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New Activities but Could Improve Measurement of Program Effectiveness' 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2011: 

Medicare Integrity Program: 

CMS Used Increased Funding for New Activities but Could Improve 
Measurement of Program Effectiveness: 

GAO-11-592: 

GAO Highlights: 

Highlights of GAO-11-592, a report to congressional requesters. 

Why GAO Did This Study: 

The Medicare program makes about $500 billion in payments per year and 
continues to have a significant amount of improper payments—almost 
$48 billion in fiscal year 2010. The Centers for Medicare & Medicaid 
Services’ (CMS) Medicare Integrity Program (MIP) is designed to 
identify and address fraud, waste, and abuse, which are all causes of 
improper payments. MIP’s authorizing legislation provided funding for 
its activities and subsequent legislation provided additional funding. 

GAO was asked to report on how effectively CMS is using MIP funding to 
address Medicare program integrity. GAO examined (1) how CMS used MIP 
funding to support the program’s activities from fiscal years 2006 
through 2010, (2) how CMS assesses the effectiveness of MIP, and
(3) factors CMS considers when allocating MIP funding. GAO analyzed 
CMS budget and other documents, interviewed CMS officials, and 
examined the agency’s method of calculating return on investment 
(ROI), a performance measure used by CMS to measure the effectiveness 
of MIP activities. 

What GAO Found: 

CMS used the increase in total MIP funding received, from $832 million 
in fiscal year 2006 to $1 billion in fiscal year 2010, to expand MIP’s 
activities. The additional funding supported oversight of Medicare 
Part C (Medicare benefits managed through private plans) and Part D 
(the outpatient prescription drug benefit) and agency efforts to 
examine the claims of Medicare beneficiaries who also participate in 
Medicaid—a joint federal-state health care program for certain low-
income individuals. CMS officials also reported that CMS was able to 
move some funding from activities, such as provider audit, to other 
activities because of savings achieved from consolidating contractors. 
The largest percentage increase from this redistribution went to 
benefit integrity activities, which aim to deter and detect Medicare 
fraud through proactive data analysis and coordination with law 
enforcement. 

Although CMS has reported that the agency measures MIP’s performance 
with goals related to reductions in the improper payment rates for 
Medicare fee-for-service, Part C, and Part D, CMS officials with 
direct responsibility for MIP generally do not connect measurements of 
effectiveness of MIP activities with the CMS goals of reducing 
improper payments. These goals to reduce improper payments, which were 
reported as goals previously and for fiscal year 2012, are 
particularly important in light of the President’s Accountable 
Government Initiative, which aims to reduce overall improper payments 
by $50 billion by the end of 2012. In interviews with GAO, CMS 
officials with direct responsibility for implementing MIP activities 
generally did not connect the measurement of effectiveness of MIP 
activities with these CMS goals to reduce improper payments and 
instead cited other measures of effectiveness. This suggests that CMS 
has not clearly communicated to its staff the relationship between the 
daily work of conducting MIP activities and the agency’s improper 
payment reduction performance goals. Because MIP will be central to CMS’
s efforts to reduce Medicare improper payments, MIP staff need to 
understand how their work supports these goals. In addition, the 
Patient Protection and Affordable Care Act requires CMS to report 
annually on the use of funds for MIP and the effectiveness of the use 
of those funds. One way that CMS already measures MIP effectiveness is 
ROI, which CMS calculates as savings from an activity in relation to 
expenditures. CMS calculates ROI for most of its MIP activities, but 
the data it uses have two flaws. First, ROI calculations are not 
updated when program expenditure data, a key component in the ROI 
calculation, are updated, which may lead to an incorrect ROI. Second, 
CMS does not have reliable information to determine the amount of MIP 
spending by activity for one type of contractor that received about 22 
percent of total MIP funding in fiscal year 2010. It will be important 
for CMS to correct these flaws to ensure reliability in ROI reporting. 

CMS considers a variety of factors when allocating MIP funding. Based 
on a review of the documents submitted to justify funding of specific 
MIP activities, CMS may consider the prior year’s funding level, the 
consequence of not funding, and the performance goal that the activity 
is intended to meet. 

What GAO Recommends: 

GAO recommends that CMS communicate the linkage between MIP activities 
and the goals for reducing improper payments and that CMS 
expeditiously improve the reliability of data used to calculate ROI. 
The Department of Health and Human Services concurred with these 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-11-592] or key 
components. For more information, contact Kathleen M. King at (202) 
512-7114 or kingk@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Increased MIP Funding and Contractor Consolidation Have Enabled CMS to 
Expand the Program from Fiscal Year 2006 through Fiscal Year 2010: 

Not All MIP Officials Connect MIP Activities with CMS's Goals of 
Reducing Improper Payments; Data Used to Calculate ROI Are Flawed: 

CMS Considers a Variety of Factors, Including Potential Effect on 
Improper Payments, When Allocating Funding: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Centers for Medicare & Medicaid Services (CMS) Oversight 
of the Medicare Integrity Program: 

Appendix II: Medicare Integrity Program (MIP) Contractors: 

Appendix III: Contractor Types Performing Medicare Integrity Program 
Activities for Fiscal Year 2010: 

Appendix IV: Comments from the Department of Health and Human Services: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Government Performance and Results Act Performance Goals and 
Associated Performance Measures for the Medicare Integrity Program, 
Fiscal Year 2012: 

Figures: 

Figure 1: Medicare Integrity Program Appropriated Funding for Fiscal 
Years 2006 through 2010: 

Figure 2: Spending for the Medicare Integrity Program Activities for 
Fiscal Years 2006 through 2010: 

Abbreviations: 

CERT: Comprehensive Error Rate Testing: 

CMS: Centers for Medicare & Medicaid Services: 

CPI: Center for Program Integrity: 

DOJ: Department of Justice: 

DRA: Deficit Reduction Act of 2005: 

GPRA: Government Performance and Results Act: 

HEAT: Health Care Fraud Prevention and Enforcement Action Team: 

HHS: Department of Health and Human Services: 

HIPAA: Health Insurance Portability and Accountability Act of 1996: 

MAC: Medicare administrative contractor: 

MEDIC: Medicare drug integrity contractor: 

Medi-Medi: Medicare-Medicaid Data Match Project: 

MIP: Medicare Integrity Program: 

MSP: Medicare Secondary Payer: 

OFM: Office of Financial Management: 

OIG: Office of Inspector General: 

OMB: Office of Management and Budget: 

PPACA: Patient Protection and Affordable Care Act: 

PSC: program safeguard contractor: 

ROI: return on investment: 

ZPIC: zone program integrity contractor: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 29, 2011: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable Scott P. Brown: 
Ranking Member: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable John McCain: 
United States Senate: 

The Centers for Medicare & Medicaid Services' (CMS) Medicare Integrity 
Program (MIP) is designed to identify and address fraud, waste, and 
abuse,[Footnote 1] which are all causes of improper Medicare payments. 
An improper payment is any that should not have been made or that was 
made in an incorrect amount under statutory, contractual, 
administrative, or other legally applicable requirements. Medicare 
makes about $500 billion in payments per year and continues to have a 
significant amount of improper payments. For example, in fiscal year 
2010, the estimated improper payments for Medicare fee-for-service 
(Parts A and B) were about $34.3 billion and for Medicare Advantage 
(Part C) were about $13.6 billion.[Footnote 2] We have designated 
Medicare as a high-risk program since 1990, in part because the 
program's complexity and size made it vulnerable to fraud, waste, and 
abuse. Since that time, Medicare has grown, and in 2006 a new benefit-
-the Medicare prescription drug benefit (Part D)--was added, making 
the task of addressing improper payments in a program of Medicare's 
size even greater. 

The Office of Management and Budget (OMB) is leading a governmentwide 
effort to reduce improper payments. MIP is important to this effort 
because of the size of the Medicare program. In fiscal year 2010, 
Medicare improper payments represented about 38 percent of all federal 
government improper payments.[Footnote 3] MIP was established, and 
provided with a dedicated source of mandatory funding from the Federal 
Hospital Insurance trust fund,[Footnote 4] in the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA)[Footnote 5] to 
enhance efforts to address Medicare's vulnerabilities to fraud, waste, 
and abuse.[Footnote 6] 

MIP is designed to better ensure the integrity of the Medicare program 
by identifying and addressing improper payments and helping to prevent 
and stop fraud and abuse through several types of activities, such as 
educating providers on proper billing practices, auditing reported 
costs used to set payments for hospitals and other institutional 
providers, and coordinating with law enforcement to target potential 
fraud. These activities are generally conducted by contractors working 
for CMS. 

