A new OIG report estimates that Medicare could realize significant savings if drug manufacturers were required to pay rebates on Medicare Part B drugs, similar to rebates under the Medicaid program. Specifically, Medicare could have collected $3.1 billion in 2011 if manufacturers had been required to pay rebates based on average manufacturer price (AMP) for 60 high-expenditure Part B drugs, while rebates based on average sales price (ASP) for the same drugs could have generated $2.7 billion in payments. In the report, the OIG recommends that CMS examine establishing such a Part B drug rebate program and, if appropriate, seek legislative change. CMS rejected this suggestion, noting that developing such a plan – which would require new legislative authority -- would necessitate analysis of the effects of making fundamental changes to the Part B claims payment system, the impact on providers, and the impact on access to care. CMS maintains that it is “unable to devote significant administrative resources at this time to a proposal that is neither a provision of current law or actively under consideration.” (The Administration has, on the other hand, advocated rebates for Medicare Part D drugs furnished to low-income subsidy beneficiaries as part of its FY 2014 budget proposal.)
Almost two-thirds of critical access hospitals (CAHs) would not meet Medicare CAH location requirements if they were required to re-enroll today, according to the OIG. Many of these rural hospitals were permanently exempted from CAH distance requirements under previous authority of states to designate “necessary provider” (NP) CAHs. Medicare reimburses CAHs at 101% of their reasonable costs; if CMS had the authority to decertify CAHs that were 15 or fewer miles from their nearest hospitals in 2011, the OIG estimates that Medicare would have saved $449 million. The OIG recommends that CMS take several steps to “ensure that the only CAHs to remain certified would be those that serve beneficiaries who would otherwise be unable to reasonably access hospital services.” For instance, the OIG recommends that CMS seek legislative authority to remove NP CAHs’ permanent exemption from the distance requirement; CMS notes that the President’s proposed FY 2014 budget would decertify any CAHs located fewer than 10 miles from another hospital or CAH (and reduce payment to all remaining CAHs to 100% of reasonable cost). CMS also discusses steps it has already taken to implement OIG recommendations to periodically reassess CAHs for compliance with all location-related requirements and to ensure that CMS applies a uniform definition of “mountainous terrain” to all CAHs. CMS disagreed with an OIG recommendation to seek legislative authority to revise the CAH Conditions of Participation to include alternative location-related requirements.
A recent OIG report examines the extent of improper Medicare reimbursement for diabetes test strips (DTS), including the effect of mail-order DTS being subject to competitive bidding in nine geographic areas beginning in 2011 (CMS subsequently implemented a national competitive bidding program for mail-order DTS, effective July 1, 2013). According to the OIG, in 2011, Medicare inappropriately allowed $6 million for DTS claims billed for beneficiaries without a documented diagnosis code for diabetes, or that inappropriately overlapped with an inpatient hospital stay or an inpatient skilled nursing facility stay. Moreover, the OIG identified $425 million in Medicare-allowed DTS claims in 2011 that had characteristics of questionable billing, such as claims in excess of utilization guidelines, claims at perfectly regular intervals, or overlapping claims for the same beneficiary. The OIG observes that the Medicare competitive bidding program appears to have been successful in reducing questionable billing for mail-order DTS, since Medicare allowed claims for mail order DTS for suppliers exhibiting questionable billing in CBAs fell from $33.2 million to $4.3 million between 2010 and 2011. The OIG recommended that CMS take additional action to address inappropriate DTS claims, such as expanding supplier education, enforcing claims edits, and increasing monitoring of DTS suppliers’ billing. CMS also agreed to take appropriate action regarding inappropriate Medicare DTS claims and suppliers identified by the OIG, including referral of questionable claims to the Recovery Auditors and Medicare Administrative Contractors (MACs).
Two recent OIG reports point out the savings that state Medicaid programs could attain if they based reimbursement for DME, prosthetics, orthotics, and supplies (DMEPOS) on Medicare competitive bidding payment amounts – although at least one state is pushing back on this idea. In the first report, “Medicaid DMEPOS Costs May be Exceeding Medicare Costs in Competitive Bidding Areas,” the OIG calculated the potential savings Texas could have achieved in 2011 if it adopted Medicare DMEPOS bidding prices for selected items of DMEPOS. According to the OIG, Texas Medicaid fee-schedule could have saved approximately $2 million (state/federal shares combined) in the Dallas/Fort Worth area if it had based Medicaid rates on the Medicare DMEPOS competitive bidding amounts for 32 DMEPOS items covered under both programs. The OIG states that its report provides “a tangible example of potential State and Federal savings for Medicaid programs if the programs were to use the Medicare Competitive Bidding payment amounts for DMEPOS items.” This report did not include recommendations or state reaction.
