Senator questions Medicare agency’s use of Defense audit unit

A key Senate Republican wants the Centers for Medicare and Medicaid Services to justify its continued use of the Defense Contract Audit Agency to conduct financial audits.

In a draft letter Government Executive obtained, Iowa Sen. Charles Grassley raised concerns that CMS could be risking the reliability of its audits by contracting with DCAA, which has undergone nearly two years of turmoil since a federal watchdog questioned the agency's management and auditor independence. Grassley, the ranking member of the Senate Finance Committee, is expected to send the letter in the coming days.

The senator told CMS acting Administrator Charlene Frizzera in the letter that he has "deep concern that CMS is staking the integrity of its [Quality Improvement Organizations] audits and potentially other audits on the DCAA."

Quality Improvement Organizations are private groups of medical professionals CMS hires to work with health care providers in each state to review medical care and to help Medicare beneficiaries with complaints about the quality of services.

Under a 2008 agreement with CMS and the Health and Human Services Department's inspector general, DCAA performs financial-related audits of the various quality organizations. But Grassley -- a frequent critic of the organizations -- questioned why CMS would continue working with DCAA in light of recent issues the Government Accountability Office raised.

The letter cited a September 2009 GAO report that found widespread deficiencies with 69 audits and cost-related reviews at field offices in DCAA's five regions from 2004 through 2006. The watchdog agency identified similar problems in a 2008 report that examined auditing concerns at a pair of California DCAA field offices.

The senator also reiterated concerns, initially raised by the Project on Government Oversight, a federal watchdog group, that DCAA remains resistant to cultural changes, including how it awards promotions to staff.

Grassley first questioned CMS' relationship with DCAA, which he called a "substandard auditor," in June 2009. CMS leaders responded the following month that they were "satisfied with the quality and accuracy" of DCAA's audits.

"CMS makes every effort to work with DCAA to ensure that we obtain quality and accurate work products," Frizzera wrote at the time. "We also assume that in performing audits for CMS, DCAA is abiding by all applicable statutes, rules and regulations."

But, Grassley does not share CMS' confidence in DCAA's audit ability. He wants CMS to provide a written justification to his office for its continued contracting with DCAA and details of any independent verification of the agency's work. Grassley also wants to know if CMS contracts with DCAA for any other audits.

Between fiscal 2005 and 2008, CMS paid DCAA more than $2.8 million for its work with the quality improvement organizations, Frizzera said.

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