Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

The GAO has issued a report on the methodology CMS uses to calculate a risk adjustment for Medicare Advantage (MA) plans, updating an analysis in provided in January 2012. The GAO previously reported that differences in diagnostic coding between MA plans and Medicare FFS resulted in inaccurately-high MA risk scores and excessive payments to MA plans. While CMS made an adjustment for coding differences in 2010, the GAO concluded that the adjustments were insufficient. Based on an analysis of two years of data available since the GAO completed its analysis for the January 2012 report, the GAO found that the cumulative impact of coding differences on risk scores increased from 2010 through 2012, and that CMS's adjustment to risk scores to account for diagnostic coding differences was too low. The GAO estimates that as a result, at least $3.2 billion in excess payments were made to MA plans over three years. The GAO continues to recommend that CMS update its methodology to more accurately account for differences in diagnostic coding between MA plans and Medicare FFS. 
 

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A recent GAO report found that CMS’s Medicare low-volume payment adjustment (LVPA) for dialysis facilities has not been effectively targeted at low-volume facilities with high costs. Specifically, based on a review of claims and cost reports, the GAO estimates that Medicare overpaid about $5.3 million in 2011 to dialysis facilities that were ineligible for the LVPA, but did not pay an estimated $6.7 million to facilities that were eligible. In addition, in 2011 almost 30% of LVPA-eligible facilities were located within 1 mile of another facility and more than half were within 5 miles, which the GAO believes indicates that the facilities “might not have been necessary for ensuring access to care.” The GAO also asserts that the LVPA program “gives facilities an adverse incentive to restrict service provision” since facilities could lose substantial Medicare revenues if they reach the program’s treatment threshold. To more effectively target the LVPA and promote payment accuracy, the GAO recommends that CMS, among other things, restrict payments to low-volume facilities that are isolated; consider changing the LVPA to a tiered adjustment to reduce the incentive for facilities to restrict service provision to avoid reaching the treatment threshold; recoup LVPA payments made in error; and improve guidance. HHS generally concurred with the recommendations. 

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In response to a request from Rep. Henry Waxman, Ranking Member of the House Committee on Energy and Commerce, the GAO has issued a report examining Pharmacy Services Administrative Organizations (PSAOs), which are used primarily by independent pharmacies to interact with drug wholesalers, third-party payers, and other entities. The report includes data from 2011 and 2012 regarding:

1. the number of PSAOs (at least 22) and the number of pharmacies that contract with PSAOs (between 20,275 and 28,343);
2. the services PSAOs offer (including contract negotiation, communication, and help-desk services, among others) and how they are paid for these services (usually a monthly fee for a bundle of services paid by a member pharmacy); and 
3. the entities that own PSAOs (the majority are owned by drug wholesalers and independent pharmacy cooperatives) and the relationships between owners and the pharmacies they represent (which vary).

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The GAO has examined how private-sector efforts to adjust physician payments to reflect quality and efficiency could be applied successfully to the Medicare program.  As previously reported, CMS developing a physician value-based payment modifier (Value Modifier), which was mandated by the ACA as a way to reward physicians for providing higher quality and more efficient care. The Medicare Value Modifier is being phased in from 2015 to 2017, with 2013 serving as the initial performance period for the 2015 Value Modifier. Under the final 2013 Medicare physician fee schedule rule, the Value Modifier initially will apply to all groups of physician with 100 or more eligible professionals. These groups will be able to choose two payment calculation options: (1) Value Modifier based strictly on participation in the Physician Quality Reporting System, or (2) Value Modifier based on quality tiering, with payments based on quality and costs. Based on a review of successful private-sector practices, the GAO recommends that CMS: consider rewarding physicians for performance improvement in addition to meeting absolute benchmarks; make more timely Medicare payment adjustments to enhance the significance of the incentive to physicians; and develop a strategy to reliably measure the performance of solo or small group practices. HHS concurred with the recommendations.

