GAO Report Criticizing CMS Suggests Heightened Enforcement Risks for Part D Sponsors

The Government Accountability Office (“GAO”) recently released a report, “Changes Needed to Improve CMS’s Recovery Audit Program Operations and Contractor Oversight,” criticizing CMS for failing to adequately oversee the Part D recovery audit contractor (“RAC”) program.  The report reflects growing concern around potential overpayments under the Part D program, mirroring the wave of interest that first arose several years ago regarding potential overpayments under the Medicare Advantage (“MA”) Program.  For a time, the MA program operated relatively unscathed by the groundswell of qui tam suits in the healthcare industry, but it is now in the midst of a widespread industry enforcement wave, and a number of plans and providers are facing FCA suits (as discussed here).  The GAO’s report could portend more Part D Sponsors being future targets of similar scrutiny.

The Affordable Care Act (“ACA”) extended the recovery audit contractor model (under which contractors audit on a contingency fee basis) from Medicare fee-for-service to the Part D program.  As the GAO’s report describes, although the Part D RAC’s contract was executed in January 2011, CMS did not begin collecting improper payments until February 2013.  The GAO criticized the Part D RAC for unsatisfactorily low overpayment recoveries, and it links these shortcomings to CMS’ failure to provide clear expectations and project timelines to the contractor.  In particular, the GAO observed:

As of May 2015, CMS had collected less than $10 million in improper payments, and had not approved the RAC to perform new audit work since March 2014….[A]s a result of CMS’s and the RAC’s challenges in determining audit work to conduct and the RAC’s challenges in developing audit methodologies, CMS has approved 1 of the 15 audit proposals from the RAC since the beginning of the contract in 2011 and has collected a limited amount of improper payments relative to the estimated $1.9 billion in improper payments in Part D in 2014.

The GAO’s report comes on the heels of a series of congressional hearings in July 2015 regarding the need to strengthen Part D program integrity.  Earlier in the summer, the OIG also released two reports identifying systematic weaknesses in the Part D program that may facilitate fraud and abuse.  This focus parallels a shift in attention by the GAO and the OIG in 2012 to the MA industry, with both entities releasing reports questioning whether MA plans and providers were being over-reimbursed.  Particularly as the ACA’s overpayments provision offers new and broad avenues to invoke FCA liability (as reported here), we are likely to see an increase in whistleblower activity against Part D Sponsors.

A copy of the GAO’s report can be found here.