In 2006, we reported that while funding for MIP had increased over 
time, the approach CMS used to allocate funding among MIP activities 
had weaknesses.[Footnote 7] Specifically, we found that allocations 
for MIP activities were generally based on historical allocation 
levels, not on risk for improper payments. We also noted that 
programmatic changes in Medicare, particularly the prescription drug 
benefit and Medicare contracting reform,[Footnote 8] would affect MIP 
funding allocations, and that the allocation approach was not adequate 
to address the associated emerging risks for improper payments. 
Finally, we found that CMS tracked dollars saved in relation to 
dollars spent--a useful quantitative measure that the agency calls 
return on investment (ROI)--to assess the effectiveness of some MIP 
activities, but did not attempt to objectively measure the 
effectiveness of all of its MIP activities. In our 2006 report, we 
recommended that CMS develop a method of allocating MIP funding based 
not only on the effectiveness of the program's activities but also on 
contractor workloads and risk for improper payments. 

Since our 2006 report, there have been changes in the funding and 
scope of MIP. Congress has appropriated discretionary MIP funding to 
supplement existing mandatory funding, in part to address increased 
responsibilities because of the addition of the Medicare prescription 
drug benefit. You requested that we report on how effectively CMS is 
using its MIP funding to address program integrity. Specifically, this 
report will examine (1) how CMS used its MIP funding to support the 
program's activities from fiscal year 2006 through fiscal year 2010, 
(2) how CMS assesses the effectiveness of MIP, and (3) the factors CMS 
considers when allocating MIP funding. 

To determine how CMS used its MIP funding to support the program's 
activities from fiscal year 2006 through fiscal year 2010, we analyzed 
CMS budget documents and conducted interviews with officials from 
CMS's Office of Financial Management (OFM) and officials who manage 
each of the MIP activities (whom we refer to as MIP activity 
managers). To determine the reliability of the budget data, we 
interviewed officials in OFM about the reconciliation process between 
CMS's budget and the accounting systems and reviewed an example of 
CMS's monthly reconciliation report. We determined that the data were 
sufficiently reliable for our purposes. 

To determine how CMS assesses the effectiveness of MIP,[Footnote 9] we 
conducted interviews with the Deputy Administrator for CMS's Center 
for Program Integrity (CPI), the Director of the Medicare Program 
Integrity Group, MIP activity managers, and officials from OFM and 
CPI. We also interviewed officials from the Department of Health and 
Human Services (HHS) responsible for departmentwide program integrity 
efforts. We reviewed relevant documents that described specific 
processes CMS employs for determining whether MIP and its individual 
activities have been effective and compared these processes against 
GAO's criteria on agency strategic planning and performance 
measurement.[Footnote 10] We examined CMS's method for calculating the 
MIP ROI and interviewed MIP activity managers and OFM officials about 
the data sources and methods used to calculate the ROI figures. 

To describe the factors CMS considers when allocating MIP funding, we 
reviewed MIP budget request documents for funded subactivities within 
the MIP activities for fiscal year 2010.[Footnote 11] We also 
interviewed CMS officials, including those from OFM, as well as MIP 
activity managers, the Director of the Medicare Program Integrity 
Group, and the Deputy Administrator for CPI. 

We conducted this performance audit from May 2010 through July 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

MIP Funding: 

CMS has indicated that the primary principle of program integrity is 
to pay claims correctly.[Footnote 12] MIP is designed to address 
fraud, waste, and abuse, including improper payments, by (1) 
preventing fraud through effective enrollment of providers and through 
education of providers and beneficiaries; (2) detecting potential 
improper billing early through, for example, medical review and data 
analysis of claims; (3) coordinating closely with partners, including 
contractors and law enforcement agencies; and (4) implementing fair 
and firm enforcement policies. 

HIPAA established mandatory funding for MIP that ensured a stable 
funding source for Medicare program integrity activities from the 
Federal Hospital Insurance trust fund not subject to annual 
appropriations. The amount specified in HIPAA rose for the first few 
years and then was capped at $720 million per year in fiscal year 2003 
and future years. CMS received increased and additional mandatory 
funding for MIP from the Federal Hospital Insurance trust fund in 
fiscal year 2006 under the Deficit Reduction Act of 2005 (DRA) and, in 
addition, received discretionary funding beginning in fiscal year 2009. 

On March 23, 2010, the Patient Protection and Affordable Care Act 
(PPACA) was signed into law. It included provisions that will provide 
MIP with a portion of an additional $350 million, to be shared with 
the Department of Justice (DOJ) and HHS, for fiscal year 2011 through 
fiscal year 2020 for health care fraud and abuse control efforts. 
[Footnote 13] It also increases funding for MIP each year by the 
percentage increase in the consumer price index for all urban 
consumers. 

MIP Activities: 

MIP currently has eight activities, and each of these has multiple 
subactivities. As we reported in 2006, CMS undertook five original MIP 
activities required by HIPAA: 

* Benefit Integrity. Aims to deter and detect Medicare fraud by 
conducting proactive data analysis of claims to identify patterns of 
fraud and taking other steps to determine whether fraud could be 
occurring. Potential fraud cases are documented and referred to law 
enforcement agencies. 

* Provider Audit. Includes desk reviews, audits, and final settlement 
of institutional provider cost reports, such as those submitted by 
hospitals and skilled nursing facilities, which are used to establish 
payment rates. 

* Medicare Secondary Payer (MSP). Identifies when beneficiaries have 
primary sources of payment--such as employer-sponsored health 
insurance, automobile liability insurance, or workers' compensation 
insurance--that should pay claims that were mistakenly billed to 
Medicare. MSP also involves recovering improper payments associated 
with such claims. 

* Medical Review. Includes both automated and manual prepayment and 
postpayment reviews of individual Medicare claims to determine whether 
the services are provided by legitimate providers to eligible 
beneficiaries and are covered, medically reasonable, and necessary. 

* Provider Outreach and Education. Provides training for providers, 
such as hospitals and physicians that serve Medicare beneficiaries, on 
appropriate billing practices to comply with Medicare rules and 
regulations. 

Since 2006, CMS has begun three additional MIP activities: 

* Medicare-Medicaid Data Match Project (Medi-Medi). Was added to MIP 
by DRA.[Footnote 14] DRA provided this activity with its own dedicated 
funding source through a separate appropriation. Medi-Medi is a joint 
effort between CMS and states that participate voluntarily to identify 
providers with aberrant Medicare and Medicaid billing patterns through 
analyses of claims for individuals with both Medicare and Medicaid 
coverage. 

* Part C and D Oversight. Consists of subactivities to address 
improper payments in Medicare Parts C and D. CMS began this activity 
in fiscal year 2006. 

* Other Medicare Fee-For-Service. Consists of a variety of 
subactivities related to Medicare fee-for-service not captured by the 
other activities, such as support for pilot programs and enhancements 
to CMS data systems that CMS officials told us will allow for better 
analysis. CMS began these subactivities in fiscal year 2009. 

CPI is the CMS component responsible for oversight of all of CMS's 
program integrity efforts, including MIP, and is led by a deputy 
administrator. Formed in April 2010, CPI was created to enable CMS to 
pursue a more strategic and coordinated program integrity approach and 
to also allow the agency to build on and strengthen existing program 
integrity efforts. CPI has targeted several program areas to help 
identify, evaluate, and focus resources and projects. These areas are 
prevention, detection, recovery, and transparency and accountability. 
MIP is led by the Director of the Medicare Program Integrity Group 
within CPI. However, the MIP activity managers and their staff members 
are not all located within CPI. There are MIP activity managers 
located in CPI, the Center for Medicare,[Footnote 15] and OFM. For 
example, while the Benefit Integrity activity is managed by CPI, the 
Medical Review activity is managed by CMS's Provider Compliance Group 
within OFM. See appendix I for an organizational chart that identifies 
the CMS components responsible for the oversight of MIP activities. 

CMS uses a variety of contractors to perform MIP activities, including 
a Comprehensive Error Rate Testing (CERT) contractor, an MSP 
contractor, Medicare administrative contractors (MAC), Medicare drug 
integrity contractors, the National Supplier Clearinghouse, program 
safeguard contractors, and zone program integrity contractors (ZPIC). 
For example, the MACs conduct provider audits, prepayment and 
postpayment review of Medicare claims, and some provider outreach and 
education. See appendix II for more information on these contractors 
and appendix III for the activities they perform. 

Funding Allocation Process: 

MIP's activity managers and Director participate in a process to 
recommend funding allocations for MIP's activities through the Budget 
Small Group.[Footnote 16] The MIP activity managers submit budget 
request documents to the MIP Budget Small Group to help guide the 
funding allocation process. The MIP Budget Small Group weighs each 
request and submits a draft MIP budget request to the CMS Chief 
Financial Officer and Chief Operating Officer. Following review by 
these officials, the MIP budget request goes to the CMS Administrator, 
who reviews the request and makes any desired changes. The MIP budget 
request is integrated into the agency's entire proposed budget, which 
is sent to the Secretary of Health and Human Services. A proposed 
budget for the entire department goes to OMB for consideration on the 
President's behalf. Adjustments may be made by OMB or the President 
before a final version is submitted to Congress, thus beginning the 
congressional appropriation process. 

