Bloomberg BNA Q&A: Peter Budetti, Former CMS Deputy Administrator

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Dr. Peter Budetti, an attorney with Phillips & Cohen LLP, was formerly a deputy administrator at the Centers for Medicare & Medicaid Services and the director of the CMS Center for Program Integrity. Budetti is a board-certified pediatrician. Bloomberg BNA reporter James Swann spoke with Budetti about the current state of Medicare and Medicaid program integrity, including the use of the Fraud Prevention System in Medicare and recent fraud provisions contained in legislation repealing the sustainable growth rate formula.

Bloomberg BNA:

How has program integrity evolved over the last five years, since passage of the Affordable Care Act?

BUDETTI:

There have been major changes since the Affordable Care Act, which has very powerful anti-fraud provisions, provisions that require every provider enrolled in Medicare to go through revalidation of their credentials, and, of course, that's led to a number of them having their billing privileges terminated in one manner or another.

The ACA has very strong provisions that strengthen certain penalties for committing fraud. It was also a major force in terms of setting up a new initiative that focuses on shifting the paradigm of fighting fraud from the extremely out-dated and inefficient way of chasing after people after they've committed fraud (pay and chase as we've always called it) to preventing fraud from happening in the first place.

So the advancements in the technology, the advancements in the organizational structure and the changes in the thinking, really have, I think, all evolved over the last five years in very important ways.

Bloomberg BNA:

Has there been a real change in terms of the impact on fraud? Has program integrity done a good job of reducing fraud in the system?

BUDETTI:

We hear a lot of numbers about how much fraud there is. It's never been quantified in a way that's reliable.

But I can tell you that the way that the systems were put into place and the way they're operating, we had many examples of circumstances in which fraud schemes were just getting started, and they were caught and nipped early on. That's a change, a very big change, compared to what's gone on in the past.

We haven't been able to add it up, except there have been two reports to the Congress by the Centers for Medicare & Medicaid Services on the first two years of the [Medicare] Fraud Prevention System.

The first year, remarkably, showed over $100 million in return on investment, and the second year over $200 million in savings attributed to the Fraud Prevention System alone. So that system is now going into a second phase, and it's going to be an even more advanced system, so I'm very optimistic that as it begins to take root and expand, it will change things dramatically.

Bloomberg BNA:

Have you seen any pushback from the provider community related to the enhanced enforcement?

BUDETTI:

I think the provider community has for a long time emphasized what I've always believed is quite true, that the vast majority of providers are honest, hard-working people doing their best to deliver medical care. Unfortunately, some of them are doing something very different, and grafted on top of that, we have an element of people who aren't providers at all, they're just scam artists. They come in and take advantage of the system the way it's structured.

So, when CMS was putting into place the new systems and the more advanced systems, there was a very strong effort to recognize that the systems shouldn't be unduly burdensome. It's something that's just necessary to do in order to get the bad guys, but it's not necessary to have unduly burdensome systems. I think that we worked very hard to strike that balance.

Bloomberg BNA:

There were a lot of fraud provisions in the recent SGR bill, including stripping Social Security numbers from Medicare beneficiary cards and increasing the outreach efforts of the MACs. Are those some projects that will bear fruit in terms of reducing the level of risk and fraud in our system?

BUDETTI:

We never saw a lot of evidence that having the Social Security number on the Medicare card was the source of Medicare fraud. On the other hand, it's clearly an opportunity when someone does have their medical identity stolen for it to turn into a general identity theft problem. So, separating the Social Security number from the Medicare card does make a lot of sense in terms of the broader context of medical identity theft.

In terms of the outreach, I think the provision in the SGR amendments that dealt with fraud and abuse, the one that interested me the most was the one that called on the Secretary to strengthen the incentives for people to report fraud.

Back in April 2013, CMS published a regulation modernizing the incentive reward program under Medicare, which has been on the books for many years. To say that it's been under-used is to be gentle, since it's only paid out a few thousand dollars over the years, compared to the whistleblower programs in the IRS or other agencies.

So the draft rule that came out in April 2013 would have allowed anyone who reported Medicare fraud to collect a portion of the recoveries up to as much as almost $10 million. When the final rule was published last December, CMS decided to put off finalizing that part of the rule, so I think the fact that there was something in SGR, I would look to that as being Congress's interest in having that provision go forward.

Bloomberg BNA:

Looking to the future, what trends do you see emerging in program integrity?

BUDETTI:

Well, I wish I was sure where the fraud schemes were going, because then we could stop them from happening. Fraud enforcement in the past has been built upon the fee-for-service model, and that's entirely understandable, because when someone is paid on a fee-for-service basis, you have to look at their incentives and their opportunities to steal.

