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Targeting fraud

Feds escalate efforts to safeguard system from waste, abuse


By Gregg Blesch
Posted: June 21, 2010 - 12:01 am ET
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The Obama administration last year fired up a joint HHS and U.S. Justice Department task force dubbed HEAT, which somehow stands for Health Care Fraud Prevention and Enforcement Action Team.

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The image and its message was a higher priority than an elegant acronym. The feds have promised to turn up the heat on providers, real and phony, who steal from and game the system. Those agencies are sitting on a flame themselves. Lawmakers and President Barack Obama are demanding that the CMS and their partners in law enforcement do more to stem the wasted healthcare dollars gushing out of the Treasury like oil into the Gulf of Mexico.

Last week the Health and Oversight subcommittees of the House Ways and Means Committee called a hearing on reducing fraud, waste and abuse in Medicare, which focused on fraud provisions of the Patient Protection and Affordable Care Act signed in March and whether they go far enough.

Also last week Vice President Joe Biden and White House Budget Director Peter Orszag said the government would deploy to the CMS a computer-based fraud mapping tool credited with keeping things surprisingly clean as funds are disbursed under the American Recovery and Reinvestment Act of 2009. Orszag said the administration plans to extend the technology across the federal government.

Biden said that during his decades in the Senate he and his colleagues often leaned on fantasy savings from fraud enforcement when calling for new spending. “It was a way to avoid responsibility, but we mean it,” Biden said. “We have begun to put in place the tools to follow up on the commitment to go after waste, fraud and abuse.”

The CMS said progress has been made in overcoming the technical challenges to corralling claims data from its patchwork of payment contractors in order to track and prevent fraud and abuse, even as the government must prepare to use sophisticated data analysis to understand how the patterns of abuse adapt to new payment and delivery models encouraged by the reform law.

“The most important thing by a wide margin is the additional funding that's going to fraud and abuse,” said Kirk Ogrosky, a partner in the law firm Arnold & Porter who until recently was deputy chief for healthcare fraud in the Justice Department's criminal division.

The additional agents and prosecutors will do more than the various changes in the law to strengthen the government's hand, said Ogrosky, who was involved in the creation and expansion of the government's Medicare Fraud Strike Force pioneered in Miami, which is now being replicated rapidly across the country.

During the hearing, officials from the CMS, HHS' inspector general's office and the Justice Department sought to assure lawmakers that they have been armed with an additional $350 million in funding over the next decade as well as a range of new authority to prevent and respond to fraud and abuse (See chart, p. 7).

The government acknowledges that the sums lost each year to fraud and abuse reached into the tens of billions of dollars, though there's little agreement on a specific estimate. Whatever the amount, it's one that the lawmakers agreed was unacceptable as the nation embarks on its trillion-dollar effort to expand access and improve the quality and efficiency of care.

Rep. John Lewis (D-Ga.), chairman of the Oversight Subcommittee, wanted to know whether the government compiles and publicizes the most common varieties of healthcare fraud in a list comparable to the “Dirty Dozen” tax scams circulated by the IRS. Lewis Morris, chief counsel to HHS' inspector general's office, replied, “Regrettably, we would probably have to call it the ‘Dirty Thousands.' ”

The officials were preceded by a panel of lawmakers from both parties pushing legislation seeking to further tighten the screws. Rep. Pete Roskam (R-Ill.), for example, wants the CMS to run claims through predictive modeling software that triggers manual review of a suspect claim before it's paid.

Roskam and others wondered why credit card companies are able to quickly suspend accounts when a cardholder's number has been hijacked yet the government pays millions to crooks and providers who have improperly submitted claims, then is left trying to get its money back with recovery audit contractors, lawsuits and prosecutions.

“Due to prompt-pay requirements in Medicare, our claims processing systems were built to quickly process and pay 4.8 million claims each day, approximately 1.2 billion claims each year,” Kimberly Brandt, director of Medicare program integrity for the CMS, said in her testimony. The reform law seeks to address that with stricter enrollment criteria and screening for providers and suppliers, better data sharing among federal agencies and law enforcement and pre-payment review of high-risk claims.