Performance Measurement: 

One way that agencies examine the effectiveness of their programs is 
by measuring performance as mandated by the Government Performance and 
Results Act of 1993 (GPRA), as amended by the GPRA Modernization Act 
of 2010.[Footnote 17] GPRA is designed to improve the effectiveness of 
federal programs by establishing a system to set goals for program 
performance and to measure results. Specifically, GPRA requires 
federal agencies to prepare multiyear strategic plans, annual 
performance plans, and annual performance reports that provide 
information on progress achieved. To meet GPRA requirements for fiscal 
year 2011, CMS established the following: 

* Five high-level strategic objectives, which included the objective 
of "accurate and predictable payments." 

* Agencywide GPRA goals, which included three specific to MIP. An 
agency's goals should flow from its strategic objectives and be 
limited to the vital goals that reflect the highest priorities of an 
agency.[Footnote 18] 

* Performance measures, which included three specific to MIP, such as 
reducing the percentage of improper payments made under the Medicare 
fee-for-service and Part C program. Performance measures are generally 
more numerous than the GPRA goals and are used to measure progress 
toward the goals and objectives. 

PPACA established additional reporting requirements for MIP. PPACA 
requires that MIP contractors provide the Secretary of Health and 
Human Services or the HHS Inspector General, upon request, performance 
statistics.[Footnote 19] These performance statistics may include the 
number and amount of overpayments recovered, the number of fraud 
referrals, and the ROI of activities the contractor undertakes. The 
act also requires the Secretary to evaluate MIP contractors at least 
once every 3 years and submit an annual report to Congress on the use 
of funds for MIP and the effectiveness of the use of those funds. 
[Footnote 20] 

Increased MIP Funding and Contractor Consolidation Have Enabled CMS to 
Expand the Program from Fiscal Year 2006 through Fiscal Year 2010: 

CMS used increased funding it received in fiscal years 2006 through 
2010 to expand MIP. From fiscal year 2006 through 2010, CMS received 
mandatory HIPAA funding along with new DRA funding, and additional 
discretionary funding in some years, to supplement its existing 
program integrity activities and support two new activities--Part C 
and D Oversight activities and Medi-Medi. Additionally, the agency was 
able to realize savings in some MIP activities, in part, because of 
the consolidation of claims administration contracts. CMS 
redistributed some of these savings to Part C and D Oversight and 
Benefit Integrity activities. 

Increased Funding Enabled CMS to Provide Additional Support to 
Existing Program Integrity Activities and Fund New Oversight 
Activities: 

CMS received additional MIP funding during fiscal years 2006 through 
2010 that was used to support new activities or existing activities 
not previously supported by MIP. These activities included Part C and 
D Oversight, Medi-Medi, and Other Medicare Fee-For-Service activities. 
During fiscal year 2006 through fiscal year 2010, CMS received the 
maximum amount of mandatory funding stipulated under HIPAA, $720 
million per year, as well as additional discretionary and DRA 
mandatory funding. (See figure 1.) 

Figure 1: Medicare Integrity Program Appropriated Funding for Fiscal 
Years 2006 through 2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Fiscal year: 2006; 
Discretionary: $0; 
Deficit Reduction Act - mandatory funding: $112 million; 
Health Insurance Portability and Accountability Act - mandatory 
funding: $720 million; 
Total: $832 million. 

Fiscal year: 2007; 
Discretionary: $0; 
Deficit Reduction Act - mandatory funding: $24 million; 
Health Insurance Portability and Accountability Act - mandatory 
funding: $720 million; 
Total: $744 million. 

Fiscal year: 2008; 
Discretionary: $0; 
Deficit Reduction Act - mandatory funding: $36 million; 
Health Insurance Portability and Accountability Act - mandatory 
funding: $720 million; 
Total: $756 million. 

Fiscal year: 2009; 
Discretionary: $147 million; 
Deficit Reduction Act - mandatory funding: $48 million; 
Health Insurance Portability and Accountability Act - mandatory 
funding: $720 million; 
Total: $915 million. 

Fiscal year: 2010; 
Discretionary: $220 million; 
Deficit Reduction Act - mandatory funding: $60 million; 
Health Insurance Portability and Accountability Act - mandatory 
funding: $720 million; 
Total: $1.0 billion. 

Source: Centers for Medicare & Medicaid Services. 

[End of figure] 

Prior to fiscal year 2006, CMS used mandatory HIPAA funding for the 
five original program activities--Benefit Integrity, Provider Audit, 
Provider Outreach and Education, Medical Review, and MSP. From fiscal 
year 2006 through fiscal year 2010, CMS continued to use mandatory 
HIPAA funding predominantly to support the five existing program 
integrity activities. In addition, beginning in fiscal year 2006, CMS 
received mandatory DRA funding, which it used to support two new MIP 
activities--Medi-Medi and Part C and D Oversight. DRA provided funding 
for Medi-Medi activities of $12 million in fiscal year 2006, which 
increased to nearly $60 million by fiscal year 2010. CMS officials 
told us that the Medi-Medi funding was used to support the ZPICs that 
work directly with the states on the Medi-Medi project.[Footnote 21] 
State participation is voluntary, and states do not directly receive 
MIP funding. 

Additional MIP funding also went toward Part C and D Oversight. DRA 
provided CMS with a onetime amount of $100 million in fiscal year 
2006, part of which CMS used to perform new Part C and D Oversight. In 
fiscal years 2007 and 2008, CMS requested but did not receive 
discretionary funding to perform Part C and D Oversight. As a result, 
CMS officials told us that mandatory HIPAA funding for MIP was moved 
from other MIP activities in fiscal years 2007 and 2008 to the Part C 
and D Oversight activity. In fiscal years 2009 and 2010, CMS received 
$147 million and $220 million, respectively, in discretionary funding 
and used more than half of that funding for Part C and D Oversight. In 
fiscal year 2009, CMS used about $85 million of the discretionary 
funding (or 58 percent of the $147 million) to perform Part C and D 
Oversight that addressed CMS's priority to deter fraud in the Medicare 
Part C and D programs. For example, CMS contractors conducted reviews 
of health care plans entering the Part C and D programs, and program 
and financial audits of the health care plans participating in the 
Part C and D programs. In fiscal year 2010, CMS used about $142 
million (about 65 percent of the $220 million) to continue performing 
Part C and D Oversight. CMS moved the remaining discretionary funding, 
about $62 million (42 percent of $147 million) in fiscal year 2009 and 
$45 million (20 percent of $220 million) in fiscal year 2010, to the 
Other Medicare Fee-For-Service activity. CMS used the funding in the 
Other Medicare Fee-For-Service activity, in part, to fund the system 
that collects and stores enrollment information for all Medicare 
providers and suppliers in a national database. 

Contractor Consolidation Enabled the Agency to Redistribute Mandatory 
Funding among MIP Activities: 

CMS officials stated that contractor consolidations resulted in some 
workload efficiencies and cost savings, which enabled the agency to 
redistribute some mandatory MIP funding to the Part C and D Oversight 
and Benefit Integrity activities. The Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 required CMS to transfer 
all Part A and B claims administration work previously conducted by 51 
claims administration contractors to MACs. As a result, from fiscal 
year 2006 through May 2011, CMS awarded contracts to 15 MACs, which 
generally covered larger jurisdictions, and replaced most of the 
contracts with previous claims administration contractors. CMS 
designed the MAC jurisdictions to achieve operational efficiencies 
through consolidation. Further, in response to one of our previous 
recommendations,[Footnote 22] CMS also consolidated its postpayment 
recovery efforts into one MSP recovery contractor in October 2006, 
thereby increasing the efficiency of the MSP activity.[Footnote 23] 

CMS officials stated that the operational efficiencies and cost 
savings resulting from the contractor consolidations enabled the 
agency to decrease mandatory MIP funding to four of the five existing 
MIP activities and redistribute those funds to the Part C and D 
Oversight and Benefit Integrity activities. Specifically, from fiscal 
years 2006 through 2009, CMS redistributed MIP funding from the 
Provider Outreach and Education, Medical Review, MSP, and Provider 
Audit activities because these activities were less costly with fewer 
contractors performing the work. For example, CMS officials told us 
that the Provider Outreach and Education activity had less overhead 
and other administrative costs with fewer contractors, which resulted 
in reduced program expenditures. Provider Outreach and Education 
spending decreased from almost $65 million in fiscal year 2006 to 
about $42 million in fiscal year 2010--about 35 percent. Provider 
Outreach and Education had the largest percentage decrease in MIP 
funding. CMS officials stated that another factor in the decrease in 
Provider Outreach and Education spending was a realignment of some of 
its activities in fiscal year 2007. CMS officials also told us that 
under the consolidation into MAC jurisdictions, CMS required only one 
medical director for each MAC jurisdiction, instead of having one 
medical director for each state, which lowered the cost to perform the 
Medical Review activity.[Footnote 24] CMS officials stated that 
reduced costs allowed CMS to use some of the newly available MIP 
mandatory funding to address other priorities, such as funding Part C 
and D Oversight in fiscal years 2007 and 2008, when the agency 
received no discretionary funding. In addition, the MSP consolidation 
allowed CMS to reduce MIP funding for the MSP activity beginning in 
fiscal year 2007, and the agency used the savings to fund other MIP 
activities. Based on the funding information provided by CMS, we 
estimated that the agency saved about $86 million from fiscal year 
2006 through fiscal year 2010 by consolidating contracted functions 
within the MSP activity. 

