Zone Program Integrity Contractors (ZPICs) had more than 1,900 pre-existing business relationships or other potential conflicts with the Centers for Medicare & Medicaid Services (CMS), a recent government audit found.

The Department of Health and Human Services’ inspector general reviewed thousands of disclosure forms offered up by 18 contractors and 85 subcontractors in the ZPIC program.

Investigators found that the so-called “offerors”—would-be contractors—had potential conflicts of interest in at least 1,919 instances. At least 16 offerors had actual conflicts of interest, investigators wrote in the July report.

Among the report’s findings:
■ Companies “often” had prior business relationships with CMS or other ZPIC contractors “but rarely considered them to be actual conflicts;”
■ “Seven offerors were subsidiaries of health insurance companies that offered Medicare plans;”
■ Some two-thirds of would-be contractors “either were Medicare claims processors or had financial ties to claims processors;”
■ Half of the offerors “had existing” ZPIC contracts with CMS;
■ Companies often “subcontracted with each other as well as with entities that had a contractual relationship with CMS;” and
■ In 173 cases, ZPIC contractors reported conflicts “without specifying whether they were actual or possible conflicts.”

Investigators are worried that “conflicts of interest that affect the impartiality of ZPICs could weaken CMS’ efforts to protect Medicare from fraud, waste, and abuse,” the Office of Inspector General report said.

“Because ZPICs perform program integrity functions for CMS, it is crucial that they be free from conflicts of interest that could affect their work.”

That’s not to say that “improper activity is taking place among CMS contractors,” investigators wrote.

“However, the public trust in CMS and its contractors could come into question if conflicts are not explicitly and openly disclosed as well as properly mitigated.”

CMS officials told the inspector general’s office that it had “mitigated” the impact of potential and actual conflicts, mostly by putting “restrictions on information and resource sharing within the offeror’s or subcontractor’s company.”

“CMS has had considerable experience addressing Organization Conflict of Interest [OCI] matters,” Acting Administrator Marilyn Tavenner wrote.

“The contracting officer is responsible for exercising common sense, good judgment, and sound discretion when making OCI determinations. CMS addressed the ZPIC conflicts of interest through exchanges with the apparent awardees.”

But CMS invited trouble by not having a written policy on conflicts, investigators wrote.

Long term care providers have complained roundly about the ZPIC program. The inspector general’s findings did little to calm nerves. Scot Hasselman is the general counsel to the American Health Care Association, which has been among the most vocal of ZPICs’ critics. He says the ZPIC program is so frustrating that he’s considering proposing a seminar entitled, “Yes, the government IS out to get you.”

“The bottom line,” he says, “is that the government is outsourcing provider claims review, fraud detection, and judicial review to private contractors, many of whom are related parties.”