Centers for Medicare & Medicaid Services Enhance Efforts to Prevent and Fight Health Care Fraud

The nation’s health care system continues to be victimized by health care fraud perpetrators intent on stealing from American taxpayers, patients, and private insurers.  These thefts drive up costs for everyone in the health care system as well as hurt the long term solvency of Medicare and Medicaid, two programs upon which millions of Americans depend.  The Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) are enhancing the tools they are using to prevent and fight fraud in the Medicare program, moving from a strict “pay and chase” approach to help identify potential fraud before it occurs.

When Attorney General Eric Holder and HHS Secretary Kathleen Sebelius announced the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in May 2009, they renewed their commitment to fighting health care fraud as a Cabinet-level priority at both Departments.  Findings from CMS’ new analytic and predictive modeling tools will contribute to the prevention efforts of HEAT by allowing CMS to take anti-fraud actions before claims are paid.  The analytic investigatory work conducted by CMS supplements the Medicare Strike Forces and traditional federal health care fraud enforcement activities by identifying emerging and migrating schemes perpetrated by criminals operating as health care providers or suppliers. 

"Predictive modeling” refers to a combination of advanced analytic techniques, including predictive analytics, linkage analysis, outlier analysis, network analysis, behavioral analysis, and other statistical techniques.  Applying predictive modeling is not intended to replace existing rules and edits in place to address known policy issues.  These tools are used by many private companies such as banks, credit card companies, insurance and others to identify potential fraud before it occurs.

Using similar tools will help CMS and other health care payers prevent bad actors from enrolling as health care providers or suppliers and identify real-time aberrant trends that could be indicators of waste or fraud.  Enhanced screening of providers and suppliers will help keep scam artists from getting into the programs in the first place, before claims are paid, and provide a basis for revoking those who are in the program and attempting to defraud Medicare.

Preventing fraud is more effective than the “pay and chase” model of fighting fraud after a sham provider or supplier has been paid and disappeared.  Many of the systems already testing or using predictive modeling are identifying possible fraudulent providers and scams based on historical billing patterns and information about the individual or the company in which the individual is affiliated.  For example, CMS investigations resulted in the revocation of billing privileges for Houston-area companies that set up “false-front” businesses.  CMS expects more administrative actions will be taken in the near future. 

CMS expects to award two contracts by April 2011 to expand Medicare’s use of predictive modeling tools by July 1, 2011.  One award will be for a risk scoring solution that uses proven predictive models to generate alerts and triangulate the results to identify high-risk claims and providers most likely to be engaged in fraudulent or wasteful behavior, or abusing Medicare policy.  In addition, the solution will include an integrated case management system that will track the findings to ensure that appropriate, timely actions are taken.

The other award will be for developing, testing, and refining predictive models that can be incorporated into the fraud risk scoring solution.  Before applying the predictive models to claims prepayment or taking action on providers, the models will be rigorously tested to:

1. Avoid a high rate of false positives to ensure that claims are paid for legitimate providers without disruption or additional costs to honest providers;
2. Ensure there is no change in beneficiaries’ access to care; and
3. Identify the most efficient analytics to appropriately target resources to the highest risk claims or providers. 

Helping Fight Abusive Drug Sales

In September, 2009, the Government Accountability Office (GAO) issued the report “Medicaid Fraud and Abuse related to Controlled Substance Identified in Selected States” which highlighted fraudulent, improper and abusive actions in the prescribing and dispensing of controlled substances.  The GAO found that about 65,000 Medicaid beneficiaries in the five states investigated visited six or more doctors to acquire prescriptions for the same type of controlled substances in the selected states during fiscal years 2006 and 2007.  These individuals incurred approximately $63 million in Medicaid costs for these drugs, which act as painkillers, sedatives, and stimulants.

One of the primary recommendations of the report was that states should use the Drug Enforcement Administration (DEA) Controlled Substance Registration file as part of their Medicaid claims processing efforts to prevent payment of controlled substances ordered by unauthorized prescribers.

CMS has issued guidance to states to help them in using the file that is available weekly at no cost to any law enforcement or regulatory agency.  Through the notification recently issued, CMS strongly encouraged state Medicaid agencies to use this file to enhance their ability to more effectively control drug utilization and make including the DEA number a mandatory requirement for provider participation in state Medicaid programs.  Finally, as a result of the Affordable Care Act, states are updating their provider enrollment applications which provide a timely opportunity to implement this recommendation.

The Affordable Care Act and Fraud

The Affordable Care Act will improve and expand consumer protections, strengthen Medicare, and reduce health care costs. One important way it achieves these goals is by improving government-wide efforts to fight fraud and waste. The new law contains some critical new tools to improve and enhance the Administration’s efforts to prevent, detect and take strong enforcement action against fraud in Medicare, Medicaid and the Children’s Health Insurance Program as well as private insurance. The new law includes:

• Enhanced Screening and Other Enrollment Requirements: The law includes new authorities for stepped-up oversight of providers and suppliers participating or enrolling in Medicare, Medicaid, and CHIP such as mandatory licensure checks. Based on the level of risk of fraud, waste and abuse, providers could be subject to fingerprinting, site visits and criminal background checks before they begin billing Medicare, Medicaid, or CHIP. The Act also allows the Secretary to prohibit new providers from joining the program where necessary to prevent or combat fraud, waste or abuse. The law also allows the Secretary to withhold payment to any Medicare or Medicaid providers if a credible allegation of fraud has been made and an investigation is pending.  These new authorities are expected to be finalized in regulation in early 2011.
• Sharing Data to Fight Fraud: Building on the Obama Administration initiatives, the law requires the Secretary to expand the CMS integrated data repository to include information from Medicaid, Veterans Administration, Department of Defense, Social Security Disability Insurance, and Indian Health Service, and enhances data matching agreements among Federal agencies. These agreements will make it easier for the Federal government to share data, identify criminals and prevent fraud.

New Center for Program Integrity  

HHS established the CMS Center for Program Integrity (CPI) in April 2010 to apply the lessons gleaned from recent enhanced enforcement activities and further ensure that correct payments are made to legitimate providers for appropriate and reasonable services for eligible beneficiaries of the Medicare and Medicaid programs. New initiatives by CPI include:

• Redesigning benefits notices to be easier to read and to help ensure that beneficiaries received all the services, medical supplies or equipment billed to Medicare;
• Sharing information about providers who have been terminated from the Medicare program with state Medicaid agencies within 30 days of provider termination; and
• Using a centralized database of compromised or stolen beneficiary and provider numbers to identify “false front” providers to prevent or recover overpayments, trigger administrative actions and support seizures by law enforcement.

Posted: December 16, 2010