Low volume Medicare providers are getting a 'free pass' from auditing

Low volume Medicare providers are getting a 'free pass' from auditing
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Back in May, 2016, the Centers for Medicare & Medicaid Services (CMS) announced new additional documentation request (ADR) limits for Medicare Recovery Audits that review claims to identify and recover improper payments.

The new policy reduced the annual ADR limit so auditors can review just 0.5 percent of a provider’s total number of paid Medicare claims with an additional twist. The twist is CMS would review provider billing accuracy rates over three 45-day periods and adjust each provider’s ADR limit higher or lower based on their individual compliance with Medicare billing rules.


Providers that demonstrate accurate billing will have their ADR limit decreased, but providers shown to have high levels of billing errors will begin to have increased scrutiny of their claims.


According to the Recovery Audit Contractor Program (RAC) contracts, this new sliding scale ADR limit policy will go into effect soon. The program has just completed the three 45-day ADR cycles and now CMS will calculate each provider’s own improper payment rate. That rate will then be used to identify a provider’s corresponding “adjusted” ADR limit.

While the new ADR policy is meant to reward providers who bill accurately with fewer audits and increase scrutiny of providers with high levels of billing errors, there’s a major loophole in the paradigm that is allowing some providers to receive a “free pass” from auditing their claims for billing accuracy.

For example, RACs currently can review 0.5 percent of a provider’s claims among approximately just 26 currently approved billing issue areas. Any Medicare provider that submits fewer than 1599 particular claims to the program per year would consistently have 0 claims audited for billing accuracy. This means that low volume Medicare providers may not qualify to have even one claim reviewed.

The new ADR methodology has essentially eliminated a whole category of providers — including approximately 1829 hospitals — from being audited. It’s unclear how those providers would even be categorized on a sliding scale and it’s even more unclear how anyone could determine if they are billing Medicare accurately or not when their claims are falling through the auditing cracks.

Medicare has lost more than $200 billion over the past 5 years due to improper provider billing. Therefore, it’s vitally important that CMS take steps to recover as many mis-billed dollars as possible and infuse them back into the struggling program.

Recovery Auditors were mandated by Congress to essentially balance the program’s checkbook, by identifying Medicare improper payments and returning those taxpayer dollars back to the Medicare Trust Fund. To date they have returned more than $10 billion in overpayments back to the program and more than $800 million in underpayments to providers.

Despite the fiscal importance of this issue, the RAC program has been significantly watered down. The new ADR policy renders 99.5 percent of Medicare claims off limits for billing accuracy review, blocking the collection of improper payments within those claims. And, this is all taking place at a time when Medicare Trustees continue to warn that at current program spending rates, Medicare Part A will reduce coverage to 88 percent of what’s covered today by 2029 due to a lack of program funds.

The current implementation of Medicare’s sliding scale ADR limit policy is preventing the recovery of improper payments and has provided a significant portion of providers with immunity from billing accuracy review due to the low volume of claims they submit.

We urge CMS to either set a minimum number of claims to be audited each period by provider to close the low volume loophole or consider increasing the base ADR limit across the board for all provider types.

Kristin Walter serves as the national spokesperson for The Council for Medicare Integrity, a non-profit organization. The Council’s mission is to educate policymakers and other stakeholders regarding the importance of healthcare integrity programs that help Medicare identify and correct improper payments.