improper payments was 32% below program corrections in fiscal 2013, according to the CMS’ annual audit report to Congress published in October. Auditors in 2013 identified and corrected $3.8 billion in improper payments, including $3.7 billion in overpayments and $102 million in underpayments, according to the CMS’ 2013 report.
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Nearly 50% of payment corrections in 2014 resulted from Region C, which covers southern states and some southwestern states, including Texas, Louisiana, Florida, Colorado, and New Mexico. Western states, (Region D) including California, Nevada, and Arizona, had the second highest payment corrections at 21%, followed by eastern states (16%) and Midwestern states (15%). The majority of improper payments resulted from Medicare Part A claims (96%), with 2% stemming from Medicare Part B claims and another 2% resulting from durable medical equipment claims.
Health care providers appealed 799,141 claims identified by the auditors in 2014, down from 836,849 appealed claims in 2013. Of the total claims appealed in 2014, 23% were overturned with decisions in the provider’s favor, an increase from 18% of provider-favorable decisions in 2013.
After the audit program’s administrative costs, underpayments paid to providers, and appeal reversals, the Medicare Recovery Audit Program returned approximately $1.6 billion to the Medicare Trust Funds in 2014. The CMS spent $461 million to operate the Recovery Audit Program, of which $275 million were contingency fees paid to Recovery Auditors. Administrative costs, such as processing appeals at the first two levels, adjusting claims, support contractors, and oversight of the program, accounted for $186 million.
CMS officials attribute the decrease in payment corrections in 2014 to limited reviews that took place during the close-out process of existing recovery auditor contracts. As the CMS completed its procurement process for the next round of recovery auditor contracts, the agency focused its resources on completing open reviews and prohibited the initiation of new complex reviews after February 2014, according to its annual report.
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