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A recent GAO report, “Medicaid: More Transparency of and Accountability for Supplemental Payments Are Needed,” reviews federal oversight of supplemental Medicaid payments, including how information in required disproportionate share hospital (DSH) audits and reports facilitates CMS’s oversight of DSH payments. The report also discusses the lack of similar information for non-DSH payments (such as payments to Medicaid providers serving high-cost Medicaid beneficiaries). The GAO suggests that such audits could indicate “the extent to which payments to individual providers are consistent with the Medicaid payment principles of economy and efficiency,” particularly in light of GAO findings that 39 states made non-DSH payments to 505 DSH hospitals that, together with their regular Medicaid payments, exceeded the hospitals' total costs of providing Medicaid care by about $2.7 billion. The GAO recommends steps to improve the transparency and accountability of supplemental payment, particularly non-DSH supplemental payments, including requiring CMS to: (1) improve state reporting of non-DSH supplemental payments, including requiring annual reporting of payments made to individual facilities; (2) clarify permissible methods for calculating non-DSH supplemental payments; and (3) require states to submit an annual independent certified audit verifying state compliance with permissible methods for calculating non-DSH supplemental payments.

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The GAO has issued a report examining selected consumer protection requirements for dual eligible beneficiaries -- low-income seniors and individuals with disabilities enrolled in both Medicare and Medicaid. The report summarizes such consumer protections for dual eligible beneficiaries (e.g., access to primary care providers, appeals processes) in the Medicare fee-for-service (FFS) and Medicare Advantage programs, along with Medicaid FFS and managed care plans. The report also highlights compliance and enforcement actions taken by CMS and selected states against managed care plans to help ensure that MA and Medicaid managed care organizations complied with relevant consumer protection requirements. For details, see the complete report, “Medicare and Medicaid: Consumer Protection Requirements Affecting Dual-Eligible Beneficiaries Vary across Programs, Payment Systems, and States.”

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In light of a continued high rate of Medicare fee-for-service improper payments (8.6% in FY 2011), the GAO recently assessed the use of Medicare prepayment edits and CMS's oversight of Medicare Administrative Contractors (MACs) that process claims.  In the report, "Medicare Program Integrity: Greater Prepayment Control Efforts Could Increase Savings and Better Ensure Proper Payment," the GAO estimates that while the use of prepayment edits saved Medicare at least $1.76 billion in FY 2010, it believes savings could have been greater if prepayment edits had been more widely used. For instance, the GAO found more than $100 million in Medicare payments that were inconsistent with a sample of three local coverage determinations (pertaining to monitored anesthesia care, parathormone, and noninvasive cerebrovascular studies) and that could have been identified using automated edits. The GAO also found weaknesses associated with CMS edit processes based on national policies, such as lack of specific time frames for implementing edits, flaws in the structure of some edits, and lack of centralized implementation. GAO recommends that CMS take a series of steps to strengthen its use of prepayment edits, such as implementing medically unlikely edits that assess all quantities provided to the same beneficiary by the same provider on the same day; encouraging more information sharing about effective edits, and assessing the feasibility of increasing incentives for edit use. HHS generally agreed with the recommendations.

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A recent GAO report, “Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication and Improve Efficiency,” points to a number of shortcomings in CMS Medicaid program integrity efforts. Among other things, the GAO found that Medicaid Integrity Group's (MIG) oversight and support activities had mixed results in achieving the goal of enhancing program integrity efforts. Moreover, the MIG’s hiring of separate review and audit contractors for its National Medicaid Audit Program was inefficient and duplicative. The GAO recommends that CMS: eliminate duplication by merging contractor functions, use comprehensive reviews to better target audits; work with states to ensure reliable reporting of their program integrity recoveries; discontinue state program integrity assessments that overlap other, more current data sources; and reevaluate its return on investment methodology.

