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Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

C M R
ARRIER  EDICAL  EVIEW 

P C
ROGRESSIVE  ORRECTIVE 

A
CTION

Daniel R. Levinson

Inspector General 

October 2005

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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 all 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 in order to reduce waste, abuse, and mismanagement and to promote economy 
and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts management and program evaluations 
(called inspections) that focus on issues of concern to HHS, Congress, and the public.  The 
findings and recommendations contained in the inspections generate rapid, accurate, and up-to-
date information on the efficiency, vulnerability, and effectiveness of departmental programs.  
OEI also oversees State Medicaid Fraud Control Units which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers.  The investigative efforts of OI lead to criminal convictions, administrative 
sanctions, 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 
in OIGs internal operations.  OCIG imposes program exclusions and civil monetary penalties on 
health care providers and litigates those actions within HHS.  OCIG also represents OIG in the 
global settlement of cases arising under the Civil False Claims Act, develops and monitors 
corporate integrity agreements, develops compliance program guidances, renders advisory 
opinions on OIG sanctions to the health care community, and issues fraud alerts and other 
industry guidance.  Report Template Version  = 09-08-04 
  E X E C U T I V E   S U M M A R Y  

OBJECTIVES 
To determine whether Medicare carriers have implemented medical 
review progressive corrective action strategies for physicians in 
accordance with guidance issued by the Centers for Medicare & 
Medicaid Services (CMS). 
To determine whether progressive corrective action is achieving desired 
results, which are to reduce physician error rates and to modify the 
behavior of physicians. 
BACKGROUND 
In fiscal year (FY) 2000, CMS revised its Program Integrity policy to 
include a new process for conducting medical review.  In general, this 
revised strategy uses progressive corrective action approaches such as 
preliminary data analysis, probe medical reviews, and the calculation of 
billing error rates to correct billing problems through targeted education 
and training. The ultimate goal of these strategies is to reduce billing 
and payment errors.   
Progressive corrective action strategies have taken on increased 
significance under the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA).  Section 921 of the MMA highlights 
the importance of providing effective education and training to Medicare 
participating providers.  It provides increased funding to improve the 
accuracy of billing and coding claims data and the timeliness of 
contractor responses.1  In addition, effective October 1, 2005, the MMA 
requires Medicare contractors to use claims payment error rate 
information as an incentive to implement effective education and 
outreach programs.2 
Under progressive corrective action strategies, carriers are instructed 
to:  (1) conduct preliminary data analysis to identify inappropriate, 
unnecessary, or excessive provider claims billed to the Medicare 
program; (2) complete a medical review of a probe sample of provider 
claims to determine the severity of the billing problem; (3) consider 
indicators such as the individual provider error rate when deciding how 
1 MMA, section 921(d)(2).  

