Department of Health and Human Services 
OFFICE OF 
  
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
E  A
ARLY  SSESSMENT OF 
 
  R M
EVIEW  EDICAID 
 
I C  
NTEGRITY  ONTRACTORS
 
Daniel R. Levinson  
Inspector General 
 
February 2012 
OEI-05-10-00200   
Executive Summary:  Early Assessment of Review Medicaid Integrity Contractors 
OEI-05-10-00200 
WHY WE DID THIS STUDY  
This study presents an early assessment of the efforts of Review Medicaid Integrity 
Contractors (Review MIC) to conduct data analysis to identify potential overpayments 
and provide or recommend audit leads to the Centers for Medicare & Medicaid Services 
(CMS).  Our objectives were:  (1) to determine the extent to which Review MICs 
completed assignments, recommended audit leads, and identified potential fraud; and 
(2) to describe barriers that Review MICs encountered in their program integrity 
activities. 
HOW WE DID THIS STUDY 
This study focused on Review MICs results for assignments made between 
January 1 and June 30, 2010.  We analyzed the results of Review MIC assignments, 
reviewed assignment data from CMSs Algorithm Tracking Database, and interviewed 
CMS and Review MIC staff.  We did not determine whether Review MIC activities 
resulted in the recovery of actual overpayments. 
WHAT WE FOUND 
Review MICs completed 81 percent of their assignments; however, they had limited 
involvement in recommending specific audit leads and identifying potential fraud.  Review 
MICs did not recommend specific audit leads; instead, CMS required Review MICs to 
submit lists of providers ranked by the amount of their potential overpayments.  Review 
MIC assignments resulted in 114 accepted reports, which identified 113,378 unique 
providers.  CMS filtered this list of unique providers, selecting 244 audit targets.  Review 
MICs did not identify any potential fraud leads from their assignments. 
Because data were missing or inaccurate, Review MICs were hindered in their ability to 
accurately complete data analysis assignments.  States invalidated more than one-third of 
sampled potential overpayments from assignments, mainly because data were missing or 
inaccurate.  As a result, some of Review MICs data analyses may not lead to recoveries. 
WHAT WE RECOMMEND 
We recommend that CMS:  (1) improve the quality of data that Review MICs can access 
for conducting data analysis and (2) require Review MICs to recommend specific audit 
leads.   
CMS concurred with both recommendations.  CMS stated that to improve the quality of 
data that Review MICs can access for conducting data analysis, it has several initiatives 
underway.  CMS is expanding the Medicaid Statistical Information System to include 
additional data elements important for detecting Medicaid fraud, waste, and abuse.  CMS 
is also working directly with States to obtain State Medicaid data.  With respect to our 
second recommendation, CMS stated that it will direct Review MICs to include specific 
recommendations in their data analysis reports for followup as potential audit targets. 
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................5 
Findings........................................................................................................8 
Review MICs completed 81 percent of their assignments; however, 
they had limited involvement in recommending specific audit leads 
and identifying potential fraud .........................................................8 
Because data were missing or inaccurate, Review MICs were 
hindered in their ability to accurately complete data analysis 
assignments ....................................................................................12 
Recommendations ......................................................................................14 
Agency Comments .........................................................................15 
Appendixes ................................................................................................17 
A:  Review Medicaid Integrity Contractor Assignments From the 
Centers for Medicare & Medicaid Services ...................................17 
B:  Agency Comments ...................................................................19 
Acknowledgments......................................................................................22 
 
   
OBJECTIVES 
1.  To determine the extent to which Review Medicaid Integrity 
Contractors (Review MIC) completed data analysis assignments, 
recommended audit leads, and identified potential fraud. 
2.  To describe barriers that Review MICs encountered in their program 
integrity activities. 
BACKGROUND 
Medicaid is jointly funded by States and the Federal Government to 
provide certain basic services to categorically and medically needy 
populations.  Medicaid spending in fiscal year (FY) 2010 totaled an 
estimated $404.9 billion, of which the Federal share was estimated at 
$271.4 billion.1  According to the Centers for Medicare & Medicaid 
Services (CMS), Medicaid spending is projected to grow because of 
anticipated increases in Medicaid enrollment.2  These projected costs will 
strain already-burdened State and Federal budgets. 
Fraud, waste, and abuse of Medicaid unnecessarily add to program costs 
for States and the Federal Government.  The Office of Inspector General 
(OIG), the Government Accountability Office, CMS, the Department of 
Justice, and State oversight agencies have uncovered millions of dollars in 
overpayments and fraudulent billing for services covered under Medicaid.  
For example, CMS projected $22.5 billion in improper payments for 
FY 2010 through its Medicaid Payment Error Rate Measurement.3    
The Medicaid Integrity Program 
The Deficit Reduction Act (DRA) of 2005 established the Medicaid 
Integrity Program as the first comprehensive effort by CMS to fight fraud, 
waste, and abuse within Medicaid.4  The DRA requires CMS to fight 
fraud, waste, and abuse by contracting with entities to identify 
overpayments to providers and to educate providers, managed care 
organizations,5 and beneficiaries regarding program integrity issues.6  The 
Medicaid Program Integrity Group within CMS is responsible for 
 
