Ensuring Accurate Payment is Top HHS Management Challenges During 2011

The Office of Inspector General (OIG) suggests that HHS can do more in both reducing erroneous payments and making appropriate payments to providers in its report that identifies top management and performance challenges facing HHS in fiscal year (FY) 2011.

 Fraud and Abuse

 CMS needs to better monitor performance among contractors such as recovery audit contractors (RACs), program safeguard contractors (PSCs), Medicare DrugIntegrity Contractors (MEDIC), and Zone Program Integrity Contractors (ZPICS) that identify, prevent and respond to fraud and abuse, according to the OIG.   RACs are paid through contingency fees from recouped overpayments, but they may not recoup any overpayments, and therefore any contingency fees, while fraud cases are being investigated.   The result being, that RACs are disincentivized to report fraud, according to the OIG. Between 2005 and 2008, the OIG identified only two instances where a RAC referred a case for suspected fraud while during the same time period RACs identified more that $1.03 billion in improper over overpayments.

OIG commented that additional opportunities exist for CMS to strengthen the enrollment system so it can be used as a tool to identify and prevent from enrolling providers whose motives are to defraud Medicare. CMS should adopt a more flexible screening approach, tailoring screening measure to fraud risks, and classifying reenrolling durable medical equipment providers and reenrolling home health providers as a high risk which would make them subject to a higher level of screening during the enrollment or re-enrollment process.

CMS should continue to develop error rate tools like the Comprehensive Error Rate Testing (CERT) and the Payment Error Rate Measurement (PERM) programs, said the OIG.  These programs have been used by contractors to enhance their medical reviews, focus on high risk areas, and reduce improper payments.

In addition OIG recommended that HHS improve law enforcement’s access to data, especially real time data.

 Quality of care

More needs to be done to improve the quality of care rendered to patients in hospitals, according to the OIG.  CMS’ policies regarding hospital-acquired conditions need to be strengthened, by improving compliance with present-on-admission coding rules and by expanding on the lists of hospital-acquired conditions.

CMS also needs to do more to ensure that health care professionals meet qualification and licensure requirements before they treat beneficiaries, OIG reported.  In addition nursing home oversight needs to be strengthened as well as oversight of outpatient prescription drugs needs to be strengthened to ensure that beneficiaries receive only the drugs that are appropriate for their medical conditions.


 HHS need to heighten its focus on oversight and enforcement of privacy and security protections to ensure  that hospitals, other health care professional and HHS  effectively safeguard individually identifiable protected health information when stored in electronic format.  OIG contends that fraud is easily committed with personally identifiable health information is stolen as that data is used to submit false claims.

 Reimbursement systems

 OIG found that state Medicaid agencies lack accurate information about pharmacy’s costs to purchase drugs, typically relying on inaccurate and unreliable published prices to estimate pharmacy costs.  In addition, Medicare fee-schedule payments for certain durable medical equipment bear little resemblance to market prices.  For instance Medicare reimbursed supplier $17,000 for a particular type of wound therapy treatment when the market price was reduced to $3,600 as a result of competition. A change to the code for this devise would have taken into account the competition in this market.  OIG also discovered that effects of a regulatory change in how Medicare pays for certain types of therapy in skilled nursing facilities that were suppose to be budget neutral actually resulted in an increased cost of $2.1 billion to Medicare.

And finally implementing the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) was identified as top priority for HHS as it has many large programs to develop and implement, including; Affordable Insurance Exchanges, the Consumer Operated and Oriented Plan Program, the Pre-Existing Condition Insurance Plan, the Early Retiree Reinsurance Program, the Prevention and Public Health Fund, the Center for Medicare and Medicaid Innovation, and others, as well as implementing the numerous changes to existing programs.