Following the introduction of severity-based MS-DRGs, hospitals appeared to be over-coding to obtain higher payments. With the American Taxpayer Relief Act of 2012, Congress estimated that CMS would recoup $11 billion in alleged overpayments from 2012 – 2017 through its Recovery Auditor Program for Fee for Service Medicare. In turn, Commercial payers began to increase their auditing programs as well. The results evidenced that health plans across the spectrum can be paying up to an average $3 – 6 million of overpayments per 100,000 participants due to coding and billing errors. This reduces cash reserves available for member benefits and significantly reduces the plan’s profitability. Retrospective auditing programs provide access to seek recovery on approximately 70% of the received claims, while pre-payment auditing achieves a higher rate of overpayment prevention up to 95% of the time, while stabilizing cash reserves.

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