1
 Centers for Medicare & Medicaid Services (CMS), 2010 Actuarial Report on the Financial Outlook for 
Medicaid.  Accessed at http://www.cms.gov on June 15, 2011. 
2
 CMS, 2010 Actuarial Report on the Financial Outlook for Medicaid.  Accessed at http://www.cms.gov on 
June 15, 2011. 
3
 Department of Health and Human Services, FY 2010 Agency Financial Report.  Accessed at 
http://www.hhs.gov on August 22, 2011. 
4
 DRA of 2005, P.L. 109-171  6034, Social Security Act,  1936, 42 U.S.C.  1396u-6. 
5
 Managed care organizations contract with States to provide Medicaid services. 
6
 DRA of 2005, P.L. 109-171  6034(a)(2), Social Security Act,  1936(b), 42 U.S.C.  1396u-6. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  1 
   
administering the Medicaid Integrity Program and overseeing the 
contracted entities. 
CMS defined three types of Medicaid Integrity Contractors (MIC) to 
perform the program integrity activities listed in the DRA and to identify 
fraud, waste, and abuse:  Review MICs, Audit MICs, and Education MICs.  
Review MICs review State Medicaid claims data and identify potential 
overpayments.  Audit MICs conduct audits of providers and identify actual 
overpayments.  Education MICs educate providers and beneficiaries on 
program integrity issues. 
Review MICs Task Orders 
In 2008, CMS began awarding Review MIC task orders to two firms.  
These two firms, Thomson Reuters and AdvanceMed, were awarded five 
task orders covering geographic areas that correspond to the 10 CMS 
regions across the country.7  Task orders in effect for FY 2010 allowed 
Review MICs to earn a maximum of approximately $15 million depending 
on costs they incurred in fulfilling their task orders.  CMS spent 
approximately $13.3 million on Review MICs in FY 2010. 
Within each task order, CMS defines the primary functions that Review 
MICs are tasked to perform, as follows:  
1.  conducting data analysis and data modeling, and performing risk 
assessments of Medicaid data;  
2.  providing or recommending leads for Audit MICs to determine 
whether any Medicaid claims identified by Review MIC data analysis 
were paid inappropriately; and 
3.  detecting or preventing Medicaid fraud, waste, and abuse by 
individuals or entities furnishing items or services under Medicaid.8   
Review MIC Identification of Potential Overpayments 
Review MIC assignments.  CMS makes monthly assignments to Review 
MICs to identify potential overpayments.  For each data analysis 
assignment, CMS specifies the State, type of Medicaid claims data, and 
range of service dates that Review MICs are to review.  CMS also 
specifies the algorithm (i.e., data analysis model) that Review MICs are to 
 
7
 Thomson Reuters was awarded task orders for Regions III and IV (East and Southeast) in April 2008 and for 
Regions I and II (Northeast) in August 2009.  AdvanceMed was awarded task orders for Regions VI and VIII 
(South and Mountain West) in September 2008, for Regions V and VII (Midwest) in May 2009, and for 
Regions IX and X (West and Northwest) in September 2009.  CMS established a 60-day transition period for 
Review MICs after awarding each task order. 
8
 CMS, Review of Medicaid Provider Task Orders. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  2 
   
use to perform assignments.9  CMS expects Review MICs to consider any 
relevant State or Federal policies, such as maximum quantity limits for 
certain drugs, to complete their assignments.  CMS generally allows 
Review MICs 60 days to complete them. 
Review MICs use data sources stored within a CMS data repository 
known as the Information Technology Infrastructure (ITI) to complete 
their assignments.  The ITI contains several sources of data; the primary 
source is the Medicaid Statistical Information System (MSIS).  MSIS is a 
nationwide Medicaid eligibility and claims data source containing a subset 
of data elements from State data systems that States report quarterly to 
CMS.10,11  The ITI also contains files to assist Review MICs in the analysis 
of MSIS data, such as the Social Security Administrations Death Master 
File, medical coding files, commercial drug data files, and the National 
Provider Identifier file.12 
Generally, Review MICs send selected samples of potential overpayments 
to the appropriate States for validation.  States determine whether the 
sampled potential overpayments are validi.e., whether they are in fact 
overpaymentsusing their State data systems.  States provide an 
explanation for their validation or invalidation of the sampled potential 
overpayments to Review MICs.  If States invalidate more than half of 
sampled potential overpayments, CMS requires Review MICs to adjust 
their data review. 
Review MIC submission of assignment results.  Once Review MICs finish 
their assignments, they enter their results into the ITI and generally submit 
Algorithm Findings Reports to CMS.  In these reports, Review MICs 
describe the purpose of the assignments, provide background information 
on State policies, list the potential overpayments identified by claim and 
provider, detail States responses to sampled claims, and indicate whether 
any adjustments were made as a result of States responses.  Algorithm 
Findings Reports also give Review MICs an opportunity to provide 
 
