OIG Report on Recovery Audit Contractors’ Fraud Referrals

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Excerpts from EXECUTIVE SUMMARY

OBJECTIVES

To determine the extent to which:

  1. recovery audit contractors (RAC) referred cases of potential fraud to the Centers for Medicare & Medicaid Services (CMS) during the demonstration project, and
  2. CMS provided training to RACs regarding fraud identification and referral during the demonstration project and in the permanent program.

FINDINGS

Between 2005 and 2008, RACs referred two cases of potential fraud to CMS. Only one RAC reported referring two cases of potential fraud involving specific providers to CMS during the 3-year demonstration project. However, CMS reported that it received no specific provider referrals from RACs during the demonstration project. While it did not make formal referrals to CMS, another RAC notified CMS of numerous claims it identified involving improper payments. The third RAC did not refer any cases of potential fraud to CMS during the demonstration project.

During the demonstration project, CMS did not provide any formal training to RACs regarding the identification and referral of potential fraud; however, CMS did provide the permanent RACs with a presentation about fraud. CMS did not provide RACs in the demonstration with formal training regarding the identification and referral of potential fraud. CMS did provide the permanent RACs with a presentation about fraud, which discussed the need for the RACs to be knowledgeable about fraud in Medicare, the definition of fraud, and examples of potential Medicare fraud. CMS is planning to provide the permanent RACs with further education and training on the identification of potential fraud. In addition, two of the three RACs reported providing informal training to their staff regarding the identification and referral of potential fraud.

RECOMMENDATIONS

During the 3-year demonstration project, RACs identified over $1 billion in improper payments, yet referred only two cases of potential fraud to CMS. 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.
RACs are required to refer any cases of potential fraud that they identify; however, they must be able to identify fraud to refer it. Having a RAC staff that is knowledgeable about fraud and trained to identify fraud will increase awareness and detection of potential fraud during the claims review process. CMS did not provide RACs in the demonstration project with formal training on how to identify fraud. However, CMS did provide the permanent RACs with a presentation about fraud.

Therefore, we recommend that CMS:

  • Conduct followup to determine the outcomes of the two referrals made during the demonstration project.
  • Implement a database system to track fraud referrals.
  • Require RACs to receive mandatory training on the identification and referral of fraud.
 

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