HHS to receive $73.5B under House funding bill, ACA left out

The 2017 Omnibus Appropriations bill allocates a total of $73.5 billion to HHS for the 2017 Fiscal year, ending September 30, 2017. The House Appropriations Committee released the fiscal year 2017 Omnibus Appropriations bill on May 1, 2017. The bill provides discretionary funding for the federal government and prioritizes health while cutting funding for “ineffective or wasteful programs.”


The HHS funding represents an increase of $2.8 billion above the 2016 enacted funding level and $3.8 billion above the Obama Administration’s budget request. The budget is split among various agencies within HHS to fund what the bill calls “effective, proven programs.”


The bill allocates $34 billion to the National Institutes of Health (NIH) for research related to Alzheimer’s, antibiotic resistance, and precision medicine. The legislation includes funding for critical disease prevention and biodefense activities by allocating $7.3 billion for the Centers for Disease Control and Prevention (CDC). The bill provides the Substance Abuse and Mental Health Administration (SAMHSA) with $3.6 billion for 2017, with a focus on prevention and treatment of opioid and heroin use. The legislation provides $6.4 billion for HRSA Health Resources and Services Administration (HRSA), in part to fund Community Health Centers.

CMS and the ACA

The bill allocates $3 billion for CMS program management and operations and, notably, does not provide funding to implement Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) programs. The bill continues prohibitions and restrictions on use of federal funds related to the ACA.

States try to manage expectations for Medicaid managed care

When CMS updated regulations regarding Medicaid managed care in May 2016, it was the first significant update to these regulations since 2002. Over the past year, as speakers at the American Health Lawyers’ Association Institute on Medicare and Medicaid Payment on March 29, 2017, noted, states have started the multi-year process of complying with the new rules, while dealing with resources issues at the state level and political change in Washington, D.C.

About 80 percent of the 73 million Medicaid enrollees are in some kind of managed care program, according to Lindsey Browning with the National Association of Medicaid Directors. Thirty-nine states and the District of Columbia have contracted with managed care entities to deliver care to all or some of their Medicaid beneficiaries.

Four options

Prior to the issuance of the revised regulations (81 FR 27498, May 6, 2016) states had basically one option for putting a managed care plan in place—requesting a Medicaid state plan amendment from HHS. Under the revised regulations states now have four options to implement managed care waivers under various provisions of the Social Security Act: (1) a Sec. 1932 state plan waiver; (2) a Sec. 1915(a) waiver (waiving competitive procurement process); (3) a Sec. 1915(b) waiver, requiring all enrollees, including dual eligibles and children with special health care needs to enroll in managed care; and (4) a Sec. 1115 waiver (which may permit coverage of services not otherwise covered in Medicaid) (see CMS modernizes Medicaid managed care, Health Law Daily, May 6, 2016).

James Golden, director, Division of Managed Care Plans at CMS, noted that full implementation of the revised regulations will take three to five years, and that the key to success is how well states work with affected stakeholders—both managed care entities and beneficiaries. “CMS expects the states to take the lead in setting standards,” Golden said.

State challenges

Browning highlighted two key challenges that states face – setting up adequate networks of providers so managed care beneficiaries can actually access health care; and limited staff capacity to drive expansion of Medicaid managed care alongside a number of other Medicaid related regulations.

Impact of new administration

A further complication, Browning noted, is the new Trump Administration and new leadership for HHS and CMS. She noted that the new CMS Administrator, Seema Verma, indicated an interest in re-examining all recent rules related to Medicare and Medicaid during her confirmation hearing. Browning also pointed to the Executive Order issued by President Trump which requires all agencies to create a Task Force to review existing regulations with the goal of repealing many of them. Browning noted that both Verma and HHS Secretary Tom Price are interested in increased state flexibility around health programs.

In addition, Browning said that any changes to the Affordable Care Act (ACA) (P.L. 111-148) may impact the new Medicaid managed care regulations, for example, she noted that a key goal of the managed care rule was alignment with qualified health plan requirements under the ACA. Would this change if the ACA’s health insurance Exchanges are eliminated? Finally, she said that any structural changes to Medicaid would likely require revised managed care rules.

Kusserow on Compliance: Medicare parts A and B among OIG’s top management challenges

Annually, the HHS Office of Inspector General (OIG) prepares a summary of the most significant management and performance challenges facing HHS and its progress toward addressing them. Among them are issues relating to Medicare Parts A and B.  The programs are expected to continue increasing significantly due to the growth in the number of beneficiaries and the increase in per capita health care costs. The Annual Report by Medicare’s Board of Trustees estimates that the Trust Fund for Part A will be depleted by 2028, and that the Part B spending growth of almost 7 percent over the next five years will be higher than growth rate for the U.S. economy. Part B is undergoing substantial changes through the Medicare Access and CHIP Reauthorization Act of 2015 and other reforms. The following were the key challenges identified in these programs.