9
 Algorithms target specific types of potential overpayments, such as services provided after a beneficiarys 
date of death or duplicate claims that appear to be for the same service. CMS and Review MICs are each 
responsible for developing algorithms. 
10
 MSIS data are a specified subset of fields extracted from each States Medicaid Management Information 
System (MMIS).  MMIS enables States to process claims and monitor use of services. 
11
 MSIS includes four Medicaid claims files: (1) inpatient care; (2) long-term care; (3) prescription drugs; and 
(4) all other claims, along with files of eligible Medicaid enrollees.  CMS, Medicaid Statistical Information 
System (MSIS) File Specs & Data Dictionary.  Accessed at http://www.cms.gov on March 11, 2011. 
12
 The Social Security Administrations Death Master File includes information reported by State 
Governments, funeral homes, and friends and family on the deaths of individuals registered with the Social 
Security Administration. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  3 
   
recommendations for further action and identify specific audit leads, with 
an optional section to list any potential fraud.13 
CMS has also periodically assigned special projects that do not require 
Review MICs to submit Algorithm Findings Reports.  In some cases, CMS 
has assigned special projects to identify overpayments that would result in 
letters requesting repayment from the States rather than audits of 
providers. 
CMS requires Review MICs to store lists of all providers identified by 
completed assignments, including special projects, in the ITI.  These lists 
sum the number of claims that each provider was potentially overpaid and 
rank providers by the amount of the potential overpayment. 
CMS Review of Completed Assignments 
CMS considers data analysis assignments complete once it accepts 
Review MIC results following CMSs quality assurance review.  This 
review includes an analysis of State policies, a review of the algorithms 
used by Review MICs, and verification of Review MICs calculation of 
potential overpayments.  If an assignment fails this quality assurance 
review, CMS does not consider the assignment complete.  For such 
assignments, CMS generally requires Review MICs to conduct further 
data analysis and to resubmit the results, including Algorithm Findings 
Reports. 
Related Work 
OIG is conducting a companion study that focuses on early results for 
audits assigned to Audit MICs between January 1 and June 30, 2010.  That 
study will also identify any barriers Audit MICs encountered in 
conducting audits of Medicaid providers and identifying actual 
overpayments. 
In addition, OIG published a report in 2009 addressing the usefulness of 
MSIS data in detecting fraud, waste, and abuse in Medicaid.  OIG found 
that MSIS did not capture all data elements that can assist in the detection 
of fraud, waste, and abuse, including those that CMS had identified as 
necessary for such detection.  Data were missing from provider identifiers; 
procedure, product, and service descriptions; billing information; and 
beneficiary and eligibility information.14 
 
 
13
 The section on fraud became a required section of the Algorithm Findings Report in December 2010, which 
was after the period reviewed by this study. 
14
 OIG, MSIS Data Usefulness for Detecting Fraud, Waste, and Abuse, OEI-04-07-00240, August 2009. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  4 
   
METHODOLOGY 
Scope 
This study is an early assessment of the results of Review MICs program 
integrity activities and barriers that Review MICs encountered when 
performing those activities.  This study focused on Review MICs program 
integrity activities conducted between January 1 and June 30, 2010.  We 
selected January 1, 2010, as the beginning of our review period to allow all 
Review MICs to have completed the 60-day transition periods for their task 
orders.  We selected June 30, 2010, as the end of our review period to create a 
6-month review period upon which to base our findings. 
This study did not evaluate the effectiveness of the Medicaid Integrity Program 
overall, nor did it evaluate the effectiveness of CMSs policies and procedures 
concerning Review MIC assignments and CMSs selection of audit targets.  
Instead, we focused on the results of Review MICs program integrity activities 
and any barriers that Review MICs encountered when performing them. 
In addition, we did not determine whether Review MICs activities to identify 
fraud, waste, and abuse resulted in the recovery of overpayments.  Because of 
the amount of time required for Audit MICs to conduct audits, fewif any
assignments made during our review period would have resulted in final audits 
or recoveries by the end of our data collection. 
Data Sources 
Data collection.  We collected data from CMS concerning Review MICs data 
analysis assignments made between January 1 and June 30, 2010.  We collected 
these data between November and December 2010, which allowed enough time 
for the completion of all data analysis, given the typical 60-day deadline for 
completing assignments.  Specifically, we collected: 
  Assignment data from CMSs Algorithm Tracking Database.  This 
database contains the algorithm, the responsible Review MIC, the State 
under review, milestone dates, status of assignments, and summary 
overpayment results for each assignment.  CMS maintains the 
Algorithm Tracking Database to track the progress and results of 
Review MIC assignments.  There were 361 assignments from our 
review period listed in this database. 
  ITI files for completed assignments.  The ITI contains lists of providers 
and potential overpayment data identified by completed assignments.  
These files include the unique provider identification number and the 
amount of potential overpayment for each provider identified in each 
completed assignment.  There were 274 completed assignments with 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  5 
   
data files in the ITI.  Seventeen completed assignments did not have 
files in the ITI because they had no or low findings. 
  Algorithm Findings Reports for completed assignments.  These reports 
include descriptions of the problems identified, the number of providers 
and amount of potential overpayments identified, results from States 
validation of sampled potential overpayments, any audit leads 
recommended, and any identified potential fraud leads.  There were 
114 completed assignments that resulted in Algorithm Findings 
Reports.15 
  Audit targets selected from completed assignments.  Audit targets are 
identified by their unique provider identification numbers and include 
the assignments in which they were identified as well as the amount of 
potential overpayments to be audited.  CMS selected 244 audit targets. 
Interviews.  We conducted structured interviews with staff from each Review 
MIC and from CMS to identify barriers that Review MICs encountered when 
conducting program integrity activities.  These interviews also included 
questions about Review MIC results, including the identification of audit leads 
and the identification of potential fraud leads. 
Data Analysis 
Algorithm Tracking Database.  Using the Algorithm Tracking Database, we 
analyzed assignments that Review MICs received between January 1 and 
June 30, 2010.  We determined whether each assignment was complete, 
ongoing, placed on hold by CMS, or rejected by CMS as of November 1, 2010. 
ITI.  We analyzed data files in the ITI that Review MICs submitted for 
completed assignments identifying providers and their potential overpayments.   
Because some providers were identified in multiple assignments, we 
determined the unique providers identified by Review MICs across all data 
files.  We calculated each unique providers total potential overpayment 
amount across all completed assignments. 
In the case of some regular assignments with algorithms intended to identify 
services provided after a beneficiarys date of death, CMS reassigned the 
algorithms with new ranges of service dates for Review MICs to analyze as 
part of a nationwide special project.  For providers identified in both regular 
assignments and special project assignments, we counted only the potential 
overpayments identified by Review MICs in the regular assignments. 
 
