Auditing the Auditors

Medicare fraud

An August report from the Department of Health and Human Services' inspector general casts doubt on recent claims by Medicare officials that they are finally cracking down on fraud. The report found that auditors hired by the Centers for Medicare & Medicaid Services (CMS) grossly underestimated the level of fraud in claims for medical equipment and supplies, mainly because officials told them not to look too hard.

The auditors found an error rate of 7.5 percent, amounting to $700 million in improper payments. The inspector general's auditors, by contrast, found an error rate of nearly 29 percent, about four times as high. The primary cause of the discrepancy was that the first team ofauditors relied mainly on documentation from suppliers, while the second team also looked at medical records and interviewed patients to confirm that the products were medically necessary, had been delivered, andwere being used.

According to the inspector general's report, official CMS guidelines tell auditors "to review beneficiaries' medical records, including pertinent records from physicians, to support"suppliers' claims. But "CMS orally instructed [the auditors] to deviate from written policies by (1) making determinations based primarily on the limited medical records available from suppliers, (2) applying clinical inference when reviewing supplier medical records to reasonably infer that the [equipment] provided was medically necessary, and (3) not counting lack of proof of delivery as an error if that was the only issue with a claim."