Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

 

EARLY ASSESSMENT OF 

REVIEW MEDICAID 

INTEGRITY CONTRACTORS

 

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 CMS’s 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 
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 1

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 2

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 3

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 Administration’s 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 valid—i.e., whether they are in fact 

overpayments—using 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 beneficiary’s 

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 State’s 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 Administration’s 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 4

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 CMS’s 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 5

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 CMS’s policies and procedures 

concerning Review MIC assignments and CMS’s 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, few—if 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 CMS’s 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 6

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 provider’s total potential overpayment 

amount across all completed assignments.

In the case of some regular assignments with algorithms intended to identify 

services provided after a beneficiary’s 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 7

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

Standards

. 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. 

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 8

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 beneficiary’s 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: 

Status of Review 

MIC Assignments 

as of November 

2011*

Source: OIG analysis of Review MIC assignments, 2011.

*Percentages do not add up to 100 percent because of rounding.

1%

17%

2%

81%

Assigned and 

Ongoing

On Hold

Rejected

Completed
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 9

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 10

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

Table 1: Providers Selected by CMS for Audits as of December 2010 

 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.

Amount of Potential 

Overpayment

Number of 

Providers Identified 

by Review MICs

Number of 

Providers Selected 

by CMS for Audits

Total Potential 

Overpayments 

Selected for Audits

$1 million to 

$3.6 million 32 7 $17.7 million

$100,000 to 

$999.999 475 42 $15 million

$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 11

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.
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 12

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 MSIS’s 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

States invalidated more than one-third of sampled potential 

overpayments from assignments, mainly because data were 

missing or inaccurate 

 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.

Of the potential overpayments that Review MICs submitted, States 

asserted—after comparing the Review MIC-provided information with 

information in their State data systems—that 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 13

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 beneficiary’s 

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 

Administration’s 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 beneficiary’s 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 beneficiary’s 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 14

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 

Louisiana’s 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 15

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 MIC’s 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 CMS’s 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 Children’s 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 16

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 CMS’s technical comments.

For the full text of CMS’s comments, see Appendix B.
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 17

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

Algorithm Service Type Billing Issue 

Reviewed

Algorithm 

Source

Frequency 

Assigned

Number of 

Providers 

Identified

Amount of 

Potential 

Overpayment

1 Adult day health 

care

Inappropriate 

service setting Review MIC 3 162 $381,491

2 Ambulance 

services

Inappropriate 

service setting Review MIC 1 186 $250,084

3 Dental services Excessive services Review MIC 1 172 $28,129

4 Durable medical 

equipment

Excessive 

equipment rental CMS 1 193 $3,049,847

5 Hospice services Inappropriate 

service setting CMS 1 0 $0

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

9 Inpatient services Inappropriate 

service setting CMS 1 0 $0

10 Inpatient services Inappropriate 

service setting CMS 3 1,410 $175,757,413

11 Inpatient services Inappropriate 

service setting CMS 6 90 $11,431,554

12 Inpatient services Services after 

death CMS 56 637 $5,244,583

13 Long-term-care 

services Duplicate billings CMS 10 1 $5,880

14 Long-term-care 

services

Services after 

death CMS 54 2,095 $18,809,573

15 Outpatient 

services Duplicate billings CMS 2 81 $47,790

16 Outpatient 

services

Inappropriate 

service setting CMS 8 2,356 $5,092,533

17 Outpatient 

services Medically unlikely CMS 4 584 $4,450,428

18 Outpatient 

services

Services after 

death CMS 59 38,531 $83,850,039

19 Outpatient 

services Upcoding Review MIC 11 3,994 $4,398,115

20 Personal care 

services

Inappropriate 

service setting Review MIC 9 87,031 $28,387,694

21 Pharmacy 

services Duplicate billings CMS 6 1,573 $1,950,520

22 Pharmacy 

services Early refill CMS 5 1,783 $479,936

23 Pharmacy 

services Early refill CMS 5 5,603 $7,207,701

24 Pharmacy 

services Early refill CMS 9 3,617 $6,616,698

25 Pharmacy 

services Inaccurate quantity CMS 8 109 $971,130

*Review MIC. continued on next page 

**CMS.
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 18

Table A-1: Breakdown of Algorithms Assigned To Review MICs by Algorithm Model (continued)

Algorithm Service Type Billing Issue 

Reviewed

Algorithm 

Source

Frequency 

Assigned

Number of 

Providers 

Identified

Amount of 

Potential 

Overpayment

26 Pharmacy 

services Overprescribed CMS 12 977 $1,555,820

27 Pharmacy 

services Overprescribed CMS 8 6,096 $720,663

28 Pharmacy

services Overprescribed Review MIC 3 21 $1,212,489

29 Pharmacy 

services

Services after 

death CMS 55 10,544 $10,618,722

30 Psychotherapy 

services Excessive time Review MIC 2 7 $91,678

31 Therapy services Ineligible billing Review MIC 1 166 $2,516,189

Source: Office of Inspector General analysis of Review MIC assignments, 2011.
APPENDIX B 

Agency Comments 

/"'''''''' ... 

( ~ DEPARTMENT OF HEALTH & HUMAN __SE_R_V_IC_E_S ___ _ ___ Ce_ nt_9_IS_fOf _M_ _ _ 9dic_sre_ &_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
OEI-05-10-00200 Early Assessment of Review Medicaid Integrity Contractors 22

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. 
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 OIG’s 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.