Recovery audit contractors should receive mandatory training on the identification and referral of fraud, HHS’ inspector general’s office recommended in a new report (PDF file).

The RAC program allows third-party auditors hired by the CMS to keep 9% to 12.5% of provider payments they identify as improper. The program was pilot-tested in several states from March 2005 to March 2008, recouping more than $992 million in overpayments to providers. The CMS’ goal is to have a permanent program operating in all 50 states this year, with four contractors each having jurisdiction for one-quarter of the country.

The inspector general’s office found that RACs received no formal training from the CMS on identification of potential fraud during the demonstration or pilot project, and that only two cases of potential fraud had been reported to the agency over the pilot’s three-year run.

The report noted that RACs do not receive contingency fees for cases they refer that are determined to be fraud. “Thus, there may be a disincentive for RACs to refer cases of potential fraud,” the inspector general’s office said.

The inspector general’s office recommended that the CMS follow up on the two referrals of fraud reported during the pilot project and implement a system to track fraud referrals.

Responding to the inspector general’s recommendation for mandatory fraud training, the CMS said it had already provided two training sessions to the permanent RACs and was in discussions with the inspector general’s office and the Justice Department on additional training. — Jennifer Lubell

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