15
 We received Algorithm Findings Reports for 113 assignments.  One additional assignment resulted in an 
Algorithm Findings Report, but the report was not provided to OIG.  However, for this assignment, we did 
receive the results and sufficient evidence that an Algorithm Findings Report had been submitted to CMS. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  6 
   
Algorithm Findings Reports.  For completed assignments that resulted in final 
Algorithm Findings Reports, we analyzed the reports to determine whether 
Review MICs recommended specific audit leads or identified potential fraud 
leads to CMS.  We also reviewed final Algorithm Findings Reports to 
determine which algorithms CMS defined as identifying potentially improper 
or fraudulent billing patterns.  Further, we calculated the percentage of sampled 
claims that States invalidated as potential overpayments. 
Audit targets.  We analyzed the providers that CMS selected as audit targets by 
December 2010.  These audit targets were selected from the lists Review MICs 
provided in Algorithm Findings Reports for assignments made between 
January 1 and June 30, 2010.  Because some providers were selected from 
multiple Algorithm Findings Reports, we identified the unique audit targets 
selected by CMS across all Algorithm Findings Reports.  We then calculated 
the amount of potential overpayments CMS selected to be audited for each 
unique audit target. 
Interviews.  We analyzed the results of structured interviews with staff from 
each Review MIC and CMS to determine whether the two Review MICs 
encountered the same obstacles when conducting program integrity activities.  
We also analyzed these structured interviews to determine whether Review 
MICs recommended audit leads or identified potential fraud leads. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General on 
Integrity and Efficiency. 
 
 
 
 
 
 
 
 
 
 
 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  7 
   
FINDINGS 
Review MICs completed 81 percent of their 
assignments; however, they had limited involvement 
in recommending specific audit leads and identifying 
potential fraud  
Review MICs were tasked with 361 data analysis assignments by CMS 
between January 1 and June 30, 2010.  The 361 assignments covered 
every State plus the District of Columbia and used 31 distinct algorithms.  
Sixty-two percent of assignments used algorithms intended to identify 
services provided after a beneficiarys date of death.  Other assignments 
used algorithms intended to identify duplicate billing, pharmacy errors, 
and excessive amounts of services.  See Appendix A for additional detail 
on Review MIC assignments. 
Review MICs completed 81 percent of assignments (either regular or 
special project assignments).  Nearly all completed assignments were 
completed within the assigned timeframes.  Seventeen percent of 
assignments were placed on hold by CMS.  The remaining 3 percent were 
ongoing and had passed the assigned completion dates or were rejected by 
CMS.  See Chart 1 for a breakdown of the status of assignments as of 
November 2010. 
Chart 1:   
1% 
Status of Review 
MIC Assignments  17% 
as of November 
2011* 
Assigned and 
 
2%  Ongoing 
On Hold 
Rejected 
Completed 
81% 
 
  Source:  OIG analysis of Review MIC assignments, 2011. 
*Percentages do not add up to 100 percent because of rounding. 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  8 
   
The 291 completed assignments fall into 3 categories.  Forty percent, or 
one hundred fourteen assignments, were completed assignments that 
resulted in Algorithm Findings Reports.  An additional 172 completed 
assignments were for a special project to identify services billed after 
beneficiaries date of deaths.  These special project assignments were not 
expected to lead to Algorithm Findings Reports or audit leads.  The 
remaining five completed assignments were other special project 
assignments. 
Review MICs did not recommend specific audit leads; instead, 
CMS required Review MICs to submit lists of providers ranked 
by the amount of their potential overpayments 
For the 114 data analysis assignments that resulted in Algorithm Findings 
Reports, Review MICs ran the assigned algorithms and provided CMS 
with the results.  The results consisted of lists of providers ranked by the 
amount of their potential overpayments.  Fifty-two percent of the 
Algorithm Findings Reports also contained a separate list of top providers 
ranked by the amount of potential overpayments.  None contained specific 
recommendations for audit leads.   
The Algorithm Findings Reports contained 113,378 unique providers with 
$282 million in potential overpayments.  The number of providers ranged 
from zero to nearly 86,000.  The $282 million in potential overpayments 
were generated by approximately 1 million claims for services covered 
under Medicaid. 
Although the amount of potential overpayments for each provider varied, 
most potential overpayments were modest.  Eighty-nine percent of 
providers included in the ranked lists each had less than $1,000 in 
potential overpayments, including 107 providers with $0 in potential 
overpayments.  At the high end of the range, one provider had more than 
$3.6 million in potential overpayments. 
The specific providers included in the separate lists of top providers do not 
appear to be recommended audit leads.  For example, one Algorithm 
Findings Report in Rhode Island had a top provider list on which the top 
provider had $69,000 in potential overpayments and the last 5 providers 
all had under $1,000 in potential overpayments.  An Algorithm Findings 
Report in Utah listed all 7 providers identified by the assignment in the 
top provider list, including a provider with $992 in potential overpayments 
and a provider with only $20 in potential overpayments. 
 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  9 
   
