Annual report to HHS for improving Medicare, Medicaid, and related services

HHS should undertake steps to (1) guard against fraud, waste, and abuse, (2) help beneficiaries and providers, and (3) implement better payment policies, according to the Office of Inspector General’s (OIG) annual report on the top unimplemented recommendations from the previous year. While the report ranged far and wide in its recommendations, including a suggestion to the FDA to improve food safety inspections, the bulk of the report was dedicated to addressing fraud, waste, and abuse in Medicare and Medicaid (OIG Report, July 22, 2019).

Background

Each year, the OIG creates a report that focuses on what it contends are the top recommendations for improvement in HHS programs that were not implemented over the past year. This report offers suggestions to both HHS and the FDA on where they should direct their reform efforts for maximum benefit.

The OIG made the following recommendation pertaining to fraud, waste, and abuse.

Inpatient rehab facilities 

In 2013, Medicare paid $5.7 billion to inpatient rehabilitation facilities (IRF) for care to beneficiaries that was not reasonable and necessary. The errors, the OIG said, were due in part to the fact that the payments to the IRFs were not properly aligned with the costs. The current system gives the IRFs a financial incentive to admit patients inappropriately. CMS is apparently evaluating the payment system, which includes a recently issued final year 2019 IRF prospective payment system final rule to update policies and payment rates for fiscal year 2019.

‘Least costly alternative’ Part B drugs

If the least costly alternative requirement had not been rescinded for Part B drugs, Medicare would have saved $33.3 million in one year ($264.6 to $231.3 million). Once the requirement was removed, utilization patterns shifted dramatically in favor of costlier products.

Part D drug oversight

Medicare Part D spending on compounded topical drugs soared from $13.2 million in 2010 to $232.5 million in 2016. Questionable billing practices seem to be concentrated in a few metropolitan areas. OIG has identified prescribers with troubling order patterns. States are hamstrung in their ability to prevent drug overpayments. State agencies need to know the 340B ceiling prices and which Medicaid claims are associated with 340B drugs to ensure that the claims are paid correctly.

Managed care organization improvements

OIG believes that a significant amount of underreporting of fraud and abuse is occurring in Medicaid involving managed care organizations. For example, even where a managed care organization discovers fraud or abuse, OIG says that it will handle the situation by itself (terminating the contract) rather than report it to CMS. CMS must do more to ensure that the organizations identify and refer fraud and abuse to the state.

Help beneficiaries and providers

In addition, the OIG recommended that CMS analyze the impact of counting time as an outpatient toward the 3-night requirement for skilled nursing facility services (SNF). Beneficiaries with similar post-hospital care needs have different access to SNF services depending upon whether they were outpatients or inpatients because of the requirement that the beneficiary spend at least three nights as an inpatient to obtain post-hospital SNF Medicare coverage. Furthermore, CMS paid an estimated $84.2 million in improper payments between 2013 and 2015 because SNFs incorrectly determined whether the 3-night requirement was met. CMS should consider changes to make the system fairer, which could include counting time as an outpatient.

FDA

The OIG had a single recommendation for the FDA, noting that deficiencies exist in the FDA’s electronic recall data system. The FDA relies too much on voluntary corrections by facilities. Just over half the facilities that were inspected and should have received warning letters actually received warning letters. The FDA also frequently fails to conduct timely follow-up inspections to ensure compliance. The OIG suggested that the FDA act to address these shortcomings.

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.

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

Off-campus outpatient department payment proposal meets industry criticism

CMS’ proposal to revise the outpatient prospective payment system’s (OPPS) method for reimbursing hospitals and physicians for services performed at off-campus locations has received harsh critiques from the industry. Hospitals are concerned that as written, the Proposed rule would require them to enter into financial arrangements with physicians that may otherwise violate fraud and abuse laws. Yet without making such arrangements, hospitals would be required to pay for these off-campus facilities but receive no reimbursement for services.

Proposed rule

The Proposed rule (81 FR 45603) in question is a lengthy one that concerns several programs and entities. One of the many things proposed is implementation of section 603 of the Bipartisan Budget Act, which mandated that certain services furnished off-campus will not be considered outpatient department (OPD) services, but paid under the applicable Part B system. For new off-campus departments that billed for Medicare outpatient services under the OPPS after November 2, 2015, the physician fee schedule will be applied in 2017 for most services.

Hospitals often have multiple departments and facilities spread across an area, and these must meet certain criteria to be considered provider-based. An off-campus outpatient department must be located within a 35 mile radius of the hospital, be held out to the public as part of the hospital, operate its finances fully integrated with the hospital, and provide clinical services integrated with the main hospital.

Objections

The American Hospital Association recently published a letter stating its objection, accompanied by a legal memorandum. Calling the policies “short-sighted and unworkable,” the letter states that hospitals will not be provided reimbursement for some Medicare services under the site-neutral policies. The AHA reasons that off-campus departments that have existing financial arrangements with physicians may run afoul of the Stark law (42 U.S.C. §1395nn) and the Anti-kickback Statute (AKS) (42 U.S.C. § 1320a-7b). The AHA believes that CMS must delay site-neutral policy implementation for at least one year in order to address the significant compliance risks.

The accompanying legal memorandum provided by Hogan Lowells dives deeper into the policy implications. The memorandum finds that the new policy may result in physicians receiving payment for expenses to own and operate the facility, even though it is an off-campus department of a hospital. Hospitals are prohibited from providing free goods and services to referring physicians under the AKS and Stark law. Even furnishing items for a physician to use in his practice may be implicated under these laws, if the items reduce a physician’s cost of doing business and are offered with intent to induce referrals. Under the new policy, physicians would receive a benefit of reimbursement for services when they paid nothing for the location in which the services were provided.

Other comments

Lawrence Vernaglia, Foley & Lardner health attorney, offered the opinion that implementing these new payments would impose unreasonable difficulties on outpatient departments that wanted to add new services. He suggested that CMS alter the requirement that grandfathered facilities remain exactly the same as before the rule was implemented and allow departments to make necessary changes. In addition, because site-neutral payments are unlikely, in his opinion, to reduce outpatient department costs, hospitals may decide to close off-campus facilities which could limit access.

America’s Essential Hospitals (AEH) focused on these access issues in its comments, stating that CMS policies “will perpetuate health care deserts” by limiting flexibility and withholding payments to outpatient departments. It emphasized that establishing and sustaining new off-campus facilities is a challenging process when serving vulnerable patients, and that the policy will make new facilities “economically unsustainable.”

These access comments should have been of little surprise to CMS, as on May 19, 2016, a very large group of senators signed a letter addressed to Acting Administrator Andy Slavitt requesting flexibility in applying the new policies. The senators emphasized the necessity of providing hospitals a predictable landscape while providing them the leeway needed to ensure access. The senators specifically asked for flexibility for services provided at dedicated emergency departments (DEDs) as well as off-campus departments that sought to relocate, rebuild, expand, or change ownership in order to meet a community’s needs.