Benefit Integrity spending increased as a result of the redistribution 
among program activities. For fiscal years 2006 through 2010, Benefit 
Integrity had the largest percentage increase in mandatory HIPAA 
funding among the original five MIP activities, in part, because of 
cost efficiencies from contractor consolidation being redistributed to 
this activity. (See fig. 2.) For this period, CMS increased the amount 
of mandatory MIP HIPAA funds spent on the Benefit Integrity activity, 
from about $125 million in fiscal year 2006 to about $166 million in 
fiscal year 2010--about 33 percent. Benefit Integrity funds, among 
other subactivities, the work of a CMS contractor responsible for 
reviewing enrollment applications from durable medical equipment 
suppliers and conducting site visits to confirm these suppliers' 
compliance with Medicare regulations. This followed a period when we 
and HHS's Office of Inspector General (OIG) had highlighted problems 
with fraud in the Medicare program, including problems with suppliers 
of durable medical equipment. It also occurred during a period, 
starting in 2009, when HHS and DOJ were increasing coordination on 
investigating and prosecuting health care fraud through the Health 
Care Fraud Prevention and Enforcement Action Team, an initiative that 
marshals resources across the government to prevent health care fraud, 
waste, and abuse; crack down on those who commit fraud; and enhance 
existing partnerships between HHS and DOJ. 

Figure 2: Spending for the Medicare Integrity Program Activities for 
Fiscal Years 2006 through 2010: 

[Refer to PDF for image: stacked vertical bar graph] 

Fiscal year: 2006; 
Other Medicare Fee-For-Service[A]: $0; 
Medicare-Medicaid Data Match Project[B]: $12 million; 
Part C and D Oversight[C]: $100.9 million; 
Provider Audit[D]: $204.6 million; 
Provider Outreach and Education[E]: $64.5 million; 
Benefit Integrity[F]: $124.5 million; 
Medicare Secondary Payer[G]: $164.1 million; 
Medical Review: $159.8 million; 
Total: $830.3 million. 

Fiscal year: 2007; 
Other Medicare Fee-For-Service[A]: $0; 
Medicare-Medicaid Data Match Project[B]: $24 million; 
Part C and D Oversight[C]: $50.5 million; 
Provider Audit[D]: $201.2 million; 
Provider Outreach and Education[E]: $46.9 million; 
Benefit Integrity[F]: $134.8 million; 
Medicare Secondary Payer[G]: $117.7 million; 
Medical Review: $165.4 million; 
Total: $740.6 million. 

Fiscal year: 2008; 
Other Medicare Fee-For-Service[A]: $0; 
Medicare-Medicaid Data Match Project[B]: $36 million; 
Part C and D Oversight[C]: $51.6 million; 
Provider Audit[D]: $197.2 million; 
Provider Outreach and Education[E]: $42.8 million; 
Benefit Integrity[F]: $139.3 million; 
Medicare Secondary Payer[G]: $123.3 million; 
Medical Review: $162.2 million; 
Total: $752.5 million. 

Fiscal year: 2009; 
Other Medicare Fee-For-Service[A]: $61.9 million; 
Medicare-Medicaid Data Match Project[B]: $48 million; 
Part C and D Oversight[C]: $127.5 million; 
Provider Audit[D]: $201.3 million; 
Provider Outreach and Education[E]: $39.6 million; 
Benefit Integrity[F]: $160.5 million; 
Medicare Secondary Payer[G]: $123.4 million; 
Medical Review: $151.2 million; 
Total: $913.3 million. 

Fiscal year: 2010; 
Other Medicare Fee-For-Service[A]: $44.9 million; 
Medicare-Medicaid Data Match Project[B]: $58.6 million; 
Part C and D Oversight[C]: $149.3 million; 
Provider Audit[D]: $179.4 million; 
Provider Outreach and Education[E]: $42.1 million; 
Benefit Integrity[F]: $165.8 million; 
Medicare Secondary Payer[G]: $126.4 million; 
Medical Review: $176.3 million; 
Total: $942.8 million. 

Source: Centers for Medicare & Medicaid Services. 

[A] Other Medicare Fee-For-Service includes a variety of Medicare fee- 
for-service-related subactivities not captured by other activities. 

[B] Medicare-Medicaid Data Match Project is a joint effort between CMS 
and states that participate voluntarily to analyze claims for 
individuals with both Medicare and Medicaid coverage to identify 
providers with aberrant Medicare and Medicaid billing patterns. 

[C] Part C and D Oversight includes subactivities designed to address 
improper payments in Medicare Parts C and D. 

[D] Provider Audit includes desk reviews, audits, and final settlement 
of institutional provider cost reports. 

[E] Provider Outreach and Education includes training for providers, 
such as hospitals and physicians that serve Medicare beneficiaries, on 
procedures to comply with Medicare rules and regulations. 

[F] Benefit Integrity includes subactivities designed to deter and 
detect Medicare fraud by conducting data analysis of claims. 

[G] Medicare Secondary Payer includes subactivities designed to 
identify claims that were mistakenly billed to Medicare when 
beneficiaries have primary sources of payment that should have paid 
the claims. 

[H] Medical Review includes both prepayment and postpayment reviews of 
individual Medicare claims to determine whether legitimate services 
are covered, medically reasonable, and necessary. 

[End of figure] 

Not All MIP Officials Connect MIP Activities with CMS's Goals of 
Reducing Improper Payments; Data Used to Calculate ROI Are Flawed: 

Although CMS measures MIP effectiveness by using the improper payment 
rates for the Medicare fee-for-service, Part C Medicare Advantage, and 
Part D prescription drug programs, CMS officials with direct 
responsibility for MIP generally do not connect the MIP activities and 
the CMS goals of reducing improper payments. CMS added two new GPRA 
performance goals for MIP for fiscal year 2012 and is also developing 
other performance metrics based on PPACA requirements. One way that 
CMS measures MIP effectiveness is ROI, but the data the agency 
currently uses to calculate this measure are flawed. 

MIP Officials Generally Do Not Connect Program Activities with CMS's 
Goals of Reducing Improper Payments: 

Three of CMS's GPRA goals for MIP in fiscal year 2012 are to reduce 
the improper payment rates in each part of the Medicare 
program,[Footnote 25] which could contribute to the governmentwide 
effort to reduce improper payments. The GPRA goals, which were also 
goals in previous fiscal years, are to reduce the percentage of 
improper payments made in the Medicare fee-for-service, Part C 
Medicare Advantage, and Part D prescription drug programs. Each goal 
has a corresponding performance measure. These goals and related 
measures are particularly important because, as part of the 
Accountable Government Initiative, the President set goals for federal 
agencies to reduce overall improper payments by $50 billion and 
recapture at least $2 billion in improper contract payments and 
overpayments to health providers by the end of 2012. Because of its 
size, Medicare represented 38 percent of the governmentwide fiscal 
year 2010 improper payments. Therefore, CMS's actions to reduce 
payment errors in Medicare will affect the success or failure of the 
governmentwide effort. To respond to the President's goals, as stated 
in its performance plan, CMS adopted a target to reduce its improper 
fee-for-service error rate from 10.5 percent in fiscal year 2010 to 
6.2 percent in fiscal year 2012 and the Part C error rate from 14.1 
percent in fiscal year 2010 to 13.2 percent in fiscal year 2012. 

Although CMS has established these GPRA goals as an important way to 
measure the effectiveness of MIP, our interviews with CMS officials 
with direct responsibility for MIP activities indicate that these 
officials generally do not connect MIP activities with the CMS goals 
of reducing improper payments. Only one of the five MIP activity 
managers[Footnote 26] stated that CMS uses the improper payment rates 
to assess MIP's overall effectiveness. Some of the remaining four MIP 
activity managers told us that they were not aware of any overall CMS 
measures of MIP effectiveness. In addition, some MIP activity managers 
told us that the improper payment rates did not clearly assess the 
work done in their activities. MIP activity managers told us that they 
used a number of other performance measures to assess the 
effectiveness of the activities for which they had responsibility, 
including assessments of individual contractors, survey results 
measuring customer satisfaction, feedback from provider associations, 
savings from claims processing, funds recovered, and ROI. 