2 MMA, section 921(b)(1). 

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to address a problem; (4) conduct medical review activities that are 
appropriate to the identified problem; and (5) provide education and 
training to all providers identified as aberrant billers.  
In addition, carriers are required to have a tracking system and 
document the following five items: all educational contacts made as a 
result of actions to correct identified problems; the results of quarterly 
reassessments for all providers; the date a provider is put on a provider- 
specific edit; the date edits are turned off; and the results of appealed 
medical review decisions. 
For this inspection, we conducted a document review of carrier manual 
instructions and program memoranda, reviewed 18 Medicare Part B 
carriers tracking systems for all physicians who were first identified for 
progressive corrective action during the first two quarters of FY 2003, 
and collected information from staff at CMS and 18 Part B carriers. 
FINDINGS 
Carriers are generally implementing progressive corrective action 
strategies consistent with CMS guidance. Our examination of the 
data from carriers tracking systems for Medicare participating 
physicians leads us to conclude that carriers are generally 
implementing progressive corrective action strategies consistent with 
CMS guidance.  Even though carriers are not required to document 
their approaches in all cases, there is evidence in their tracking systems 
that they are implementing the five progressive corrective action 
approaches. Specifically, 
 	 sixteen carriers have evidence in their tracking systems that their 
decision to conduct medical review is based on the results of 
preliminary data analysis, 
 	 all eighteen carriers have information indicating that they conduct 
pre-or postpayment probes to validate suspected aberrant billing 
behavior for at least some of the physicians identified for corrective 
action, 
 	 sixteen carriers include error rate calculations in their tracking 
systems for at least some of the identified physicians, which 
indicates that carriers consider error rates when deciding how to 
address a given billing problem, 
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 	 all eighteen carriers have information documenting that they take 
steps to subject physicians to reasonable amounts of medical review, 
and 
 	 seventeen carriers have information in their system documenting 
that they provide education and training to at least some of the 
physicians identified for progressive corrective action. 
In addition, in our interviews with the 18 carriers, they confirm that 
they are implementing corrective action strategies, and they provide 
explanations of how they carry out each of the 5 approaches. 
However, carriers are not following all tracking requirements. 
Carriers are required to have a tracking system and document five 
specific progressive corrective action elements. We found that while all 
carriers have a tracking system, none of the carriers document all the 
required elements. They are most commonly missing the results of 
quarterly reassessments and information on contacts made to correct 
identified problems. 
Little information exists to determine whether progressive 
corrective action strategies are achieving desired results. We 
found that carriers calculated baseline and subsequent error rates for 
an average of 8 percent of the 2,316 physicians identified for 
corrective action during the first two quarters of FY 2003, which is too 
small a sample to determine whether or not progressive corrective 
action strategies are effective. Additionally, CMS relies primarily on 
compliance-based oversight mechanisms that do not address 
progressive corrective action outcomes. As a result, we cannot 
determine whether progressive corrective action strategies reduce 
individual physician error rates and/or modify the behavior of 
physicians. 
RECOMMENDATIONS 
The MMA highlights the importance of providing effective education 
and training to Medicare participating providers. However, CMS does 
not currently have any method that measures the effectiveness of 
progressive corrective action strategies and whether the strategies 
reduce individual physician error rates and/or modify the behavior of 
physicians. 
To address these issues, we recommend that CMS: 
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 	 Institute outcome-based program measures to better determine 
whether progressive corrective action strategies reduce individual 
physician error rates and/or modify the behavior of physicians.   
 	 Conduct reviews of carrier tracking systems to ensure that carriers 
are complying with requirements. 
AGENCY COMMENTS 
CMS concurred with our recommendations.  CMS further commented 
that it has already taken steps to include reviews of carrier tracking 
systems as part of its annual SAS-70 reviews.  The full text of CMSs 
comments is included in Appendix A. 
CMS also commented that it will continue to require its contractors to 
evaluate the effectiveness of corrective actions taken. It noted that 
there are a number of methods that can be employed to identify 
progressive corrective action outcomes.  CMS commented that error 
rates, as well as analysis of claims data, may be sufficient to determine 
the effectiveness of a progressive corrective action intervention.  
OFFICE OF INSPECTOR GENERAL RESPONSE 
We agree. However, we question whether carriers will evaluate and 
track the effectiveness of corrective action strategies in absence of more 
guidance from CMS.   For example, further guidance on when to require 
the calculation of individual provider error rates would increase CMSs 
ability to determine whether progressive corrective action strategies are 
achieving desired results.  We reiterate that, based on our review of 
carriers tracking systems, we found that none of the 18 carriers tracked 
the results of quarterly reassessments for all physicians identified for 
corrective action during our sampling timeframe, as required by CMS.  
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EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 i 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 

F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9 

Carriers implementation of progressive corrective action . . . . . . .  9 

Carriers are not following all tracking requirements . . . . . . . . . .  11 

Little information exists about whether progressive corrective 

action achieves results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13 

R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 

Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
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OBJECTIVES 
To determine whether Medicare carriers have implemented medical 
review progressive corrective action strategies for physicians in 
accordance with guidance issued by the Centers for Medicare & 
Medicaid Services (CMS). 
To determine whether progressive corrective action is achieving desired 
results, which are to reduce physician error rates and to modify the 
behavior of physicians. 
BACKGROUND 
In fiscal year (FY) 2000, CMS revised its Program Integrity policy to 
include a new process for conducting medical review.  In general, this 
revised strategy uses progressive corrective action approaches such as 
preliminary data analysis, probe medical reviews, and the calculation of 
billing error rates to correct billing problems through targeted education 
and training. The ultimate goal of these strategies is to reduce billing 
and payment errors.   
Progressive corrective action strategies have taken on increased 
significance under the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA).  Section 921 of the MMA highlights 
the importance of providing effective education and training to Medicare 
participating providers.  It provides increased funding to improve the 
accuracy of billing and coding claims data and the timeliness of 
contractor responses.3  In addition, effective October 1, 2005, the MMA 
requires Medicare contractors to use claims payment error rate 
information as an incentive to implement effective education and 
outreach programs.4 
Medical Review and Progressive Corrective Action  
Section 1862(a)(1)(A) of the Social Security Act states that Medicare 
covers services that are included in a Medicare benefit category, are not 
statutorily excluded, and are reasonable and necessary.  Federal statute 
sets forth broad categories of benefits covered by Medicare, but does not 
provide a comprehensive list of services that are reasonable and 
necessary for beneficiaries medical care.  CMS and the contractors 
3 MMA, section 921(d)(2). 

