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At a Sept. 9 hearing, the House Commerce Subcommittee on Oversight and Investigations blasted the Health Care Financing Administration (HCFA) for its lax oversight of Medicare contractors and grilled several of those contractors about fraudulent claims processing practices.
George Grob, deputy inspector general at the Health and Human Services' Office of Inspector General (OIG), told the subcommittee that while examples of contractor fraud are often dramatic, contractor financial mismanagement that fails to catch provider fraud is a greater and far more pervasive problem. That signaled some observers that the OIG's focus is likely to remain firmly fixed on providers.
In all, Medicare contractors received a tidy $1.6 billion in 1998 to process over $700 million in Medicare claims every business day. But the General Accounting Office's (GAO) Leslie Aronovitz told the subcommittee that HCFA's efforts to oversee the activities of Medicare fee-for-service claims administration contractors are still largely inadequate.
Aronowitz said new funds for HCFA's Medicare Integrity Program have "really helped," and suggested the agency is taking recommendations included in GAO's latest report very seriously.
Even so, she also ticked off a number of ways the agency could do "a lot better" still. Topping the list is more flexibility in the way HCFA contracts with carriers. She argued the current nomination process has outlived its usefulness.
The subcommittee had planned to question the carriers earlier this summer but postponed that hearing when the U.S. Justice Department announced that three additional contractors had pleaded guilty to criminal felony counts related to their Medicare business.
At least eight Medicare contractors have been convicted of criminal offenses, fined, or entered into civil settlements since 1993. Over $235 million in civil and criminal fines have been assessed against six of them.
Improprieties have included improperly screening, processing, and paying Medicare claims as well as destroying claims and failing to properly collect money owed to Medicare by providers. Some contractors also falsified their performance results and circumvented HCFA performance reviews.
"Because HCFA gave contractors too much advance notice of its oversight visits and the records that would be reviewed, it often failed to detect improper contractor activities," Aronovitz told the subcommittee. Worse yet, many of those weaknesses persist today, she added.
According to Aronovitz, employees at all levels — from directors of operations to staff-level employees — have engaged in fraudulent activities over extended periods. "These employees failed to properly conduct claims processing and safeguard activities and then covered up their poor performance by doctoring records that HCFA staff reviewed," she said. "The employees did so because they feared losing their Medicare contracts and their jobs if they did not meet HCFA's expectations."
Aronovitz told the subcommittee that investigators and former contractor employees have reported that manipulating samples, covering up errors, and "fixing" HCFA-selected records prior to the agency's review had become "a way of life" at the three contractors recently targeted. "According to three former contractor employees and investigators in two of the cases, such activities spread as employees at various levels and units taught each other how to commit improprieties," she added.
In its report, the GAO made several formal recommendations to improve HCFA's oversight of contractors, including a contractor management policy that requires verification that all contractors have effective internal controls, as well as systematic validation of contractor-reported data.
The GAO said that annual contractor assessments could also be improved by a comprehensive set of clearly defined and measurable performance standards. It recommended assessing all contractors regularly on core performance standards and reviewing individual contractors on other activities identified by risk assessments.