Brandt, who is leaving the CMS at the end of June after six years in the position, also noted that Obama has directed the agency to reduce the fee-for-service payment error rate in half by 2012. The error rate, though not specifically a measure of fraud, is based on a sample of claims analyzed by a contractor. It was calculated in November to be 12.4%, or $35.4 billion. (Nov. 23, 2009, p. 6)

Wider adoption of electronic health records, with funding and direction under the stimulus law, should lower the error rate by improving the documentation of underlying claims, a problem that plagues a good portion of improperly submitted claims, Brandt suggested.

But the error rates are only a small part of the government's problem getting a handle on its claims.

An integrated data repository, long in the works for the CMS, went live in January with Medicare fee-for-service and Part D claims, Brandt said, which is intended to help the government identify patterns of fraud across programs and categories of providers and suppliers. (Nov. 9, 2009, p. 30) The Affordable Care Act requires the CMS to incorporate data from Medicaid, Veterans Affairs, the Defense Department, Social Security disability and the Indian Health Service.

The inspector general's office is compiling similar data on its own servers. “We're taking that base of information and then we're adding elements to it for business intelligence tools and analytics that aren't inherent in the data itself,” Morris said later in an interview. “The challenge that we're all facing right now—and we're making important strides in the right direction—is figuring out how to effectively get that information from the contractors in to CMS and to us as quickly as possible,” Morris said. “If someone is pushing thousands of claims on Monday, we don't want to learn about it 15 days later.”

Meanwhile, Morris said, the government must be prepared to modify its enforcement strategies and erect new safeguards as the landscape of payment and delivery models evolves. Morris told lawmakers that the anti-kickback and Stark laws “may need to be adjusted or taken into balance” and that the HHS secretary has the authority to lift the inspector general's sanction authority during demonstration projects.

Building safeguards as programs roll out, he said, will require analyzing data to identify trends and shifts in use that might be attributed to providers gaming the system rather than caring for patients. “How the program pays for services will regrettably define how it's going to get cheated,” Morris said. “If that principle applies, and we think it will, there are going to be opportunities for abuse and fraud.”

The new risks, Morris said, might include providers who limit care delivered under gain-sharing arrangements or bundled payments; fabricate quality data; manipulate payment windows to double-bill for bundled services; and avoid enrolling sicker patients in medical homes or accountable care organizations, which he referred to as “lemon dropping.”

Rick Gundling, vice president of healthcare financial practices for the Healthcare Financial Management Association, said that if those models of coordinated care are to flourish, the government will have to modify its application of the anti-kickback statute and the Stark law, which restricts physician self-referral. “Hospitals and physicians and other care providers have to work very closely together in order to do that and be able to share the revenue streams.”

The government's significant infusion of resources and attention to the integrity of claims means providers can expect more audits, investigations and demands for repayment.

“They giveth and they taketh away,” Gundling said. “A lot of the ways they're going to balance the cost of the expansion is on providers, going after enforcement and documentation.” He added, however, that some of the government's efforts, such as compelling better documentation, can only help providers achieve the coordination of care at the heart of many of the delivery models to be explored by the new Center for Medicare and Medicaid Innovation established by the reform law, (June 14, p. 6).

The law will expand its Recovery Audit Contractor Program to Medicare Advantage, Medicare Part D and Medicaid. It also requires that providers return overpayments from the government within 60 days after they are identified, and failure to do so could trigger False Claims Act liability under amendments made last year to that law.

The overpayment requirement raises a number of unanswered questions, lawyers have observed, not the least of which is when an overpayment is considered “discovered” for the purposes of starting the clock. “The challenge is, how does a provider act in a responsible, straightforward way in meeting its legal obligation but in a context where not everything is always crystal clear?” said Ankur Goel, a partner in the law firm McDermott, Will & Emery.

During the hearing, Rep. Pete Stark (D-Calif.)—whose name is attached to one of the more convoluted regulatory webs in healthcare—noted that the complexity of the healthcare business can lead well-meaning lawmakers and bureaucrats into a regulatory thicket. He recalled that his mission to remove the financial incentive from medical decisionmaking started with a simple bill that was less than a page long, which was deemed too ambiguous, and grew to what he estimated is the size of a phonebook.

“This is what you're up against,” said Stark, chairman of the Health Subcommittee. “We put in a few more restrictions, then a lot of lawyers got a hold of it and used the rest as kind of a guideline to loopholes.”

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