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Medicaid MIC Audits to Increase

Medicaid MIC Audits are Expected to Increase.(May 15, 2012): Recent efforts by CMS to improve the performance of Medicaid MIC audits have resulted in procedural changes for these contractors and new financial incentives for Medicaid Recovery Audit Contractors (MRACs).  These new procedural changes are intended to improve the effectiveness of MRAC audits.  The recent U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) report entitled “Early Assessment of Audit Medicaid Integrity Contractors”, issued on 03/19/12, revealed that MICs underwent a learning curve during their startup audit efforts in 2010 and after identifying several problems, the Medicaid Integrity Program (MIP) is now poised to significantly improve its audit presence and its ability to target and identify healthcare waste, fraud and abuse.

I.  State-Administered Medicaid MIC Audits Have Been Largely Ineffective:

The OIG’s report indicated that initial MIC audits in state-administered Medicaid programs were largely ineffective, but identified correctable issues associated with the application and analysis of Medicaid data.  As a result, significant improvements in Review and Audit MIC capabilities to identify audit overpayments can soon be expected.

The federal government’s share of Medicaid spending for 2010 was $271.4 billion, with the various states accounting for the remaining $133.9 billion.  As set out in CMS’ 2010 Actuarial Report, overall Medicaid spending totaled $404.9 billion. CMS projected $22.5 billion in improper payments through its Medicaid Payment Error Rate Measurement, discussed in the HHS Agency Financial Report for 2010.

The OIG report found that of the 370 pre-screened MIC audits that had been conducted or were still ongoing in the first 6 months of 2010, 81% were either unable or unlikely to identify overpayments.  From January 1, 2010 through June 30, 2010, the OIG found that, “Only 11% of assigned audits were completed, with findings of $6.9 million in overpayments, $6.2 million of which resulted from seven completed collaborative audits involving Audit MIC’s, Review MIC’s, States and CMS.”

Moreover, CMS spent approximately $30.5 million on Review and Audit MICs in 2010, with $17.2 million going to Audit MICs. The government has enjoyed success on the Medicare side with increased contractor audits by RACs and ZPICs, and is now looking to improve its initially disappointing performance on the Medicaid side and increase its $6.9 million total in overpayment recoveries.

II.  MIC Auditors Have Done a Poor Job Identifying Targets:

The OIG report found that Medicaid MIC audits were hindered by poor target identification algorithms in their data analysis software and mistakes in the Review MICs’ application of State Medicaid program policies and data, bearing in mind that each state’s program policies and data are unique.  The OIG made a number of suggestions for improved application and analysis, with the result being that providers should expect largely improved overpayment identification by MICs in the future.

Significantly, the OIG found that $6.2 million of the $6.9 million dollars identified as overpayments in 2010 resulted from 7 of 8 collaborative audits conducted between Audit MICs, Review MICs, State MICs and CMS.  Of the 42 MIC audits studied, these 7 collaborative audits identified 90% of the overpayments for that period, with only $700,000 coming from the remaining 35 MIC audits.

III. Final Remarks:

OIG recommended that CMS expand its collaborative audit efforts with State Medicaid administrative agencies, and improve its audit target selection in states that choose not to collaborate with the federal government in improving identification of waste, fraud and abuse by Medicaid providers.

Healthcare LawyerLiles Parker is a full service health law firm, providing assistance and representation with Medicaid and Medicare compliance concerns, government audits and appeals, and other health law matters.  Should you have any questions, please contact Richard Pecore at: (713) 432-4747 for a free consultation.