Credit: AdvanceMedWe wrote yesterday about the new Medicare fraud scandal, and how agency officials allegedly pressured their private auditors to use questionable accounting methods, resulting in figures that greatly underestimated the extent of false and unsupported claims for medical equipment.

The information comes from a draft inspector general's report detailed in the New York Times.

While the report focused on just medical equipment fraud, the company that did the audits, AdvanceMed, actually has many more contracts with the Centers for Medicare and Medicaid Services (CMS), for similar projects to do with tracking down false and undocumented medical claims.

The Government Accountability Office told us they've begun investigating one of those other projects.

The Medicare Recovery Audit Contractor (RAC) program, which "employs private companies on a contingent-fee basis to identify and recover improper over and under-payments of Medicare funds," started as a pilot in 2003 and was extended in 2006.

The program ran into difficulties since contractors hired to detect fraud were allegedly using unqualified personnel and inconsistent methods. In mid-July, five congressmen wrote to the GAO complaining about the program and requesting an investigation.

GAO spokeswoman Kathy King told us few details about the inquiry are available at this stage because it is so new, but that the investigation will look at "the changes that CMS has implemented from the pilot program to the permanent program."

AdvanceMed was not one of the primary RAC contractors, but they did work as "validation contractors" on the project. Neither the GAO, nor the offices of the congressmen who requested the GAO report knew exactly what that role entailed, and AdvanceMed's Kaye would not comment.

AdvanceMed calls itself "one of the most successful companies in the Medicare Integrity Program," and it won last year's "Investigation of the Year Award" from the national Health Care Anti-Fraud Association.

In promoting the award, the company wrote: "Identifying and combating fraud, waste and abuse in the nation’s Medicare program is necessary in protecting our elderly population from unscrupulous health care providers who deliberately endanger patients’ lives to cheat the system."

AdvanceMed's Web site lists six projects on Medicare fraud, operating in 23 states. CMS is their most important client, according to AdvanceMed's head of operations, Phyllis Kaye.

Kaye wouldn't comment on the GAO investigation, nor on the allegations that CMS ordered her company to use incorrect accounting methods. (According to the Times, the inspector general's report said such an order might violate the law.)

"We are asked by CMS to refer all requests to them," she told ProPublica. "When you get a request from your client, that's what you do."