4 MMA, section 921(b)(1). 

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(including Medicare Part B carriers) are responsible for reviewing, 
processing, and adjudicating claims to determine whether services 
provided are reasonable and necessary, and are therefore covered under 
Medicare. 
In an effort to minimize fraud, waste, and abuse in Medicare, CMS 
requires Part B carriers to review claims submitted for payment.5 
Specifically, under the Program Integrity medical review function, 
carriers are instructed to review submitted claims to determine whether 
they are reasonable and necessary and are correctly coded.  When 
conducting medical review, carriers are instructed to apply progressive 
corrective action strategies. 
CMS program memorandum AB-00-72, dated August 7, 2000, provides 
Medicare carriers with written instructions on progressive corrective 
action strategies.  CMS describes these instructions as  . . . further 
guidance, underlying principles and approaches to be used in deciding 
how to deploy resources and tools for medical review.  These 
instructions require some specific activities, but also allow carriers 
flexibility in the approaches they may use when carrying out 
progressive corrective action. 
CMS instructs carriers to perform preliminary data analysis to identify 
inappropriate, unnecessary, or excessive provider claims billed to the 
Medicare program.  In addition, carriers must complete a medical 
review of a probe sample of provider claims to determine the degree of 
severity of the billing problem.6  When problems are identified, carriers 
are to conduct medical review activities that are appropriate to the 
problem.  Carriers must also provide education and training to all 
providers who are identified as aberrant billers.  See the chart on the 
next page for a primer on progressive corrective action approaches, 
which are outlined in CMS program memorandum AB-00-72. 
5 CMS, Medicare Program Integrity Manual, June 2000. 
6  With the exception of not exceeding a probe sample size of 20-40 claims, currently CMS     
does not require carriers to use a specific sampling methodology (e.g., a random sample) 
for the probe medical review. 
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Primer on Progressive Corrective Action Approaches and Activities 
Recommended  Underlying 
Approach  Principle  Specific Activities 
The decision to  Preliminary data  Activities may include simple identification of 
conduct medical  analysis determines  aberrancies in billing patterns or claims; 
review should be  whether patterns of  provider referrals; reports from CMS; and/or 
data driven.  claims submission  comparisons between peer groups, for 
and payments  example, how identified physicians billing 
indicate potential  patterns compare to billing patterns of peers in 
problems.    the same specialty.   
Validate potential  Probe sample reviews  Carriers should select a sample (either 
problems by  validate the existence  prepayment or postpayment) that generally 
conducting probe  of billing errors.  does not exceed more than 20 to 40 claims for 
reviews.   any individual provider problem, or 100 
claims or services from a wider universe of 
providers. 
The provider error  Information such as  Carriers should consider the error rate.  They 
rate is an  provider billing or  are also encouraged to consider the total value 
important  payment error rates  of the problem, the past history of the 
consideration.  guide carriers in how  provider, and/or whether the severity of the 
to address the billing  problem is determined to be minor, moderate, 
problem.   or significant in nature.   
Subject providers  Medical review  Carriers should target problems that are high 
only to the amount  resources are  cost, likely to have adverse impact on 
of medical review  allocated to providers  beneficiaries, and/or are problems that have 
necessary.   or services where the  become progressively worse.   
Medicare Trust Fund 
is at greatest risk. 
Provider feedback  Education and  Carriers should provide education and training 
and education is an  feedback is a core  to all providers identified for medical review.  
essential part of  step in solving billing  This education can be in the form of direct 
solving problems.    problems.    one-on-one contacts, through telephone or 
conference calls, and/or through group 
meetings. These are referred to as types of 
interventions. 
Source: CMS, Medical Review Progressive Corrective Action Program Memoranda Transmittal AB-00-72, August 2000. 
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In addition, carriers are required to have a tracking system that 
documents the following five items: 
 	 all educational contacts made as a result of actions to correct 
identified billing problems.  This information may include dates 
when educational letters were mailed out or when telephone or 
onsite meetings were held, 
 	 results of quarterly reassessments to determine if behavior changed  
after the provider received necessary education and training, 
 	 date a provider is put on a provider-specific edit,7 
 	 date a provider is taken off an edit, and 
 	 results of appealed medical review decisions. 
National Paid Claims Error Rate 
Currently, CMS contracts with the program safeguard contractor, 
AdvanceMed, to calculate the national paid claims error rate through 
the Comprehensive Error Rate Testing (CERT) program.8  The goal of 
this work is to improve the accuracy of payment decisions made by 
Medicare contractors.  Based on local and national coverage policies, a 
medical review team reviews information the carrier used to make its 
decision to verify that decisions regarding the claims were accurate 
