DEPARTMENT OF HEALTH AND HUMAN SERVICES 
OFFICE OF INSPECTOR GENERAL 
WASHINGTON, DC  20201 
APR 232012 
TO: 	 Marilyn Tavenner 
Acting Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Status of244 Provider Audit Targets Identified Using 
Review Medicaid Integrity Contractor Analysis, OEI-05-10-00201 
This memorandum report is intended as an addendum to our February 2012 report, Early 
Assessment ofReview Medicaid Integrity Contractors (OEI-05-1 0-00200), in which we 
identified concerns with the quality of Review Medicaid Integrity Contractor (MIC) analysis. 
The effect those quality concerns could have on audit outcomes served as the impetus for issuing 
this memorandum report.  That report and this memorandum report are an early assessment of 
Review MICs' program integrity activity results. 
SUMMARY 
To identify overpayments to Medicaid providers, the Centers for Medicare & Medicaid Services 
(CMS) contracts with two types of MICs:  Review MICs and Audit MICs.  Review MICs 
analyze Medicaid claims data to identify providers with potential overpayments.  From the 
resulting lists of providers, CMS selects audit targets to assign to Audit MICs. 
In the report Early Assessment ofReview Medicaid Integrity Contractors (OEI-05-10-00200), the 
Office ofInspector General (OIG) identified concerns with the quality of Review MIC analysis 
that resulted in CMS's selection of 244 providers as audit targets.  This memorandum report 
follows those 244 audit targets and reports on the status and outcomes of audits conducted by 
Audit MICs.  The results provide insights into whether the quality of Review MIC analysis 
affected findings ofactual Medicaid overpayments. 
Between June 2010 and January 2011, CMS assigned to Audit MICs 161 ofthe 244 audit targets. 
As ofFebruary 1,2012, Audit MICs had completed 127 of the 161 assigned audits.  Only 25 of 
these 127 completed audits found actual overpayments, totaling $285,629.  Page 2  Marilyn Tavenner 
BACKGROUND 
 
The Deficit Reduction Act (DRA) of 2005 established the Medicaid Integrity Program to fight 
fraud, waste, and abuse.  The DRA requires CMS to contract with entities to identify 
overpayments to Medicaid providers.  CMS contracted with two types of MICsReview MICs 
and Audit MICsto identify such overpayments.     
 
Identification of Overpayments From Review MIC Analysis 
CMS contracted with Review MICs to identify providers who potentially received Medicaid 
overpayments and with Audit MICs to audit these providers.   
 
CMS makes data analysis assignments to Review MICs.  Using nationally available Medicaid 
claims data, Review MICs identify providers who potentially received overpayments.  After 
reviewing the analysis provided by Review MICs, CMS selects certain providers as audit targets 
and assigns them to Audit MICs.  Audit MICs then audit these targets to determine whether the 
potential overpayments associated with them were overpayments.  Chart 1 shows this process for 
identifying Medicaid overpayments. 
 
Chart 1:  Process for Audit Targets Originating From Review MIC Analysis 
CMS makes data analysis assignments to Review MICs 
Review MICs identify potential overpayments 
States review samples of potential overpayments 
Review MICs make changes to analysis based on State comments  
Review MICs send CMS lists of providers with potential 
overpayments 
CMS completes quality assurance on lists of providers 
CMS selects audit targets 
CMS screens audit targets with States or 
Federal entities 
CMS assigns audit targets to  
Audit MICs 
Audit MICs conduct audits 
Audit MICs identify actual 
overpayments 
 
Source:  OIG analysis of interviews with CMS, March 2012.
OEI-05-10-00201  Status of 244 Provider Audit Targets Identified Using Review Medicaid Integrity Contractor 
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In addition to this traditional process, CMS may assign collaborative audits, which involve Audit 
and Review MICs, States, and CMS in identifying audit targets.  MICs, CMS, and the States 
work together to identify providers with potential overpayments using each States own 
Medicaid claims data.  CMS then assigns these targets to Audit MICs.   
 
Related OIG Work 
OIG has issued two reports on the use of MICs to identify Medicaid overpayments for recovery 
by States: 
 
  Early Assessment of Review Medicaid Integrity Contractors (OEI-05-10-00200).  As 
described earlier, this February 2012 report found that CMS selected 244 providers as 
audit targets from 113,378 providers that Review MICs identified (from assignments 
made between January and June 2010) as having potential overpayments.  In addition, we 
found that the Medicaid claims database used by Review MICs often had missing or 
inaccurate data, hindering Review MICs ability to accurately complete their data 
analysis assignments.   
  Early Assessment of Audit Medicaid Integrity Contractors (OEI-05-10-00210).  This 
March 2012 report focused on 370 different audit targets assigned to Audit MICs 
between January and June 2010.  We found that 81 percent of reviewed audits either did 
not find overpayments or were unlikely to find overpayments.  Most of the actual 
overpayments identified by Audit MICs were found through seven collaborative audits.  
Further, we found that Audit MICs ability to identify overpayments was hindered 
because audit targets were inappropriately identified by Review MICs. 
 
