Kusserow on Compliance: HHS OIG annual report on Medicaid Fraud Control Units

Medicaid Fraud Control Units (MFCUs) are funded jointly by each state and the federal government. Federal funding is administered by the HHS Office of Inspector General (OIG) with each receiving approximately 75 percent of its total expenditures from the federal government. In fiscal year (FY) 2015, combined federal and state expenditures for the MFCUs totaled approximately $251 million.

Statistical results from 2015 MFCU investigations

  1. 1,553 convictions
  2. 731 civil settlements
  3. $744 million in criminal and civil recoveries
  4. 71 percent of convictions involved fraud
  5. 29 percent of convictions involved abuse or neglect
  6. Half of fraud cases involved unlicensed providers
  7. Personal care services attendants accounted for 439 convictions (or 65 percent of all fraud convictions)
  8. 40 percent of all abuse or neglect convictions were nurse aides, with 160 convictions
  9. 117 drug diversion cases were 8 percent of convictions and $4.4 million in recoveries
  10. All MFCUs reported civil settlements or judgments, ranging from 3 to 69 per Unit
  11. 731 civil settlements and judgments
  12. 279 (38 percent) civil settlements involved pharmaceutical manufacturers
  13. 54 settlements and judgments involved retail and wholesale pharmacies
  14. On average MFCUs recovered almost $3 for every dollar spent

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 © 2016 Strategic Management Services, LLC. Published with permission.

Medicare Advantage, Part D premiums remain relatively stable for 2017

In 2017, Medicare Advantage (MA) premiums will remain stable, and enrollment is projected to increase to an all-time high, according to CMS. Additionally, as a result of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), millions of seniors and people with disabilities enrolled in Medicare will continue to benefit from prescription drug discounts and affordable benefits.

Growth of Medicare Advantage

The MA monthly premium will decrease by $1.19 in 2017, from an average of $32.59 to $31.40. The lower premium is 13 percent less than the average MA premium prior to the passage of the ACA. For 67 percent of MA enrollees, premiums will not increase, and more than 94 percent of Medicare beneficiaries will have access to a $0 premium MA plan. MA plans will also offer enrollees more supplemental benefits, such as dental, vision, and hearing. MA enrollment will increase by more than 60 percent, for a record high of 18.5 million beneficiaries, representing 32 percent of Medicare beneficiaries. Access to the MA will remain nearly universal, with 99 percent of Medicare beneficiaries having access to an MA health plan in their area.

Part D access

The Medicare Part D prescription drug benefit will continue to provide beneficiaries to affordable drug coverage, with the average premium for 2017 remaining relatively stable at an average of $34 per month. This represents an increase of approximately $1.50 from the average Part D premium for 2016. From the enactment of the ACA through July 2016, more abilities benefitted from savings and discounts in the coverage gap, or donut hole, of more than $23.5 billion on prescription drugs—an average of $2,127 per beneficiary.

Mylan CEO highlights EpiPen® access improvement efforts before House committee

Mylan CEO Heather Bresch attempted to deflect the conversation away from the EpiPen® price hike before the House Committee on Oversight and Government Reform by emphasizing Mylan’s efforts to improve access to the device. Dr. Douglas Throckmorton, Deputy Director for Regulatory Programs for the FDA’s Center for Drug Evaluation and Research, also testified about the FDA’s efforts to support the development of new auto-injector products to compete with the EpiPen.

Price hike

When Mylan first purchased the EpiPen from Merck in 2007, the list price for the device was about $57. Today, a 2-Pak is listed at $608. These numbers gained national attention, resulting in outcry from consumers, government scrutiny, and falling stock prices. In response, Mylan doubled eligibility for the patient assistance program allowing consumers to use a savings card when purchasing the EpiPen. Consumers and the press found this action insufficient, especially considering that those without insurance and patients enrolled in federal health care programs are not eligible to use the savings card (see Mylan attempts to mitigate EpiPen® cost hike controversy, Health Law Daily, August 25, 2016).


