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Medicare audits: CMS imposes corrective action plans on sponsor faults


Beginning on October 1, 2007, the Centers for Medicare and Medicaid Services (CMS) began posting Corrective Action Plans (CAP) on the public area of its Web site. The goal was to post all review findings for audited conducted on Medicare Advantage and Part D plans for a specific time period that resulted in a CAP.

Beginning on October 1, 2007, the Centers for Medicare and Medicaid Services (CMS) began posting what are called Corrective Action Plans (CAP) on the public area of its Web site. The intent of this was to allow public viewing of review findings from audits conducted on Medicare Advantage (MA) and Part D plans from January 1, 2006, through September 30, 2007, that resulted in a CAP. This practice has continued since October 2007 with newly posted CAP information as of June 2008.

As the MA and Part D programs have progressed and their fiscal costs have grown exponentially, Congress and other oversight agencies such as the Office of Inspector General (OIG) and the Government Accountability Office (GAO) have placed increasing pressure on CMS to be more proactive in its scrutiny of plan sponsors to ensure compliance with regulations. With this pressure came the decision to take the CAPs out of the vacuum and expose them publicly.

A CAP is a program imposed by CMS that results from findings of deficiencies from an MA and/or Part D audit conducted by CMS or one of its contracted audit entities. The CAP requires the plan sponsor to take affirmative steps to rectify specific deficiencies identified. CMS conducts biennial audits of its contracted plan sponsors to ensure that MA and Part D programs are complying with regulations and that there are adequate safeguards in place to provide assurance that the program is being administered appropriately. CMS utilizes audit guides to review an MA or Part D plan sponsor's compliance with regulations.

When there are negative audit findings from a CMS review of a plan sponsor, they are often categorized by the relevant audit guide chapter, and a CAP is imposed that requires the plan sponsor to take affirmative steps to become compliant with the provisions of the audit guide chapter and its underlying regulation.

In the past, plan sponsors have utilized these CAPs as strictly an internal matter that would require, for instance, the revision of a policy or procedure or the development of a training protocol. All CAPs imposed on plan sponsors before the public posting remained in a proverbial vacuum with no transparency to other plans or the public.


With the advent of public posting of CAPs from audits all the way back to January 2006, there has been some consternation on the part of plan sponsors related to how these CAPs are presented. Many plans claim that the CAP data posted on the CMS Web site can be misleading or outdated, as CMS only reports the audit guide chapter and area for which the CAP is imposed and does not indicate the magnitude of any findings leading to the CAP, according to an April 2008 study by Atlantic Information Services. According to these plans, a CAP imposed for a minor violation may appear to be the same as a major discrepancy. Furthermore, when conducting the transactional testing piece of an audit, CMS does not employ statistically valid sampling techniques but rather draws small random samples from very large plan universes of data.

The unit of measure for compliance in an area subject to transactional testing is that each standard must be at a 95% compliance level. Thus, it is very easy for plans to end up with a CAP if these areas are not well-functioning on a daily basis.

While it is possible that more information or context may be provided in future CAP disclosures, plan sponsors must be aware and prepared for their compliance "dirty laundry" to be aired to the public.

Other recent actions follow this trend of full transparency for MA and Part D plan sponsors. In its Final Rule dated December 5, 2007, CMS describes the probability that plan sponsors will soon be under mandate to provide required self-disclosures of any compliance deficiencies even in the absence of a formal CMS audit finding.

Recognition and comprehension of this continuing trend toward full transparency has and will become the hallmark of effective administration of MA and Part D by successful plan sponsors. Those that reject or resist this trend will be behind the curve and may be subject to harsher treatment. In fact, CMS has been using the ad hoc CAP category to include plan identified self-disclosures on the CAP area of its Web site.

There are ways that plan sponsors can utilize to their advantage the public posting of CAPs. Now, for the first time, plans can see what is going on with other plans and the trends related to areas of difficulty.

For instance, when reviewing all of the posted CAPs, there may be areas of administration in which many plans are deficient, such as enrollment. Plan sponsors, upon recognition of this, can perform targeted, internal audit and compliance monitoring of these high-volume areas to identify potential weaknesses and take appropriate action in order to reduce the risk of a CAP for that area.

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