The Centers for Medicare & Medicaid Services (CMS) proclaimed recently that its two-year-old Fraud Prevention System (FPS) is a fruitful investment with a high rate of return, but Congress is not as sanguine about the agency’s fraud-fighting efforts as the agency appears to be.

CMS Praises New System

Following the FPS’ first year of operation, CMS found that the system has earned an estimated $3 for every $1 it has spent rooting out fraud. Peter Budetti, CMS’ deputy administrator for program integrity, explained recently to the House Energy and Commerce Subcommittee on Health that the FPS is a “highly sophisticated” system that prevented or identified more than $115 million in improper payments in its first year.
In a December 2012 report to Congress, CMS says the FPS led them to take numerous administrative actions against providers. “Through these actions, CMS saved an estimated $115.4 million in payments, comprising $31.8 million in estimated actual savings and $83.6 million in estimated projected savings,” the report says.
“The FPS also generated leads for 536 new ZPIC [Zone Program Integrity Contractors] investigations, augmented information for 511 pre-existing investigations, and prompted 617 provider interviews and 1,642 beneficiary interviews to verify legitimate provision of Medicare services and supplies.”
Budetti’s testimony in front of the House panel touts the FPS as a “highly technical, highly sophisticated system that analyzes all Medicare fee-for-service claims using risk-based algorithms” and generates alerts that allow contractors to utilize a variety of methods to investigate them before they are paid.

Congress Sees A Different Picture

The FPS figures may be impressive, but a bipartisan group of senators has been searching for solutions from sources other than CMS. In January, current and former members of the Senate Finance Committee released a report outlining recommendations from more than 160 stakeholder groups on ways to improve the feds’ efforts to combat waste, fraud, and abuse in Medicare and Medicaid.
Among the recommendations highlighted by the senators were:
■ Eliminating duplication and redundancy in federal and state Medicare/Medicaid anti-fraud;
■ Changing certain Medicare payment policies that, through disparate pricing issues, lead to fraud, waste, and abuse;
■ Ensuring that provider enrollment policies are consistent and utilized
■ Clarifying the circumstances in which use of care and the setting for care is appropriate such as when it is appropriate to use inpatient care versus outpatient;
■ Making numerous process changes to how the various CMS audit contractors operate to ensure they are doing so efficiently and effectively;
■ Balancing the incentives for Medicare contractors to identify overpayments with penalties for contractors whose findings are overturned on appeal through the CMS administrative process; and
■ Creating an advisory panel to provide clinical input as a component of contractor oversight.
The report and its recommendations are the result of a request made last spring by the senators to get input on the best ways to fight fraud. They called on stakeholders in the health care community to come up with their own ideas for battling fraud.
“Last spring I joined with colleagues in asking members of the health care community to provide us with their best ideas for streamlining and strengthening federal efforts to curb waste, fraud, and abuse in Medicare and Medicaid,” said Sen. Tom Coburn, MD (R-Okla.).
“Members of the health care community offered hundreds of pages of good, actionable, common-sense ideas, and I plan to continue working with my colleagues in a bipartisan manner to improve federal efforts in this area.
“Evidence from the Government Accountability Office and the Inspector General’s Office has shown some federally funded program integrity efforts are failing to achieve the aims they were designed to achieve, while others are even losing money.”

CMS Invests Millions In Fraud System

Despite the senators’ apparent dissatisfaction with CMS’ efforts, the agency has invested millions of dollars in the FPS and appears to view it as a panacea to the age-old system of “pay and chase” that is now considered obsolete within the agency. The FPS report to Congress highlights the system’s projected and actual savings during its first year, which CMS estimates at $31.8 million and $83.6 million, respectively.
Also in the report are costs associated with the FPS. During the first year of the program, costs were described in three categories: contractor costs, FPS-related CMS management costs, and ZPIC costs incurred in investigating and acting upon FPS-generated leads.
Contractor costs amounted to some $30.5 million, while CMS management costs totaled $4.2 million, for a total cost of $34.7 million in the first year of implementation.
One area of focus in the report is the FPS’ collaboration with law enforcement. “Mission rotations” are touted prominently as a key component in bringing together field investigations and predictive analytics.
It works like this: “Multidisciplinary teams, including [ZPICs] and law enforcement, join CMS’ Center for Program Integrity in face-to-face collaborative mission rotations to develop consistent approaches for investigation and action,” the report says.
This process compares with past approaches that included “numerous handoffs and required significant time,” while the FPS approach brings “experts and decision makers together in a pilot command center,” thus making the cycle time for making decisions on payment suspensions significantly reduced.
With expanded law enforcement cooperation, FPS “provides investigators with the ability to access additional support information and analytic tools,” the report says.
Multiple layers of law enforcement collaboration are further described in the report, including how Recovery Auditors (RAs) are able to refer cases in which they identify fraud to ZPICs for investigation.
Also identified in the report are some “enhancements” to the FPS that CMS plans to implement over the next year. Among them is the expansion of “FPS capabilities and targeting fraudulent providers and claims” and the integration of the claims processing system and the FPS.
This change will enable the FPS to “stop payment of certain improper claims, without human intervention, by communicating a denial message to the claims payment system,” the report says.