But, Medicare and lots of other health insurance plans are moving into newer ways of paying for medical care. For example, the accountable care organizations, which is a fee-for-service model, but with rewards for reducing certain kinds of medical care expenditures.

There's a large and increasing share of Medicare beneficiaries going into Medicare Advantage plans, and both of those, the ACOs and the Medicare Advantage plans, offer the opportunity for people to scam in different ways and to steal money, basically, from the government, the taxpayers, that are similar to, in some ways, and, in other ways, very different from fee-for-service.

My own view is that over the next few years there's going to have to be a lot more attention paid to the incentives in the emerging ways of paying that are being put into place, while continuing to maintain a whole lot of scrutiny of the fee-for-service side, because that's not going away tomorrow.

Bloomberg BNA:

A bipartisan group of recently sent a letter asking the Government Accountability Office to investigate the FPS. Is there anything to this?

BUDETTI:

I just found out yesterday myself that the RFP [request for proposal] for the second generation of the FPS has come out, and I personally love what's happened with the FPS. I think it was remarkable. It was unexpected, it was where we wanted to go, definitely where we wanted to go, because the technology in CMS to fight fraud was completely outdated and the mindset was outdated and the operational structure was all outdated.

The FPS was a challenge in a bunch of ways. One was we had a one-year implementation schedule.

It was in the Small Business Jobs Act, and no one expected it to be enacted, and then all of a sudden, there it was. We had a one-year implementation period, and we actually implemented one day short of one year.

So we did what Congress told us to do, and we did it quickly and we did it very well. It was a massive undertaking, it was a change in the technology.

The biggest change in the technology, by the way, besides using big computers and so forth, was the ability to go into different databases and tie things together. Whereas before, if Dr. Budetti billed for surgery on James Swann in a hospital on Monday, and also billed for surgery on James Swann in a hospital in Seattle on Monday, and a hospital in Tampa on Monday, or if Dr. Budetti were billing for surgery on James Swann in the hospital and in a free-standing surgery center on the same day, those would never be connected to each other.

That's just downright silly, because the system that was in place only looked at one claim at a time, as opposed to looking at patterns of claims. So the big change in the technology and the way that the system was set up was the ability to look at the practices of physicians over time and other providers over time, and the patterns of health-care being billed under one person's name.

So that was a big shift. The other big shift was that organizationally. What that meant was that different parts of CMS had to have their data used for program integrity purposes where it hadn't been in the past.

There were big-time silos within CMS. So this changed that very significantly. The third thing that's very important that's reflected in the two annual FPS reports is the change shift in the paradigm from what is relatively easy to measure. You know, when you have a press conference, and you say you just arrested Dr. X for stealing $50 million from Medicare, that gets headlines. It's easy to say we're going after this guy.

But if you set up a system that prevents the $50 million from being stolen in the first place, how do you measure that? How do you prove that it even happened? Even if it didn't happen, how do you convince people that what you did is why that didn't happen?

The CDC faces the same issue: How do you measure the value of preventing a disease from spreading? If you see an epidemic, then you've got an idea that you've missed something, but as long as everyone is healthy, you don't see anything.

Bloomberg BNA:

Has the CMS command center been successful?

BUDETTI:

Given the fact that I've actually stayed away from my former agency in respecting the ethics rules that I agreed to, I can't tell you in any detail, but I can tell you that as far as I know, it's a tremendous resource.

The big value of the resource was always in getting multiple inputs into thinking about how to move forward, whether it's to design the models for the FPS or whether it's to plan some other kind of activity. The benefit was always the ability to have people in a physical location.

Bloomberg BNA:

Is the Health Care Fraud Prevention Partnership similar to the command center model?

BUDETTI:

The HFPP reflects a start of something that was a long time coming. The HCFAC [Health Care Fraud and Abuse Control] program was set up in HIPAA when it was passed, and one of the first provisions of the HCFAC called upon the [HHS] secretary and the private plans to share data to combat fraud, waste and abuse.

It was never thoroughly implemented, and years and years and years went by, and then we managed to get the charter for the HFPP going, involving the private sector with the public sector.

I think that's something that needs a lot more attention frankly. Every time we look at it, what we see is that the same people are stealing from Medicare, Medicaid and private health plans.

The people in the private health plans are very enthusiastic about this, because they understand what's going on.

I'm not sure what's going on right now in terms of the next steps of the HFPP, but I view it as extremely important in the work that I'm doing now working on lawsuits brought on behalf of the government by whistleblowers.

There are a couple of state, California and Illinois, where FCA lawsuits can be brought not just for fraud against Medicare or Medicaid, but also for fraud against private insurers, and there have been a number of very successful lawsuits brought on behalf of the government for fraud against private health plans.

