House bill would unleash fraud bounty hunters
Days after Grassley introduced his sweeping measure, private contractors told the House Subcommittee on Government Management, Information and Technology June 29 that the Health Care Financing Administration (HCFA) could recoup billions of dollars if it outsourced the identification and recovery of overpayments to private recovery firms. In fact, they argued HCFA could achieve the 50% to 70% recovery rate obtained by private sector companies that use this technique.
Earlier this year, Rep. Dan Burton (R-IN), Chairman of the House Government Reform Committee, introduced legislation along with House Leader Dick Armey (R-TX) that would apply recovery auditing to all federal government programs including Medicare. The audits would use sophisticated computer programs to scrutinize transactions and identify overpayments resulting from pricing and billing errors and then offset future payments to recoup those overpayments.
Pointing to Medicare’s estimate of $56 billion in improper payments due to fraud and overpayments over the last three years, Doug Wilwerding, CEO of Omnium Worldwide Inc. in Omaha, NE, told the subcommittee that it is "unclear" what requirements HCFA has of its intermediaries and carriers to identify and recover these overpayments. "We do know that little is being recovered," he argues. Wilwerding claims that recoveries through fines and restitution dropped 65% in 1998 to $321 million and are a meager $176 million for the first half of FY 1999. "These recoveries have little impact on the billions improperly paid," he argues.
Here are the major provisions included in Burton’s bill:
Requires executive branch agencies to conduct recovery auditing for all of their payment activities that spend more than $10 million annually. Agencies could conduct recovery audits in-house or through contractors, who typically are compensated by retaining a percentage of collections. Allows agencies to use up to 25% of overpayment amounts collected to finance their recovery auditing costs, including meeting obligations to contractors. Allows agencies to return up to another 25% of collections to the programs and activities from which the overpayments arose. Requires agencies to use up to 50% of collections to finance management improvement programs designed to avoid future overpayments and otherwise reduce waste and error in the agency. Allows agencies to make cash awards of up to $150,000 to employees who save their agencies at least twice as much in waste and error as the amount of their awards.House Government Reform Committee spokesman Mark Corallo says Burton’s bill already has 22 co-sponsors in the House not to mention some powerful allies in the Senate. Last year, Sen. Ted Kennedy (D-MA) urged HCFA Administrator Nancy-Ann DeParle to consider using private insurance recovery specialists. But so far, HCFA is resisting. DeParle told Kennedy that although she has received "numerous inquiries" urging HCFA to employ this technique, the agency lacks the statutory authority to pay contractors on a contingency fee basis.
Burton’s legislation would remove that roadblock, but HCFA is still standing firm. To the surprise of some, HCFA’s chief financial officer, Michelle Snyder, told the subcommittee last month that recovery auditing is simply the wrong tool for HCFA. Using recovery auditors on a contingency basis may have some value in limited situations where HCFA is unable to collect from providers, says Snyder. But she quickly adds that HCFA does not believe contingency payment is necessary as a means to identify Medicare payment errors. Doing so could be perceived by providers as a "bounty system" and actually lead to inappropriate denials, increased appeals, and denial of proper payment, she asserts.
Whether HCFA’s objections are enough to overcome the momentum this measure has already generated in Congress is yet to be seen. Corallo says Burton’s bill is heading for mark up sometime this summer.
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