Get the Facts About Medicare Audits Local home medical equipment and supply companies that have been serving their community for decades are often hamstrung when auditors dig through records (up to three years back depending on the audit contractor) looking for errors. When the audit process holds back reimbursement for equipment that has already been given to the patient, the significant delays (often years) cause many suppliers to be unable to pay their bills, their employees, or even close their doors.

Home medical equipment companies are being audited by an alphabet soup of Medicare contractors, including Durable Medical Equipment Medicare Administrative Contractors (DME MACs), Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and the Comprehensive Error Rate Testing Contractor (CERT). The multiple audits by the various auditors (sometimes for the same claim) tie up resources and limit a provider’s ability to serve patients.

Want more in-depth detail about the problems with audits? Read the Senate Special Committee on Aging Report: Improving Audits

When you are discharged from the hospital and need a home hospital bed, a walker or oxygen equipment, you should have a fast and easy way to get equipment and supplies. Patients should have as many options as possible when it comes to where and how their receive their home medical equipment. How can you help?

Patients often experience delays in finding a supplier that can get them what they need in a timely manner when they are forced to change suppliers. Often the paperwork and medical documentation has already been completed, but the patient must go through the evaluation and testing process again because of Medicare requirements.

The most alarming part is that most audit claims that are denied early in the process end up being overturned upon appeal. The system is so broken that there are approximately over 600,000 appeals backlogged at the ALJ level.

The Medicare audit process coupled with the complicated coverage criteria simply does not work. The process must be modified in order to reduce the negative impact on home medical equipment suppliers’ ability to continue caring for patients.

AAHomecare is concerned that the audit standards used by Medicare contractors are having the following unintended consequences:

  • Eligible Medicare beneficiaries are not receiving medically necessary and covered benefits.
  • Auditors for CMS misinterpret and misapply Medicare rules and regulations sometimes on a retroactive basis.
  • Legitimate suppliers furnishing medically necessary items and services are being hurt by unjustified monetary recoupments.
  • Data regarding inappropriately paid claims is being distorted.

CMS will not be able to achieve the Administration’s goal of reducing the error rate until it modifies its current audit policies.

Providers of durable medical equipment (DME) are no strangers to audits, facing what’s been called an “alphabet soup” of auditors: DMEMACs, RACs, ZPICs, and CERTs.

The Four Contractor Types

Medicare Administrative Contractors (MACs):  MACs have primary responsibility for processing and paying fee for service (FFS) claims in each of four jurisdictions. In addition, they conduct program integrity activities, including prepayment and postpayment claim reviews. They also implement local coverage determinations, as long as such determinations do not conflict with national coverage policy or other Medicare payment requirements. MACs identify ways to address future payment errors including automated controls and provider education.

Zone Program Integrity Contractors (ZPICs):  The ZPICs’ primary function is to identify and investigate potentially fraudulent FFS claims and providers in each of seven geographic jurisdictions, which are called zones. Investigations include complaints from other Medicare contractors, and analyzing claims data. ZPICs prioritize investigative leads based on predictive model analysis to identify which providers’ billing patterns are most aberrant.

Recovery Audit Contractors (RACs):  Conducting postpayment claims reviews is the RACs’ primary function. Use of RACs was designed to be an addition to existing MAC claim review processes, since the number of postpayment reviews conducted by the MACs and other contractors was small relative to the number of claims paid and the amount of improper payments.

Comprehensive Error Rate Testing (CERT):  The CERT contractor conducts complex claim reviews on a random sample of FFS claims selected nationwide from those that the MACs have processed to determine whether or not the claims were processed in error. As a result, claims reviews are a central part of the CERT function. CERT reviews also help identify program integrity vulnerabilities by measuring the payment accuracy of each MAC, and the FFS improper payment rate by type of claim and service.
The Three Audit Types

When conducting postpayment claims reviews, contractors apply the same criteria—Medicare regulations, and coverage and coding policies—to determine whether or not a claim was paid properly. CMS outlines the general process and requirements for conducting reviews in manuals and contractor statements of work.

  1. Automated: Use computers to check claims for evidence of improper coding or other mistakes in paid claims and identify those that can be determined to be improper without examining any additional documentation.
  2. Semi-automated: Use computers to check for possible improper payments, but allow providers to send in information to argue against a denial before it is finalized. If providers send additional information, contractor staff review it before making a final determination.
  3. Complex: Conducted if additional documentation is needed to determine whether a payment was made in error. A complex review involves manual examination of a claim and any related documentation requested and received from the provider by licensed clinical professionals and certified coders. Contractors have physician medical directors on staff who provide guidance and who may discuss determinations with providers.

AAHomecare members can find more information and get involved in shaping policy on audits through the Association’s Regulatory Council.

Audit Task Force

AAHomecare’s Audit Task Force meets quarterly to evaluate activities related to audits in the homecare sector and how to best address current issues surrounding audits.

Audit Task Force Action Plan (July 2014)


  • Educate DMEPOS providers, physicians, and beneficiaries on the link between the DMEPOS Medicare payment error rate and CMS audit activity.
  • Engage policymakers in Congress and the Administration in a dialogue about the need to reform the Medicare audit process.
  • Work with DME MACS, auditing contractors, and CMS to streamline the audit and appeals processes in order to be more effective and efficient for providers and contractors.


  • Work toward Medicare audit contractor reform relating to audits and coverage policies, and establish clear and unambiguous guidance to medical review staff so that the process is less subjective.
  • Change the Medicare audit process to mirror how audits are conducted in the private sector.
  • Work with DME MACs to have overturned audit denials removed from error rate calculations.

Audit Tracking Tool

Audit Task Force Strategic Plan (July 2013)

One of AAHomecare’s key initiatives is to look at data from the DME MACs to aggregate and present information in a manner that helps our industry with lawmakers, CMS, and other interested parties.

As a part of this initiative, the AAHomecare Regulatory Council now tracks the quarterly pre-pay error rates for each of the MACS in order to measure change and to get an overall picture of how the rates are trending. The Council’s summary shows data for the different MACS, what product lines they are looking at, and how the industry is measuring up.

HME in DC: Rep. Ellmers Fights for HME Providers on Capitol Hill

“There is fraud, we all know that there is fraud and abuse of the system, but you are going after the good guys to make up the dollar difference. You are not addressing the real fraud issues,” said Ellmers during her questioning.

Audit Bill in the Works

Legislation would limit documentation look back periods; require timely filing limits; create education program.

AAHomcare Announces ‘Massive’ Audit Program

Audit Key effort will collect data that completely, accurately tracks impact of Medicare audits.

Video: Rep. Meadows Roasts CMS on Audits

North Carolina takes CMS to task on ALJ delay during House Oversight and Government Reform hearing.

AAHomecare Outlines Audit Reform Objectives

Association advises Senate Finance Committee, gearing up to launch legislation, other initiatives.

Industry to OMHA: Audit Process Is Broken

AAHomecare’s Ryan tells OMHA’s Griswold that ALJ delay has put providers in ‘crisis mode’ and a fix is needed fast.

While AAHomecare works with Congress and CMS to make the necessary modifications, the Association will continue to educate providers and help them improve compliance.

AAHomecare Medicare Audit Oversight Issue Brief

Congressional Letter to HHS on RAC Audits (February 10, 2014)

Download a sample checklist here.

Diabetic Supplies Audit Checklist

Enteral Nutrition Audit Checklist

Hospital Bed Audit Checklist

Oxygen Audit Checklist