The statements by agency officials indicate that CMS has not clearly 
communicated to its staff the relationship between the daily work of 
conducting MIP activities and the agency's higher-level performance 
measures for improper payment reduction. Our prior work has 
established that responsibility for meeting performance measures 
should be linked directly to the offices that have responsibility for 
making programs work. A clearly communicated connection between 
performance measures and program offices helps to reinforce program 
managers' accountability and ensure that managers keep in mind the 
outcomes their organization is striving to achieve.[Footnote 27] 
Within MIP, however, activity managers generally did not connect the 
activity-specific performance measures they use to assess their 
activity's effectiveness and the agencywide GPRA performance goals for 
reducing improper payments. Our prior work found that leading 
organizations try to link the goals and performance measures for each 
organizational level to successive levels and ultimately to the 
organization's strategic goals. These leading organizations recognized 
that without clearly communicated, hierarchically linked performance 
measures, managers and staff throughout the organization will lack 
straightforward road maps showing how their daily activities can 
contribute to attaining organizationwide strategic goals.[Footnote 28] 

CMS Added MIP Performance Goals for Fiscal Year 2012 and Is Developing 
Other Metrics Based on PPACA Requirements, but Their Linkage to 
Measures Used by MIP Activity Managers Is Not Clear: 

In its FY 2012 Online Performance Appendix, CMS added two new MIP 
performance goals to the goals related to the improper payment rate 
for Medicare fee-for-service, Part C, and Part D, but it is also not 
clear how they link with performance measures currently used by MIP 
activity managers.[Footnote 29] (See table 1.) The first new 
performance goal is related to increasing the number of law 
enforcement personnel with training and access to near real-time CMS 
data.[Footnote 30] The second new performance goal aims to strengthen 
CMS's provider enrollment actions to prevent fraudulent providers and 
suppliers from enrolling in Medicare and ensure that existing 
providers continue to meet enrollment requirements. The performance 
measure associated with this goal will be an increase in the 
percentage of Medicare enrollment site visits to "high-risk" providers 
and suppliers that result in administrative actions.[Footnote 31] It 
is not clear how the revised GPRA goals relate to the performance 
measures used by MIP activity managers to assess the effectiveness of 
their activities because CMS has not established such a linkage. Such 
linkage is helpful to effectively communicate how performance is 
measured within the agency. 

Table 1: Government Performance and Results Act Performance Goals and 
Associated Performance Measures for the Medicare Integrity Program, 
Fiscal Year 2012: 

Performance goal: Reduce the percentage of improper payments made 
under the Medicare fee-for-service program; 
Associated performance measure: Reduce the percentage of improper 
payments made under the Medicare fee-for-service program to 6.2 
percent; 
New or existing performance goal: Existing. 

Performance goal: Reduce the percentage of improper payments made 
under the Part C Medicare Advantage program; 
Associated performance measure: Reduce the percentage of improper 
payments made under the Part C Medicare Advantage program to 13.2 
percent; 
New or existing performance goal: Existing. 

Performance goal: Reduce the percentage of improper payments made 
under the Part D Prescription Drug program; 
Associated performance measure: Report a composite error rate for Part 
D program that is lower than the composite error rate reported for 
fiscal year 2011[A]; 
New or existing performance goal: Existing. 

Performance goal: Increase the number of law enforcement personnel 
with training and access to near real-time Centers for Medicare & 
Medicaid Services (CMS) systems data; 
Associated performance measure: All law enforcement personnel referred 
by the Health Care Fraud Prevention and Enforcement Action Team 
initiative for training and access to near real-time CMS systems data 
receive the training and access[B]; 
New or existing performance goal: New. 

Performance goal: Prevent Medicare fraud and abuse by strengthening 
CMS's provider enrollment actions; 
Associated performance measure: Fifteen percent of Medicare enrollment 
site visits to "high-risk" providers and suppliers result in 
administrative actions[C]; 
New or existing performance goal: New. 

Source: GAO analysis of information in CMS FY2012 Online Performance 
Appendix. 

[A] The Centers for Medicare & Medicaid Services (CMS) is in the 
process of developing a composite error rate for Medicare Part D that 
takes into account measures of error in four separate parts of the 
Part D program. 

[B] The Health Care Fraud Prevention and Enforcement Action Team 
initiative is an interagency initiative by the Department of Health 
and Human Services and the Department of Justice to combine the 
resources of the two agencies and focus them toward identifying fraud, 
prosecuting criminals, and recovering fraudulently taken taxpayer 
dollars. 

[C] In a final rule published on February 2, 2011, CMS assigned 
provider types to three levels of risk: limited, moderate, and high. 
According to CMS, provider types assigned to higher risk levels will 
receive greater oversight and review. 76 Fed. Reg. 5, 862 (Feb. 2, 
2011). 

[End of table] 

In addition to expanding the GPRA performance goals, CMS officials 
told us that they hired a contractor to develop agencywide performance 
metrics in response to PPACA requirements. The performance metrics 
being developed by the contractor include performance metrics for MIP. 
CMS officials did not provide a date when the new performance metrics 
will be completed. According to the Director of the Medicare Program 
Integrity Group, the PPACA performance metrics are broader than the 
GPRA goals but generally are consistent with the GPRA goals. 

In addition to the efforts at CMS to increase program integrity within 
the Medicare program, HHS officials told us that they are developing a 
departmentwide strategy to address program integrity in all HHS 
programs. An official noted that measuring the effectiveness of any 
program integrity effort is a challenge. She said it is difficult to 
quantify instances where fraud or abuse was avoided because of program 
integrity efforts. For instance, Provider Outreach and Education on 
proper billing practices is a MIP activity, but it would be difficult 
to quantify how much more improper billing would occur without this 
education. 

CMS Calculates ROI for Most MIP Activities, but the Data CMS Uses in 
Its Calculation Have Flaws: 

PPACA requires CMS to report annually on the use of funds for MIP and 
the effectiveness of the use of those funds. One way that CMS measures 
program effectiveness is through calculation of ROI. CMS already 
calculates ROI for each MIP activity, with the exception of Provider 
Outreach and Education. An overall ROI for MIP is reported to Congress 
annually in the agency's budget justification. ROI is calculated as 
program savings from the activity divided by program expenditures from 
the activity. The Director of the Medicare Program Integrity Group 
told us that the current methodology used by MIP for calculating ROI 
is likely the method the agency will use to meet the PPACA reporting 
requirements. 

The data CMS currently uses to calculate the ROI have two flaws. 
First, CMS calculates the ROI for each activity in January of each 
year for the prior fiscal year, but contractors can change expenditure 
data via the submission of additional invoices or corrections through 
the time they are audited, which can occur up to 2 years after the end 
of the fiscal year. The ROI figures calculated based on this 
information are not subsequently updated. When we compared the 
expenditure data used to calculate activity-level ROIs and final 
expenditure data provided by OFM, we found differences up to $9.7 
million. Given that these dollar amounts are used as the denominator 
for the ROI, the ROI amounts would likely change if they were updated 
with final expenditure data. In the case of the $9.7 million 
difference, for example, the difference represented a 6.4 percent 
increase in the program expenditures. Second, ROIs for activities 
conducted by MACs are potentially inaccurate because MACs have 
discretion to direct MIP funding among the activities they perform, 
and CMS does not have reliable information to determine the exact 
amount spent by each MAC on individual MIP activities.[Footnote 32] 
CMS officials told us that they were aware of the issue and were 
making changes to the data collection system so that CMS could 
calculate actual spending data. As of May 2011, these officials were 
unable to estimate when the change to the data collection system would 
be implemented. 

CMS Considers a Variety of Factors, Including Potential Effect on 
Improper Payments, When Allocating Funding: 

Decisions about recommendations for how MIP funding should be 
allocated among the various activities and subactivities are based on 
a variety of factors. Based on the budget request documents we 
reviewed, the CMS MIP Budget Small Group may consider any or all of 
the following factors: 

* prior year's approved funding levels and requested levels for the 
current and following fiscal year; 

* rationale for the increase or decrease in requested funding; 

* description and justification of the subactivity; 

* agency performance goals, including the strategic objective and GPRA 
goal, that the subactivity is intended to meet; and: 

* consequence of not funding the subactivity. 

We reviewed 36 budget request documents for subactivities funded in 
fiscal year 2010 and found that 11 cited the reduction of the fee-for- 
service improper payment rate as the GPRA goal the subactivity was 
intended to meet. 

It is difficult to determine the factors CMS considers when allocating 
MIP funds beyond those listed in the budget request documents. There 
is no record of why submitted subactivities were funded or not funded. 
Also, CMS has no policies or procedures in place that outline how 
decisions about funding allocations should be made for MIP. CMS 
officials told us that a subactivity's effectiveness may be discussed 
orally at the meetings, though there is no documentation 
substantiating this. A budget official in CMS told us that when 
allocating MIP funds, the MIP Budget Small Group tries to focus on 
where the problems are in each area and then determines how to 
efficiently spend the money. For instance, he said that in the past 
the process for allocating MIP funding within the Part C and D 
Oversight activity had been difficult because the subactivities were 
new, and consequently, there were no baseline ROI data available. This 
same official said that he thought the allocation process for Part C 
and D Oversight would become more data driven as program savings data 
become available, which will allow the agency to calculate ROIs for 
the Part C and D Oversight subactivities. 

