The Department of Health and Human Services (HHS) reported $65 billion in improper payments across eight of its high-risk programs in 2012. This is just one of the morsels of information that listeners of the March 18 Monitor Monday broadcast heard from special guest Gloria Jarmon, Deputy Inspector General (IG) for the Office of Audit Services (OAS) in the Office of Inspector General (OIG) for HHS.

As some readers may know, the OAS is the largest civilian audit agency in the federal government and the biggest section of the OIG. It is the job of OAS investigators—about 600 of them (out of a total staff of 700)—to examine whether HHS and its affiliates are fulfilling their responsibilities.

To do so, the OAS conducts independent audits of HHS programs and operations, either by using its own resources or by overseeing audit work done by others. Investigators also audit the performance of HHS programs and/or its grantees and contractors to determine whether they are fulfilling their respective responsibilities. The goals, says Jarmon, are “to help reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout the department.”

In addition to explaining the audits on HHS programs, she provided examples of the amount of improper Medicare and Medicaid payments collected from providers. She also reviewed the purpose of, and results from, Improper Payments Information Act of 2002 (IPIA) as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA).

Obeying the IPERA

Lest healthcare providers think that they are the only ones undergoing federal government scrutiny, think again. Although many readers may not have heard of the IPERA, it’s an important piece of legislation designed to ensure that DHHS is doing its job. (A summary can be found at

Specifically, the legislation requires the OIG to review and report on annual improper payment information included in the agencies’ financial reports (AFR). The OAS established the following objectives for this review:

  • Determine whether HHS complied with the IPIA for fiscal year 2012 in accordance with related Office of Management and Budget (OMB) guidance.
  • Evaluate the accuracy and completeness of the HHS’s reporting.
  • Evaluate HHS’s performance in reducing and recapturing improper payments.

Although HHS has met many of the requirements, it is not, says Jarmon, in full compliance—even though, as stated above, the department reported $64.8 billion in improper payments in 2012. The payment came from eight programs deemed to be high-risk by the OMB. It did not, however, report an error rate for the Temporary Assistance for Needy Families (TANF) program.

HHS also reported that four of the nine programs met their improper rate-reduction targets, but three of nine did not (Medicare fee-for-service, Medicare Advantage, and foster care). This requirement didn’t apply to the two remaining programs (TANF and the Children’s Health Insurance Program [CHIP] because a target hadn’t been established for either of them. The department achieved improper payment rates below 10 percent—another requirement of the act—for each of the other programs reported on except Medicare Advantage.

As Jarmon says, “The challenge remains for the department to further reduce improper payments and to meet its target rates and develop error-rate reduction targets and corrective action plans for CHIP and ensure effective monitoring of TANF. We do acknowledge that the department plans to take action to address our recommendations.”

Monitoring Medicare and Medicaid

A primary focus of the OIG is to identify and reduce improper payments and create opportunities to achieve cost savings, and Jarmon shared examples of audits being conducted to achieve these goals.

For example, in 2012, the HHS reported about $65 billion in improper payments—most from Medicare or Medicaid claims. Recent work has focused on improper hospital payments. The OAS reviewed and issued reports of its findings from 50 hospitals and performed audit work on another 50 hospitals for which no reports have yet been issued. The purpose of these audits, says Jarmon, is “to improve internal hospital controls, increase provider awareness and compliance with Medicare rules, and recommend recovery of identified overpayments.”

OAS investigators also have recently reviewed the Medicare overpayment collection efforts of the Centers for Medicare & Medicaid Services (CMS) and recommended improvements to those efforts. CMS has already taken steps to address those concerns.

Medicaid audits also are being conducted, and, like in the Medicare program, auditors are looking for improper payments and potential ways to achieve cost savings.

For example, “In New York, we reported on the issue of excessive rates charged to the federal government related to the care of small populations of developmentally disabled individuals at an intermediate care facility. This audit showed that the federal government would have saved $700 million in the audit year,” she said. This uncovering resulted in a congressional hearing last September.

Another example: In the past six years, OAS has issued 20 reports on Medicaid personal care services’ and conducted numerous investigations. For a full description of this program, Jarmon recommends consulting the OIG’s portfolio entitled Personal Care Services: Trends, Vulnerabilities and Recommendations for Improvement, which outlines the steps taken to uncover about $580 million in questionable charges from several state programs.

The OAS also conducts Medicaid audits in home health agencies, military providers, and durable medical equipment suppliers.
“Our responsibility spans a department with a budget of $900 billion. We have a very large audit responsibility,” said Jarmon.


Risks Connected with EHR

Has the increased use of electronic health records (EHRs) caused more improper payment? Although EHRs may facilitate more accurate billing and increase quality of care, Jarmon believes that they also present a variety of problems.

For example, EHRs can be used to:

  • Fabricate information that results in improper payments.
  • Make it easier for providers to upcode claims or submit improper claims by using the copy-and-paste function.
  • Describe more billable services than were actually performed.

There also are other potential problems, including inadequate security of providers’ EHR systems and information technology, which may result in stolen beneficiary information that could be used by dishonest providers or employees to submit false claims. Clearly, as Jarmon said, there will be “new opportunities and challenges that will need to be managed and monitored. If information is entirely electronic, auditors will have to develop a new audit technique to supplement traditional methods.”

About the Author

Janis Oppelt is the editor at MedLearn Publishing®, Panacea Healthcare Solutions Inc., St. Paul, MN

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Payment Suspension Poses Threat to Noncompliant Healthcare Providers


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