WASHINGTON--The Program Safeguard Contractors hired by CMS to detect fraud and abuse are showing only "minimal results," and the agency must be more diligent in its oversight of these contractors, the Office of Inspector General said in a July 20 report.

While the PSCs are supposed to be one of CMS' major tools in fighting fraud, the OIG report challenged their effectiveness, saying most PSCs "had minimal results from proactive data analysis." In addition, according to the report--"Medicare's Program Safeguard Contractors: Activities to Detect and Deter Fraud and Abuse"--the PSCs displayed vast differences in the numbers of new investigations and case referrals to law enforcement.

The report was based on reviews of 17 PSCs and their fraud detection activity in 2005. According to the study, the PSCs produced between 18 and 3,707 new Part B investigations, with a median of 196. Of those, the PSCs referred between 2 and 39 Part B cases to law enforcement, with a median of 13.

The OIG questioned the huge differences, noting: "Although PSCs might be expected to differ from one another in workload activity levels, neither the size of a PSC's budget nor its oversight responsibility (dollar amount of Medicare paid claims) was strongly correlated with the number of new investigations or the number of new case referrals to law enforcement produced in 2005."

Based on its findings, the OIG recommended that CMS review PSCs with no activity or low levels of activity to "determine whether these PSCs have taken all the necessary steps to identify potential fraud and abuse." CMS should remedy the situation by providing more guidance to PSCs and even consider contract termination, the OIG said.

Investigators were also troubled by minimal results from PSCs' proactive data analysis. As part of their duties, the OIG noted, the contractors are expected to use data analysis to "identify previously unidentified patterns or instances of fraud and abuse."

But 13 of the 17 PSCs studied reported 18 percent or less in new investigations stemming from data analysis, the OIG said. Two of the 17 produced no such investigations, and seven had 8 percent or less. Nearly half of the PSCs made only a single case referral to law enforcement originating from proactive data analysis. One had none.

The OIG noted that the reports submitted to CMS by the contractors were inconsistent in the level of information provided and it could not determine whether the contractors were performing data analysis that did not yield suspected fraud cases--or whether they were not performing the proactive analysis at all.

CMS needs to require its PSCs to provide more detailed explanations of their work in their monthly reports, the OIG concluded, including information about investigations, case referrals and proactive data analysis projects.

In response to the report, CMS said it was difficult to compare performance of the PSCs because workloads vary among them. But the agency pointed out that it is in the process of aligning PSC jurisdictions with those of its Medicare Administrative Contractors, which handle payments, to allow for better evaluation and easier comparison of the contractors to each other.