GAO report says required Medicare Advantage audits “of limited value” because of CMS delays and refusal to pursue sanctions

Before 2006, companies choosing to participate in the Medicare Advantage
program were annually required to submit an ACRP to CMS for review and
approval. In 2006, a bid submission process replaced the ACRP process. The
ACRPs and bids identify the health services the company will provide to
Medicare members and the estimated cost for providing those services. CMS
contracted with accounting and actuarial firms to perform the required audits.
According to our analysis, CMS did not meet the requirement for auditing the
financial records of at least one-third of the participating Medicare Advantage
organizations for contract years 2001-2005. CMS is planning to conduct other
financial reviews of organizations to meet the audit requirement for contract
year 2006. However, CMS does not plan to complete the financial reviews until
almost 3 years after the bid submission date each contract year, which will
affect its ability to address any identified deficiencies in a timely manner.
CMS did not consistently ensure that the audit process for contract years
2001-2005 provided information to assess the impact on beneficiaries. After
contract year 2003 audits were completed, CMS took steps to determine such
impact and identified an impact on beneficiaries of about $35 million. CMS
audited contract year 2006 bids for 80 organizations, and 18 had a material
finding that affected amounts in approved bids. CMS officials took limited
action to follow up on contract year 2006 findings. CMS officials told us they
do not plan to sanction or pursue financial recoveries based on these audits
because the agency does not have the legal authority to do so. According to
our assessment of the statutes, CMS had the authority to pursue financial
recoveries, but its rights under contracts for 2001–2005 were limited because
its implementing regulations did not require that each contract include
provisions to inform organizations about the audits and about the steps that
CMS would take to address identified deficiencies. Further, our assessment of
the statute is that CMS has the authority to include terms in bid contracts that
would allow it to pursue financial recoveries. Without changes in its
procedures, CMS will continue to invest resources in audits that will likely
provide limited value.

Read the full report:  http://www.gao.gov/new.items/d08154t.pdf?source=ra