and based on sound policy. In FY 2003, CMS found that carriers paid 
7.3 percent of all Medicare Part B claims in error.9  It is CMSs 
expectation that progressive corrective action intervention efforts will 
contribute to a reduction in the national paid claims error rate.10 
CMS Oversight 
In FY 2003, CMS initiated the Self-Assessment, Performance Oversight, 
and Comprehensive Error Rate Testing and Educational program 
(SPACE) and began using it to conduct oversight of carrier activities, 
7  Edits are software-based controls used to prevent an overutilization of codes, upcoding to 
a higher reimbursement rate, or inappropriate frequencies of services billed for the same 
beneficiary.  Edits are put in place to flag any group of claims that does not follow 
Medicare coverage guidelines and may serve to delay or reject payments.   
8  From fiscal year 1996 to fiscal year 2002, the Office of Inspector General calculated the 
national Medicare paid claims error rate.  In fiscal year 2003, CMS assumed this 
responsibility. 
9  This estimate excludes nonresponse claims. 
10 CMS, FY 2003 Improper Medicare Fee For Service Payments Report, November 2003. 
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including those activities associated with progressive corrective action 
interventions.  The SPACE program consists of the following: 
 	 Self-Assessment Certification Package for Internal Controls- A 
carriers self-assessment to identify and correct any weakness 
within an operational area; 
 	 Performance Oversight Statement on Auditing Standards 
Number 70 (SAS-70)  An audit of a Medicare contractors 
operational areas conducted by an independent auditing firm. 
Among other elements, auditors measure whether internal controls 
and objectives for medical review are in place and based on CMS 
instructions; 
 	 Comprehensive Error Rate Testing  A program safeguard 
contractor-run program that measures carriers paid claims error 
rates; and 
 	 Educational Training Program  An educational interaction 
between CMS staff and carriers based on potential or current areas 
of contractor vulnerability. Educational interventions may be based 
on findings from SAS-70 audits or other CMS concerns.  
Related Work 
The Government Accountability Office (GAO) issued a report entitled 
Recent CMS Reforms Address Carrier Scrutiny of Physicians Claims 
for Payment in May 2002.11  This report describes the progressive 
corrective action strategy and its use of provider education in 
combination with medical review, as well as its effects on physician paid 
claims. GAO found that only a small percentage of total physician 
claims are ever selected for medical review, which can limit progressive 
corrective actions influence on reducing the national paid claims error 
rate. 
SCOPE 
This inspection determines the extent to which carriers have 
implemented progressive corrective action strategies consistent with 
CMS guidance.  It does not determine the effectiveness of any individual 
carriers use of progressive corrective action strategies.  In addition, this 
11 GAO-02-693, May 2002. 
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inspection focuses solely on physicians and excludes other types of 
providers that may be identified for corrective action. 
METHODOLOGY 
We obtained information for this inspection from a number of sources: a 
document review of carrier manual instructions and transmittals, a 
review of 18 Medicare Part B carriers tracking systems, telephone 
interviews and onsite discussions with carrier staff, and telephone and 
in-person interviews with key CMS regional and central office staff. 
Document Review 
We reviewed the Medicare Program Integrity Manual and CMS 
Program Memoranda transmittals pertaining to progressive corrective 
action and other relevant documents.12  These documents were 
primarily used to determine the approaches and recommended activities 
under progressive corrective action. 
Tracking System and Error Rate Analysis 
We contacted 18 Medicare Part B carriers and requested a description of 
the variables listed in their tracking system.  We also asked for data for 
all physicians who were first identified for progressive corrective action 
during the first or second quarters of FY 2003.  For all identified 
physicians, we requested that carriers submit the following information: 
 	 all education and training activities in FY 2003;13 
 	 error rates prior to progressive corrective action intervention, 
i.e., baseline error rates, and error rates after receiving 
progressive corrective action intervention, i.e., subsequent error 
rates that were calculated in FY 2003; and  
 	 any information regarding the status of appealed medical review 
decisions. 
We developed an instrument to review and analyze the variables and 
data in the carriers tracking system.  Specifically, we determined 
whether each carrier documented both the required information and 
any other information regarding recommended progressive corrective 
12 CMS, Medicare Program Integrity Manual, June 2000. 
13 Carriers had a reasonable amount of time during the course of fiscal year 2003 to provide 
education and/or training and conduct at least one quarterly reassessment, as required   
by CMS guidance. 
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action approaches and/or activities. Note that we did not independently 
verify the accuracy of any of the data in the tracking systems. 
We also analyzed the error rate information provided by carriers. 
Specifically, we determined the extent to which carriers calculated 
baseline and subsequent error rates for the physicians identified for 
progressive corrective action. 
Carrier Onsite Discussions and Telephone Interviews 
We conducted site visits with three carriers to determine their 
