GAO Investigation: CMS Provided Insufficient Audit Oversight

Agency created a situation that quickly spiraled out of control; industry pushes AIR Act.

A Government Accountability Office investigation has determined that the Centers for Medicare & Medicaid Services provided insufficient oversight to auditing contractors Medicare reimbursement claims.

That lack of control resulted in the inappropriate, and multiple audits that are crippling the operations of many home medical equipment suppliers, according to a statement from the American Association for Homecare. The association noted that the GAO report underscores the repeated complaints from suppliers that the CMS audit system is out-of-control and placing unfair burdens on their businesses.

 “The GAO report confirms what the industry has been saying for years: the CMS auditing system is poorly managed, is forcing good suppliers out of business and needs to be significantly revised,” said AAHomecare president Tom Ryan. “Hopefully, the GAO report helps create the changes needed to ensure that HME suppliers can stay in business and supply Medicare beneficiaries with the quality services and products that they deserve.”

Two key issues identified by the report are the Adminisrative Law Judge delay and the confusing nature of the audit system.  

While the industry has been well aware of the problems with CMS’s ramped-up audit program, the severity of the issue became more apparent to Congress when CMS’s CMS’ Office of Medicare Hearings and Appeals moved to delay assigning Administrative Law Judges to appeals by more than two years. There are estimated to be more than 600,000 cases awaiting appeals.

Traditionally, most appeals have ultimately been won by suppliers who received the money owed for providing HME to Medicare beneficiaries. Deepening on the type of audit, the overturn rate has been as high as 60 percent. But the ALJ delay has left suppliers with no recourse and has forced many to shut their businesses or no longer service Medicare patients.

The other key factor for suppliers is the amount of time and resources providers must muster in order to comply with the array of auditors that CMS unleashed without proper management.  CMS has hired a variety of contractors that conduct audits of suppliers -. And what

GAO determined that the various entities involvd in the audit process — Durable Medical Equipment Medicare Administrative Contractors (DME MACs); Zone Program Integrity Contractors (ZPICs); Recovery Audit Contractors (RACs); and the Comprehensive Error Rate Testing Contractor (CERTs) — are not coordinated and are wasting government resources by auditing the same claims, while needlessly burdening the suppliers.

 “This audit process — from paying contractors a ‘bounty’ to open audits to shutting down appeals for suppliers — has done a major disservice to suppliers and to the Medicare beneficiaries who they serve,” Ryan said. “The GAO report is a major rebuke of CMS’ ability to adequately manage an audit system and provides further evidence that this is bad public policy must be fixed.”

Other issues identified in the GAO report:

  • A Recovery Audit Data Warehouse was created to track audits and prevent duplications, but GAO found that the database was not designed to provide information on all possible duplications, and that its data was not reliable because the contracts didn’t include the necessary information.
  • Contractors had a low compliance rate on requirements that they communicate to suppliers their rights during an audit. This affected the ability of suppliers to exercise their rights.
  • A lack coordination and oversight by CMS regarding the activities of its audit contractors.
  • CMS has not established clear guidance prohibiting contractors from reviewing the same claims.

The flaws cited in the GAO report got the attention of many on Capitol Hill, according to AAHomecare.

“The provider community has raised numerous concerns about the consistency and accuracy of the audit process over the past few years and this report is the first effort to determine what steps could be taken to improve the process,” said Rep. Diana Louise DeGette (D-Colo.). “The information in this report can now be used by Congress and CMS to help make improvements and ensure more consistent oversight of both the contractors and audit process.”

That is important, given that Congress is already working on a legislative fix to the audit system, Ryan noted. The Audit Improvement and Reform Act (AIR Act; H.R. 5083) was introduced into the House in July by Reps. Renee Ellmers (R-N.C.) and John Barrow (D-Ga.) to boost transparency within the program; providing better education and outreach; and rewarding suppliers that have low error rates on audited claims.

Ryan cautioned that the audit legislation won’t solve all the problems, but will help. To learn more, visit

About the Author

David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on Twitter at @postacutenews.


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