WASHINGTON, D.C. – More than a month after Medicare managers ordered a pause in a controversial California hospitals auditing program, Rep. Lois Capps and another California House member demanded to be told if the auditing firm has been cleared to resume work.

The pause was ordered by the Center for Medicare and Medicaid Services on Sept. 26 after the California congressional delegation raised concerns that Atlanta-based PRGSchultz International rejected huge numbers of claims by rehabilitation hospitals.

That cost the hospitals millions of dollars for providing services to
elderly patients recovering from knee and hip replacement surgery.
“CMS’ unwillingness to respond to repeated requests for this crucial information demonstrates a severe lack of leadership and underscores the need for congressional action to force CMS to address our concerns with this program,” Capps, D-Santa Barbara, said in a statement.

The Medicare agency said that it would submit information to the delegation, but spokesman Howard Coan said he could not say whether the California program had been cleared by the internal review.

Thursday’s letter is the latest development in an escalating conflict between the state’s congressional delegation and CMS over the audit program.

Congress created it to control rising Medicare costs. But some believe it could end up costing taxpayers more money than it saves.

PRG-Schultz won a three-year contract in 2005 to review old California Medicare claims to determine if there were overcharges.

It has rejected more than 90 percent of the claims submitted by hospitals for rehabilitation services to knee and hip replacement patients. Under its contract, PRG-Schultz is rewarded with up to 30 percent of claims money it recovers.

The California Hospital Association complained that the auditing is being done in violation of Medicare rules.

California lawmakers have said that the federal Medicare agency’s procedures may be at fault for many of the problems.

But lawmakers also said that even in instances where hospitals were in error, they should be at least partially compensated for services they provided — the same procedure the agency uses in reviewing physician claims.

Another complaint is that PRG-Schultz is allowed to keep its commission even if its findings are rejected on appeal.

Many of the cases are now going before administrative-law judges and are being reversed because the cases are too old to review under Medicare rules. CMS has told the delegation, however, that the number of cases overturned on appeal is not nearly as high as hospitals claim.
After a series of well-attended meetings with California lawmakers, Medicare agency officials said in September they were instituting a monthlong pause during which PRGSchultz would not ask for more hospital records or repayments and its processes would be independently reviewed.

In their letter Thursday, Capps and Rep. Devin Nunes, R-Visalia, said they had been told the agency would give them a written explanation of the pause.

But nothing has been forthcoming — including an indication of whether the auditing program has been cleared by the review.

“It is impossible for us to assist our constituents who are being affected without this information,” they stated in the letter. They gave the Medicare agency until Wednesday to respond.

Capps is preparing legislation placing a moratorium on the auditing program, now in three states as part of a pilot program but expected to spread nationally by 2011 under a permanent expansion.

Nunes had said recently that he thought there had been enough progress during meetings with Medicare agency officials that legislation might not be necessary.

But his office said Thursday that the agency’s failure to keep the delegation informed gives him little choice but to sign onto Capps’ bill next week.

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