Stepped-up efforts putting medical cheaters on defensive

By Dr. Peter Budetti
September 11, 2012
Predictive analytics, better provider screening help HHS take offensive

JIFA_logoAbstract: The Center for Medicare & Medicaid Services (CMS) has enhanced its focus on combating healthcare fraud. CMS plays a vital role in bringing fraudsters to justice by working closely with key law-enforcement partners through strike forces. They are called called Healthcare Fraud Prevention & Enforcement Action Teams (HEAT), and are combating fraud in nine hotspot cities. CMS also takes a wide range of administrative actions against wrongdoers, such as denying medical-provider enrollment or revalidation into the Medicare program. With new resources from the Affordable Care Act and Small Business Job Act, CMS is greatly enhancing its ability to proactively root out healthcare fraud. Central to the enhanced overall effort is the Twin-Pillar strategy. The first pillar uses predictive analytic technology and other sophisticated analytics to detect aberrant billing patterns in nearly real time, before suspect claims are made. The second pillar involves rapid and automated screening of all providers and suppliers seeking to enroll in Medicare or revalidate their Medicare enrollment. CMS also is working with our state partners to ensure that those caught defrauding Medicare cannot bilk Medicaid, and that fraudsters in one state cannot easily move to another state’s Medicaid program. The harder and smarter we work today, the stronger our system will be for years to come.


Over the last two years, the Center for Medicare & Medicaid Services (CMS) has made large and innovative improvements to our program-integrity strategy, including an enhanced focus on combating fraud.

Combined with these historic anti-fraud actions, our law-enforcement partners recovered $4.1 billion in fiscal year 2011, including $2.5 billion for Medicare.

In one key initiative, the Department of Health and Human Services and the Department of Justice (DOJ) have made a cabinet-level commitment to combat healthcare fraud with Medicare strike forces operating in nine “hot spot” cities. This program is called Healthcare Fraud Prevention & Enforcement Action Teams (HEAT).

In fiscal year 2011, these efforts led to a) 132 indictments against defendants who collectively billed Medicare more than $1 billion; b) 172 guilty pleas and c) the imprisonment of 175 defendants.

But prosecutions alone cannot eliminate fraud. We also are moving beyond the old “pay-and-chase” model by identifying suspicious behavior patterns early on. To this end, CMS recently implemented a twin-pillar approach to preventing Medicare fraud.

The first pillar is the new Fraud Prevention System (FPS), which enables CMS to use predictive analytic technology to identify aberrant and suspicious billing claim patterns before payments are made.

The second pillar is the Automated Provider Screening (APS) system. It identifies ineligible providers or suppliers before they can enroll or revalidate existing enrollments. These new systems are increasingly protecting patients and taxpayers from bad actors.

Detecting and investigating cases
JIFAstory2CMS plays a vital role in bringing fraudsters to justice by working closely with key law-enforcement partners, including the OIG, DOJ and state Medicaid agencies through the HEAT strike forces. For example, a large number of schemes that resulted in federal convictions were uncovered by CMS and its anti-fraud contractors, then referred to law enforcement for further investigation and prosecution.

Taking down a fraud scheme often starts with a tip from sources such as a hotline call by a Medicare beneficiary or caregiver, an employee or concerned citizen to 1-800-MEDICARE. CMS screens every complaint and has implemented a geospatial toolset to create a national “heat map” of tips. The technology can track such calls to identify changing trends and new hot spots as they emerge. CMS also compiles provider-specific complaints to identify providers who engage in multiple fraud or abuse.

Once suspect behavior or billing activity is reported or identified, CMS relies on its anti-fraud investigators, called Zone Program Integrity Contractors (ZPICs). They develop investigative leads generated by the FPS and perform data analysis to identify suspected fraud, waste and abuse.

In a major scheme involving ABC Home Healthcare and Florida Home Healthcare Providers, CMS data analysis and ZPIC investigative work played an important part in the investigation and prosecution.

According to court documents, these firms were billing Medicare for expensive physical therapy and home-health services that were medically unnecessary or never provided. Prescriptions, care plans and home-health certifications for unneeded therapy and services were issued through doctors’ offices in exchange for kickbacks and bribes.

But a HEAT strike force identified potential fraud. CMS investigators then performed data analysis and provided the data and summary reports to the strike force. Initial data showed suspicious billing patterns, including home-health services for the same beneficiaries but on different dates.

One entity would admit the patient, bill for services and discharge the patient. Then the other entity would admit the patient and bill. CMS data analysis contributed to federal grand-jury indictments against two owners plus six other individuals on June 24, 2009.

CMS also has contractors who perform program-integrity functions for Part C (Medicare Advantage) and Part D Drug Plan contracts. Among the functions are complaint intake and response; data analysis and investigation; outreach and education; and technical assistance for law enforcement.

