Audits: Money saved or money wasted?

A recent press release from the Office of Inspector General (OIG) for the Department of Health and Human Services trumpets recoveries from audits of "about" $222 million between October 2010 and March 2011. According to the Inspector General, the recoveries are the result of a "period of intense activities" on the part of the OIG and others. Not a single HME provider will dispute that there have been and continue to be "intense activities" in the audit arena, so it is not surprising that the government recovered that much money in a period of only six months.

Some may cheer the recoveries as a way of returning improper--or fraudulent--payments to Medicare, but the truth is that they mostly reflect Medicare contractors' overly zealous interpretation of polices, and many of them will be reversed on appeal. This is costing everyone money, and it doesn't have to be this way.

It's a myth that Medicare costs can be controlled merely (or substantially) by eliminating the "waste, fraud and abuse" that is rampant in the system; yet Medicare has built an elaborate framework in support of this premise. There are at least four kinds of Medicare contractors, each with its own mandate to audit providers, including the CERT contractors who audit providers in order to audit the contractors. Each one of them must also justify the costs of its contract with Medicare.

We need to acknowledge that healthcare is expensive, and Medicare covers a demographic with many chronic health needs. It may be possible to "save" by recouping payments for test strips for a type 1 diabetic testing within the limits of the LCD because of his doctor's illegible handwriting, but the savings may well be offset by the corresponding costs to the system: The cost of maintaining an infrastructure for audits, of the audit itself and the provider's response to the audit, including physician involvement in obtaining documents, followed by appeals, and perhaps even costs to the beneficiary who may have to sign an ABN in the future if the doctor's notes continue to be inadequate.

Instead, Medicare should create benefit thresholds based on the beneficiary's condition. Once it's established that he has insulin dependent diabetes, an audit would not be warranted if the beneficiary's supply utilization is within the limits of the LCD. This diagnosis driven approach is more intellectually honest than the current one and would reduce some of the costs of managing the program.

As it stands now, we are spending a lot of money chasing overpayments that are the result of ambiguous policies and Medicare program instructions that are so general there is no consensus on what they mean or how they should be applied. In a diagnosis driven model, once the beneficiary is shown to have a condition that requires a type of care, then there is no further need to verify medical necessity for items and services related to that condition, as long as his utilization fits normal parameters. In other words, once a patient has COPD, a Medicare contractor would not question his or her ongoing need for oxygen. That's just a waste of time and money.

Asela Cuervo is a healthcare attorney based in Washington, D.C.