Instead of requiring Review MICs to provide specific audit 
leads, CMS selected 244 audit targets from the full lists of 
113,378 providers  
CMS selected 244 audit targets with $39.8 million in potential 
overpayments, covering a retrospective 5-year audit period established by 
CMS.16  Of the 244 audit targets, 133 were in the top 10 providers 
identified by Review MICs in any given assignment.  Forty-nine of the 
244 audit targets had total potential overpayments of over $100,000 each 
for the 5-year audit period.  The majority of audit targets, or 182 audit 
targets, had between $10,000 and $100,000 in potential overpayments.   
See Table 1 for a breakdown of the potential overpayments of providers 
selected as audit targets. 
Table 1:  Providers Selected by CMS for Audits as of December 2010  
Number of  Number of  Total Potential 
Amount of Potential 
Providers Identified  Providers Selected  Overpayments 
Overpayment 
by Review MICs  by CMS for Audits  Selected for Audits 
$1 million to 
32  7  $17.7 million 
$3.6 million 
$100,000 to 
475  42  $15 million 
$999.999 
$10,000 to $99,999  905  182  $7.1 million 
$1,000 to $9,999  10,725  8  $39,000  
$1 to $999  101,134  5  $2,000  
$0   107  0  NA 
     Total  113,378  244  $39.8 million 
Source:  OIG analysis of Review MIC assignments, 2011. 
CMS took multiple steps to select the 244 audit targets to pass on to Audit 
MICs.  The first step was to conduct quality assurance reviews on all 
submitted Algorithm Findings Reports.  This resulted in the acceptance of 
114 reports, which identified 113,378 unique providers.  The quality 
assurance reviews included analyzing State policies, which Review MICs 
are expected to consider when completing their assignments.  The quality 
assurance reviews also included reviewing the algorithms used by Review 
MICs and verifying Review MICs calculation of potential overpayments.   
CMS categorized assignments as complete once they passed its quality 
assurance review. 
After categorizing the 114 Algorithm Findings Reports as complete, CMS 
had to filter the 113,378 unique providers to determine which of the audit 
leads would make suitable audit targets.  CMS considered all          
113,378 unique providers listed by Review MICs to be audit leads.  Of the 
 
16
 CMS established a 5-year audit period because most States require providers to maintain records for at least 
5 years. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  10 
   
244 audit targets selected from the ranked lists of providers, 111 were not 
in the top 10 providers identified by Review MICs for any given 
assignment. 
In selecting audit targets, CMS considered a variety of factors.  For 
example, CMS officials reported that they considered the number of 
ongoing audits in the relevant State and the number of audits assigned to 
the responsible Audit MIC when selecting the 244 audit targets.  CMS 
then screened the audit targets to ensure that they were not being audited 
or were not under investigation by States or by other Federal entities, such 
as OIG and the Department of Justice. 
For more than half of the 244 audit targets, CMS also had to adjust the 
potential overpayments reported by Review MICs.  CMS removed 
potential overpayments reported by Review MICs that occurred beyond 
the 5-year audit period.  Ultimately, CMS removed more than $5.6 million 
from the $45.5 million in potential overpayments that Review MICs 
attributed to the 244 audit targets, leaving $39.8 million in potential 
overpayments. 
Review MICs did not identify any potential fraud leads  
Both a review of Algorithm Findings Reports and interviews with Review 
MIC and CMS staff revealed that Review MICs did not identify any 
potential fraud leads to CMS from assignments made between 
January 1 and June 30, 2010.  However, for 20 assignments, Review MICs 
were assigned algorithms that CMS described as identifying potentially 
improper or fraudulent billing patterns.  For these 20 assignments, all of 
which were completed, Review MICs listed 11,097 unique providers in 
their results. 
CMS officials stated that they have formalized the process for Review 
MICs to identify potential fraud leads.  In December 2010, CMS began 
requiring Review MICs to include a section in the Algorithm Findings 
Reports for identifying any potential fraud leads.  In this section, Review 
MICs can identify those providers that the Review MIC feels should be 
investigated by CMS in more detail for potential referral to law 
enforcement. 
 
 
 
 
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Because data were missing or inaccurate, Review 
MICs were hindered in their ability to accurately 
complete data analysis assignments 
Review MICs identified problems with data that limited their ability to 
accurately complete their data analysis assignments.  During interviews, 
staff from Review MICs and CMS identified data elements missing from 
the MSIS data used by Review MICs that are important for conducting 
program integrity activities.  For example, MSIS data lack provider 
identification and are missing adjustments that corrected payments.17  OIG 
also identified these data elements, as well as service descriptions and 
beneficiary information, as missing from MSIS and vital to program 
integrity activities.18 
Recognizing MSISs shortcomings and needing to implement changes 
required by the Patient Protection and Affordable Care Act of 2010, CMS 
is making efforts to upgrade MSIS.19  CMS intends to replace MSIS with 
an expansion known as Transformed MSIS (T-MSIS), which will include 
new data and should be updated more frequently than MSIS.20  According 
to CMS staff, the effort to upgrade the system began in 2007 and a pilot 
project of T-MSIS began in 10 States during late summer 2011.  CMS 
anticipates that T-MSIS will be operational in 2014. 
States invalidated more than one-third of sampled potential 
overpayments from assignments, mainly because data were 
missing or inaccurate 
Of the potential overpayments that Review MICs submitted, States 
assertedafter comparing the Review MIC-provided information with 
information in their State data systemsthat 34 percent were not 
overpayments.  For many of their completed data analysis assignments, 
Review MICs selected a sample of individual claims that they identified as 
potential overpayments and submitted them to States for validation. 
States invalidated results from Review MIC assignments because the 
results did not match information in the States data systems.  State data 
systems are more up to date than MSIS and contain data elements missing 
from MSIS, which is an extract of State data systems.  Data from State 
systems are not available to Review MICs because they are not loaded into 
the ITI, which CMS requires Review MICs to use for data analysis. 
 
