Greater Investment in Claims Review Would Save Millions

HEHS-94-35: Published: Mar 2, 1994. Publicly Released: Mar 11, 1994.

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Pursuant to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) Medicare claims medical review process to determine whether: (1) the improved medical review activities at the demonstration carriers produced measurable savings or benefits to the claims process; (2) additional medical review funding for other carriers would be cost-effective; and (3) HCFA medical review oversight needs to be improved.

GAO found that: (1) Medicare demonstration carriers have saved millions through increased medical reviews; (2) the demonstration carriers have improved their analytical tools, medical policies, and other payment controls to identify claims for inappropriate or unnecessary services; (3) spending more money on medical review activities can yield substantial Medicare program savings; (4) funding for medical review activities declined from 1989 to 1992, and increases are unlikely; and (5) HCFA carrier performance evaluations provide carriers with few incentives to improve their medical review programs.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HCFA initiatives have refocused Medicare program integrity activities and negated the recommendation. More effective utilization of scarce program safeguards was needed to offset declining funds and increasing claims volume. That environment has dramatically changed. The Health Insurance Portability and Accountability Act created a Medical Integrity Program (MIP) and the Fraud and Abuse Control Program. MIP provided a stable source of funding for program integrity activities and authorized HCFA to contract with entities other than claims processing contractors to specialize in cost report audits and medical and utilization reviews. HCFA is testing this approach in several states. The Fraud and Abuse Control Program established funding for fraud and abuse activities and activities that target aberrant providers, and places more emphasis on ensuring claims accuracy before payment. HCFA has developed a database that allows the rapid identification and analysis of aberrant data across provider types.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to take better advantage of carrier medical review activities by developing precise measures of carrier performance in such key medical review areas as the: (1) effectiveness of carrier data analysis capabilities; (2) adequacy of carrier medical policies; (3) scope and effectiveness of prepayment screens; and (4) significance of carrier medical review savings.

    Agency Affected: Department of Health and Human Services


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