CMS also dedicates significant resources to our partnership with law enforcement. Successful healthcare prosecutions often involve CMS collaboration with undercover operations; trial support that includes providing expert witnesses; and requests for information throughout an investigation, trial and sentencing.

CMS also is better poised to take a wide range of administrative actions such as revoking Medicare billing privileges and suspending payments.

In 2011, CMS revoked billing privileges of 4,850 providers and suppliers. CMS also deactivated another 56,733 billing numbers as we eliminated vulnerabilities in Medicare.

In 2011, CMS also saved $208 million through pre-payment edits that automatically stopped implausible claims before they were paid.

For example, CMS acted against ABC Home Healthcare and Florida Home Healthcare Providers, and against other participants in their schemes.

“CMS already had begun exploring using predictive modeling for fighting fraud when Congress enacted the Small Business Jobs Act of 2010. That law provided more resources, and required CMS to adopt predictive technology to combat fraud, waste and abuse.” We suspended Medicare payments on June 30, 2009, and revoked their Medicare provider numbers.

A default final judgment was entered against the owners for more than $12 million in December 2009. CMS then permanently terminated the providers’ Medicare enrollments, and returned the accompanying funds to Medicare.

These entities were removed from Medicare less than a year after the first data request from the strike force. This shows that through collaboration, CMS and our partners can move quickly and efficiently.

Prosecutors also have obtained more than 50 criminal convictions of healthcare operators, providers and recruiters involved with ABC and Florida Home Healthcare Providers.

New twin-pillars strategy
The Affordable Care Act and Small Business Jobs Act provide resources that enhance CMS’ authority to suspend Medicare payments to providers or suppliers during fraud investigations. This strengthens our ability to halt claim payments before funds go out the door.

It also helps move us toward a more prevention- focused approach to fighting fraud. Payment suspensions alone helped recover more than $27 million from suspect providers in calendar year 2011.

In the past, CMS often was two or three steps behind perpetrators. We quickly paid out nearly every apparently proper claim, then tried to track down the fraudsters. We often showed up after criminals had skipped town with their fraudulent billings. CMS couldn’t keep up, and was forced to chase fraud instead of prevent it.

But CMS is using more-innovative tools to enhance our anti-fraud collaboration with law enforcement, thanks to both the Affordable Care Act and Small Business Jobs Act. These innovations are built around the twin-pillar strategy.

First pillar: fraud prevention system
The first pillar is our Fraud Prevention System (FPS) — the predictive analytic technology. The FPS uses predictive and other sophisticated analytics to detect aberrant billing patterns and other vulnerabilities by running predictive algorithms before payments are made.

CMS already had begun exploring using predictive modeling for fighting fraud when Congress enacted the Small Business Jobs Act of 2010. That law provided more resources, and required CMS to adopt predictive technology to combat fraud, waste and abuse.

CMS implemented this provision aggressively and efficiently only nine months after President Obama signed the bill. The FPS uses predictive analytics to detect aberrant billing patterns and other vulnerabilities by running algorithms and other sophisticated analytics against all Medicare Part A, Part B and durable medical equipment claims nationwide since June 30, 2011.

CMS was well ahead of phasing in the technology in 10 initial states in the Medicare fee-for-service program by July 1, 2011.

“...through collaboration, CMS and our partners can move quickly and efficiently. Prosecutors also have obtained more than 50 criminal convictions of healthcare operators...”

With the FPS, we are using our investigative resources to target suspect claims and providers, and take administrative action. The technology identifies providers who exhibit the most egregious, suspect or aberrant activity.

In the first seven months of implementation, the FPS has directly resulted in 510 new investigations, with 336 pre-existing investigations being supported by real-time data.

The FPS also has led to 417 direct interviews with suspected providers, and more than 1,262 interviews with beneficiaries to confirm whether they received the billed Medicare services.

Beneficiary tips called in to 1-800-MEDICARE also are incorporated into the FPS, and feed into our analytics.

The FPS provides a nearly real-time view of Medicare fee-for-service claims across lines of business for the first time. Our program-integrity contractors also can analyze beyond designated regions to reveal schemes that operate nationally.

For example, in the past it was burdensome for ZPIC investigators to determine if a beneficiary had seen a doctor, or ordered services and supplies. Claims data are dispersed among different systems. Doctor visits or orders for durable medical equipment are billed under Part B while hospital and other provider services are billed through Part A. But FPS presents this information across all three systems in near-real time. Our investigators now can see and analyze billing patterns as claims are submitted.

Second pillar: enhanced provider screening
The second pillar involves the new enhanced provider enrollment and screening initiatives. The heart of this work is the Automated Provider Screening (APS) system.