understanding of progressive corrective action strategies and objectives. 
We also conducted structured telephone interviews with the supervising 
staff at each of the 18 Medicare Part B carriers involved in conducting 
progressive corrective action activities.14 During telephone interviews, 
we gathered information about carriers experiences implementing 
progressive corrective action, which included: 
 	 the extent to which carriers have implemented the strategies, 
 	 the extent to which progressive corrective action has achieved 
desired results, and 
 	 how CMS oversees carriers performance related to progressive 
corrective action. 
CMS Central Office and Regional Office Interviews 
We conducted structured in-person interviews with key staff at CMS 
central office who are responsible for Program Integrity, medical review 
oversight. We also conducted telephone interviews with each of the 
eight CMS regional offices.15 Our questions focused on the following: 
 	 the extent to which carriers have implemented the strategies, 
 	 the extent to which progressive corrective action strategies have 
achieved desired results, and 
 	 the oversight mechanisms CMS currently uses to determine 
carrier performance with regard to progressive corrective action. 
14 We excluded Triple-S, the carrier for Puerto Rico and the Virgin Islands. 
15 At the time we collected data for this inspection, CMS had 10 regional offices throughout 
the United States, and for its medical review work, had combined regions 8, 9, and 10 
into a consortium. 
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LIMITATIONS 
Although CMS guidance instructs carriers to consider individual 
provider error rates when deciding how to address a billing problem, it 
does not explicitly require the carriers to calculate baseline or 
subsequent billing and/or payment error rates. As we discuss in more 
detail later, carriers had limited information on baseline and 
subsequent error rates in their tracking systems. As a result, we were 
unable to determine whether progressive corrective action strategies 
reduce billing and/or payment errors. 
STANDARDS 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on 
Integrity and Efficiency. 
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  F I N D I N G S  
Carriers are generally implementing progressive 
Our examination of the data from 
corrective action strategies consistent with CMS 
carriers tracking systems for 
guidance 
Medicare participating physicians 
leads us to conclude that carriers are generally implementing 
progressive corrective action strategies consistent with CMS guidance.  
Even though carriers are not required to document their approaches in 
all cases, there is evidence in their tracking systems that they are 
implementing the five progressive corrective action approaches.16 
Additionally, in our interviews with the 18 carriers, they confirm that 
they are generally implementing corrective action strategies, and they 
provide explanations of how they carry out each of the 5 specific 
approaches.  
The decision to conduct medical review should be data driven. 
Sixteen of the eighteen carriers have evidence in their tracking system 
that their decision to conduct medical review is based on the results of 
preliminary data analysis.  Carriers tracking systems have information 
such as indications that a given physician appeared to be upcoding for a 
particular service and indications that a given physician billed for 
significantly higher amounts than other physicians in the same area of 
specialization.   
In addition, in our interviews with the carriers, all 18 report that their 
decision to conduct medical review is based on the results of preliminary 
data analysis.  Specifically, all carriers report that they analyze 
provider billing information to identify aberrant billing patterns for 
both physician specific and service specific data prior to conducting 
medical review.17  When asked to provide further detail, 10 carriers 
explain that they compare national, State, and local data across 
provider peer groups to determine where aberrancies exist. 
Validate potential problems by conducting probe reviews. All 18 carriers 
have information in their tracking systems indicating that they conduct 
prepayment or postpayment probes to validate suspected aberrant 
billing behavior.  Specifically, carriers tracking systems include 
16 CMS, Medial Review Progressive Corrective Action, Program Memoranda Transmittal 
AB-00-72, August 2000.   
17 Physician specific data analysis generally involves comparing individual physicians 
billing practices with billing practices of other, comparable physicians.  Service specific 
analysis generally involves comparing the billing of particular services with local or 
national trends data.   
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information such as the sample size of a given probe, the number of 
claims reviewed, the type of probe action taken, and the date that a 
given probe was closed.   
Furthermore, in our interviews with the carriers, all 18 report that they 
use the results of prepayment or postpayment probe medical reviews to 
validate a potential billing problem.  Seven carriers report that probe 
reviews are one of the most effective progressive corrective action 
practices.  One carrier notes, The concept of the probe review has been 
very effective.  It can validate that the issue is valid before over-working 
the provider.   
The provider error rate is an important consideration in deciding how to address 
the problem. Sixteen of the eighteen carriers have error rate calculations 
in their tracking systems for at least some physicians who were 
identified for progressive corrective action during the first two quarters 