17
 Adjustments may be made to claims data that affects payment of those claims.  If adjustments are made after 
States submit data for MSIS, those adjustments would not be reflected in the data Review MICs can access.  
18
 OIG, MSIS Data Usefulness for Detecting Fraud, Waste, and Abuse, OEI-04-07-00240, August 2009. 
19
 Patient Protection and Affordable Care Act of 2010, P.L. 111-148  6504(a), 42 U.S.C. 1396b(r)(1)(F). 
20
 CMS, Annual Report to Congress on the Medicaid Integrity Program for Fiscal Year 2010.  Accessed at 
http://www.cms.gov on August 22, 2011. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  12 
   
Of all of the Review MIC-identified potential overpayments that Review 
MICs submitted to States for review, the assignment type that resulted in 
the highest percentage of invalidated potential overpayments was for 
assignments intended to identify services provided after a beneficiarys 
date of death.  For the 37 completed regular assignments intended to 
identify such services during our review period, States invalidated an 
average of 67 percent of the potential overpayments submitted by Review 
MICs.  In many cases, States invalidated potential overpayments because 
Review MICs had identified them using MSIS data that had not been 
adjusted to reflect final payment information.  Another reason why States 
invalidated potential overpayments was that State files showed different 
dates for beneficiaries deaths than did the Social Security 
Administrations Death Master File used by Review MICs. 
Because data were missing or inaccurate, CMS invalidated a 
special project identifying services provided after beneficiaries 
deaths  
A nationwide special project performed by Review MICs to identify 
services provided after a beneficiarys date of death will not yield any 
recoveries for States or the Federal Government.  The special project 
consisted of 172 assignments that identified $113 million in potential 
overpayments.  The special project was a nationwide expansion of the 
37 completed regular data analysis assignments intended to identify 
services provided after a beneficiarys date of death.  The $113 million in 
potential overpayments was in addition to the potential overpayments 
identified in the 37 completed regular assignments.  The goal of the 
special project was to identify overpayments for immediate collection 
from States. 
CMS decided to invalidate the special project after reassessing the MSIS 
data used by Review MICs.  An OIG audit assessing the same types of 
potential overpayments in California found $273,000 in overpayments, a 
lower amount than that found by Review MICs during the special 
project.21  After reassessing the results of the special project and holding 
discussions with OIG staff, CMS determined that the MSIS data used by 
Review MICs did not include payment and billing adjustments and other 
variables that potentially invalidated some of the overpayments identified 
by Review MICs.  In contrast, the State data used by OIG contained the 
payment and billing adjustments and other variables missing from MSIS. 
 
 
21
 OIG, Review of Medicaid Payments for Services Claimed for Deceased Beneficiaries in California, 
A-09-09-00110, June 2010. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  13 
   
RECOMMENDATIONS 
Review MICs task orders with CMS state that Review MICs are to:  
(1) conduct data analysis, (2) provide or recommend audit leads, and 
(3) detect and prevent Medicaid fraud.  However, during our review 
period, Review MICs only conducted data analysis and provided lists of 
providers ranked by the amount of their corresponding potential 
overpayments.  Review MICs did not single out any individual providers 
on their lists either as specific audit leads or as providers having 
potentially fraudulent billing patterns. 
Further, the fact that data were missing or inaccurate compromised 
Review MICs ability to accurately perform data analysis.  Because States 
and CMS determined that Review MICs incorrectly identified some 
potential overpayments, some of the Review MICs assignments may not 
lead to recoveries.   
This study was an early assessment of the results of Review MICs 
activities; therefore, our recommendations focus on increasing Review 
MICs contribution to protecting the integrity of Medicaid payments.  We 
make the following recommendations to CMS: 
Improve the quality of data that Review MICs can access for 
conducting data analysis  
Because data were missing or inaccurate, Review MICs inaccurately 
identified potential overpayments and may have overlooked some 
potential overpayments.  Review MICs ability to accurately identify 
overpayments that result in actual recoveries for States and the Federal 
Government depends on accurate data.   
One option for CMS to improve the quality of data available to Review 
MICs is to facilitate their access to States Medicaid data systems.  As the 
responsible parties for administering their Medicaid programs, States use 
their Medicaid data systems to process and monitor claims.  These systems 
contain more timely information than MSIS and contain adjustments that 
are not included in MSIS because it is a quarterly extract of State 
Medicaid data systems.  Using State systems to conduct analysis should 
enable Review MICs to improve the accuracy of their results.  Along these 
lines, CMS has already initiated a project in which a Review MIC is using 
Louisianas Medicaid data system. 
Another option for CMS to improve the quality of data that Review MICs 
can access is to implement T-MSIS.  T-MSIS should improve the accuracy 
of Review MICs identification of potential overpayments because it is 
intended to contain more data elements and will be updated more 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  14 
   
