Kusserow on Compliance: Increased Regulatory and Enforcement of Medicare Advantage Plans

One of the key features of health care reform is to stop fraud, abuse, and waste at every opportunity. The government has been given enhanced powers of enforcement to perform this task. This extends to the Medicare Advantage (MA) plans as well. MA has already been under scrutiny for alleged service inefficiencies and the subject of investigations and sanctions. Recent government actions have been brought under the False Claims Act with resulting sanctions for non-adherence to CMS mandated compliance protocols.

Increased Enforcement Attention to MA

The number of authorities calling for tighter oversight of waste, fraud, and abuse in MA is increasing. Two years ago, the HHS Office of Inspector General (OIG) conducted the first-ever system-wide audit of the MA program, and found wide disparities in vigilance and reporting among the privately run plans. The OIG reviewed data from MA organizations and found a lack a common understanding of key fraud and abuse program terms and raised questions about whether organizations were implementing their programs to detect and address potential fraud and abuse effectively. Last year, the OIG reported in its summary of the most significant management and performance challenges facing HHS that improper payments to MA plans pose a significant vulnerability for CMS and cost taxpayers billions of dollars. It said that in 2013, HHS reported an error rate of 9.5 percent for MA, corresponding to an estimate of almost $11.8 billion in improper payments (consisting of about $9.3 billion in overpayments and about $2.6 billion in underpayments). The MA error rate measures errors related to risk-adjustment payments. During this period of OIG reviews, CMS was conducting audits of the plans, finding similar results. Also, the OIG has released a report recommending that CMS grant the Medicare Drug Integrity Contractor (MEDIC) wider latitude in pursuing potential fraud and abuse by MA plans. It found that MEDIC, which is responsible for investigating fraud and abuse by MA and Part D drug plans, devoted nearly all of its investigations to Part D plans. OIG called for structural reforms to unearth instances of fraud and abuse by MA plans, such as misrepresenting enrollment or encounter data to increase payments, receiving duplicative copayments or premiums from beneficiaries, and submitting claims for services not provided.

In May of this year, CMS issued a Final rule that will revise the MA and Part D prescription drug benefit programs regulations to implement statutory requirements, improve program efficiencies, clarify program requirements, and improve payment accuracy. The Final rule is projected to save approximately $1.615 billion over the next 10 years; however, the story may not end there.

Measuring MA Coding Intensity

Subsequent to the CMS actions, Dr. Richard Kronick, director of the Agency for Healthcare Research and Quality (AHRQ) published a report the results of a study that focused on MA. The AHRQ supports research and is designed to improve the outcomes and quality of healthcare with a mission of seeking to reduce costs and medical errors; address patient safety; and broaden access to effective services. They conduct and sponsors research, which helps people make more informed decisions and improve the quality of healthcare services. The study was a product of such research and it called for officials to “consider tightening audit standards with an eye toward cutting payments to health plans that seem to diagnose much higher-than-expected rates of patient illness.” Dr. Kronick and his HHS colleague W. Pete Welch used government data never before made public to show wide variations in levels of diseases in some health plans.

The Risk Score

Medicare payments are based upon complex formula called a “Risk Score,” which means that sicker patients command higher rates than healthier ones. The problem found in the Study was that plans have been found to overstate how sick some patients are to boost Medicare revenue. This practice is widely known as “upcoding” and is the practice of inappropriately submitting codes that are higher CPT procedure codes than were actually performed, resulting in a higher payment by Medicare. The thrust of the findings was that federal officials need to do a better job ferreting out billing errors and overpayments to MA plans that has more than 15 million elderly and disabled Americans participants and cost Medicare about $160 billion this year. The mistakes cited in the study are estimated to cost taxpayers billions of dollars every year. The study notes that CMS had recognized for years that payments to some high-coding plans be cut, but did not follow through. Although the study called for “further policy changes” to correct these weaknesses, no specific recommendations were offered.

What may be interesting to outsiders is that both AHRQ and CMS are in the same department reporting to the HHS Secretary. AHRQ is one of the staff divisions of the Office of the Secretary, and CMS one of the operating divisions. So when AHRQ called on officials to take action, they are referring to CMS and by implication to the OIG auditors. However, even though all three of these agencies are in the same department, under the same Secretary, it does not mean that there is always agreement between the agencies. In fact, CMS has been pretty silent in responding to the Study and its recommendations.

With the pressure to find ways to reduce waste and abuse in health care, it is likely that this will get increased attention in the future and result in more tightening of the MA regulations and added focus on enforcement. Already, all one has to do is refer to the OIG website for enforcement actions against MA plans and resulting CIAs to see this area is getting more attention on that front.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.