‘New philosophy’ at CMS on improper payments

By Jared Serbu
Reporter
Federal News Radio

Officials at the Centers for Medicare and Medicaid Services say they’re taking aggressive action to knock down the improper payments rate in Medicare, including with new authorities granted to the agency under the Affordable Care Act.

Medicare leads the federal government in improper payments by a large margin. Of $125 billion in improper payments agencies reported in 2010, Medicare programs accounted for $48 billion. And that’s not counting improper payments under Medicare Part D, the prescription drug benefit. CMS will begin reporting Part D improper payments for the first time in its 2011 report to the Office of Management and Budget.

Medicare officials say they have stepped up their efforts to recover payments on the back end, such as a new contractor-operated program that audits health care providers to recover funds after the fact. But in line with government efforts to get away from the “pay and chase” model, they’re also taking several steps to stop improper payments before they leave the treasury, said Michelle Snyder, the deputy chief operating officer at CMS. She said they are in the process of reviewing and recertifying all 1.4 million of Medicare’s existing health care providers, and applying more scrutiny to new providers.

“If it’s a new guy, we give him a temporary billing number,” Snyder told the House Oversight and Government Reform committee’s subcommittee on government organization. “That means that within three months we have to make sure they are indeed a good guy. It’s sort of a stop loss policy. Another one is as we go through and look at recertifications, we’re sending people out to do face-to-face visits with providers. And we’re going to show up randomly over time, just to make sure you are indeed a legitimate provider.”

That enhanced oversight was mandated by provisions in the Affordable Care Act. Additionally, Snyder said Medicare has just issued regulations that will subject some providers to detailed background checks, including fingerprinting. “We’ve just hired a contractor that will start to take information about providers, particularly in areas where we know we’ve had problems, and start to look at all the kinds of public information we have about them, to start to ask whether this is somebody Medicare should be doing business with,” she said.

Snyder said CMS also now has new authorities to suspend payment to providers when it suspects a provider’s claims are not on the up-and-up. She described that as a change in philosophy.

“The philosophy for Medicare all along was that we’ll take any willing provider,” she said. “That philosophy has changed, because $38 billion is a big number. We’ve sent something like 40 providers in the last quarter over to the Office of the Inspector General to ask them to take a look. We may sometimes continue payments because law enforcement wants to build a case, but there are a number of ways in which we’re stopping payment to begin with, or at least limiting the damage.”

But in her testimony, Snyder was quick to point out that just as with other agencies, bad actors aren’t always behind improper payments. In Medicare’s case, they can be attributed to insufficient documentation, incorrect coding or medical services that were later deemed not to be “reasonable and necessary.”

But she said so far, CMS does not know how many of its improper payments are because of fraud. That’s because so far, the agency has not been able to find what it feels is a scientifically valid way to estimate health care fraud rates, whether in the public sector, the private sector or in outside studies.

“When people claim we have a certain amount of fraud, we look behind it to see how they measured it. What we’ve found is there isn’t a methodology,” Snyder said. “So our Center for Program Integrity has started out a new program. They’ve just awarded a contract, and we’re going to try to estimate levels of fraud, starting in two areas that we feel are fraud-prone. We hope to have that done in the next six to eight months, and we’re hoping that we are going to be able to say, ‘Here’s a methodology that we feel will work.’ We’re hoping we’re going to be successful, because we think it could work not just for CMS, but for the private sector as well. If we develop something that works, we’ll share it.”

The Obama Administration has set a goal of cutting Medicare improper payments in half by 2012. That would mean the program would have to reduce improper payments from about 12 percent to 6 percent.

The good news, according to Snyder, is that Medicare knows where to focus its efforts. CMS knows where most of the money is going, and it knows what areas are ripe for fraud, she said. The big dollars are in hospital inpatient care, and evidence of previous high rates of improper payments leads them to focus in on certain outpatient claims, including durable medical equipment and home health care services.

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