We need to build on this and move forward, and the HFPP is one way to do that.

Bloomberg BNA:

There's been a lot of talk about program integrity contractor reforms. Are you hearing anything about a push for contractor reform?

BUDETTI:

I have to say that one of the most important things that the public sector can do is reform its contracting structure in this arena. In the Center for Program Integrity, what we encountered was one set of contractors dealing with fraud against the Medicare program and another set of contractors dealing with fraud against the Medicaid program. In a number of instances, it was the same company with two separate contracts.

You might be sitting on your side of the desk, and I'm sitting on my side of the desk, and you know that Dr. X is stealing from Medicaid, and I know Dr. X is stealing from Medicare, but there was an artificial barrier that kept us from talking to each other and using the resources under the contract.

It was very wasteful, so one of the things we started was the Unified Program Integrity Contractor, and now I see that CMS is moving forward with that and looking for people to bid.

The UPIC would roll up the ZPICs [Zone Program Integrity Contractors] and the Medicaid Integrity Contractors, and it would create opportunities for one entity to have an overview of all of the issues that are going on in public sector program fraud.

With the hundreds of millions of dollars being spent on the ZPICs and the MICs, it's very important that the government get more for its money.

I think that moving toward a UPIC with a very different structure for accountability of the contract as well as for integration of the contract, that was a very high priority for me, and I'm very pleased that's now seeing fruition.

Bloomberg BNA:

Resources are always a major issue for the government. Is that a legitimate concern for program integrity?

BUDETTI:

The answer is yes, and I come at that answer from two different perspectives. For one, I do think the public sector resources are absolutely critical here. The HCFAC program gets money from all of the funds recaptured and that gets distributed both to the DOJ and to HHS.

So to some degree, there's some automatic funding, mandatory funding that occurs, and that's very good, very important, but maybe the government's not getting its money's worth and the contracting reform's are critically important for doing that.

However, public sector resources are never going to be enough. The brilliance of the Lincoln Law that set up the FCA [False Claims Act] and then the amendments in 1986 that modernized it was to get the private sector involved in fighting fraud against the government.

So came the idea of so-called private attorney's general, people who are willing to come forward and be responsible for blowing the whistle on fraud against the government, and the vast majority of the money that's recovered goes back to the government.

I think you have to have both all of the time. I very strongly support the public sector having adequate resources to do its job. I know the OIG had major financial issues and was restructuring in a number of ways that I think were not the direction they want to go in.

I very strongly support them having adequate funding.

The FPS, the HFPP, the Sunshine Act provisions, all of those are things that are add-ons to the fraud budget of just a few years ago, and so they need appropriations, ongoing funding.

I also think it's just critically important that we continue to have very powerful incentives for private sector people to get involved in fighting fraud on behalf of the government. I would also add to that the Medicare incentive reward program because I've said many times that the best defense against fraud is 50 million Medicare beneficiaries.

It's one of the reasons why while I was at CMS we revamped the Medicare summary notices, the explanation of benefits. so that they were more readable and specifically mentioned what to do if there's a problem in terms of fraud.

If people knew they could also get a financial reward for doing it, all the better.

I think we need very strong public sector programs, a very solid qui tam and whistleblower program under the FCA, and a strong set of whistleblower incentives.

Bloomberg BNA:

Many Medicare beneficiaries accept what's on their summary notices, trusting their doctor. Is that a problem?

BUDETTI:

I have two reactions to that. One is exactly that, ‘If it's on the bill, it must be right, the doctor would never do that.' I think some people are a lot more skeptical than that, and so they say ‘Wow, this really looks fishy to me,' but then they look in the lower right-hand corner and it says ‘Amount that you owe: Zero.'

On the the other hand, if they knew they could get a financial reward for saying something, maybe they wouldn't be so reticent.

Bloomberg BNA:

Are you a supporter of the Senior Medicare Patrol?

BUDETTI:

I'm a very strong supporter of the Senior Medicare Patrol. I think the SMP has been very important in terms of elevating consciousness among seniors that there is a problem and that they can and should be participating in helping to ameliorate the problem.

In fact, when I was at CMS, for two years we partnered with the SMP, essentially doubling their budgets from funds we thought were important to move around for that purpose.

Bloomberg BNA:

Health-care fraud isn't just a financial issue, is it?

BUDETTI:

You're absolutely right. My background is as a physician, and I have to say one of the things that we constantly emphasized was that yes this is money, but this is not just about the money, it's about the people, people getting unnecessary tests and procedures, people appearing to get tests and procedures that they never got. There are all kinds of ways that people get harmed.

The idea that there are real human beings at the center of this is absolutely critical.