CMS Intensifies Medicare Audits as Nursing Home Improper Payments Surge

Audit activity in the nursing home sector is expanding due to a notable increase in improper Medicare payments, which have risen nearly 10% and now stand at 17.2% in 2024 compared to 7.79% in 2021. This rise has prompted the Centers for Medicare and Medicaid Services (CMS) to intensify oversight, demanding better documentation quality and more timely responses from nursing home operators. Failure to comply can result in denials, recoupments, and more severe federal actions. Nursing homes remain the leading care setting for documentation errors, driven largely by missing certifications, insufficient clinical detail, and discrepancies between Minimum Data Set (MDS) submissions and clinical records. To manage this increasingly complex audit environment, facilities are encouraged to implement proactive compliance systems, improve internal communication, and invest in routine and internal audits. Monitoring notifications through the Internet Quality Improvement and Evaluation System (iQIES) is essential, and hiring dedicated staff to handle documentation requests can support quicker, more accurate responses. Increased CMS data analytics enhance identification of outliers, billing inconsistencies, unsupported diagnoses, and patterns warranting further review. Several Medicare contractors conduct audits with varying responsibilities. Medicare Administrative Contractors (MACs) process claims, handle redetermination requests, issue recoupment letters, and conduct routine post-pay audits, which nursing homes are likely to encounter regularly. The Targeted Probe and Educate (TPE) program escalates scrutiny and can lead to up to 100% pre-payment review if deficiencies persist. Comprehensive Error Rate Testing (CERT) contractors sample claims to measure improper payments and assess compliance with Medicare coverage, coding, and billing rules. Recovery Audit Contractors (RACs) focus on identifying and correcting improper payments by auditing claims up to three years prior and recommending adjustments. Supplemental Medicare Review Contractors (SMRCs) utilize data mining to detect abnormal service utilization patterns, potentially escalating cases for further investigation. At the highest scrutiny level, Unified Program Integrity Contractors (UPICs) identify potential fraud and abuse with limited timelines of 15 to 30 days for documentation submission. They have the authority to suspend Medicare payments and refer cases for civil or criminal prosecution. The Department of Health and Human Services Office of Inspector General (OIG) also audits nursing homes and suggests enforcement actions and recoupments to CMS. Timely and complete responses to documentation requests are critical to avoiding automatic denials. The TPE and other audit programs emphasize ongoing education and review, with persistent errors risking escalation or continuous prepayment scrutiny. The SNF Quality Reporting Program (QRP) data validation audits add further risk, with failure to submit requested records potentially leading to a 2% payment reduction. Overall, the nursing home sector faces mounting federal audit and denial pressures fueled by rising improper payment rates, enhanced data analytics capabilities at CMS, and a multi-faceted contractor audit system. Facilities must adopt robust compliance strategies, focus on accuracy in documentation and coding, and maintain vigilant monitoring of regulatory communications to mitigate financial risk and regulatory penalties.