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OIG Issues Its Annual Report On Top Management Challenges Facing The U.S. Department Of Health And Human Services

Medicare Parts A and B Still Among Top Challenge Areas

Annually, the OIG prepares a summary of the most significant management and performance challenges facing the Department of Health and Human Services (HHS). This summary is known as the Top Management Challenges (TMCs). The TMCs and the Department’s progress toward addressing them reflect continuing vulnerabilities that the OIG has identified for HHS over recent years. TMCs also forecast new and emerging issues HHS will face in years to come. Within the TMCs are issues relating to Medicare Parts A and B, which are expected to continue increasing significantly due to the growth due to increases in beneficiaries and per capita health care costs.

Medicare’s Board of Trustees estimates in its 2016 Annual Report that the Part A Trust Fund will deplete by 2028. The Report also estimates that Part B spending will grow almost seven (7) percent over the next five (5) years, a growth rate higher than that of the U.S. economy. Part B is undergoing substantial changes through the Medicare Access and CHIP Reauthorization Act of 2015 and other reforms.

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Key Challenges

Reducing Improper Payments. In fiscal year (FY) 2015, CMS reported an improper payment rate of 12.1 percent, corresponding to $43.3 billion for Medicare Fee-for-Service payments (Parts A and B). These measures include payments for incorrect amounts (including both overpayments and underpayments), as well as for unnecessary services, services not rendered, billing or coding errors, and claims that did not meet documentation or other Medicare coverage requirements. Recent reviews highlighted vulnerabilities in hospital billings and returning improper payments to the Medicare Trust Fund, and focused on vulnerabilities for improper payments in home health and hospice care. The OIG’s home health agencies audit uncovered improper payments across a number of risk areas, such as insufficient documentation, medical necessity, and homebound determinations. They also found that one-third of stays for hospice general inpatient care in 2012 did not meet Medicare requirements, costing the program $268 million. The OIG review of improper payments to Part B providers, such as chiropractors, physical therapists, and certain durable medical equipment (DME) suppliers (e.g., power mobility device suppliers) found high improper payment rates, some exceeding 50 percent.

Preventing, Detecting, and Responding to Fraud. The OIG has found program areas susceptible to widespread fraud include home health, hospice, and DME. Common issues include billing for unnecessary services or services not provided; kickbacks to recruiters and patients; aggressive and illegal DME telemarketing, and social targeting of Medicare beneficiaries that put them at risk of medical identity theft. The OIG states that Medicare must have accurate information about the individuals and entities with which it does business and must take appropriate steps to avoid doing business with, and exposing beneficiaries to, those who are untrustworthy. CMS must also fully and effectively deploy all available program integrity tools, including those provided under the Patient Protection and Affordable Care Act, such as enhanced screening of provider enrollments. OIG also noted weaknesses in contractors’ administration of provider enrollments that could leave Medicare vulnerable to billing by ineligible providers and beneficiaries. Weaknesses include gaps in the verification of key information, inconsistencies in site visit procedures, and failures to use site visit results for enrollment decisions. CMS’s Provider Enrollment, Chain and Ownership System (PECOS) is incomplete and, in some cases, inaccurate. This information was intended to aid CMS in tracking enrollment and revalidation trends to help determine whether CMS contractors are meeting requirements.

Fostering Prudent Payment Policies. Medicare pays significantly different amounts for the same services provided to similar patients in different settings. The OIG estimated swing-bed services provided up to 90 percent of the critical access hospitals (CAHs) that it reviewed, which could have been provided at other nearby facilities that are paid under the Skilled Nursing Facility (SNF) Prospective Payment System. The OIG estimates that Medicare could have saved $4.1 billion over 6 years if payments for swing-bed services at CAHs were made to other facilities at SNF rates. Medicare and beneficiaries also typically pay more for a physician service provided in a “provider-based facility” (i.e., one owned by a hospital) than for the same service provided in an independent facility. The OIG noted that CMS is implementing a significant overhaul of the payment system for clinical laboratory tests pursuant to the Protecting Access to Medicare Act of 2014. The new system will seek to better align Medicare reimbursement for lab tests with market rates (taking effect on January 1, 2018). The OIG raised concerns about risks to payment accuracy on the basis of CMS’s plans to rely on labs to self-identify whether they meet the criteria for reporting private payer data and CMS’s plans to rely on reporting labs’ self-attestations of the data’s completeness and accuracy. The OIG also noted that some payment systems create financial incentives that may negatively affect patient care and increase Medicare costs, such as payment policies for SNFs that give facilities incentives to bill for higher levels of therapy than beneficiaries need. The OIG’s work showed SNFs having billed for the highest level of therapy at increasing rates that were not supported by patient needs. The OIG also found that hospices provided care much longer and received much higher Medicare payments for beneficiaries in inpatient assisted living facilities (ALFs) than for beneficiaries in other settings, creating incentives for hospices to target these patients. Hospice care in ALFs has more than doubled in the past 5 years.

