CMS heralds effectiveness of audit program. Source: www.flickr.com

The Centers for Medicare & Medicaid Services (CMS) has released a new report, indicating that its Medicare recovery audit contractors (RAC) pilot program has recovered more than $1 billion since 2005 with 85 percent of the money coming from hospitals.

The report shows that $693.6 million of the improper Medicare payments collected was returned to the Medicare Trust Funds between 2005 and March 2008. The funds were returned after taking into account the dollars repaid to healthcare providers, the money overturned on appeal and the costs of operating the RAC program.

Of the overpayments, 85 percent were collected from inpatient hospital providers, 6 percent from inpatient rehabilitation facilities and 4 percent from outpatient hospital providers.

The types of inadvertent errors found by the RACs that led to improper payments include billing for the same procedure multiple times. For example, when a healthcare provider charged Medicare for conducting three colonoscopies on the same patient in the same day, incorrectly coded procedures and submission of duplicate claims resulted in two payments to a provider.

The program, designed to protect the Medicare Trust Funds and beneficiaries from improper payments, begun in California, Florida and New York in 2005, expanded to Arizona, Massachusetts and South Carolina in July 2007.

CMS said it has initiated a competition for four permanent RACs after the pilot program ended in March.

The agency also has developed a strategy to ensure that the RAC program does not interfere with the transition from the existing Medicare claims processing contractors to the new claims processors, Medicare administrative contractors (MACs), which will allow the new MACs to focus on claims processing activities before working with the RACs, according to the report.