METHODOLOGY 
 
Using CMSs tracking database, we determined whether each audit target was assigned to an 
Audit MIC and whether each assigned audit was completed or ongoing as of February 1, 2012.  
For the purposes of this review, we considered audits to be complete if they resulted in a report 
or were discontinued by CMS.  For completed audits, we used the most recently reported 
estimate of actual overpayments to calculate the monetary results.   
 
As of February 1, 2012, CMS assigned 161 of the 244 audit targets for audit.  Therefore, our 
analysis is based on those 161 assigned audit targets.  We do not have any information as to why 
the remaining 83 audit targets were not assigned. 
 
Data Limitations 
This memorandum report only provides information and insights on audit targets originating 
from Review MIC analysis.  The 244 audit targets reviewed in this memorandum report were 
identified through the traditional process in which providers are identified by Review MICs, 
reviewed and selected for audit by CMS, and audited by Audit MICs.  We did not review 
collaborative audits assigned by CMS during this period.  As a result, this memorandum report 
does not capture the entirety of CMSs efforts to identify Medicaid overpayments.  This 
memorandum report also does not examine the roles that CMS or Audit MICs play in the 
identification, assignment, or audit of providers that potentially received Medicaid 
overpayments.   
 
OEI-05-10-00201  Status of 244 Provider Audit Targets Identified Using Review Medicaid Integrity Contractor 
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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. 
 
RESULTS 
 
Audits of Providers Identified by Review MICs Found Few Overpayments 
Ultimately, Review MIC analysis from assignments made between January and June 2010 led to 
25 completed audits with actual overpayments, totaling $285,629.  Review MICs had initially 
identified 113,378 providers with potential overpayments, and CMS had reviewed these 113,378 
providers and selected 244 as audit targets.  CMS assigned 161 of these 244 audit targets, with 
$33.5 million in potential overpayments, to Audit MICs.   
 
As of February 1, 2012, Audit MICs had completed 127 of the 161 assigned audits of providers.  
An average of 10 months elapsed between the date CMS assigned these audits to Audit MICs 
and the date the Audit MIC reported its findings to CMS.  Twenty-five of these completed audits 
found overpayments, totaling $285,629.  The remaining 102 completed audits found no 
overpayments.  Thirty-four of the assigned audits had not been completed and were ongoing as 
of February 1, 2012.  Chart 2 shows the process that resulted in the identification of $285,629 in 
actual overpayments. 
    
Chart 2:  Identification of Actual Overpayments From Review MIC analysis  
Review MICs identify 113,378 providers  $282 million in potential overpayments 
CMS selects 244 providers as  $39.8 million in potential 
audit targets  overpayments 
CMS assigns 161 providers  $33.5 million in potential 
as audit targets  overpayments 
25 provider audits  $285,629 in actual 
completed  overpayments 
 
 
Source:  OIG analysis of Review MIC assignments and 244 audit targets, February 2012.
   
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CONCLUSION 
 
The results in this memorandum report are consistent with results of previous OIG reports on 
Review MICs and Audit MICs.  As mentioned earlier, we issued reports on Review MICs and 
Audit MICs in February and March 2012, respectively.1  In the Review MIC report, we noted 
that missing and inaccurate data in the Medicaid claims database used by Review MICs hindered 
their ability to correctly identify potential overpayments, and that some assignments may not 
lead to recoveries.  In the Audit MIC report, we documented that most audits completed prior to 
those identified in this memorandum report also did not identify actual overpayments, primarily 
due to problems with the data and with analyses conducted by Review MICs and CMS that led to 
poorly identified audit targets.   
 
In each of these reports, we made a recommendation directed at improving the effectiveness of 
MICs and the process for identifying providers who received Medicaid overpayments.  In 
response, CMS stated that it has several initiatives underway to improve audit target selection, 
including improving the quality of data that MICs can access for conducting data analysis.  
Additionally, CMS stated that it has redesigned its approach to audit assignments, instructing 
Audit MICs to focus on collaborative projects.  In fact, CMS stated that it assigned more audits 
through the collaborative process than through the traditional process in 2011. 
 
This memorandum report is being issued directly in final form because it contains no 
recommendations.  Please refer to report number OEI-05-10-00201 in all correspondence. 
                                                 
1 OIG, Early Assessment of Review Medicaid Integrity Contractors (OEI-05-10-00200), February 2012, and Early 
Assessment of Audit Medicaid Integrity Contractors (OEI-05-10-00210), March 2012. 
OEI-05-10-00201  Status of 244 Provider Audit Targets Identified Using Review Medicaid Integrity Contractor 
Analysis