Progress Reported by CMS/HHS in Addressing the Challenges

  • Through the Health Care Fraud and Abuse Control (HCFAC) Program, the OIG, HHS, and DOJ have made substantial strides in fighting fraud, waste, and abuse in Medicare and Medicaid while recovering stolen and misspent funds (returning $6.10 for every $1 invested).
  • Steps have been taken to implement additional program integrity tools and many of the OIG’s recommendations.
  • Prior authorization models and demonstrations are being implemented in certain areas to help make sure items and services are provided in compliance with Medicare coverage, coding, and payment rules.
  • Prior authorization processes are being implemented in certain locations that cover the following: power mobility devices, repetitive scheduled non-emergent ambulance transport, and certain durable medical equipment, prosthetics, orthotics, and supplies.
  • Implementation of a demonstration project has begun in five states, requiring home health agencies to submit required documentation for pre-claim review to help reduce and prevent improper payments.
  • Reductions in Medicare billing and payments for certain services and geographic areas known for fraud risks have been noted.
  • Steps have been taken to improve provider enrollment safeguards to protect the integrity of the Medicare program.
  • Expansion of temporary provider enrollment moratoria for home health agencies has been extended in certain geographic locations known for significant fraud.
  • New regulations have been proposed that would use provider and supplier information more effectively to keep out or remove providers who pose risks to Medicare and its beneficiaries.
  • The use of enhanced address verification software in PECOS to better detect vacant or invalid addresses or commercial mailing reporting agencies.
  • Improvements have been reported in oversight and measurement of contractors’ performance and the corrective actions regarding improper payment vulnerabilities that contractors identify.
  • For laboratory services, reports have been made of significant progress in several key areas. This includes promulgating regulations, establishing the Advisory Panel, publishing sub-regulatory guidance, and building the data collection system.
  • New legislation is being proposed that would restrict the higher payment rates for provider-based facilities to “on-campus” facilities and to “off-campus” facilities that were designated as such before November 2, 2015.

What OIG States Still Needs to Be Done

  1. Improving oversight of the performance of contractors in implementing Medicare provider enrollment safeguards to ensure payment accuracy, and identify and recover overpayments in a timely manner.
  2. Improving the completeness, accuracy, and timeliness of its provider ownership data (maintained in PECOS) to support effective oversight.
  3. HHS should continue to address and resolve identified program integrity weaknesses.
  4. Implementation of actions to reduce improper payments for specific services.
  5. Increasing oversight of hospice general inpatient claims, ensure that a physician is involved in the decision to use proper level of care, and conduct prepayment reviews for lengthy stays.
  6. Strengthening safeguards to ensure that Medicare pays for home health services only when the beneficiary meets the applicable homebound requirement, and the home health agency has provided reasonable and necessary skilled services that are supported by and documented in the physician’s certification plan.
  7. Changes are needed (some requiring legislation) to promote more prudent payment policies, including payments to hospital outpatient departments and ambulatory surgical centers, SNFs, and hospices.
  8. Acting upon a number of pending recommendations within existing authorities to mitigate the financial and quality of care risks under the current systems, such as CMS analyzing billing data, to identify SNFs that appear to be overbilling for therapy and expand oversight reviews of those SNFs.
  9. For laboratory tests, a need to maintain focus on key remaining tasks, including completing the data collection system, ensuring completeness and accuracy of reported data, and establishing new Medicare payment rates after labs report data in 2017.
  10. Need to monitor labs’ reporting to ensure report data are accurate and complete.
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