Ultimately, the APS will perform rapid and automated screening of all providers and suppliers seeking to enroll or revalidate their Medicare enrollment. The system already monitors the eligibility of enrolled providers and suppliers.

This innovative approach achieves two things simultaneously: providers and suppliers can enroll more easily and efficiently, and those who do not belong in the Medicare program are better screened out.

The new APS technology was launched on December 31, 2011. Today, CMS screens providers and suppliers against thousands of private and public databases.

This more efficiently identifies and removes ineligible providers and suppliers from Medicare. The new approach should decrease application processing time, while enabling CMS both to continuously monitor the accuracy of its enrollment data, and assess applicants’ risks to the program.

Provider enrollment is the registration and verification gateway to Medicare, and CMS has added improvements.

The Provider Enrollment Chain and Ownership System (PECOS) maintains the official record of information for providers and suppliers, and for their associated groups. Provider-enrollment data supports claims-payment, fraud-prevention initiatives and law-enforcement activities.

A key strategy to improve the process for honest providers while making it easier to find bad actors is to create an all-digital process for the web-based PECOS. Providers and suppliers pay an application fee online, and the electronic signatures on applications eliminate mailing of paper signatures.

The APS technology is a major component of our enhanced screening under the Affordable Care Act. It has strengthened the enrollment process, and improved our ability to identify providers and suppliers that do not meet enrollment requirements. When CMS identifies them, they are denied enrollment or current billing privileges are revoked.

Effective March 25, 2011, moderate-risk providers and suppliers must undergo an onsite visit before enrolling or when their Medicare billing privileges are revalidated.

High-risk providers and suppliers are subject to announced and unannounced site visits, and to fingerprint-based criminal background checks.

Overall, CMS will conduct around 50,000 additional site visits between March 2011 and March 2015. In another ambitious effort, CMS also will revalidate the enrollments of all 1.5 million Medicare suppliers and providers by 2015. Only qualified participants can service Medicare beneficiaries.

Pillars magnify each other
Importantly, these two pillar systems interact, and feed information into one another regarding suspect providers or claims. They create an integrated ability to manage and analyze data, which magnifies their impact.

For example, we can analyze fraud characteristics identified by the FPS predictive algorithms, and then use that information as we screen providers in the APS. Similarly, the APS can flag providers for closer review in FPS.

We also are making it easier for law enforcement and local jurisdictions to share data and access claim information before being submitted to Medicare.

These pillars are an integrated approach to program integrity. They prevent fraud before payments are made, keep out bad providers and suppliers in the first place, and quickly knock wrongdoers out of the program once they are detected.

Supporting state efforts
Many of these tools also are useful in ongoing integrity efforts. We are working with our state partners to ensure that those who are caught defrauding Medicare cannot bilk Medicaid, and that fraudsters in one state cannot easily move to another state’s Medicaid program.

Medicaid’s unique federal-state partnership has enabled initiatives that help states strengthen their own efforts to combat fraud, waste and abuse. The Medicaid Integrity Institute (MII) is one of CMS’ most significant achievements. It offers states substantive training, technical assistance and support in a structured learning environment.

The MII has offered numerous courses and trained more than 2,464 state employees at no charge in its four years of existence.

CMS also conducts triennial reviews of each state’s program-integrity activities, and shares best practices with the states.

CMS also provides states with “boots on the ground” for special investigations. Since October 2007, CMS has participated in 12 projects in three states. Most were in Florida.

CMS and these states interviewed 1,150 beneficiaries and took more than 540 actions such as fines, suspensions, licensing referrals, and referrals to state Medicaid Fraud Control Units. The states reported that these reviews have saved $40 million through cost avoidance. An online application allows states to share information about terminated providers, and view information on Medicare providers and suppliers whose billing privileges were revoked for cause. This tool is the beginning of a smarter, more efficient federal-state partnership that integrates technology to routinely share relevant program information.

Looking forward
Defrauding Medicare, Medicaid and CHIP affects every American. This crime drains critical resources from our healthcare system, and contributes to rising costs of healthcare for all. Fraud, waste and abuse harm many Americans, including some of our most vulnerable citizens.

The Administration is committed to reining in fraud, waste and abuse. With the new twin pillars of program integrity, bolstered by the Small Business Jobs Act and the Affordable Care Act, we have more tools than ever to move beyond “pay-and-chase” and become far more proactive. No one group, agency or business owns all resources or expertise to keep criminals out of our healthcare system.

Through partnerships between public and private stakeholders, we are learning how to better protect our healthcare system.

I am confident that the harder and smarter we work today, the stronger our system will be for years to come.

About the author: Dr. Peter Budetti is Deputy Administrator for Program Integrity of the Centers for Medicare and Medicaid Services (CMS), U.S. Department of Health and Human Services. He also is Director of the CMS Center for Program Integrity.

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