Conclusions: 

The administration has made reducing the governmentwide improper 
payment rate a priority. CMS must play a strong role in this effort 
because, even without Part D, Medicare's improper payments constitute 
more than a third of total federal government improper payments. As 
the CMS program with the goal to reduce Medicare's improper payments, 
MIP will be central to the agency's effort to reduce the Medicare 
improper payment rates. CMS will need a strong, concerted effort on 
the part of staff and contractors working on MIP activities to achieve 
the improper payment reduction goals the agency has set for itself, 
and MIP staff will need to understand how their work supports these 
goals and any additional goals developed in response to PPACA 
requirements. Further, a clear focus on reducing improper payments 
should be central to MIP budget allocations. Because at least some 
information is presented orally at the MIP Budget Small Group 
meetings, we cannot determine the extent to which the risk of improper 
payments and effectiveness of MIP activities in addressing that risk 
are discussed during the process. We continue to believe that 
consideration of how MIP activities will reduce the risk of improper 
payments and their effectiveness in doing so should be an important 
part of the funding process and encourage CMS to make that a priority. 

As we noted in our 2006 report, ROI is a useful method for assessing 
the effectiveness of MIP activities. However, such reporting is 
valuable only if the ROI figures reported are reliable. Currently, the 
data used to calculate the ROI are flawed because the ROI calculations 
are not updated beyond the end of a fiscal year to account for changes 
in MIP expenditure data, and CMS does not currently have a way to 
account for the exact amount of MIP funds MACs spend on individual MIP 
activities. CMS officials acknowledged the shortcomings of the MAC 
expenditure data and noted that they were implementing changes to the 
applicable data collection system to more accurately capture MAC 
expenditures. Expeditiously completing this task and ensuring that 
final expenditure data are used to update ROI calculations will be 
essential to ensuring reliability in ROI reporting. 

Recommendations for Executive Action: 

We are making three recommendations to CMS. To enhance accountability 
and sharpen the focus of the agency on reducing improper payments, we 
recommend that the Administrator of CMS clearly communicate to staff 
the linkage between GPRA and PPACA performance measures related to the 
reduction in improper payments and other measures used to determine 
the performance of MIP activities. 

To enhance the reliability of data used to calculate the MIP ROI, we 
recommend that the Administrator of CMS take the following two actions: 

* periodically update ROI calculations after contractor expenses have 
been audited to account for changes in expenditure data reported to 
CMS and publish a final ROI after data are complete and: 

* expeditiously complete the implementation of data system changes 
that will permit CMS to capture accurate MAC spending data, thereby 
helping to ensure an accurate ROI. 

Agency Comments: 

We provided a draft of this report to HHS for review, and in its 
written comments, HHS concurred with our recommendations. (HHS's 
written comments are reprinted in app. IV.) HHS noted that CMS has 
expanded its efforts to ensure that GPRA goals become an integral part 
of its overall management culture, including management of MIP 
activities. In addition, HHS stated that with the introduction of 
PPACA, the department is developing performance metrics that are in 
addition to, and align with, GPRA goals. 

CMS concurred with our recommendation to clearly communicate to staff 
the linkage between GPRA and PPACA performance measures related to the 
reduction in improper payments and other measures used to determine 
the performance of MIP activities. CMS stated that the agency recently 
established the position of the Chief Performance Officer to provide 
leadership, technical direction, and guidance in the development, 
implementation, communication, and operation of a comprehensive, CMS- 
wide performance management program. CMS also summarized other agency 
activities under way to assess program effectiveness, such as 
developing a new online data tool to report on the progress of key 
performance indicators, including those related to program integrity. 

CMS concurred with our recommendation to periodically update ROI 
calculations after contractor expenses have been audited to account 
for changes in expenditure data reported to CMS and publish a final 
ROI after data are complete. According to CMS, the agency will update 
the ROI when there has been a material change in the data used in the 
calculation and, at a minimum, will revisit the ROI annually to 
account for revisions in contractor cost reports and updated savings 
information. CMS also highlighted the complexities of estimating cost 
data for the MACs for purposes of the ROI. 

CMS also concurred with our recommendation to complete the 
implementation of data systems changes that will permit CMS to capture 
accurate MAC spending data, thus helping to ensure the accuracy of the 
ROI. CMS stated that the agency will convene an internal work group 
consisting of staff from several components to explore more efficient 
ways to accumulate MAC cost data and calculate ROI performance 
statistics. CMS also noted that some changes to the cost reporting 
system for contractor cost submissions have already been completed, 
particularly in the area of medical review cost reporting. However, 
the agency plans to pursue a full assessment of the costs reported 
across all of the MIP functions performed by the MACs to ensure that 
any additional changes are identified and implemented. 

We are encouraged by CMS's plans to implement our recommendations and 
believe that doing so will lead to a better understanding by the 
agency and Congress of MIP's effectiveness. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of Health and Human Services, Administrator of CMS, 
appropriate congressional committees, and other interested parties. 
The report also will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix V. 

Signed by: 

Kathleen M. King: 
Director, Health Care: 

[End of section] 

Appendix I: Centers for Medicare & Medicaid Services (CMS) Oversight 
of the Medicare Integrity Program: 

[Refer to PDF for image: organizational chart] 

Top level: 
CMS Administrator[A]. 

Second level, reporting to CMS Administrator: 
Center for Program Integrity[A]: 
* Medicare Program Integrity Group[A]: 
- Benefit Integrity[B]; 
- Medicare-Medicaid Data Match Project[B]; 
Center for Medicare[A]: 
* Provider Outreach and Education[B]; 
* Part C and D Oversight[B]; 
Operations[A]: 
* Office of Financial Management[A]: 
- Provider Compliance Group[A]: 
-- Medical Review[B]; 
- Financial Services Group[A]: 
-- Medicare Secondary Payer[B]; 
-- Provider Audits[B]. 

Source: GAO analysis of information from CMS. 

[A] CMS components. 

[B] Medicare Integrity Program activities. 

[End of figure] 

[End of section] 

Appendix II: Medicare Integrity Program (MIP) Contractors: 

MIP contractors include:[Footnote 33] 

* The Comprehensive Error Rate Testing (CERT) contractor establishes 
error rates and estimates of improper payments for Medicare, which the 
Centers for Medicare & Medicaid Services (CMS) uses to assess the 
performance of MIP. 

* Medicare administrative contractors (MAC)[Footnote 34] perform 
medical review of claims, identification and recovery of improper 
payments, provider audits, provider education, and screening of 
beneficiary complaints related to alleged fraud. MACs use information 
generated by the CERT contractors to identify how to target their 
improper payment prevention activities. In addition to performing 
these program integrity activities, MACs process Medicare claims and 
conduct other claims-related activities, such as answering provider 
inquiries and recouping overpayments. 

* Medicare drug integrity contractors (MEDIC) are tasked with 
identifying potential fraud and abuse in Part C and D of the Medicare 
program and referring cases to the Department of Health and Human 
Services' Office of Inspector General (OIG) or Department of Justice 
as necessary. MEDICs are also responsible for auditing the fraud, 
waste, and abuse compliance programs that are a requirement for 
participation as a Part D provider. 

* The Medicare secondary payer (MSP) contractors are responsible for 
researching and conducting all MSP claim investigations. In addition 
to this role in MIP, the MSP contractor identifies all health 
insurance held by Medicare beneficiaries and coordinates the payment 
process. 

* The National Supplier Clearinghouse is responsible for reviewing 
enrollment applications from durable medical equipment suppliers and 
conducting site visits to confirm these suppliers' compliance with 
Medicare regulations. 

* Program safeguard contractors (PSC) perform benefit integrity 
subactivities for Parts A and B of Medicare to identify cases of 
suspected fraud and take action to ensure that Medicare funding is not 
inappropriately paid and that any mistaken payments are identified. 
Cases of potential fraud are referred to the Department of Health and 
Human Services' OIG. 

* Zone program integrity contractors (ZPIC) will eventually be 
responsible for performing benefit integrity subactivities for claims 
under Parts A, B, C, and D of the Medicare program. CMS is currently 
in the process of replacing the PSCs with ZPICs.[Footnote 35] 

[End of section] 

Appendix III: Contractor Types Performing Medicare Integrity Program 
Activities for Fiscal Year 2010: 

Activity: Benefit Integrity[B]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Check]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Check]; 
Program safeguard contractors: [Check]; 
Zone program integrity contractors: [Check]. 

Activity: Provider Audit[C]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Check]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Check]; 
Zone program integrity contractors: [Empty]. 

Activity: Medicare Secondary Payer[D]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Check]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Check]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Empty]. 

Activity: Medical Review[E]; 
Comprehensive Error Rate Testing contractor: [Check]; 
Medicare administrative contractors: [Check]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Empty]. 

Activity: Provider Outreach and Education[F]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Check]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Empty]. 

Activity: Medicare-Medicaid Data Match Project[G]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Empty]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Check]. 

Activity: Part C and D Oversight[H]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Empty]; 
Medicare drug integrity contractors: [Check]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Empty]. 