of FY 2003. Further, in our interviews, 17 of the 18 carriers report that 
they consider the individual physician error rate when deciding how to 
address a physicians billing problem. 
Subject providers only to the amount of medical review necessary to address 
the nature and the extent of the identified problems.  All 18 carriers have 
information in their tracking system indicating that they consider 
factors such as the dollar value of the billing problem, the history of the 
physicians billing patterns and/or the physicians billing or payment 
error rate when deciding how to address a given billing problem. 
In our interviews with the carriers, all 18 confirm that they take steps 
to ensure that physicians are subjected only to reasonable amounts of 
medical review.  For example, all carriers explain that they determine 
the severity of a problem by examining the dollar value of the identified 
problem, and/or the past billing history of the physician.  Eight carriers 
also report using the results of probe reviews to determine the level of a 
given billing problem. This severity level information is then used to 
determine the type of corrective action.  
Provider feedback and education is an essential part of solving problems. 
Seventeen of eighteen carriers have information in their tracking 
systems documenting that they provided education and training to at 
least some of the physicians identified for progressive corrective action 
during the first two quarters of FY 2003.  The tracking systems have 
indications that educational letters were sent to at least some 
physicians or that education was provided on a given date.  The extent 
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to which carriers meet the requirement to track this information for all 
physicians identified for progressive corrective action is discussed in 
greater detail in the next section.18 
Additionally, in our interviews with the carriers, all 18 report that they 
use feedback and education to solve billing problems. Specifically, all 
18 carriers explain that they provide education and training on a one-
on-one and/or group basis. They also report providing training through 
written materials or electronically. 
Carriers are required to have a
However, carriers are not following all tracking 
tracking system and document
requirements 
five specific elements. We found 
that all carriers have a tracking system; however, none of the carriers 
document all the required elements. (See Table 1 on the next page.) 
Carriers are instructed to identify all individual providers and track all 
contacts made as a result of actions to correct identified problems. 
Twelve of eighteen carriers do not track this information for all 
physicians identified for progressive corrective action during the first 
two quarters of FY 2003, as required. Specifically, six carriers have this 
information for at least half but not all of the identified physicians. Five 
carriers document contact information for less than half of the identified 
physicians. One carrier does not track any information for any of the 
identified physicians. 
Carriers are also required to reassess all providers on medical review 
quarterly to determine if their behavior has changed. The results of 
these reassessments must be noted in their tracking system.19  None of 
the 18 carriers track the results of these quarterly reviews for all 
physicians identified for corrective action during our sampling 
timeframe. One carrier tracks quarterly results for less than half of the 
identified physicians. While some carriers have subsequent error rate 
calculations for some identified physicians, there is often no indication 
that these rates were calculated on a quarterly basis. Further, there 
are no other reassessment measures, such as a downgrade from a major 
problem to a minor problem, recorded for all identified physicians. 
18 CMS, Medial Review Progressive Corrective Action, Program Memoranda Transmittal 
AB-00-72, August 2000. 
19 Quarterly reassessments included subsequent error rates or any other measure 
indicating that the physicians billing behavior was reevaluated at 3-month intervals. 
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Carriers are also required to document the date the provider is put on a 
provider-specific edit.20  While not all billing problems warrant this type 
of information, 9 of 18 carriers do not have any dates that physicians 
who were identified for corrective action during the first two quarters of 
FY 2003 were placed on an edit.  Furthermore, carriers must record the 
dates that edits are turned off. Eleven carriers do not have this 
information for any of the identified physicians.  
Finally, carriers are required to track and consider the results of 
appeals in their medical review activities.  Six carriers do not have this 
information for any of the physicians identified for progressive 
corrective action during the first two quarters of FY 2003.  
Table 1:  Number of Carriers that Follow Tracking System Requirements 
Number of 
Carriers that 
Number of  Number of  Track Information 
Carriers Not  Carriers  for at Least Some 
Following  Following  Identified 
Tracking Requirements  Requirement  Requirement  Physicians  
All contacts made as a result of 
12  6  17 
actions to correct identified problem 
Results of quarterly reassessments 
18  0  1 
for all providers 
Date a provider is put on 
a 
provider-specific edit for medical  9  9 9 
review 
a 
Date edits are turned off  11  7 7 
Results of appealed medical review 
6  12b  12 
decisions 
Source: OIG Review of Carrier Tracking Systems, 2004.  
a = Includes carriers that have information on any dates that physicians were placed

on edits. 

b = Includes carriers that have information on any appealed medical review decisions. 

20 Edits are software-based controls used to prevent an overutilization of codes, upcoding to          
a higher reimbursement rate, or inappropriate frequencies of services billed for the same 
beneficiary.  Edits are put in place to flag any group of claims that does not follow 
Medicare coverage guidelines and could serve to delay or reject payments.  
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Little information exists to determine whether 
Carriers report that progressive 
progressive corrective action strategies are 
corrective action strategies seek to 
achieving desired results  reduce individual physician error 
rates and modify behavior of 
physicians through education.21  We found that little information exists 
to determine whether progressive corrective action strategies are 
achieving these desired results.  Specifically, carriers have limited data 
on physician error rates, and CMS relies on compliance-based oversight 
that does not measure progressive corrective action outcomes. 
Carriers have limited data on physician error rates 
CMS transmittals instruct carriers to consider the individual provider 
error rate when deciding how to address a billing problem. Carriers are 
not, however, explicitly required to calculate or track these error rates 
for each physician identified for progressive corrective action. We found 
that carriers calculated baseline error rates for an average of 48 percent 
of physicians who were identified for progressive corrective action 
during our sampling timeframe.  Seven carriers calculated baseline 
error rates for less than 50 percent of physicians identified for 
progressive corrective action during this timeframe.  Only one carrier 
calculated baseline error rates for all identified physicians. 
Carriers calculated subsequent error rates for even fewer physicians 
who were identified for progressive corrective action.  Specifically, 
carriers calculated subsequent rates for an average of 8 percent of the 
physicians identified for corrective action during the first two quarters 
of FY 2003. Twelve carriers calculated these rates for less than    
10 percent of identified physicians.  Again, only one calculated 
subsequent rates for all physicians identified for corrective action 
during this timeframe. See Table 2 on the next page.  
21 Additionally, CMS guidance (SPACE Program Guidelines: Contractor Medical Review 
Oversight, p. 3, October, 2004) indicates, and carriers report, that the ultimate goal of the 
progressive corrective action strategies is to reduce the national paid claims error rate.     
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FF II NN DD II NN GG SS  
Table 2:  Number of Physicians Identified for Progressive Corrective 
Action With Baseline and Subsequent Error Rates by Carrier* 
Total Number of  Number of  Percentage of  Number of  Percentage of 
Physicians  Physicians with  Physicians  Physicians with  Physicians with 
Carriers  Identified for  Baseline Error  with Baseline  Subsequent  Subsequent Error 
Progressive  Rates  Error Rates  Error Rates  Rates 
Corrective Action 
A  407  162  40  0  0 
B  8  7  88  1  13 
C  106  52  49  2  2 
D  31  16  52  0  0 
E  2  0  0  0  0 
F  73  47  64  29  40 
G  277  177  64  14  5 
H  327  224  69  4  1 
I  94  35  37  15  16 
J  13  13  100  13  100 
K  119  59  50  5  4 
L  113  50  44  3  3 
M  216  168  78  77  36 
N  28  19  68  2  7 
O  385  24  6  4  1 
P  48  0  0  0  0 
Q  59  51  86  11  19 
R  10  8  80  0  0 
Totals  2,316  1,112  48%  180  8% 
Source: OIG Review of Carrier Tracking Systems, 2004. 
*Physicians were identified during the first two quarters of FY 2003. 
In total, 180 physicians who were identified for progressive corrective 
action during the first two quarters of FY 2003 had a baseline and a 
subsequent error rate. Because this represents only 8 percent of the 
2,316 physicians who were identified, we are unable to determine 
whether progressive corrective action interventions do, in fact, reduce 
individual physician error rates. 
CMS relies on compliance-based oversight that does not address 
progressive corrective action outcomes 
CMS central office reports that the Self-Assessment, Performance 
Oversight and Comprehensive Error Rate Testing and Educational 
program (SPACE) measures progressive corrective action outcomes. 
The SPACE program includes the Certification Package for Internal 
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Controls (CPIC), SAS-70 audits, the Comprehensive Error Rate Testing 
(CERT) program, and the Educational Training program. 
The majority of the SPACE program activities measure the extent to 
which carriers comply with progressive corrective action requirements 
and whether controls exist to ensure compliance.  The primary goal of 
the self-assessment CPICs is to identify operational areas that are at 
risk and need improvement.  The goal of the SAS-70 audits is to 
determine if internal controls are in place and whether they are 
effective. The goal of the Educational Training program is to correct 
areas of contractor vulnerabilities. None of these three activities 
measures whether progressive corrective action strategies are reducing 
individual error rates or modifying behavior of physicians through 
education. 
The final component of the SPACE is the CERT program.  The CERT 
program measures the extent to which all Medicare Part B claims were 
paid in error.  The goal of this measure is to improve the accuracy of 
payment decisions made by Medicare contractors for all Medicare 
participating providers.  In contrast, progressive corrective action 
strategies aim to reduce the billing or payment errors for a select group 
of providers who are identified as aberrant billers.  Therefore, while the 
CERT program measures outcomes, it may not be specific enough to 
determine whether progressive corrective action is achieving its desired 
results. 
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E X E C U T I V E   S U M M A R Y
  R E C O M M E N D A T I O N S  