frequently than MSIS.  However, T-MSIS will still be an extract of State 
Medicaid data systems. 
Require Review MICs to recommend specific audit leads   
CMS should require Review MICs to conduct the analysis necessary to 
recommend specific audit leads to CMS that have the best potential for 
recoveries of State and Federal overpayments.  Beyond ranking providers 
by potential overpayments, Review MICs did little to filter the lists of 
providers generated from their data analysis assignments.  As a result, 
Review MICs provided CMS with 113,378 unique providers, from which 
CMS selected 244 audit targets. 
Requiring Review MICs to recommend specific audit leads would help 
CMS improve upon the value of the Review MICs contribution to the 
Medicaid Integrity Program.  CMS could focus less of its resources on 
filtering audit leads and more on screening and assigning audit targets, 
tasks Review MICs are not in a position to accomplish. 
This recommendation is another step in line with those CMS has already 
taken to improve the Medicaid Integrity Program.  CMS has already 
strengthened fraud identification and reporting by clarifying the process 
for Review MICs and requiring that all Algorithm Findings Reports have a 
section identifying any potential fraud leads.  Increasing the expectations 
for Review MICs to conduct more sophisticated filtering of providers, 
beyond ranking them by the amount of potential overpayments, would 
similarly improve the effectiveness of the Medicaid Integrity Program.  It 
would also align with one of CMSs five strategic goals for program 
integrity:  to use advanced technology and data analysis to prevent and 
detect fraud, waste, and abuse.22   
AGENCY COMMENTS 
CMS concurred with both recommendations.  CMS stated that to improve 
the quality of data that Review MICs can access for conducting data 
analysis, it has several initiatives underway.  CMS has established the 
Medicaid and Childrens Health Insurance Program Business Information 
and Solutions governance body to oversee the development and 
deployment of improved data systems for Medicaid program integrity and 
oversight.  The development of improved data systems includes expanding 
the MSIS dataset to include data elements important for detecting 
Medicaid fraud, waste, and abuse. 
 
22
 CMS, Annual Report to Congress on the Medicaid Integrity Program for Fiscal Year 2010.  Accessed at 
http://www.cms.gov on August 22, 2011. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  15 
   
In addition to expanding MSIS, CMS is working directly with States to 
obtain Medicaid data from MMIS.  Further, CMS indicated that it plans to 
load State MMIS data for Texas, Oklahoma, and Colorado into the ITI by 
2012.  These data would then be available for Review MICs to analyze. 
With respect to our second recommendation, to require Review MICs to 
recommend specific audit leads, CMS stated that it will direct Review 
MICs to include specific recommendations in their data analysis reports 
for followup as potential audit targets.  CMS stated that it began in 
December 2010 to provide Review MICs with more explicit directions on 
recommending next steps and will extend this to include specific 
recommendations for potential audit targets. 
We made revisions to the report based on CMSs technical comments. 
For the full text of CMSs comments, see Appendix B. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  16 
   
APPENDIX A 
Review Medicaid Integrity Contractor* Assignments From the 
Centers for Medicare & Medicaid Services** 
Table A-1:  Breakdown of Algorithms Assigned To Review MICs by Algorithm Model 
Number of  Amount of 
Billing Issue  Algorithm  Frequency 
Algorithm  Service Type  Providers  Potential 
Reviewed  Source  Assigned 
Identified  Overpayment 
Adult day health  Inappropriate 
1  Review MIC  3  162  $381,491 
care  service setting 
Ambulance  Inappropriate 
2  Review MIC  1  186  $250,084 
services  service setting 
3  Dental services  Excessive services  Review MIC  1  172  $28,129 
Durable medical  Excessive 
4  CMS  1  193  $3,049,847 
equipment  equipment rental 
Inappropriate 
5  Hospice services  CMS  1  0  $0 
service setting 
6  Inpatient services  Duplicate billings  CMS  8  15  $718,548 
7  Inpatient services  Duplicate billings  Review MIC  1  0  $0 
8  Inpatient services  Duplicate billings  CMS  8  506  $42,824,192 
Inappropriate 
9  Inpatient services  CMS  1  0  $0 
service setting 
Inappropriate 
10  Inpatient services  CMS  3  1,410  $175,757,413 
service setting 
Inappropriate 
11  Inpatient services  CMS  6  90  $11,431,554 
service setting 
Services after 
12  Inpatient services  CMS  56  637  $5,244,583 
death 
Long-term-care 
13  Duplicate billings  CMS  10  1  $5,880 
services 
Long-term-care  Services after 
14  CMS  54  2,095  $18,809,573 
services  death 
Outpatient 
15  Duplicate billings  CMS  2  81  $47,790 
services 
Outpatient  Inappropriate 
16  CMS  8  2,356  $5,092,533 
services  service setting 
Outpatient 
17  Medically unlikely  CMS  4  584  $4,450,428 
services 
Outpatient  Services after 
18  CMS  59  38,531  $83,850,039 
services  death 
Outpatient 
19  Upcoding  Review MIC  11  3,994  $4,398,115 
services 
Personal care  Inappropriate 
20  Review MIC  9  87,031  $28,387,694 
services  service setting 
Pharmacy 
21  Duplicate billings  CMS  6  1,573  $1,950,520 
services 
Pharmacy 
22  Early refill  CMS  5  1,783  $479,936 
services 
Pharmacy 
23  Early refill  CMS  5  5,603  $7,207,701 
services 
Pharmacy 
24  Early refill  CMS  9  3,617  $6,616,698 
services 
Pharmacy 
25  Inaccurate quantity  CMS  8  109  $971,130 
services 
*Review MIC.                                                  continued on next page 
**CMS. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  17 
   