Activity: Other Medicare Fee-For-Service[I]; 
Comprehensive Error Rate Testing contractor: [Empty]; 
Medicare administrative contractors: [Empty]; 
Medicare drug integrity contractors: [Empty]; 
Medicare secondary payer contractors[A]: [Empty]; 
National Supplier Clearinghouse: [Empty]; 
Program safeguard contractors: [Empty]; 
Zone program integrity contractors: [Empty]. 

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) 
information. 

[A] Includes the coordination of benefits contractor, the workers 
compensation review contractor, and the Medicare secondary payer 
recovery contractor. 

[B] Benefit Integrity includes subactivities designed to deter and 
detect Medicare fraud by conducting data analysis of claims. 

[C] Provider Audit includes desk reviews, audits, and final settlement 
of institutional provider cost reports. 

[D] Medicare Secondary Payer includes subactivities designed to 
identify claims that were mistakenly billed to Medicare when 
beneficiaries have primary sources of payment that should have paid 
the claims. 

[E] Medical Review includes both automated and manual prepayments and 
postpayment reviews of individual Medicare claims to determine whether 
legitimate services are covered, medically reasonable, and necessary. 

[F] Provider Outreach and Education includes training for providers, 
such as hospitals and physicians that serve Medicare beneficiaries, on 
procedures to comply with Medicare rules and regulations. 

[G] Medicare-Medicaid Data Match Project is a joint effort between CMS 
and states that participate voluntarily to analyze claims for 
individuals with both Medicare and Medicaid coverage to identify 
providers with aberrant Medicare and Medicaid billing patterns. 

[H] Part C and D Oversight includes subactivities designed to address 
improper payments in the Medicare private health plan program (Part C) 
and outpatient prescription drug benefit (Part D). 

[I] Other Medicare Fee-For-Service includes a variety of Medicare fee- 
for-service-related subactivities not captured by other activities. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Health and Human Services: 

Department Of Health & Human Services: 
Office Of The Secretary: 
Assistant Secretary for Legislation:
Washington, DC 20201: 

July 15, 2011: 

Kathleen King: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street N.W. 
Washington, DC 20548: 

Dear Ms. King: 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) draft report entitled: "Medicare Integrity Program: CMS Used 
Increased Funding for New Activities But Could Improve Measurement of 
Program Effectiveness" (GA0-11-592). 

The Department appreciates the opportunity to review this report 
before its publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

[End of letter] 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled, 
"Medicare Integrity Program: CMS Used Increased Funding For New 
Activities But Could Improve Measurement Of Program Effectiveness" 
(GAO-11-592): 

The Department appreciates the opportunity to review and comment on 
this draft report. 

In this report, GAO evaluated: 1) how the Centers for Medicare & 
Medicaid Services (CMS) used Medicare Integrity Program (MIP) funding 
to support the program's activities from fiscal years 2006 through 
2010, 2) how CMS assesses the effectiveness of MIP, and 3) factors CMS 
considers when allocating MIP funding. 

CMS has expanded its efforts to ensure that its Government Performance 
and Results Act (GPRA) goals become an integral part of its overall 
management culture, including management of MIP activities. We are 
dedicated to making our employees aware of our commitment to the use 
of performance information to manage our programs and resources, 
especially regarding the reduction of improper payments. With the 
introduction of the Affordable Care Act (ACA), we are developing 
performance metrics that are in addition to, and align with, GPRA 
goals. We are working toward a corporate-level perspective of our 
performance management program as well as strengthening performance 
management coordination throughout our organization. 

Creating a strong strategic management framework around what we do 
will ensure our success and the accomplishment of our strategic goals. 
We will continue to work to ensure that limited resources are used 
wisely, operational risks are identified and mitigated, and that 
employees are held accountable for achieving results. 

In addition, we are committed to identifying improvements to the 
current approaches used to allocate MIP funding, as well as, the 
process for calculating the Return on Investment (ROI) for MT 
activities. We will continue to investigate data collection methods to 
ensure accurate accounting of spending information and outcomes 
achieved for MIP funded activities. 

GAO Recommendation No. 1: 

To enhance accountability and sharpen the focus of the Agency on 
reducing improper payments, we recommend that the Administrator of CMS 
clearly communicate to staff the linkage between GPRA and PPACA 
performance measures related to the reduction in improper payments and 
other measures used to determine the performance of MIP activities. 

CMS Response: 

CMS concurs. To improve communication and coordination of performance 
measures throughout CMS, we recently established the position of the 
Chief Performance Officer (CPO). The role of the CPO is to provide 
leadership, technical direction, and guidance in the development, 
implementation, communication, and operation of a comprehensive CMS-
wide performance management program. The CPO reports to the Chief 
Operating Officer (COO) and Deputy Chief Operating Officer (DCOO) to 
bolster its independent, cross-cutting Agency support role. 

Our GPRA performance measures are representative of the broad scope of 
Agency activities and are used to communicate Agency efforts to 
Congress and the public through the Federal budget process. Included 
in our GPRA program are numerous program integrity goals that reflect 
the publicly stated program integrity mission of the Agency. 

As noted in your report, there are many other measures and ongoing 
activities apart from the GPRA goals that assess program effectiveness 
and are communicated to staff. For example, we have implemented a 
state-of-the art project management system to track the status of all 
ACA provisions, including those relating to program integrity. It is 
widely used by CMS leadership and is a critical tool in helping us 
monitor progress, identify areas of risk, and report on performance. 
Other efforts include developing a new online data reporting tool that 
will report on the progress of key performance indicators, including 
those relating to program integrity. In addition, we developed a CMS 
strategic plan which aligns with the HHS Strategic Plan goals. The CMS 
Strategic Plan highlights CMS' many mission-critical activities, 
including those relating to program integrity that support the DHHS 
Goal 4 "Fight Fraud and Work to Eliminate Improper Payments." These 
goals are discussed during Senior Staff meetings, and the status of 
each goal is updated on a monthly basis. 

GAO Recommendation No. 2: 

To enhance the reliability of data used to calculate the MIP ROI, we 
recommend that the Administrator of CMS: 

* Periodically update the ROI calculations after contractor expenses 
have been audited to account for changes in expenditure data reported 
to CMS and publish a final ROI after data is complete. 

CMS Response: 

CMS concurs. The ROI calculation will be updated when there has been 
"a material change" in the data used in the calculation. At a minimum, 
CMS will revisit the calculation annually to account for revisions in 
contractor cost reports and updated savings information. 

The basis for the cost half of the ROI equation is financial 
obligations made through the end of the fiscal year. This data 
includes the amounts awarded to Medicare Administrative Contractors 
(MACs). It should be noted that MAC contracts cross fiscal years. As 
such, the amount obligated, the contract award, will not match amounts 
expended in a given fiscal year. 

The amount in the end of fiscal year obligation data for each MAC 
represents the total amount of the contract and is not broken down 
into the basic MIP categories. The business proposals of the MACs do 
distribute the funding, however, the MACs have authority to reprogram 
funds during the year. To account for this reprogramming, actual MAC 
expenses incurred during the fiscal year, as reported in their monthly 
cost reports, are used as a proxy for obligations. 

The cost report data for the same 12 month period as the end of fiscal 
year obligation data report is summarized and the percentage of total 
cost for each MIP category is determined. This percentage is applied 
to the MAC obligations in the SOF in order to allocate the costs for 
ROI purposes. FY 2010 was the first year that actual MAC costs were 
taken into consideration using this methodology. 

GAO Recommendation No. 3: 

To enhance the reliability of data used to calculate the MIP ROI, we 
recommend that the Administrator of CMS: 

* Expeditiously complete the implementation of data system changes 
that will permit CMS to capture accurate MAC spending data, thereby 
helping to ensure accurate ROI. 

CMS Response: 

CMS concurs. We recognize that having different periods of 
performances and different funding years for each MAC have made it 
challenging to compile national cost data on a fiscal year reporting 
basis. CMS will convene an internal workgroup consisting of staff from 
several components to explore more efficient ways to accumulate MAC 
cost data and calculate ROI performance statistics. While some changes 
to the cost reporting system for contractor cost submissions have been 
completed already, particularly in the area of medical review cost 
reporting, CMS will pursue a full assessment of the costs reported 
across all of the MIP functions performed by the MACs to assure that 
any additional changes are identified and implemented. We believe that 
this will support the activity-specific ROI calculations. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

Contact: 

Kathleen M. King, (202) 512-7114 or kingk@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Kay L. Daly, Director; Sheila Avruch, Assistant Director; 
Phillip McIntyre, Assistant Director; Sabrina Springfield, Assistant 
Director; Lori Achman; Nicole Dow; Emily Loriso; Chelsea Lounsbury; 
Roseanne Price; Andrea Richardson; and Jennifer Whitworth. 

[End of section] 

Footnotes: 

[1] Government Auditing Standards defines fraud as a type of illegal 
act involving the obtaining of something of value through willful 
misrepresentation. Abuse is defined as behavior that is deficient or 
improper when compared with behavior that a prudent person would 
consider reasonable and necessary business practice given the facts 
and circumstances. See GAO, Government Auditing Standards, [hyperlink, 
http://www.gao.gov/products/GAO-07-731G] (Washington, D.C.: July 2007). 

