Admitting that it needs to sharpen its oversight of Medicare, HCFA rolled out a comprehensive plan that would raise performance standards for its Medicare fiscal intermediaries.
The plan unveiled by HCFA Administrator Nancy-Ann Min DeParle late last week also calls for more training of the fraud investigation units of the fiscal intermediaries, which process claims for the government.
The ability of fiscal intermediaries and other HCFA contractors to detect fraud is a "grave concern" to the agency, said Penny Thompson, head of HCFA's program integrity unit.
"(The fiscal intermediaries) continue to do a good job based on what's on the claim, but the problem is what's behind the claims-the medical records, the documentation," Thompson told a conference of compliance officers in Washington last week.
HCFA officials also promised more scrutiny of providers, especially new participants in the program.
Thompson said the agency has not done enough to weed out fraudulent providers on the front end.
"We want to catch the bad apples early," said Thompson, a 10-year veteran of HHS' inspector general's office.
HCFA's plan came two days after the agency heralded the lowest Medicare payment error rate in three years. HHS' third annual audit of Medicare overpayments revealed that of all Medicare payments in fiscal 1998, 7%, or $12.6 billion, were erroneous, compared with 11%, or $20.3 billion, in fiscal 1997.
"(The lower error rate) is confirmation that the efforts of all of us, HCFA and the provider community, are really paying off," Thompson said. "This new plan is a way to sustain that momentum. But it's still a $12.6 billion problem."
The most troubled area appears to be billing for medically unnecessary services.
According to the report, the total number of errors related to a lack of medical necessity slid 6.6% to $7 billion from $7.5 billion in fiscal 1997.
However, payments to providers for medically unnecessary outpatient and inpatient services increased, the report said.
Hospitals were responsible for about 39% of the erroneous claims, and physicians accounted for 26%, according to the report.
HCFA wants to subject an additional 10% of all Medicare claims to the medical review process, an examination of the medical records and documentation behind claims.
HHS Inspector General June Gibbs Brown said she didn't know how much of the overpayment was due to fraud.