Table A-1:  Breakdown of Algorithms Assigned To Review MICs by Algorithm Model (continued) 
Number of  Amount of 
Billing Issue  Algorithm  Frequency 
Algorithm  Service Type  Providers  Potential 
Reviewed  Source  Assigned 
Identified  Overpayment 
Pharmacy 
26  Overprescribed  CMS  12  977  $1,555,820 
services 
Pharmacy 
27  Overprescribed  CMS  8  6,096  $720,663 
services 
Pharmacy 
28  Overprescribed  Review MIC  3  21  $1,212,489 
services 
Pharmacy  Services after 
29  CMS  55  10,544  $10,618,722 
services  death 
Psychotherapy 
30  Excessive time  Review MIC  2  7  $91,678 
services 
31  Therapy services  Ineligible billing  Review MIC  1  166  $2,516,189 
Source:  Office of Inspector General analysis of Review MIC assignments, 2011. 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  18 
  APPENDIX B 
Agency Comments 
/"'''''''' ... 
~ 
(  DEPARTMENT OF HEALTH & HUMA_N _SE_R_V_IC_E_S_  __  _  ___ C_e nt_9_IS_Of_f  _M _9d_ics_r_e &_M_9_dic_a_ld_S_91V_i_c&_S 
,~"'-	
Administrator 
Washington, DC 20201 
NOV 0 2 2011
DATE: 
TO: 	 Daniel R, Levinson 

Inspector General 

FROlWr 	 Su"mrla ~IC'k,!'VI,l), 

Administrat~r 

SUBJECT: 	 Office ofinspector General (DIG) Draft Report: "Early Assessment of Review 
Medicaid Integrity Contractors" (OEI-05-1 0-00200) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to comment 
on this subject Office of Inspector General (01 G) draft report. The objectives of the report were: 
1) to determine the extent to which Review Medicaid Integrity Contractors (Review MICs) 
completed assignments, recommended audit leads, and identified potential fraud and 2) to 
describe barriers that Review MICs encountered in their program integrity activities. 
The DIG found that Review MICs completed 81 percent oftheir assignments, but had limited 
involvement in recommending specific audit leads and identifying potential fraud.  OIG also 
found that missing or inaccurate data hindered Review MICs' ability to accurately complete 
assignments. 
We appreciate DIG's efforts in working with CMS to assess the results of Review MICs' 
program integrity activities and identifying the barriers that Review MICs have encountered in 
performing those activities. Our response to each ofthe OIG recommendations follows. 
OIG Recommendation 
The CMS should improve the quality of data that Review MICs can access for conducting data 
analysis. 
CMS Response 
The CMS concurs that improving the quality of Medicaid claims data accessible to Review MICs 
would significantly increase the accuracy of identifying potential overpayments. CMS has 
several initiatives underway to improve the quality ofdata available for program integrity efforts, 
and we will continue to work to provide program integrity contractors with access to better 
quality Medicaid data. 
OEI-05-10-00200  Early Assessment of Review Medicaid Integrity Contractors  19   
 
 
 
 
 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  20 
   
 
 
 
 
 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  21 
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Ann Maxwell, Regional 
Inspector General for Evaluation and Inspections in the Chicago regional 
office; Thomas F. Komaniecki, Deputy Regional Inspector General; and 
Laura Kordish, Deputy Regional Inspector General.   
Mark Stiglitz served as the team leader for this study and Benjamin 
Dieterich served as lead analyst.  Other principal Office of Evaluation and 
Inspections staff from the Chicago regional office who contributed to the 
report include Leigh Pylman and Cassandra Yarbrough; central office staff 
who contributed include Kevin Manley, Antigone Potamianos, and 
Andrew VanLandingham.  
 
 
 
OEI-05-10-00200   Early Assessment of Review Medicaid Integrity Contractors  22 
   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is 
to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the 
health and welfare of beneficiaries served by those programs.  This statutory mission is carried out through 
a nationwide network of audits, investigations, and inspections conducted by the following operating 
components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with 
its own audit resources or by overseeing audit work done by others.  Audits examine the performance of 
HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments of HHS programs and operations.  These assessments help 
reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, 
and the public with timely, useful, and reliable information on significant issues.  These evaluations focus 
on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of 
departmental programs.  To promote impact, OEI reports also present practical recommendations for 
improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and 
misconduct related to HHS programs, operations, and beneficiaries.  With investigators working in all 
50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the 
Department of Justice and other Federal, State, and local law enforcement authorities.  The investigative 
efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 
advice and opinions on HHS programs and operations and providing all legal support for OIGs internal 
operations.  OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty cases.  In 
connection with these cases, OCIG also negotiates and monitors corporate integrity agreements.  OCIG 
renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement 
authorities.