Life Science Compliance Update

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February 08, 2018

CMS Improper Payment Rate Dips Below 10%


In 2017, the improper payment rate for fee-for-service Medicare dropped to 9.5%, the first time since 2013 that figure has been below 10%. By comparison, the rate was 11% in 2016, and there was a $4.9 billion year-over-year decrease in estimated improper payments, according to a blog post by Kimberly Brandt, principal deputy administrator for operations at the Centers for Medicare & Medicaid Services.

Last year, CMS officials said the improper payment rate dropped from 12.1% in 2015 to 11% in 2016 chiefly because of the two-midnight rule, which set a new benchmark for impatient hospital claims. But in both of those years, it failed to reach the target of less than 10% established in the Improper Payments Elimination and Recovery Act of 2010. An independent audit released in May 2016 said the rate exceeded 12% in 2015 mainly because of a spike in improper payments for home health claims.

FY 2017 Medicare FFS Improper Payments (in Millions) and Percentage of Improper Payments by Monetary Loss and Type of Error


The above figure provides information on Medicare FFS improper payments that are a known “monetary loss” to the program (i.e. medical necessity, incorrect coding, and other errors). The estimated known “monetary loss” improper payment rate is 3.0 percent, representing an estimated known monetary loss of $11.3 billion out of the total estimated improper payments of $36.2 billion.  In the figure, “unknown” represents payments where there was no or insufficient documentation to support the payment as proper or a known monetary loss.

Improper Payments

Brandt notes that improper payments are not always indicative of fraud, nor do they necessarily represent expenses that should not have occurred. As an example, there are cases where there is no documentation to support the payment as proper and is cited as improper payments under the current OMB guidance. The blog post points out that the majority of Medicare FFS improper payments are due to documentation errors and CMS could not determine whether the billed items or serves were actually provided, were billed at the appropriate level, and/or were medically necessary. A smaller portion of these payments are for claims that CMS determined should not have been made or made in a different amount.

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