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The Health Information Technology for Economic and Clinical Health (HITECH) Act provided funding to promote the adoption and meaningful use of certified EHR technology, including a Medicaid EHR program. In 2011, the first year of the Medicaid EHR program, 1,964 hospitals and 45,962 professionals were awarded a total of approximately $2.7 billion in Medicaid EHR incentive payments, according to a GAO report describing the characteristics of providers that participated in the program in 2011. Hospitals claimed $1.7 billion in these Medicaid EHR incentive payments, with a median payment amount of $613,512. Almost half of the hospitals (46%) receiving payments were located in the south, while the smallest proportion (15%) were located in the northeast. Also among hospitals receiving payments, 62% were located in urban areas, 80% were acute care hospitals, 57% percent were nonprofits, and 57% were not members of a chain, while hospitals with the highest number of total beds were twice as likely to receive an incentive payment than those with the fewest number of beds. With regard to professionals, who were awarded a total of $967 million in incentive payments, more than three times as many eligible professionals participated in the Medicaid EHR program than in the Medicare EHR program. The largest proportion of professionals who received a Medicaid EHR incentive payment for 2011 were in the south (37%), compared to 20% in the midwest. As with hospitals, most professionals receiving EHR incentive payments (83%) were located in urban areas. Additional details can be found in the full report, “Electronic Health Records: Number and Characteristics of Providers Awarded Medicaid Incentive Payments for 2011."

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A recent GAO report suggests that the bundled Medicare payment for dialysis care over-compensates dialysis facilities for end-stage renal disease (ESRD) drug costs. By way of background, the Medicare ESRD payment bundle was expanded in 2011 to include payment for injectable ESRD drugs and their oral equivalents and certain other items and services for which Medicare previously had paid separately. According to the GAO, utilization of ESRD drugs was about 23% lower on average in 2011 than in 2007, the year on which 2011 rates were based (attributed largely to a decline in the utilization of erythropoiesis stimulating agents). The GAO estimates that Medicare dialysis spending would have been $650 million to $880 million lower in 2011 if the bundled rate were rebased to reflect the 2011 utilization level of ESRD drugs, and potential savings could be even more significant in future years. According to the report, CMS does not believe that the statute provides it with explicit authority to rebase rates. The GAO therefore recommends that Congress require the Secretary of HHS to rebase the ESRD bundled payment rate as soon as possible and on a periodic basis thereafter, using the most current available data.

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The OIG’s December 2012 Compendium of Unimplemented Recommendations highlights unimplemented OIG recommendations that the OIG believes represent significant opportunities for action in FY 2013. The report includes recommendations made through FY 2011 that were not fully implemented as of December 2012. The OIG’s priority open recommendations, which in the OIG’s view represent the most significant opportunities to positively impact HHS’s programs, include the following:

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A recent Government Accountability Office (GAO) report reviews CMS efforts to implement the Fraud Prevention System (FPS), which uses predictive analytics technologies to identify fraudulent claims before they are paid. CMS and its program integrity contractors began using the FPS in July 2011 in compliance with the Small Business Jobs Act. According to the GAO, while the FPS can generate automatic alerts on specific claims and providers for further review and investigation, the system has not yet been integrated with CMS’s payment-processing system to block payment until the suspect claim can be determined to be valid. The GAO also reports that CMS has not yet defined or measured quantifiable benefits or established appropriate performance goals for the FPS. The GAO therefore recommends that CMS develop schedules for completing integration with existing systems, define and report to Congress quantifiable benefits and measurable performance targets and milestones for the FPS, and conduct a post-implementation review of FPS. In a related development, on November 28, 2012, the House Energy and Commerce Subcommittee held a hearing entitled "Examining Options to Combat Health Care Waste, Fraud and Abuse" to examine CMS’s use of predictive analytics technologies.

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The GAO has issued a report analyzing trends related to high-expenditure Medicare Part B drugs, which are drug commonly administered by a physician or under a physician's close supervision in physicians' offices and hospital outpatient departments. The report provides data on: (1) the highest-expenditure Medicare Part B drugs in 2010 and utilization and spending trends for these drugs, and (2) nationwide spending for the total U.S. population for these drugs and Medicare's share of this spending. Among other things, the GAO found that the 55 highest-expenditure Part B drugs represented $16.9 billion in spending in 2010, or about 85% of all Medicare Part B drug spending. Most of these 55 drugs increased in expenditures, prices, and average annual cost per beneficiary from 2008 to 2010. Spending attributable to Medicare beneficiaries accounted for the majority of the estimated total U.S. spending for 35 of the 55 highest-expenditure Part B drugs in 2010.

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A recent GAO report examines the growing prevalence of physician self-referral (referral to the physician’s own practice) for advanced imaging services (e.g., magnetic resonance imaging (MRI) and computed tomography (CT) services) and its effect on Medicare spending. The GAO reports that while the number of both self-referred and non-self-referred advanced imaging services increased from 2004 through 2010, the growth rate was much higher for self-referred services. For instance, the number of self-referred MRI services increased by more than 80% during this period, compared to a 12% growth rate for non-self-referred MRI services. Self-referring providers referred about twice as many MRI and CT services as providers who did not self-refer in 2010, and these differences persisted even after accounting for practice size, specialty, geography, or patient characteristics. The GAO also found that providers' referrals of MRI and CT services substantially increased the year after they purchased or leased imaging equipment or joined a group practice that self-referred. The GAO estimates that providers who self-referred likely made 400,000 more referrals for advanced imaging services in 2010 than they would have if they were not self-referring, increasing Medicare costs by about $109 million. The GAO points out that any unnecessary referrals “pose unacceptable risks for beneficiaries, particularly in the case of CT services, which involve the use of ionizing radiation that has been linked to an increased risk of developing cancer.” The GAO recommends that CMS take steps to improve its ability to identify self-referral of advanced imaging services and address increases in these services, including: inserting a self-referral flag on Medicare Part B claims form to indicate whether or not an advanced imaging service is self-referred; implementing a payment reduction for self-referred advanced imaging services to “recognize efficiencies when the same provider refers and performs a service”; and determining how to ensure the appropriateness of advanced imaging services referred by self-referring providers.

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The GAO has issued a report that responds to concerns raised by certain Democratic lawmakers that manufacturers participating in the Medicare Part D drug “Coverage Gap Discount Program” would raise prices for brand-name drugs used by beneficiaries in the coverage gap to offset the 50% discount that manufacturers must provide under the Affordable Care Act. Contrary to these concerns, the GAO found that prices for brand-name drugs used by beneficiaries in the coverage gap increased similarly to those used by beneficiaries who did not reach the gap, both before and after the Discount Program was implemented in January 2011. The GAO also reports that while pharmacy benefit managers (PBMs) interviewed believe that some manufacturers decreased brand name rebate amounts as a result of the Discount Program, most plan sponsors did not observe this, and manufacturers reported no effects on their rebate negotiations as a result of the Discount Program. Most sponsors and PBMs also reported that the Discount Program did not affect Part D plan formularies, plan benefit designs, or utilization management practices. The GAO cautioned that its findings are limited to those sponsors, PBMs, and manufacturers interviewed and may not be representative of the effects observed across all of these types of entities, and multiple factors besides the Discount Program can affect drug prices over time.

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A new Government Accountability Office (GAO) report breaks down the provider types most frequently involved with Medicare, Medicaid, and Children’s Health Insurance Program fraud cases in 2010.  Highlights include the following: 

• Medical facilities (including medical centers, clinics, or practices) and DME suppliers were the most-frequent subjects of criminal health care fraud investigations, comprising about 40% of subjects. Of the 7,848 subjects associated with criminal cases, about 1,100 were charged and 85% of those charged were found guilty or pled guilty or no contest. 
• Hospitals and medical facilities were the most-frequent subjects investigated in civil health fraud cases (38% of 2,339 subjects), but more than half of the subjects of civil cases were not pursued for various reasons. In 2010, 88% of subjects investigated in civil cases were investigated in qui tam cases. Of these, 52% cases were either voluntarily dismissed by the relator (34%) or were declined by the US Attorney’s Offices or the Department of Justice’s Civil Division (18%).
• Almost 2,200 individuals and entities were excluded from federal programs for health care fraud convictions and other reasons (including license revocation and program-related convictions). About 60% of excluded individuals were in the nursing profession. 
• Based on data from 10 state Medicaid Fraud Control Units (MFCU), over 40% of the 2,742 subjects investigated for health care fraud in Medicaid and CHIP in 2010 were home health care providers and health care practitioners. Civil health care fraud cases pursued by these MFCUs in 2010 resulted in judgments and settlements totaling nearly $829 million, with pharmaceutical manufacturers paying more than 60% of that amount.