Reducing improper payments. In FY 2015, CMS reported an improper payment rate of 12.1 percent, corresponding to $43.3 billion, for Medicare fee-for-service (Parts A and B). These measures include payments that were paid at an incorrect amount (including both overpayments and underpayments), as well as payments for unnecessary services, services not rendered, billing or coding errors, and claims that did not meet documentation or other Medicare coverage requirements. The OIG found vulnerabilities in hospital billings and returning improper payments to the Medicare Trust Fund. Special focus is needed on improper payments in home health and hospice care vulnerabilities.  Many improper payments have been identified across a number of risk areas, such as insufficient documentation, medical necessity, and homebound determinations.  One-third of stays for hospice general inpatient care have been found as not meeting Medicare requirements, costing $268 million.   There have been findings, as well, of improper payments (some exceeding 50 percent) to Part B providers, such as chiropractors, physical therapists, and certain durable medical equipment (DME) suppliers.

Preventing, detecting, and responding to fraud. The OIG has found that program areas susceptible to widespread fraud include home health and hospice services and DME, including 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.  CMS lacks 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.  There is a need to fully and effectively deploy all available program integrity tools, including those provided under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), such as enhanced screening of provider enrollments.  Weaknesses have been found in contractors’ administration of provider enrollments that could leave Medicare vulnerable to billing by ineligible providers and beneficiaries. Weaknesses included 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. It was intended to aid in tracking enrollment and revalidation trends and to help determine whether 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 hospital (CAH) services that they reviewed, which could have been provided at other nearby facilities that are paid under the Skilled Nursing Facility (SNF) Prospective Payment System.  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.  CMS is implementing a significant overhaul of the payment system for clinical laboratory tests pursuant to the Protecting Access to Medicare Act of 2014 and the new system seeks to better align Medicare reimbursement for lab tests with market rates (taking effect on January 1, 2018).  Concerns continue 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 they plan to rely on reporting labs’ self-attestations of the data’s completeness and accuracy.  Some payment systems create financial incentives that may negatively affect patient care and drive up Medicare costs, such as payment policies for SNFs that give facilities incentives to bill for higher levels of therapy than beneficiaries need.  Some SNFs have been billing for the highest level of therapy at increasing rates that were not supported by patient needs.  Many hospices have been found providing care much longer and received much higher Medicare payments for beneficiaries in inpatient assisted-living facilities than for beneficiaries in other settings, creating incentives for hospices to target these patients, doubling hospice care cost in the last 5 years.

Progress reported by CMS/HHS in addressing the challenges

  • Substantial strides in fighting fraud, waste, and abuse in Medicare and Medicaid have been made through the Health Care Fraud and Abuse Control Program, recovering stolen and misspent funds at a return of $6.10 for every $1 invested.
  • Many OIG recommendations are being implement to implement additional program integrity tools.
  • Prior authorization models and demonstrations are being implemented in certain areas to help ensure items and services are provided in compliance with Medicare coverage, coding, and payment rules.
  • Prior authorization processes are being implemented in certain locations for power mobility devices, repetitive scheduled non-emergent ambulance transport, and certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).
  • 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.
  • There have been reductions in Medicare billing and payments for certain services and geographic areas known for fraud risks.
  • Steps have been taken to improve provider enrollment safeguards and protection for 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.
  •  Enhanced address verification software in PECOS has been reported to better detect vacant or invalid addresses or commercial mailing reporting agencies.
  • Improvements have been reported in oversight and measurement of contractors’ performance and agency corrective actions regarding improper payment vulnerabilities that contractors identify.
  • For laboratory services, reports have been made of significant progress in several key areas, including promulgating regulations, establishing the Advisory Panel, publishing most of the 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

  • Continued improvement of oversight of the performance of contractors in implementing Medicare provider enrollment safeguards is needed to ensure payment accuracy and identify and recover overpayments in a timely manner.
  • Need to improve the completeness, accuracy, and timeliness of its provider ownership data (maintained in PECOS) to support effective oversight.
  • HHS should continue to address and resolve program integrity weaknesses identified.
  • Numerous actions remain to be acted upon and implemented to reduce improper payments for specific services.
  • Need to increase 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.
  • Safeguards need strengthening 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.
  • 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.
  • Need to act 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 its oversight reviews of those SNFs.
  • For laboratory tests, 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.
  • Monitor labs’ reporting to ensure report data are accurate and complete.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

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

Kusserow on Compliance: CMS program integrity reports saving $40B over two years

CMS issued its 2016 mandated annual program integrity report to Congress that addresses activities during fiscal years 2013 and 2014.  The agency reported that its program integrity activities saved Medicare over $39 billion, for a two-year return on investment of $12.4 to 1.  Over 70 percent in aggregate was the result of prevention of improper payments.  Recovery of overpayments represented only about one-fourth of the total savings with Reviews and Audit recoveries of about $5 billion, Recovery Auditor Collections of about $6 billion, and Law Enforcement Referrals of $230 million.  During the same period, CMS had about 1,000 active payment suspensions. Prevention of improper payments continues to increase as CMS proceeds with its proactive approach to program integrity.

The report also addressed the CMS Medicaid Integrity Program.  CMS directed the Audit Medicaid Integrity Contractors (MICs), which identified roughly $50 million in overpayments for recovery by states. Through Audit MIC activities, the states returned the federal share of $11 million to the Treasury. Through the State Medicaid Recovery Audit Programs, the states have recovered a total federal and state share combined amount of about $230 and returned the federal share of $140 million to the Treasury.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

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