While all carriers appear to be implementing progressive corrective 
action strategies consistent with CMS guidance, we found that none of 
the carriers are following all tracking requirements.  In addition, we 
found that little information exists to determine whether progressive 
corrective action is achieving desired results.   
The MMA highlights the importance of providing effective education 
and training to Medicare participating providers.  However, CMS does 
not currently have any method that measures the effectiveness of 
progressive corrective action strategies and whether the strategies 
reduce individual physician error rates and/or modify the behavior of 
physicians. 
To address these issues, we recommend that CMS:  
 	 Institute outcome-based program measures to better determine 
whether progressive corrective action strategies reduce individual 
physician error rates and/or modify the behavior of physicians.  To 
do this, CMS could: 
-	 Modify its SPACE program to assess progressive corrective 
action outcomes. 
-	 Revise its Medicare Carriers and Intermediaries Manuals to 
explicitly require the calculation of individual-provider error 
rates before and after progressive corrective action 
intervention.  This information could then be used to 
determine whether corrective action strategies do, in fact, 
help reduce billing errors. 
 	 Conduct reviews of carriers tracking systems to ensure that carriers 
are complying with requirements.   
AGENCY COMMENTS           
CMS concurred with our recommendations.  CMS further commented 
that it has already taken steps to include reviews of carrier tracking 
systems as part of its annual SAS-70 reviews.  The full text of CMSs 
comments is included in the Appendix.  
CMS also commented that it will continue to require its contractors to 
evaluate the effectiveness of corrective actions taken. It noted that 
there are a number of methods that can be employed to identify 
progressive corrective action outcomes.  CMS commented that error 
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rates, as well as analysis of claims data, may be sufficient to determine 
the effectiveness of a progressive corrective action intervention. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We agree. However, we question whether carriers will evaluate and 
track the effectiveness of corrective action strategies in absence of more 
guidance from CMS.   For example, further guidance on when to require 
the calculation of individual provider error rates would increase CMSs 
ability to determine whether progressive corrective action strategies are 
achieving desired results.  We reiterate that, based on our review of 
carriers tracking systems, we found that none of the 18 carriers tracked 
the results of quarterly reassessments for all physicians identified for 
corrective action during our sampling timeframe, as required by CMS.  
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  A C K N O W L E D G M E N T S  

This report was prepared under the direction of Jodi Nudelman, Acting 
Regional Inspector General for Evaluation and Inspections in the New 
York regional office.  Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Ellen Vinkey, Team Leader 
Christi Macrina, Project Leader 
David Rudich, Program Analyst 
Tricia Davis, Director, Medicare and Medicaid Branch 
Barbara Tedesco, Mathematical Statistician 
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