This means that CMS will be able to deny improper claims that it describes as “medically unbelievable.”

Medicare Auditors Press On

With the FPS in full force, CMS shows no signs of decelerating its fraud-fighting efforts. Providers continue to be surprised by audit letters and notifications in various pockets of the country, with the usual intensity aimed at Southern states such as Florida and Texas. And auditors appear to be targeting medically unnecessary care and providers’ use of high-level resource utilization groups (RUGs). Also under the microscope are billing errors, upcoding, and technical errors, and both ZPICs and RAs continue to lead the charge in pursuing skilled nursing facility (SNF) providers.
Gary Herschman“A lot of what we’re seeing is based on therapy levels, higher RUGs, and documentation,” says Gary Herschman, chair of the Health Care Practice Group at Sills Cummis & Gross and vice chair of the fraud and abuse practice group with the American Health Lawyers Association. “They’re going back and second-guessing SNFs, who will have to be prepared to defend their coding, medical necessity, and supporting documenation. The government is taking an aggressive stance.”
So what’s a provider to do? “Being proactive with internal reviews, training and education, and other compliance measures could help providers avoid audits, or if audited, enable them to better defend and rebut audit findings,” says Herschman.

Medical Necessity, RUGs Are Scrutinized

Much of the recent audits have centered on medical necessity, as well as technical findings, says Herschman, who has been working in this area for nearly 15 years. “Some of things we’re seeing, in letters from ZPICs, for example, focus on finding inconsistencies between the minimum data set [MDS] and the medical record and therapy notes,” he says.  Herschman cites as a common example the fact that SNFs may tend to poorly document physician signatures for orders or plans of care. “ZPICs are scrutinizing facilities on a 360 degree basis—consistency with MDS, medical record support for therapy, documentation of therapy provided, and RUGs coding.
Herschman draws a connection between enhanced reviews and audits and the fact that a November 2012 Office of Inspector General (OIG) report found a 25 percent error rate among SNF claims. “They’re going to cast a wide net,” he says. “And they’re not just looking for clearly erroneous coding; they’re looking for anything questionable and small technicalities.”
Also on ZPICs’ radars: a lack of restorative potential of therapy, in which the provider allegedly hasn’t demonstrated the patient’s progress with therapy.

(OIG Targets SNF Billing Practices)

Washington State Sees Uptick

Some providers in Washington state have seen a recent flare-up of RA audits, says Bill Ulrich, president and chief executive officer of Consolidated Billing, in Spokane.
“This is new for Washington,” Ulrich says. “Historically, we have not seen a lot of auditor activity.”
It began just recently, with RA letters to providers, asking for medical records for residents from three years ago, he says.
“For a state with no activity for SNFs to get letters, up here, where we haven’t seen much, it’s got some people concerned,” says Ulrich, although he says he hasn’t found anything that says they are after a certain RUG category.
SNF providers that are inclined to rely on the CMS appeals processes to save the day are best advised to recognize that a very small number of SNF Medicare claims denials are actually overturned on appeal.
Dianne De La Mare“Recovery Auditors are paid on a contingency fee basis,” says Dianne De La Mare, AHCA’s vice president of legal affairs. “But what happens if a provider wants to appeal—the appeals process is five stages long, and the administrative appeals process is the same for both MACs [Medicare Administrative Contractors] and RAs.”

De La Mare contends that the complexity of the appeals process creates a disincentive for providers to pursue appeals. “CMS data show that only 12 percent of claims get appealed, and only 4 percent get overturned.
According to Herschman, in light of reimbursement levels and other financial pressures, it’s hard for many SNFs to  invest resources and money into self audits and other proactive compliance measures.
“As long as the government believes that there are overpayments, overbilling, wasteful spending, and fraud, they will continue to look for it,” he says.
“The OIG studies give them internal support to throw more resources toward auditing. As long as they think investigations, reviews, and audits are going to result in recoveries well in excess of their enforcement and audit expenses, then they will continue to spend money on these endeavors.”
As such Herschman and others advise providers and contracted therapy providers to be “super cautious. They need to self-review, conduct internal audits, and attempt to find out if there are major issues with their billing and documentation processes,” says Herschman. “If problems are identified, facilities need to change their policies and procedures, or better train their staff with respect to the implementation of the policies and procedures.”
Look for the CMS program integrity and auditor resources at the following links:
■ The American Health Care Association maintains resource pages and links on Medicare and Medicaid integrity programs for its members at the following link: