A COMPREHENSIVE STRATEGY TO FIGHT HEALTH CARE WASTE, FRAUD AND ABUSE
Overview: Since 1993, the Clinton Administration has focused unprecedented attention on the fight against fraud, abuse and waste in the Medicare and Medicaid programs. Today, the result is a series of investigations, indictments and convictions, as well as new management tools to identify wasteful mispayments to health care providers. In 1999, HHS increased health care convictions by 57 percent over 1998 levels and by more than 80 percent since 1992. As a result, the federal government last year recovered nearly $500 million from health care prosecutions. Since 1996, aggressive enforcement has recovered nearly $1.9 billion, while other efforts to prevent improper and wasteful spending have saved taxpayers an estimated $60 billion since 1993.
A heightened focus on fraud and abuse since 1993 by the HHS Inspector General, the FBI and Department of Justice, HHS' Health Care Financing Administration (HCFA) and others throughout government is yielding a new, more detailed picture of fraudulent activities aimed at the Medicare and Medicaid systems. In his fiscal year 2001 budget, President Clinton unveiled a new investment of more than $40 million to ensure a swift and coordinated response to waste, fraud and abuse involving the private insurance companies, which, by law, process and pay claims on behalf of Medicare. The budget also includes proposals to reduce overpayments and fight waste, which would save the Medicare program $7.9 billion over five years.
In 1995, Secretary Shalala launched Operation Restore Trust, a ground-breaking project aimed at coordinating federal, state, local and private resources and targeting them on areas most plagued by abuse. During its two-year demonstration phase, the project identified $23 in overpayments for every $1 of project costs. In addition, the Secretary led the way toward steady, guaranteed funding for anti-fraud efforts by the HHS Inspector General, included in the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
FIGHTING WASTE, FRAUD AND ABUSE IN MEDICARE AND MEDICAID
Improper Payments Decline. In 1994, Congress passed the Government Management Reform Act, requiring an annual audit of all government programs according to private sector accounting principles. These annual audits have given HCFA a new tool to measure its progress in combating improper payments to Medicare providers. Audits are conducted by the HHS Inspector General with HCFA's full cooperation.
According to the Inspector General, the Medicare error rate has declined dramatically, from 14 percent in fiscal year 1996 to 7.97 percent in fiscal year 1999. The Inspector General credits this improvement to HCFA's efforts under the Medicare Integrity Program; fraud and abuse initiatives; improved provider compliance; outreach efforts; and HCFA's corrective action plan.
Operation Restore Trust. In May 1995, President Clinton and Secretary Shalala launched Operation Restore Trust (ORT), a comprehensive anti-fraud initiative in five key states designed to test the success of several innovations in fighting fraud and abuse in the Medicare and Medicaid programs. As partners, HCFA, the HHS Inspector General, and the HHS Administration on Aging are putting this plan into action. During the two year demonstration, ORT identified $23 in overpayments for every $1 spent looking at suspected trouble spots in Medicare, including home health care, skilled nursing facilities, and providers of durable medical equipment. In May 1997, Secretary Shalala announced that with its successes demonstrated, ORT techniques would be expanded nationwide and applied to additional areas of fraud and abuse.
Fraud and Abuse Hotline. HHS has expanded the 1-800-HHS-TIPS hotline started in 1995 to report fraud and abuse in Medicare and Medicaid programs, assisting callers in either English or Spanish. In February 1999, the Administration joined with the AARP to launch an initiative called "Who Pays? You Pay" to educate Medicare beneficiaries about how to identify and prevent improper payments and fraud. Since the campaign kick-off, more than 450,000 callers contacted the hotline.
Administration on Aging Ombudsman Program. As a partner in Operation Restore Trust the Administration on Aging has trained thousands of paid and volunteer long term care ombudsman and other aging services providers to recognize and report fraud and abuse, including problems in nursing homes and other long term care settings.
Comprehensive Plan for Program Integrity. In February 1999, HCFA released its first Comprehensive Plan to highlight the agency's overall strategy for reducing fraud and abuse. The plan defined five overall focus areas: making medical review and benefit integrity activities more effective, implementing the Medicare Integrity Program, strengthening payment safeguards for new benefits in the Balanced Budget Act of 1997, promoting provider integrity and developing millennium contingency plans. In addition, the plan targets vulnerabilities in five settings with known risks: inpatient hospital, congregate care, managed care, community mental health centers, and nursing homes.
Guaranteed and Expanded Funding. In August 1996, President Clinton signed the Health Insurance Portability and Accountability Act (HIPAA) legislation into law, which for the first time created a stable source of funding for fraud control. This law established the Health Care Fraud and Abuse Control Account, a key proposal of the Clinton Administration, to which money is deposited annually from the Medicare Part A Trust Fund to help finance expanded fraud and abuse control activities. The special funding is divided between HHS and the Department of Justice and is used to coordinate federal, state and local health care law enforcement programs, conduct investigations, provide guidance to the health care industry on fraudulent health care practices, and establish a national data bank to receive and report final adverse actions against unscrupulous health care providers and suppliers. The HCFAC Account will increase to $182 million in FY 2001, a $24 million increase over FY 2000.
Expanded Office of the Inspector General (OIG). Funding from the Health Care Fraud and Abuse Control Account has enabled the OIG to place personnel in an additional 19 states to carry out enforcement actions, increasing from 26 to 45 the number of states in which the OIG is present.
Increased Efforts by the Department of Justice (DOJ). Funding from the Health Care Fraud and Abuse Control Account has also enabled the Department of Justice, including the FBI, to step up its efforts to investigate health care fraud. DOJ has increased resources, focused investigative strategies, and improved coordination among law enforcement agencies. The number of successful legal action against fraud and other crimes in the health care field has increased by more than 240 percent since FY 1992.
Hiring Special Program Integrity Contractors. In May 1999, using specific contracting authority provided by HIPAA, HCFA chose 13 companies, including financial management and technology companies, as its first-ever contractors devoted to protecting the Medicare Trust Fund. These contractors, who have health-care expertise, are tackling key tasks, including audits, medical reviews, data analysis, site visits and provider education, to stop and prevent fraud, waste and abuse.
Rewards for Fraud and Abuse Information. The Incentive Program for Fraud and Abuse Information, which was created under HIPAA, was implemented in July 1998. Under this program, Medicare beneficiaries and others who report fraud and abuse in the Medicare program can be paid rewards if their information leads directly to the recovery of Medicare money.
Tightening Standards for Home Health Care Providers. Because of extensive evidence of abuse, home health was one of the initial targets of Operations Restore Trust:
In September 1997, HHS imposed a four-month moratorium on enrollment of new home health care providers in the Medicare program while new regulations were developed to keep unscrupulous and unqualified providers from entering the program. The new regulations included provisions requiring home health agencies to post surety bonds of at least $50,000 before they can enroll or re-enroll in Medicare, requiring a minimum number of patients to establish an agency's experience prior to seeking Medicare enrollment, and requiring agencies to submit detailed information about all businesses they own to prevent the use of improper financial transactions. With the new regulations in place, the moratorium was lifted in January 1998.
Medicare also has doubled the number of home health audits and increased claims review by 25 percent. It has also increased survey frequency for problem agencies and secured authority to exclude providers convicted of health care-related fraud, as well as establishing minimum capitalization requirements to ensure that new agencies have enough funds on hand to operate responsibly. HHS also now requires home health agencies to be more accountable for the care they provide, and to conduct criminal background checks on the aides they hire.
In October 2000, HCFA expects to implement a new prospective payment system for home health services. This system includes incentives to provide for care efficiently and avoid unnecessary visits. The new system will pay providers prospectively, similar to the way Medicare pays hospitals.
New Requirements for Durable Medical Equipment Suppliers. Payment for durable medical equipment was another area selected by Operation Restore Trust because of evidence of extensive abuse. In 1998, HHS proposed new regulations for suppliers of DME (including wheelchairs, canes, and other medical supplies), aimed at assuring that beneficiaries would be served by legitimate businesses. The new regulations would require suppliers to obtain surety bonds and would ban DME supplier telemarketing. It would also require suppliers to have a physical office and a listed phone number, and would codify a requirement that suppliers re-enroll in Medicare every three years. In addition, it would prohibit suppliers from reassigning a supplier number, and note that any deliberate misrepresentation or concealment of material information in billing number applications may subject the supplier to liability under criminal and civil laws. At the same time, Medicare began conducting on-site inspections of medical equipment suppliers when they apply to participate in the program and when they re-enroll, to assure that beneficiaries are served by legitimate businesses. Last year, HHS began a competitive-bidding demonstration in Polk County, Florida, saving beneficiaries and Medicare 17 percent on certain supplies while protecting quality and access. This year, a second demonstration is planned.
Targeting fraud in Community Mental Health Centers. In September 1998, HHS announced new actions to ensure that Medicare beneficiaries with acute mental illness receive quality treatment in community mental health centers and that Medicare pays appropriately for those services. As part of a comprehensive action plan, HHS began termination actions against centers that were unable to provide Medicare's legally required core services, and required others to come quickly into compliance. HHS also demanded repayment of money that had been paid inappropriately for non-covered services or ineligible beneficiaries. The actions came after HCFA and the HHS Inspector General found providers enrolled in the program who were not qualified to deliver psychiatric services, as well as enrollment of patients who were ineligible for the Medicare benefit, and services billed to Medicare that were not appropriate. As part of Operation Restore Trust, HCFA had begun in 1997 to identify patterns of fraud and abuse of the benefit at community mental health centers. In 1998, HCFA followed up with site visits to about 700 Medicare-participating centers and applicants. In addition, in 1999, HHS charged one of its MIP contractors with conducting unannounced site visits for all CMHC applicants to ensure that they provide all the services required for Medicare enrollment.
The Medicare Integrity Program (MIP) and Payment Safeguards. This system of payment safeguards, also authorized by HIPAA, identifies and investigates suspicious claims throughout Medicare, and ensures that Medicare does not pay claims other insurers should pay. MIP also ensures that Medicare only pays for covered services that are reasonable and medically necessary. HCFA's current payment safeguards are already paying dividends in cost savings. These safeguards comprise a comprehensive system which attempts to identify improper claims before they are paid, to prevent the need to "pay and chase." Some of the payment safeguard activities include the Medicare Secondary Payer Program, medical review, cost report audits and anti-fraud activities. Payment safeguard activities saved an estimated $7.8 billion in FY 1997 and $8.5 billion in FY 1998. Under the Medicare Integrity Program, HCFA will receive $680 million in FY 2001 for program integrity activities, up from $630 million in FY 2000.
HCFA in 1999 hired a new national contractor to streamline efforts to ensure that Medicare does not pay health-care claims that are the responsibility of private insurance companies. The contract uses private-sector expertise to build on the roughly $3 billion Medicare saves each year by ensuring that private insurance companies pay their share of beneficiaries' health-care bills. By consolidating these efforts into a single contract, Medicare expects to increase its savings while improving service to beneficiaries, providers and insurers.
Improving Health Care Industry Compliance. The HHS Office of the Inspector General has issued compliance program guidance for hospitals to assist in developing measures to combat fraud and abuse in the hospital industry. In addition, the OIG released guidelines identifying steps for clinical laboratories, hospitals, home health agencies, and third-party billers to undertake to improve adherence to Medicare and Medicaid statutes, regulations, and program directives. The guidelines are part of the Inspector General's continuing efforts to work with health care providers to promote voluntary compliance with the applicable statutes, regulations, and program requirements pertaining to federal and other health care programs. In addition, the OIG has issued fraud alerts, advisory opinions and other guidance as part of an ongoing effort to promote the highest level of ethical and lawful conduct by the health care industry.
Correct Coding Initiative. In 1994, HCFA began the Correct Coding Initiative by awarding a contract for the development of correct coding policy for all physician billing codes referred to as current procedural terminology (CPT) codes. Implemented in 1996, this enhanced pre-payment, control and associated software update resulted in $215 million in savings in FY 1997.
Substantive Claims Testing. HCFA is now working to develop a substantive testing process to help determine not only whether claims are paid properly, but also whether services are actually rendered and medically necessary.
Education Efforts. HCFA's contractors educate the provider billing community, including hospitals, physicians, home health agencies and laboratories about Medicare payment rules and fraudulent activity. Last year, Medicare began a $1.3 million innovative campaign featuring interactive computer courses to allow providers to study specific topics and to ensure accurate claims. This education effort complements Medicare's estimated $52 million in investments to educate providers about program requirements.
Tough New Requirements for Medicare and Medicaid Participants. President Clinton introduced new legislation in May 1997, the "Medicare and Medicaid Fraud, Abuse and Waste Prevention Amendments of 1997," that established tough new requirements for individuals and companies that wish to participate in Medicare and Medicaid. Most of the Clinton Administration's recommendations were included in the budget bill signed by the President on August 5, 1997, including:
Penalties for services billed by a provider who has been excluded by Medicare and Medicaid.
Penalties for hospitals who contract with providers who have been excluded by Medicare and Medicaid.
Civil monetary penalties levied on providers that violated the anti-kickback statute, under which the physician received some kind of incentive for referring patients.
Requiring health care providers applying to participate in Medicare or Medicaid to provide their Social Security numbers and their employer identification numbers so HCFA can check an applicant's history for past fraudulent activity.
Barring convicted felons from participating in Medicare and Medicaid.
Proposed FY 2001 Anti-Fraud and Abuse Legislative Package. To build on unprecedented success in fighting health care fraud, waste, and abuse, President Clinton's FY 2001 budget includes further anti-fraud and abuse legislative proposals that would save Medicare some $3 billion over five years. The package includes measures that would eliminate the physician markup on outpatient drugs; reduce misuse of and clarify eligibility for partial hospitalization benefit; require private insurance companies to provide Medicare Secondary Payer information; and reduce Medicare reimbursement for erythropoietin (EPO).
Administration on Aging "Fraud Buster Projects." The Administration on Aging (AoA) has trained thousands of paid and volunteer long-term care ombudsman, insurance counselors and other aging service providers to recognize and report fraud and abuse in nursing homes and other service settings. In FY 2000, the AoA will award $4.6 million in grants to 14 states to recruit and train thousands of retired professionals to serve as health care "fraud busters" who work with older persons in their communities to review benefits statements and report potential cases of waste, fraud, and abuse. Millions of persons have been reached through the projects' public service announcements, community education events, training sessions, and informational materials.