While HHS inspector general auditors sat on their findings for years, the industry was pushing back hard behind the scenes, trying to discredit the findings or keep them hidden, records show.
Excellus, a Rochester, N.Y.-based health plan attacked the auditors’ methodology in a December 2010 letter to an Inspector General’s Office official.
The health plan said the auditors’ finding that it was overpaid by about $41.6 million in 2007 was “inflated and based on flawed data.” The plan also blamed any deficiencies in record keeping on its doctors. An Excellus spokesman told the Center for Public Integrity that the health plan settled the matter in December 2013 by paying the government $157,777. “[The government] recognizes this is an industry-wide issue,” said the Excellus statement, “and it is adjusting its audit approach accordingly, while continuing to encourage health plans to work with the provider community to improve documentation of claims and diagnoses.”
PacifiCare, a division of insurance titan UnitedHealth Group, the nation’s largest Medicare Advantage contractor, hotly disputed audit findings for its plans in California and Texas.
Auditors had deemed the risk scores for 45 of 100 California patients “invalid” because medical records didn’t verify they had been treated for the conditions claimed. One patient who had knee replacement surgery was listed as having blood poisoning. While the medical chart confirmed the operation, no care for blood poisoning was evident.
UnitedHealth Group fired back in a September 2010 letter that HHS had “exceeded its authority.” In a second letter that year, the company demanded that the results be kept confidential while executives contested the audit finding that the plans could owe the government more than $539 million for 2007.
In the end, the inspector general’s review of just those six plans estimated that Medicare overpaid a total of nearly $650 million just for 2007, the only year studied. The inspector general lacked the power to demand refunds, but it recommended that CMS work out how much the health plans should return to the federal treasury. The inspector general did not pursue a broader investigation into the high error rates — and still hasn’t. And CMS sided with the industry and all but ignored the inspector general’s recommendations.
The health plans contend that the audit process can be subjective and unwieldy because they must scramble to track down records of medical visits years after they occurred. Sometimes, doctors retire or move, making it hard to locate patient files, they say.
Several point out that they shouldn’t be penalized when doctors fail to keep adequate records. They also argue that no billing formula can fully predict who will require expensive medical care and they can lose money when risk-based payments don’t cover their costs.
Cigna Healthcare of Arizona, for example, disputed the audit finding that it was overpaid by more than $23 million for 2007. Calling the audit standards “fatally flawed,” Cigna said it actually lost about $800,000 that year treating the 100 patients whose files auditors sampled.
The industry also argues that just because medical auditors can’t find a record of a disease doesn’t mean patients don’t have it, or that the condition isn’t affecting their health and treatment plan. Doctors are trained to detail what they did during an office visit, but may not dwell on all the underlying medical conditions that impact treatment decisions, they say.
HHS IG auditors counter that they can only rely on the medical record presented to them. If that record fails to substantiate a specific diagnosis and treatment, then they count it as an overpayment and want a refund. Under their contracts with the government, health plans are responsible for assuring these records are accurate.
James Cosgrove, who directs the health care division of the Government Accountability Office, the watchdog arm of Congress, said that federal health officials have yet to answer a basic question: did the health plan fail to provide the service or did it simply not document it properly?
“That’s something we would be very interested in looking at,” Cosgrove said.
While the industry clashed with the HHS Inspector General’s Office, it found a sympathetic ear at CMS. Rather than hammer the health plans for chronic billing blunders, the agency has mostly shrugged them off or settled for recouping minimal sums.
In February 2012, CMS officials decided to forgive overpayments to Medicare health plans made from 2008 through 2010. The surprise decision brought cheers to corporate boardrooms, according to John Gorman, a former federal health official who now advises Medicare Advantage plans.
Gorman said CMS decided that “the sins of the past are absolved.”
“They didn’t have to do that, and we, hundreds of CFOs and bankers up and down Wall Street and Madison Avenue, are thankful they did,” Gorman added.
The CMS decision certainly spelled relief for Coventry Health Care in Bethesda, Maryland, which operates in more than a dozen states and is owned by insurance giant Aetna. Within a week of the decision, the company freed up $133 million it had held in reserves to cover any potential liability from flawed risk scoring, according to its financial statements.
Humana Inc., which disclosed to securities regulators that it was the subject of six CMS payment audits for 2007, declined to say how much the audits cost the company, but noted the results were not significant financially.
CMS ignored the HHS inspector general’s finding that the six health plans it audited had been overpaid by an estimated $650 million for 2007. CMS settled five of the six audits for a total repayment of just over $1.3 million, the Center for Public Integrity found.
Further, CMS decided not to chase after overcharges from 2008 through 2010 even though the agency estimated through sampling that it made more than $32 billion in “improper” payments to Medicare Advantage plans over those three years. CMS did not explain its reasoning.
CMS took that stance just a month after congressional auditors criticized the agency for failing to crack down on Medicare Advantage plans that overbilled.
CMS officials also decided in 2012 to conduct only 30 of its own confidential RADV overpayment audits each year. That’s less than a third the number of audits the agency said it would do in 2009. At that time, the Obama administration had promised to ramp up efforts to recoup overpayments to help fund the Affordable Care Act.
At that rate, it would take CMS more than 15 years to review the hundreds of Medicare Advantage contracts now in force.
CMS also helped out the industry in other ways likely to limit recoveries. The agency agreed to write off a portion of overpayments to account for doctors’ coding differences and mistakes, a concession insiders said was a big break for the health plans.
CMS officials also declared an amnesty period for voluntarily disclosing improper risk scores for which plans had been overpaid, much like a library suspending fines for a short period for the return of overdue books.
Trusiak, the former federal prosecutor, said CMS officials yielded too much ground to the industry and that these concessions will “restrict the amount of money recouped” by taxpayers.
Still, it’s not clear that the health plans will continue to slip the hook.
After years of delays and deliberation, CMS now intends to “extrapolate” its RADV audit findings for the first time later this year. Auditors will presume that the percentage of billing errors they find in a sampling of 200 patients exists throughout a plan’s full membership. That could potentially cost a large health plan millions of dollars or more.
Former CMS official Thomas E. Hutchinson, who helped design the RADV audit process and now advises health plans, said that small penalties weren’t taken seriously by the industry. In some cases, he said, it cost health plans more to retrieve medical records to buttress their billing than accepting the small CMS penalty for failing to do so.
Now, he said, health plans could face a “nuclear option” if they can’t justify their billings. “We either have too little a stick or too big a stick,” Hutchinson said.
CMS officials have said they expect to recover $370 million in overpayments as a result of their 30 audits that start this year. Though that’s significantly below earlier predictions, it still caught the industry’s attention.
Both Humana and UnitedHealth Group, the nation’s two biggest Medicare Advantage plans, have told investors they could be ordered to cough up significant refunds, according to Securities and Exchange Commission filings. Humana reported to the SEC in November that “certain” of its contracts would be audited. It offered no details. Other plans also warned investors of a “material effect” on their finances, the SEC filings show.
In January, CMS threw another curve by proposing regulations that would require health plans to return overpayments they had received dating back six years. CMS did not explain how that proposal was consistent with its earlier decision to forgive overpayments from some past years.
The regulations also clear the way for other divisions of HHS — presumably the Inspector General’s Office — to conduct more Medicare Advantage audits.
Whether the inspector general’s office will actually take up the challenge is anyone’s guess. It has already gone on record saying it lacks the funding to undertake comprehensive risk score audits, which it has set as a priority every year since 2008. In a video presentation outlining their investigative priorities for 2014, OIG officials made no mention of Medicare Advantage.
The inspector general’s audits are far more threatening to the industry than those done by CMS. The inspector general’s audits are widely distributed and can draw media attention as well as demands for reform in Congress.
Absent the inspector general’s review, it’s doubtful the public will ever get a full accounting of how accurately individual Medicare Advantage plans spend billions of tax dollars.
Burns, of the taxpayer rights group, said federal officials need to get serious about protecting taxpayers and keep from being “outgamed” by the health care industry.
“You need an electric fence for these cows,” he said. “As soon as you touch it you get nailed.”