Throckmorton noted that four epinephrine auto-injectors have been granted FDA approval, but only two are on the market. Amedra’s brand name Adrenaclick® is not currently marketed, but the company is marketing its own generic version. Its Twinject® product was discontinued. Kaleo purchased Auvi-Q® from Sanofi after it was recalled and has not yet returned the product to market. According to Throckmorton’s testimony, the FDA is willing to provide one-on-one guidance for products like an auto-injector that combines drug and device components and is working to assist manufacturers in bringing generic drugs to market.

Bresch believes that the issue of access to the EpiPen is equally critical as the pricing aspect. She testified that in 2007, fewer than one million out of the 43 million consumers at risk for anaphylaxis had access to an auto-injector. Since then, about 80 percent more patients have been reached and 85 percent who obtain the EpiPen pay less than $100 for the 2-Pak. Mylan has also provided 700,000 free EpiPens to schools.

Turning to price, she clarified that Mylan does not receive $600 in profits per 2-Pak sold. Although the wholesale acquisition cost (WAC) is $608, Mylan receives $274 after rebates and fees. After subtracting cost of goods and costs, Mylan’s profit is about $100 per 2-Pak. Bresch outlined four steps Mylan has taken to combat the pricing issue:

  • announcing a generic EpiPen to be priced at $300;
  • providing a direct ship option for the generic;
  • increasing the savings card program benefit to $300, from $100; and
  • doubling the income eligibility limit for receiving free pens.

Medicare Part D costs

The Kaiser Family Foundation (KFF) found that between 2007 and 2014, Part D spending on EpiPens increased by 1151 percent. Although the total number of EpiPen users grew from about 80,000 to 211,500 during that time frame (164 percent growth), the average total spending per prescription went from $71 to $344 (383 percent increase). Part D spent $7 million on EpiPens in 2007 and almost $88 million in 2014.

Out-of-pocket spending increased dramatically as well, even though Part D covers some of enrollees’ drug costs. The increase in users and price resulted in a jump in out-of-pocket spending from $1.6 million to $8.5 million. The report noted that the price of the EpiPen has increased by 74 percent since 2014, but Part D spending information for this time period is not yet available.

HHS uses CIAs to teach fraudulent providers a lesson

The United States reached a $28.5 million settlement with a private for-profit corporation that operates 35 skilled nursing facilities (SNF), most located in California following allegations that the corporation engaged in a scheme to submit false claims to Medicare and TRICARE for medically unnecessary rehabilitation therapy services. Under the settlement, the corporation entered into a corporate integrity agreement (CIA) with the HHS Office of Inspector General (OIG). In an unrelated case, the OIG imposed a $3 million penalty—the largest penalty for CIA violations to date—on another provider that failed to correct improper billing practices during the term of its CIA.

Settlement and CIA for false claims scheme

North American Health Care Inc. (NAHC), its chairman of the board, and its senior vice president of reimbursement analysis will pay $30 million to resolve allegations that they violated the False Claims Act (31 U.S.C. §§3729–3733) by causing the submission of false claims to Medicare and TRICARE for medically unnecessary rehabilitation therapy services provided to skilled nursing facility (SNF) residents. The government alleges that the senior vice president of reimbursement analysis contributed to the conduct by creating the improper billing scheme and that the chairman reinforced the scheme at NAHC facilities. As part of the settlement, NAHC entered into a five-year CIA with the OIG requiring an independent review organization to annually review therapy services billed to Medicare.

Violation of CIA

Kindred Health Care, Inc., paid a penalty of more than $3 million to the federal government for failing to comply with a CIA, marking the largest penalty for CIA violations to date. Kindred entered into a CIA with the OIG after it was discovered that Kindred billed Medicare for hospice care provided to patients who were not eligible for the services. In audits mandated by the CIA, internal auditors found that Kindred failed to correct improper billing practices in the fourth year of its five-year agreement. The OIG caught wind of the noncompliance during several unannounced visits.

“This penalty should send a signal to providers that failure to implement these requirements will have serious consequences,” said Inspector General Daniel R. Levinson. “We will continue to closely monitor Kindred’s compliance with the CIA.”