[2] Medicare consists of four parts. Parts A and B are known as 
original Medicare or Medicare fee-for-service. Part A covers hospital 
and other inpatient stays. Medicare Part B covers hospital outpatient, 
physician, and other services. Part C is Medicare Advantage, under 
which beneficiaries receive benefits through private health plans. 
Part D is the outpatient prescription drug benefit. These estimates of 
improper payments do not fully measure improper payments in Medicare 
as a whole because an error rate for Part D will not be available 
until November 2011. 

[3] This does not include improper payments from Part D because CMS 
did not report an improper payments estimate for Part D for fiscal 
year 2010. 

[4] Mandatory funding refers to budget authority that is provided in 
laws other than appropriation acts and the outlays that result from 
such budget authority. In contrast, discretionary funding refers to 
funding provided in and controlled by appropriation acts. Financial 
transactions for Medicare Part A operate through the Federal Hospital 
Insurance trust fund. The main source of income for Medicare's Federal 
Hospital Insurance trust fund is taxes on wages and self-employment 
income. 

[5] Pub. L. No. 104-191 §§ 201(b), 202, 110 Stat. 1936, 1993 (codified 
at 42 U.S.C. §§ 1395i(K)(4), 1395ddd). 

[6] Before 1996, Medicare program integrity activities were subsumed 
under Medicare's general administrative budget and performed, along 
with general claims processing functions, by insurance companies under 
contract with CMS. The level of funding available for program 
integrity activities during this period was constrained by the need to 
fund ongoing Medicare administrative activities and provisions in the 
Budget Enforcement Act of 1990, which required reductions in 
discretionary spending for other programs, such as immunizations or 
job training, in order to increase Medicare's administrative budget. 
Pub. L. No. 101-508, title XIII, 104 Stat. 1388, 1388-573-1388-630. In 
the early and mid-1990s, we reported that such funding constraints had 
reduced Medicare contractors' ability to conduct program integrity 
activities. 

[7] GAO, Medicare Integrity Program: Agency Approach for Allocating 
Funds Should Be Revised, [hyperlink, 
http://www.gao.gov/products/GAO-06-813] (Washington, D.C.: Sept. 6, 
2006). 

[8] As mandated under the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, CMS has been replacing about 50 claims 
administration contractors with 19 Medicare administrative contractors 
(MAC). Pub. L. No. 108-173, § 911, 117 Stat. 2066, 2378 (codified at 
42 U.S.C. § 1395kk-1). These MACs process and pay claims, answer 
questions from Medicare providers, and implement Medicare coverage 
rules. CMS plans to further consolidate the number of contractors from 
19 to 14 during the next round of contract awards and transitions over 
the next several years. 

[9] Effectiveness is the extent to which an activity fulfills its 
intended purpose or function. 

[10] GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June 
1996). 

[11] CMS provided us with 49 MIP budget request documents (which are 
called glossaries by CMS) for subactivities that requested MIP funding 
for fiscal year 2010. Of the 49 budget request documents we received, 
13 were for subactivities that were not ultimately funded. Therefore, 
we did not include these 13 requests in our review. We also received 
budget request documents for MIP-funded information technology 
subactivities, but did not include these in our analysis because they 
are assessed for funding through a separate process. 

[12] For the purposes of this report, we consider program integrity a 
component of the effective and efficient administration of government 
programs, which are entrusted with ensuring that taxpayer dollars are 
spent wisely. Efforts to ensure Medicare program integrity include 
processes directed at reducing payment errors to Medicare providers as 
well as activities to prevent, detect, investigate, and ultimately 
prosecute health care fraud. 

[13] Pub. L. No. 111-148, § 6402(i), 124 Stat. 119, 760, as amended by 
the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 
111-152, § 1303, 124 Stat. 1029, 1057. 

[14] Medicaid is a joint federal-state health care program for certain 
low-income individuals. 

[15] The Center for Medicare serves as CMS's focal point for the 
formulation, coordination, integration, implementation, and evaluation 
of national Medicare program policies and operations. 

[16] The process of using "small groups" to make funding allocation 
decisions is used throughout the agency for all CMS programs and 
activities. 

[17] Pub. L. No. 103-62, 107 Stat. 285, as amended by Pub. L. No. 111- 
352, 124 Stat. 3866 (2011). 

[18] GAO, Agencies' Annual Performance Plans Under the Results Act: An 
Assessment Guide to Facilitate Congressional Decisionmaking, 
[hyperlink, http://www.gao.gov/products/GAO/GGD/AIMD-10.1.18] 
(Washington, D.C.: February 1998). 

[19] Pub. L. No. 111-148, § 6402(j) 124 Stat. at 762 (codified at 42 
U.S.C. § 1395ddd(c)(4)). 

[20] 42 U.S.C. § 1395ddd(i). This report is due 180 days after the end 
of each fiscal year, beginning in fiscal year 2011. 

[21] ZPICs perform benefit integrity subactivities for claims under 
Parts A, B, C, and D of the Medicare program. 

[22] See GAO, Medicare Secondary Payer: Improvements Needed to Enhance 
Debt Recovery Process, [hyperlink, 
http://www.gao.gov/products/GAO-04-783] (Washington, D.C.: Aug. 20, 
2004). In this report, we recommended that CMS improve the efficiency 
of MSP payment recovery by consolidating its efforts under fewer 
contracts. 

[23] Formerly, the identification and recovery of funds due to MSP 
issues was one of several activities conducted by about 50 claims 
administration contractors. 

[24] Medical Review spending decreased from fiscal year 2006 to fiscal 
year 2009, and then increased in fiscal year 2010. According to CMS 
officials, Medical Review costs were reduced, from almost $160 million 
in fiscal year 2006 to about $151 million in fiscal year 2009, 
partially as a result of the contractor consolidation. However, 
Medical Review spending increased in fiscal year 2010 to $176.3 
million--up about 17 percent from fiscal year 2009. CMS officials told 
us that the increased spending was for information technology to 
support Medical Review and a change in the funding method for the CERT 
program that calculated the fee-for-service improper payment rate. 

[25] Centers for Medicare & Medicaid Services, FY 2012 Online 
Performance Appendix, [hyperlink, 
http://www.cms.gov/performancebudget/] (accessed Feb. 14, 2011). 

[26] Of the eight MIP activities, only Other Medicare Fee-For-Service 
does not have an activity manager. One person serves as the activity 
manager for Provider Audit and MSP, and one person serves as the 
activity manager for Benefit Integrity and Medi-Medi. 

[27] [hyperlink, http://www.gao.gov/products/GAO/GGD/AIMD-10.1.18], 11. 

[28] [hyperlink, http://www.gao.gov/products/GAO/GGD-96-118], 24. 

[29] CMS, FY 2012 Online Performance Appendix. 

[30] Law enforcement personnel include agents from the HHS OIG, DOJ 
Assistant U.S. Attorney, Federal Bureau of Investigation, and OIG 
Railroad Retirement Board. As part of the Health Care Fraud Prevention 
and Enforcement Action Teams (HEAT) initiative, law enforcement 
personnel involved with HEAT use CMS data to examine claims payment 
data for aberrancies, to identify suspicious billing patterns, and to 
conduct surveillance of target providers and suppliers under 
investigation for potentially fraudulent practices. HEAT is an 
interagency partnership between HHS and DOJ in seven areas across the 
country focused on health care fraud. 

[31] In a final rule published on February 2, 2011, CMS assigned 
provider types to three levels of risk: limited, moderate, and high. 
According to CMS, provider types assigned to higher risk levels will 
receive greater oversight and review. Medicare, Medicaid, and 
Children's Health Insurance Programs; Additional Screening 
Requirements, Application Fees, Temporary Enrollment Moratoria, 
Payment Suspensions and Compliance Plans for Providers and Suppliers, 
76 Fed. Reg. 5,862 (Feb. 2, 2011). 

[32] Because MACs are involved with multiple aspects of Medicare 
operations, they received funds to conduct aspects of each of several 
MIP activities. In fiscal year 2010, they received about $207 million 
for MIP activities, or about 22 percent of the total MIP funds spent. 

[33] Although they are not supported by MIP funds, recovery audit 
contractors also were created by the statute establishing MIP. 
Recovery audit contractors are private organizations that contract 
with CMS to identify and collect improper payments in the Medicare fee-
for-service program. 

[34] MACs are replacing the fiscal intermediaries and carriers. 
Historically, fiscal intermediaries performed claims administration 
functions for Medicare Part A and Part B claims to hospitals, other 
institutions, and home health agencies, and carriers performed claims 
administration functions for Medicare Part B providers. 

[35] In May 2011, an official from CMS informed GAO that CMS was in 
the midst of transitioning work from the PSCs to the ZPICs. An October 
2008 CMS press release stated that the MEDICs would also transition to 
ZPICs, but CMS officials could not confirm whether this transition 
would take place. 

[End of section] 

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