Healthcare Business News

Amid concerns about overpayments, HHS notes small number of Medicare Advantage probes

By Joe Carlson
Posted: January 10, 2013 - 12:01 am ET

(Updated with comment from CMS.)

HHS' inspector general's office says the $124 billion Medicare Advantage program is the focus of very few investigations from fraud-hunters—a conclusion that comes on the heels of a string of audits alleging hundreds of millions of dollars of questionable payments in the program.

HHS officials last year published the results of long-running investigations into four Medicare Advantage plans, concluding that the plans had received nearly $600 million more than they should have in 2007 by claiming that patients were more medically complex than they were.

All four companies denied the allegations, but the inspector general's office is continuing with probes of an untold number of the other 170 or so Medicare Advantage companies working for the CMS.

Against the backdrop of $598 million in alleged overpayments in Medicare Advantage, the inspector general's office is releasing an audit this morning that says the outside company hired to investigate potential fraud in Medicare Advantage health plans devotes only a small percentage of its overall efforts to policing the program.

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The report obtained by Modern Healthcare (PDF) says the contractor, Health Integrity of Easton, Md., spends the bulk of its energy on Medicare's prescription drug program, which accounted for less than half of the spending that Medicare Advantage did in 2011, according to the Medicare Payment Advisory Commission.

Health Integrity has a contract with the CMS to look for fraud in the Medicare Advantage program, often called Medicare Part C, as well as the prescription-drug benefit called Medicare Part D.

But the audit found that 79% of the 2,277 investigations opened by Health Integrity in 2010 and 2011 dealt with allegations in the Part D program, which only accounts for $59 billion a year in Medicare spending. Medicare Advantage, which costs the federal treasury twice as much, was the focus of just 8% of the cases sent to authorities for prosecution. (Some 13% of the cases involved a mix of parts C and D.)

“CMS takes this report very seriously, and is committed to ensuring the integrity of Medicare Parts C and D through effective strong oversight” of Health Integrity, a spokesperson for CMS said in an email. “We have taken a number of steps to address the issues raised in this report, including making centralized Part C data available to the MEDIC and enhancing the reporting requirements for the MEDIC. Our goal is to ensure people with Medicare receive quality health care while safeguarding taxpayer dollars.”

A lengthy response from acting CMS Administrator Marilyn Tavenner included in the report noted that the health plans themselves are actually charged with rooting out documentation problems in the medical records that can lead to overpayments.

But the auditors noted two weaknesses in the CMS' system that may be preventing Health Integrity from doing more investigation into Medicare Advantage. First, the company is not provided access to a centralized database of Medicare Advantage claims, which makes data-mining difficult, and second, the company does not have the authority to pursue alleged overpayments if a law enforcement entity declines to take the case.

Tavenner noted that any overpayments identified by Health Integrity are actually reimbursed to the Medicare Advantage health plan, not the CMS.

Officials with Health Integrity said they are required by contract to direct requests for comment to the CMS.

The findings regarding oversight in Medicare Advantage plans come not long after the inspector general's office said it documented scores of cases of questionable claims by insurers that increased overall payments.

In one case cited in an inspector general's office report, UnitedHealth Group's California Medicare Advantage subsidiary claimed it should receive enhanced Medicare payments for a diagnosis of prostate cancer in a patient whose files said he actually had surgery for tendonitis. UnitedHealth's Texas MA subsidiary claimed it should receive higher payments for a diagnosis of vascular disease in a patient who was treated for dropping a heavy can on her foot.

Unlike traditional Medicare programs, which typically pay specific fees for discrete services, Medicare Advantage insurers are paid a flat rate by the CMS to care for overall populations. This “capitated” payment rate can be adjusted if the insurer can show that its population of beneficiaries is unusually sick, but patient records are supposed to justify such increases.

The inspector general's office is still probing other Medicare Advantage insurers to see whether patient records do indeed justify these risk-adjustments, but the office's annual work plan doesn't say how many others are being investigated or when they might be released.

In denying the allegations, the companies say the inspector general's office had used a flawed methodology for its analysis. They say the contractor can only use an established method from the CMS to calculate any potential payment errors, and the CMS has not established any such methods.

The inspector general's office said it documented $183,000 in actual overpayments to UnitedHealth's Texas Medicare Advantage plan using randomly selected patient files, and then extrapolated that amount to conclude the company probably received $115 million too much in 2007. In California, a similar analysis documented $224,000 in actual overpayments, and estimated a total loss amount was $424 million that year.

The inspector general's office last year also released reports on Excellus Health Plan of Rochester, N.Y., and Paramount Care, a subsidiary of ProMedica Health in Toledo, Ohio. The reports said Excellus received an alleged $158,000 in actual overpayments, and an estimated $42 million across its entire MA business in 2007, while Paramount got $206,000 in actual claims and another $18 million in estimated overpayments.

In all four cases, the inspector general's office recommended that UnitedHealth repay the alleged documented losses, but stopped short of recommending reimbursements for the much-larger estimated overpayments, because the CMS is already in the process of examining the issue.

Several commenters told the CMS in public remarks in 2010 (Federal Register 19748) that it was unfair to penalize Medicare Advantage companies, which act as a middle-man between Medicare and its MA patients, because inaccuracies in patient records are actually the fault of healthcare providers.

Tavenner's letter in response to the audit notes that bills using fraudulent patient records are actually paid directly by the Medicare Advantage Plans, not the CMS, which is why any overpayments involving inflated medical documentation go to the health plans.

The inspector general's office audits of the four Medicare Advantage plans' risk-adjustment rates are here:

Excellus Health Plan;

UnitedHealth of California;

UnitedHealth of Texas;

Paramount Care.

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