Efforts to Stop Health Insurance Fraud Through Use of Contractors Under Fire

In recent reports, from June 25, 2014 and August 13, 2014, the Government Accountability Office (GAO) highlights the mixed results achieved by the federal government's increased efforts to crack down on health insurance fraud through the use of contractors. The government has spent upwards of $600 million a year to uncover and punish health care fraud and overpayments, but  some have seen a need to improve the new initiative’s effectiveness – specifically, its use of contractors to unveil fraud. The GAO has stated that the use of contractors has been, at times, inefficient and lacking in clear oversight.  Currently, while the government spends approximately $600 million a year to combat health insurance fraud, $4.3 billion in fraudulent charges has been recovered.  Medicare fraud is estimated at tens of billions of dollars per year. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-14-712T, MEDICARE FRAUD: FURTHER ACTIONS NEEDED TO ADDRESS FRAUD, WASTE, AND ABUSE (2014). 

In June 2014, the GAO recommended a number of fixes to the lack of coordination in these new fraud recovery efforts. Many of these recommendations  had yet to be implemented due to obstacles and a lack of funding. For example, the GAO recommended that CMS increase the amount and type of data collected in its central data repository by fiscal year 2010, as such data would better help CMS and its contractors uncover fraud. As of June of this year, CMS had still not expanded the data reported to its central data repository despite the GAO's suggestions.  The GAO further suggested that CMS force all contractors to adopt a government web portal intended to provide CMS and contractors with a single access point to CMS' central data repository and analytical tools to better analyze CMS' data and uncover fraud. CMS had not required all contractors to adopt that government web portal by June of this year. These and other shortcomings prompted the GAO to conclude in a June report that "although CMS has taken some important steps to identify and prevent fraud through increased provider and supplier screening and other actions, the agency must continue to improve its efforts to reduce fraud, waste, and abuse in the Medicare program." See GAO-14-712T at 17.

The GAO's most recent report on August 13, 2014 detailed a number of further shortcomings with CMS’ management of its fraud contractors. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-14-474, MEDICARE PROGRAM INTEGRITY: INCREASED OVERSIGHT AND GUIDANCE COULD IMPROVE EFFECTIVENESS AND EFFICIENCY OF POSTPAYMENT CLAIM REVIEWS(2014). The August report specifically notes that while CMS has created a Recovery Audit Data Warehouse, a claim database which tracks claims that contractors have already reviewed, that database does not track whether all of the various types of contractors have duplicated their efforts reviewing claims. The report concluded that "CMS does not have sufficient information to determine whether its contractors are conducting inappropriate duplicative claims reviews" and that "CMS has conducted insufficient data monitoring to prevent [contractors] from conducting inappropriate duplicative reviews." Id. at 38. The GAO has recommended development of clearer guidelines from CMS to contractors and better oversight by CMS to ensure that contractors are not duplicating efforts.

Adding to the difficulties, hospitals have resisted private contractors who arrive to investigate potential fraud. Some hospitals feel overburdened by the contractors' investigations and the fact that should a contractor's audit result in a determination of overpayment or another adverse action against a hospital, the CMS appeals process, which adjudicates whether a contractor's determination was justified, lacks sufficient resources to manage a high volume of cases. Some estimate there is a backlog of up to two years in the appeals process. See Memorandum From Nancy J. Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals, to OMHA Medicare Appellants (Dec. 24, 2013). A recent article in The New York Times suggests that such burdens on hospitals may have led them to push back on the government's recent initiatives to curb fraud. Just this past summer, the government terminated a Florida fraud hotline even though it purportedly led to more than a thousand fraud investigations and uncovered millions in possible fraudulent payments. This hotline was once managed by an outside contractor, but calls to the hotline are now transferred to a general Medicare phone number that takes significantly longer to address complaints.  

The GAO's critical reviews, coupled with mounting pressure to do more to reduce health care fraud, should prompt efforts to collect more data regarding Medicare billing along with efforts to make more of that information available to contractors. Thus, it remains to be seen whether hospitals should prepare for and anticipate a more integrated and concerted effort from Medicare fraud contractors to uncover fraudulent billing. As always, Medicare and Medicaid providers should take measures to prevent fraud within their organizations, manage outside contractor audits effectively, and stay abreast of the various new CMS initiatives to address fraud and overbilling. 

Topics:  Audits, GAO, Health Insurance, Healthcare Fraud, Medicaid, Medicare, Recovery Audit Contractor

Published In: Government Contracting Updates, Health Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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