Are Medicare Anti-Fraud Efforts Flawed?

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By James Swann

Medicare’s anti-fraud crown jewel, the Fraud Prevention System, has yet to produce consistent results and there are questions about whether the program is paying off for taxpayers.

For example, the Centers for Medicare & Medicaid Services failed to track savings associated with FPS efforts, and didn’t ensure that cost savings reflected billing irregularities detected by the FPS, a recent Health and Human Services Office of Inspector General report said.

In the second and third years of the FPS, the OIG wasn’t able to certify $221 million in savings that program integrity contractors attributed to the FPS, out of overall reported savings of $885 million, the OIG said.

The FPS debuted in 2011, and its mix of predictive analytics and pre-payment edits is designed to stop improper claims prior to payment. Despite little significant contribution to enforcement actions thus far, the CMS remains committed to improving the FPS.

However, calculating the value of deterrence can be daunting, Ellyn Sternfield, a health-care attorney with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC in Washington, told Bloomberg BNA Oct. 4.

“When I ran my MFCU [Medicaid Fraud Control Unit], I often said I knew my program budget, and I know how much my team obtained in civil and criminal judgments, but I couldn’t tell you how much fraud our team prevented by the public knowledge of my unit’s investigation and enforcement activities,” Sternfield said.

The CMS didn’t respond to a request for comment. Northrop Grumman, the lead contractor responsible for developing the FPS, refused a request for comment.

Imperfect Process

Predictive anayltics isn’t a perfect process, Katie Pawlitz, a health-care attorney with Reed Smith in Washington, told Bloomberg BNA Oct. 6. Just because certain claims or providers are atypical doesn’t mean they’re fraudulent, Pawlitz said.

“Certaintly predictive modeling can and does help the government identify potential subjects for investigation, but it doesn’t in and of itself prove fault or falsity,” Pawlitz said.

There are always valid explanations for why certain provider data are different from that of their peers, Pawlitz said.

Even with its imperfections, predictive modeling will remain an anti-fraud tool, Pawlitz said, so providers should be aware how their claims data compare with their peers’.

“Such proactive monitoring will help providers be prepared in the event they’re identified as part of the FPS,” Pawlitz said.

Return on Investment

Between its debut in 2011 and the end of 2015, the FPS helped prevent roughly $1.5 billion in improper or potentially fraudulent payments, according to the most recent report from the CMS, issued in 2015.

However, health-care fraud enforcement often is judged by the return on investment, Sternfield said, so there’s pressure on government officials to bump up the ROI by increasing judgment amounts, even if the defendant can’t pay, or by including the value of prevented fraud.

The CMS was required to prepare reports after the first three years of the FPS, culminating in the 2015 report. A CMS spokesman didn’t comment on when or whether the CMS would next release an FPS report.

The OIG also certified the program’s ROI for the first three implementation years, which ran from July 1, 2011, to Dec. 31, 2014.

The OIG’s analysis focused on whether the CMS and its contractors used verifiable numbers in reporting their FPS accomplishments, which are then used to calculate the program’s ROI, Sternfield said.

Sternfield said the focus on producing a good ROI is not necessarily indicative of success. For example, if an FPS lead on billing irregularities results in an investigation that finds vague billing regulations are to blame, not fraud, that can be useful to the CMS, even though it wouldn’t improve the ROI, Sternfield said.

OIG Recommendations

The OIG said the CMS is redesigning the program to provide better performance metrics, including tracking administrative actions back to the individual FPS model that created the lead. The CMS released what it called the FPS 2.0 in March, which it said would improve tracking.

The OIG said the new FPS should let the CMS:

  •  track savings that originate from FPS leads;
  •  allow Zone Program Integrity Contractors and Program Safeguard Contractors to adjust any cost savings reports to CMS to cover only those associated with the FPS; and
  •  take into account identified savings as well as adjusted savings.

Evidence of Success

At the same time, the anti-fraud program has had some success, both in developing investigative leads and developing and executing pre-payment edits, Sternfield said.

That success was acknowledged in a recent Government Accountability Office report. As of May 2017, the CMS had developed 24 pre-payment edits, which denied approximately 324,000 claims in FY 2016, saving Medicare $20.4 million.

The FPS was responsible for $133 million in adjusted savings in 2014, according to the most recent certification of the program by the OIG.

While 24 payment edits may seem like a small number, Sternfield said the GAO identified some logistical challenges facing the FPS, such as limited resources to test the edits before they’re implemented.

Fraud Leads

While fewer than half the leads developed using the FPS resulted in payment suspensions, that shouldn’t be considered a failure of the FPS, Sternfield said.

Conduct associated with FPS leads may be the result of unclear or inconsistent billing rules, or there may be no way to substantiate suspected fraud, Sternfield said.

The Sept. 29 GAO report was requested by the Republican and Democratic leadership of the House Energy and Commerce Committee and the Ways and Means Committee.

The report said the FPS denied claims payments based on Medicare regulations, not on the presence of fraud.

To contact the reporter on this story: James Swann in Washington at jswann1@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

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