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The CMS Fraud Prevention System is Proving to be an Invaluable Targeting Tool for ZPIC Audits.

Under the Fraud Prevention System, ZPICs are using data mining tools such as predictive modeling.

(February 14, 2013): With the passage of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Department of Justice (DOJ) and the Department of Health & Human Services, Office of Inspector General (OIG) were allocated dedicated funding to be devoted to the identification, prevention and prosecution of health care fraud.  These law enforcement agencies were given sufficient funding to significantly ramp-up the number of investigations and prosecutions for violations of civil and criminal fraud violations.  Over the last 15 years, various additional statutes have been passed (such as the Affordable Care Act (ACA)) which have provided both new investigation and prosecution efforts with even more funds and tools to facilitate the identification and review of improper claims.

 I.   Predicting Modeling is Being Used to Fight Fraud:

 While both the DOJ and OIG have remained at the forefront of innovation when it comes to identifying and prosecuting post-payment cases involving alleged fraud, it is important to keep in mind that the Centers for Medicare & Medicaid Services (CMS) launched an ambitious national project of its own in 2010 which was designed not merely to collect overpayments from improper providers, but also to “obstruct” wrongdoers from committing fraud in the first place.  Essentially, CMS has adopted a number of the predictive modeling tools that have been used for many years by credit card companies to thwart thieves.  For instance, if you live in Houston Texas, rarely travel and never purchase alcoholic beverages, a credit card issuer will find it odd that your credit card is now being used in New York City to purchase expensive champagne.  Practically all credit card issuers carefully track their card members’ buying habits and the locations where purchases are made.  When a vendor tries to run such a charge, the credit care issuer may place the transaction on hold, ask to speak to the card holder, or call the card holder to verify that their card has not been stolen.  While the identification strategies may differ, CMS is essentially employing these same tools to identify potentially fraudulent individuals and entities who are seeking to be admitted to the Medicare program.  Moreover, CMS contractors now use these modeling tools to identify specific claims which appear to be improper, thereby blocking their payment in the first place so that the government is not later forced into another “Pay and Chase” situation.

Ultimately, CMS has made it clear that the agency’s old method of “Pay and Chase” is becoming more and more obsolete with each passing day.  As sad as it is, CMS cannot risk the integrity of the Medicare Trust Fund by continuing to employ a pay and chase strategy.  Instead, CMS is now focusing its efforts on keeping bad actors out of the Medicare program in the first place.  A key part of their new strategy involves the effective use of a relatively new (it is now one year old) Fraud Prevention System to identify potential instances of health care fraud prior to the payment of such claims.  CMS’ use of the Fraud Prevention System can greatly reduce the likelihood of wrongdoers being able to enroll in the Medicare system.

What is the Fraud Prevention System?  Essentially, CMS’ Fraud Prevention System initiative allows CMS (and its contractors such as Zone Program Integrity Contractors (ZPICs) and Recovery Audit Contractors (RACs) to conduct state-of-the-art predictive modeling and data analytics of Medicare claims in an effort to ferret out possible fraud.  Notably, CMS now systematically applies this and similar tools to Medicare claims on a nationwide basis.

II.   First Year Results of Fraud Prevention System:

Over the course of its first year in operation, CMS has reported the following accomplishments as a result of their use of Fraud Prevention System:

  • Met and exceeded legislative requirements and timeline.
  • Implemented the Fraud Prevention System nationwide, better coordinating fraud-fighting efforts across program integrity contractors’ jurisdictions.
  • Developed complex and sophisticated Fraud Prevention System models as a result of nationwide implementation, strong stakeholder partnerships, and a rigorous governance process.
  • Achieved a positive return on investment (ROI), saving an estimated $3 for every $1 spent in the first year.
  • Prevented or identified an estimated $115.4 million in payments.
  • Generated leads for 536 new investigations by CMS’s program integrity contractors and augmented information for 511 pre-existing investigations. 

III.   CMS “Twin Pillars” Approach Towards Fighting Health Care Fraud:

According to CMS, the agency’s adaptation of the Fraud Prevention System represents the first of its “Twin Pillars” approach toward fighting health care fraud.  As CMS writes:

“The pillars represent an integrated approach to program integrity—preventing fraud before payments are made, keeping ineligible providers and suppliers and other bad actors out of Medicare in the first place, and quickly taking administrative actions to stop payments to and/or remove wrongdoers from the program once they are detected.”

CMS’ second pillar is represented by the agency’s “Automated Provider Screening (APS) system.  The APS system facilitates the rapid identification of identifies ineligible health care providers and durable medical equipment suppliers both BEFORE they can enroll in the Medicare system and their enrollment and when their eligibility status changes (possibly due to loss of licensure, criminal conviction or exclusion).

To their credit, CMS has now implemented significant changes to the screening and enrollment process which will undoubtedly reduce the number of potential fraudulent claims submitted to the Trust Fund for payment.

IV.   Predictive Modeling and Data Analytics are Providing Targeting Data for ZPIC Audits and RAC Audits:

Using the Fraud Prevention System for predictive modeling and data analytic purposes can be effective targeting tool, thereby providing ZPICs and RACs with a narrowed list of health care providers who are outliers (in terms of the services they are providing or their coding/billing practices) to be audited.  ZPIC audits can take a number of forms, ranging from an unannounced visit to a provider’s place of service to a review which results in the ZPIC’s recommendation to CMS that a provider’s Medicare number should be revoked or suspended.

Over the course the first year, CMS estimates that it has “stopped, prevented, or identified an estimated $115.4 million in payments.”  When compared to the cost of the program, CMS calculated that the Fraud Prevention System resulted in an estimated savings, prevention or recovery of $3 for every $1 spent.

During this same time period, CMS’ use of this system resulted in 536 new investigations by agency  program integrity contractors (including ZPIC audits) and helped provide additional support for approximately 511 investigations which had been initiated prior to the implementation of the Fraud Prevention System.  Importantly, CMS indicated that the Fraud Prevention System has helped them target wrongdoers, focus their audit and investigative resources, and take administrative action against health care providers suspected of engaging in fraudulent or improper activities (administrative action might include temporary suspension from the program or revocation of a provider’s Medicare number – both of which are extremely serious and are likely to result in the bankruptcy of a company).

V.     Conclusion:

For many years now, we have strongly recommended that health care providers actively engage in a “gap analysis” of their business, care, coding and billing practices.  Without such an analysis, it is extremely difficult for a provider to know (with any real level of certainty) whether they are currently “compliant” with applicable laws, rules and regulations OR whether they are merely continuing down the wrong path.  A gap analysis is an integral part of an effective Compliance Plan and Program.  If you have not already done so, we encourage you to initiate this process so that you can learn whether your current practices may appear to be aberrant to CMS or its program integrity contractors.

Healthcare LawyerRobert W. Liles serves as Managing Partner at Liles Parker, a boutique health law firm.  Liles Parker attorneys represent health care providers around the country and are more than happy to work with your local counsel, if needed.  Should you have any questions regarding these issues, call Robert for a free consultation.  He can be reached at:  1 (800) 475-1906.

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