Management | Data mining

A high-tech answer to health care frare fraud

Data analysis aids in finding abuses of Medicare’s rapid payment system

UPDATE: This article was updated at 11:55 a.m., Friday, Jan. 16, 2009, to indicate that Haywood Talcove is chief executive officer of LexisNexis Special Services, a division of LexisNexis.

South Florida is the home of sunshine, beaches and, as federal investigators have discovered, fraudsters who take advantage of gaps in federal claims processes for senior citizen health care services to swindle the government.

Suppliers for durable medical equipment, in particular, such as wheelchairs and oxygen machines, have been getting away with untold millions of dollars because the Centers for Medicare and Medicaid Services (CMS), by law, must pay out claims within 30 days. With more than 1 billion claims annually, it is difficult to ever fully review them all, said Kimberly Brandt, CMS director of program integrity.

The Health and Human Services Department agency has begun to strengthen oversight of shady medical equipment suppliers by combining technology-based fraud detection with better collaboration with health care providers and seniors, making sure that beneficiaries receive the equipment and services being billed on their behalf.

The key technological component of the effort is CMS’ increasingly aggressive use of data analysis, which has allowed CMS to detect a major uptick in payments for home health care services in the Miami area, Brandt said.

Payments to home health care agencies there in 2007 had increased nearly 25 percent over the previous year, and the total number of payments for Miami-Dade County was significantly higher than anywhere else in the country.

“It was a huge red flag. Even though we had money that went out the door, because we were able to identify that it was on the uptick, we’ve now been able to take aggressive action by suspending payments to many of those providers,” Brandt said.

CMS recently revoked the billing privileges of 1,100 suppliers for durable medical equipment in South Florida and California because they did not meet Medicare’s standards, said Kerry Weems, CMS’ acting administrator. The agency has taken other steps also intended to improve its oversight of suppliers.

CMS pays $8 billion annually for the medical equipment suppliers’ program, which has long been vulnerable to waste and fraud, according to auditors from the Government Accountability Office and HHS’ inspector general.

Typically, Medicare has paid the claims and tried to recover the funds if fraud or abuse later becomes apparent.

Now, CMS tries to avoid making such payments in the first place.

“It’s been about a yearlong effort so far,” Brandt said. “Rather than doing the pay-and-chase model that we had done before, we’ve been trying to be more aggressive in doing proactive identification of potential fraud issues so we can stop the money before it goes out the door.”

Auditors also spurred CMS to take more substantial action. In August 2008, an HHS IG’s report found that the error rate for a sample of claims that CMS paid in fiscal 2006 was much higher than the agency reported. CMS had reported to the IG that the 2006 error rate for durable medical equipment suppliers was 7.5 percent, or $700 million in improper payments. In a review of 363 cases, IG auditors found the error rate was actually 28.9 percent, said IG Daniel Levinson. The errors were the result for the most part of CMS contractors making determinations based on inadequate data and documentation.

“We continue to recommend that CMS obtain all medical records, including, but not limited to, physicians’ records, for DME claims and contact the beneficiaries names on high-risk claims,” Levinson said.

Timothy Hill, CMS chief financial officer, said the actions to accomplish the IG recommendations to strengthen error measurement efforts could cost the agency $2.5 million more than what it currently spends, a 20 percent increase.

“The best outcome is to strengthen our fraud fighting efforts in DME, as well as improve our measurement activities,” Hill said. “To that end, we want to ensure that any new program integrity investments are directed at highly vulnerable providers and geographic areas and leverage enrollment and enforcement activities, in addition to measurement activities.” Now CMS interviews senior beneficiaries and physicians to verify that the services have met the Medicare definition of reasonable and necessary and that the physician had determined that the beneficiary needed and met the criteria for home health services under Medicare before making payments, Brandt said.

“It’s a process that is resource intensive but is paying big dividends,” she said.

Integration will reveal cheats An integrated repository will allow agency personnel to easily access claims data from Medicare hospital and physician claims, medical equipment suppliers, managed care and prescription drug providers. Currently, contractors house their own categories of data. Also, 10 states so far have provided their Medicaid data to be loaded into the repository.

As the amount of data accessible through the repository grows, the ability to identify patterns and abnormalities increases, Brandt said.

Now, a provider committing fraud in California can elude detection in another state because the systems of CMS claims contractors don’t talk with each other. CMS is beginning to integrate its contractors’ repositories, but it will take three or four years to complete, she said.

CMS is also expanding a pilot in which LexisNexis cross-checked 248 million claims filed over four years in Illinois and Washington state with the company’s public records database for medical licenses, criminal convictions, professional sanctions and death records. Of the $56 billion in total claims paid out to physicians and medical equipment suppliers, $3.2 billion was suspicious, including deceased doctors writing prescriptions, said Haywood Talcove, chief executive officer of LexisNexis Special Services, a division of LexisNexis.

“Using public records, we can identify fraudsters,” he said.

CMS and states are putting controls in systems that didn’t have them before.

CMS will get better at it because the economy is forcing the government to be more efficient, Talcove said.

CMS’ Hill has also made it a priority for the agency to be more aggressive about putting internal controls in place to make sure it pays claims correctly, Brandt said.

CMS also has hired program integrity contractors as part of its national Recovery Audit Contractors program to determine the veracity of claims for hospital and physician services under the Medicare A and B program. Recovery audit contractors review provider claims to supplement the oversight of the Medicare administrative contractors, Brandt said. They review claims after CMS pays them it, then they have to try and get back the money.

Hill made the decision for a shift in management strategy to concentrate more on the pre-pay review of medical equipment suppliers since the audit contractors were expanding nationwide post-pay reviews over the next few months, she said. The three-year, six-state demonstration program had recouped more than $900 million in overpayments and returned $38 million in underpayments to providers.

“The question is always where to put our resources,” Brandt said. “For prepay review, it’s very resource intensive.

We put it in our most vulnerable area where the highest dollar claims are, where we see the most fraud. An area like durable medical equipment, DME suppliers, and even physicians, that’s a big area with a lot of dollars at stake.” CMS doesn’t experience much fraud from hospitals, she said. Inaccurate payments to hospitals are much more likely to come from honest mistakes, such as someone entering an incorrect diagnostic code on a patient’s medical record. It’s easier to detect because no one is deliberately trying to hide it, she said, and “you also know that the hospital’s going to be there, so you can go back and recoup it.”


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