The Small Business Jobs Act of 2010 (pertinent sections of which are codified at 42 U.S.C. Section 1320a-7m) directed the Centers for Medicare & Medicaid Services (CMS) to use predictive modeling and other analytics technologies to identify and prevent fraud, waste, and abuse in the Medicare fee-for-service program. The statute required CMS to implement a system that could analyze provider billing and beneficiary utilization patterns to identify potentially fraudulent claims before they were paid. CMS calls this predictive analytics program the Fraud Prevention System (FPS).

CMS recently issued a report to Congress entitled “Fraud Prevention System Second Implementation Year” (June 2014) (Report), covering the progress of the FPS for the period from October 1, 2012 to September 30, 2013 (the Report was due in 2013). Among its reported items are the following:

• CMS indicates that since June 2011, all Part A and Part B claims are being screened prior to payment with FPS analytics, and also are checked against some external databases like the compromised numbers checklist, the Fraud Investigation Database, and certain complaints;
• CMS reported 938 administrative actions ensuing from FPS (including prepay edits, revocations of billing privileges, referrals to law enforcement, and payment suspensions);
• In addition, CMS reported that leads from the FPS resulted in 469 new investigations of providers or suppliers referred to the Zone Program Integrity Contractors for further scrutiny. FPS modeling also contributed to 348 existing investigations;
• CMS reports that it has a relatively complete history of Medicare claims (Parts A and B claims data covering seven years plus Part D data), allowing it to better identify outlier claims and billing patterns;
• According to the Report, CMS now has its claims processing systems linked to the FPS. This means that CMS can more directly take action with respect to identified anomalies it has identified by applying FPS analytics; and
• CMS also indicated in the Report that, as required by statute, it will look to expanding analytics modeling to Medicaid.

Also as required by statute, OIG issued a corollary “Certification of the Report to Congress: Fraud Prevention System–Second Implementation Year,” which is included as an appendix to the Report. OIG found the return on investment (ROI) to be just $1.34/$1, in contrast to CMS’ ROI calculation of $5/$1. OIG made two recommendations to improve the effectiveness of the FPS program: (1) that CMS provide written instructions to its contractors as to how to identify those administrative actions that resulted from FPS; and (2) that the contractors be required to prepare and retain documentation as to how FPS contributed to their efforts.

On June 25 the U.S. Government Accountability Office (GAO) released a written statement of Kathleen King, Director, Health Care, GAO, entitled “Medicare Fraud: Further Actions Needed to Address Fraud, Waste, and Abuse,” which, among other things, addressed the FPS. GAO noted that while CMS had now established the link between the FPS and CMS claim processing systems so that it could deny claims, it still had no way to suspend (delay adjudication) claims while the claims were under investigation.

In addition, GAO recommended that CMS focus on several areas for improvement in non-FPS fraud-fighting efforts, including implementation of authorities provided by the 2010 Affordable Care Act:

• Surety bonds – additional types of providers and suppliers could be good candidates for surety bond requirements in order to prevent risk to the Medicare program;
• Enrollment disclosures – the Affordable Care Act (ACA) authorities for collection of additional information as part of the enrollment process, e.g., whether the provider/supplier had been subject to a payment suspension from a federal health care program, should be implemented;
• Mandatory compliance programs – the ACA authorized CMS to require compliance programs as a condition of enrollment. CMS should finalize these requirements; and
• GAO also again recommended that Medicare cards should not include Social Security Numbers (SSNs) because of the risk of identity theft. CMS has indicated that eliminating the use of SSNs would take coordination with other agencies, and CMS does not have funding for this effort. GAO will be looking at options and will issue a report early next year with recommendations.

Access CMS’ press release on the Report.

This article originally appeared on the American Health Lawyers Association’s website. AHLA would like to thank Fraud and Abuse Enforcement Committee member Timothy J. Cahill (Nationwide Children’s Hospital, Columbus, OH) for reviewing this post. Author Judith A. Waltz is also a member of the Fraud and Abuse Enforcement Committee.

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