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 of actual 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. 
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OEI-05-10-00201 Status of 244 Provider Audit Targets Identified Using Review Medicaid Integrity Contractor 

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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 MICs—Review MICs 

and Audit MICs—to 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

Audit MICs identify actual 

overpayments

Audit MICs conduct audits

CMS assigns audit targets to 

Audit MICs

CMS screens audit targets with States or 

Federal entities

CMS selects audit targets

CMS completes quality assurance on lists of providers

Review MICs send CMS lists of providers with potential 

overpayments

Review MICs make changes to analysis based on State comments 

States review samples of potential overpayments

Review MICs identify potential overpayments

CMS makes data analysis assignments to Review MICs

Source: OIG analysis of interviews with CMS, March 2012.
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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 State’s 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 CMS’s 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 CMS’s 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. 
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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

CMS selects 244 providers as 

audit targets

CMS assigns 161 providers 

as audit targets

25 provider audits 

completed

$282 million in potential overpayments

$39.8 million in potential 

overpayments

$33.5 million in potential 

overpayments

$285,629 in actual 

overpayments

Source: OIG analysis of Review MIC assignments and 244 audit targets, February 2012.
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OEI-05-10-00201 Status of 244 Provider Audit Targets Identified Using Review Medicaid Integrity Contractor 

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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.