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A recent GAO report warns of information security risks – such as unauthorized changes of device settings resulting from a lack of appropriate access controls -- associated with the growing use of wireless technology in certain active implantable medical devices (e.g., implantable cardioverter defibrillators and insulin pumps). On the other hand, officials and technology experts caution that efforts to mitigate information security risks need to be balanced against potential adverse impact on devices’ performance, including limiting battery life. The GAO also highlights potential gaps in the FDA’s use of its traditional adverse event reporting system to address information security in active implantable medical devices, particularly since reporting entities might not understand the relevance of information security risks. In the report, “Medical Devices: FDA Should Expand Its Consideration of Information Security for Certain Types of Devices,” the GAO recommends that the FDA develop and implement a more comprehensive plan to enhance the agency’s review and surveillance of medical devices. The plan should address how FDA can: (1) increase its focus on manufacturers' identification of potential unintentional and intentional threats, vulnerabilities, the resulting information security risks, and strategies to mitigate risks during the premarket approval review process; (2) utilize available resources, including those from other federal agencies; (3) leverage postmarket efforts to identify and investigate information security problems; and (4) establish specific milestones for implementing this plan. HHS concurred with GAO’s recommendation and described efforts FDA has initiated in this area.

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The GAO has released a report examining Medicare payments and provider costs for ground ambulance services, along with beneficiary utilization of ambulance services. The GAO found that in 2010, costs per transport varied widely among ambulance providers in the GAO’s sample, ranging from $224 to $2,204 per transport, with a median cost of $429.  The report discusses the factors impacting these costs, including volume of transports, the proportion of transports that were nonemergency, and the extent to which providers received government subsidies. The median Medicare margin for 2010, including add-on payments, was about 2% for the providers in GAO's sample, but it varied from about -2% to +9%, (without add-on payments, the margin ranged from about -8% to +5%). Medicare utilization levels also have been on the increase, with ground ambulance transports for all Medicare fee-for-service beneficiaries increasing 33% from 2004 to 2010, with the highest growth in super-rural areas. According to the GAO, ambulance provider organization representatives suggested the increase in transports may stem from increased billing by local governments, since some local governments that used to provide Medicare transports free of charge may now be billing Medicare because of budgetary pressures. On the other hand, the GAO notes that the OIG has cited improper payments as a potential cause for increases in Medicare ambulance utilization.

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The Government Accountability Office (GAO) has issued a report entitled “Medicare Special Needs Plans: CMS Should Improve Information Available about Dual-Eligible Plans' Performance.” The report examines the characteristics of dual-eligible beneficiaries enrolled in Medicare Advantage plans known as dual-eligible special needs plans (D-SNPs), which serve Medicare beneficiaries who also are eligible for Medicaid because they meet income and other criteria. About 9% of the dual-eligible population is enrolled in 322 Medicare D-SNPs, and they were more frequently under age 65 and disabled, more likely to be eligible for full Medicaid benefits, and more frequently diagnosed with a chronic or disabling mental health condition than beneficiaries in other MA plans. The GAO found that D-SNPs provide fewer supplemental benefits on average than other MA plans, yet spend proportionately more of their rebate to fund supplemental benefits and less to reduce Medicare cost-sharing. The GAO recommends a number of steps CMS should take to increase D-SNPs' accountability, including: requiring D-SNPs to state explicitly in their models of care the extent of services they expect to provide; requiring D-SNPs to collect and report to CMS standard performance and outcome measures; and analyzing and publicizing the performance and outcomes data. 

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The GAO has provided a report to Congress describing states’ use of managed care in their Medicaid programs, including the type of managed care arrangements states have in place and their enrollment of populations with complex health care needs. The GAO points out that this data “may be informative as states consider expanding their use of managed care to new geographic areas or new populations, such as disabled beneficiaries who traditionally have more complex health care needs.”

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