Home Health & Hospice Week

If you're wondering how often a Recovery Audit Contractor's review of overpayments turns into a federal fraud investigation, a recent report from a federal watchdog agency says "not often enough."

Step up the fraud hunting, the HHS Office of Inspector General urges the Centers for Medicare & Medicaid Services in the report. The OIG examined how often the RACs selected to participate in the demonstration project referred potential fraud cases to CMS. During the period between March 2005 and March 2008, participating RACs identified $1.03 billion in improper Medicare payments -- 85 percent of which came from inpatient hospital facilities.

However, during the same time period, all the RACs together referred only two cases for CMS to investigate for fraud. And, there must have been some kind of communication break, because CMS reports getting no fraud referrals from the RACsduring that time.

Why were the RACs essentially blind to possible fraud, even as they raked in overpayment money? Perhaps because the RACs are required to report potential fraud to CMS, but once they refer a case, it's no longer open to them as a place to seek out overpayments.

The RACs are paid on contingency, meaning they don't get paid unless they collect overpay- ments. Current RACs have fees between 9 and 12.5 percent (see Eli's HCW, Vol. XVIII, No. 13, p. 99).

And collecting overpayments is lucrative; the RACs that participated in the demo project received a total of $187.2 million over three years.

"Because RACs do not receive their contingency fees for cases they refer that are determined to be fraud, there may be a disincentive for RACs to refer cases of potential fraud," the OIG reports.

The OIG recommends that CMS:

• conduct followup to determine the outcomes of the two referrals made during the demo;

• implement a database system to track fraud referrals; and

• require RACs to receive mandatory training on the identification and referral of fraud.

"Having a RAC staff that is trained and knowledgeable about fraud will increase awareness and detection of potential fraud during the claims review process," the OIG says.

The OIG doesn't recommend a solution to CMS for the RAC "disincentive" issue it identifies within the report. Note: The OIG report is at www.oig.hhs.gov/oei/reports/oei-03-09-00130.pdf.