In the second report, “New Jersey Medicaid Program Could Achieve Savings by Reducing Home Blood-Glucose Test Strip Prices,” the OIG estimates that the New Jersey Medicaid program could have saved approximately $1.8 million to $2.7 million in 2011 by reducing home blood-glucose test strip reimbursement rates to retail rates or by establishing a competitive bidding program for test strips. Such policy changes for test strips also could reduce Medicaid managed care organization reimbursement rates by up to 70%. However, the New Jersey Department of Human Services disagreed with the OIG’s recommendations to align state Medicaid reimbursement with average retail price or Medicare competitive bidding pricing, citing, among other things, doubts about the feasibility of attaining such savings and concerns about patient access and the impact on proper diabetes management.
The OIG has called on CMS to strengthen activities to prevent improper Medicare payments, including enhancements to the Recovery Audit Contractor (RAC) program. For instance, the OIG notes that RACs identified half of all claims they reviewed in FYs 2010 and 2011 as having resulted in improper payments totaling $1.3 billion. While CMS took corrective actions to address the majority of identified vulnerabilities, the agency did not evaluate the effectiveness of these actions, however, so high levels of improper payments may continue. The OIG also raised concerns about CMS failure to act on all referrals of potential fraud that it received from RACs, along with gaps in CMS evaluations of RAC performance on contract requirements. The OIG recommends that CMS: address identified vulnerabilities; ensure that RACs refer all appropriate cases of potential fraud; take appropriate action on RAC referrals of potential fraud; and enhance RAC performance evaluation. CMS generally concurred with the OIG recommendations. The report, “Medicare Recovery Audit Contractors and CMS’s Actions to Address Improper Payments, Referrals of Potential Fraud, and Performance,” is available here.
In a recent report, “Medicaid Drug Pricing in State Maximum Allowable Cost Programs,” the OIG examines options for controlling state Medicaid prescription drug costs, particularly given a surge in Medicaid enrollment expected in the coming years as a result of the ACA. The OIG highlights the value of state Maximum Allowable Cost (MAC) programs as an alternative to federal upper limit (FUL) pricing, especially since CMS is years behind in implementing AMP-based federal upper limit (FUL) amounts under the ACA. The OIG found that aggregate pre-ACA FUL amounts were on average nearly double state MAC prices in January 2012, although the post-ACA FUL amounts (which have not been implemented) were lower than MAC prices on average. The OIG also notes that states could achieve additional cost savings by using more aggressive MAC pricing formulas and inclusion criteria, particularly along the lines of Wyoming’s program, which sets MAC prices by considering (1) acquisition cost plus a markup, (2) wholesale acquisition cost (WAC) minus a percentage, (3) average wholesale price (AWP) minus a percentage, or (4) AMP plus a markup. According to the OIG, 39 states would have saved $483 million (excluding dispensing fees) in the first half of 2011 if they had used Wyoming’s MAC criteria. The OIG recommends that CMS complete implementation of the post-ACA FUL amounts; CMS concurred and said it plans to finalize these FULs in the near future. CMS also concurred with OIG's recommendation to encourage states to reevaluate their Medicaid programs to identify additional cost saving opportunities, and noted its plans to release a related informational bulletin to the states in the near future.
The HHS Office of the Inspector General (OIG) has issued a report entitled “Medicare Could Save Millions by Strengthening Billing Requirements for Canceled Elective Surgeries.” Based on a review of 100 claims, the OIG estimates that Medicare made $38.2 million in Part A inpatient hospital payments in calendar years 2009 and 2010 for short-stay, canceled elective surgery admissions that were not reasonable and necessary. Specifically, the OIG found that for 80 of the 100 sampled claims, Medicare made payments totaling $345,717 for hospital inpatient claims involving canceled elective surgeries when the condition of the patient was not severe enough to warrant an inpatient admission (i.e., a clinical condition did not exist on admission or a new condition did not emerge after admission that required inpatient care). The OIG recommends that CMS: (1) adjust sampled claims representing overpayments to the extent allowed under the law; (2) strengthen guidance to hospitals; (3) resolve remaining non-sampled claims and recover overpayments to the extent feasible and allowed under the law; and (4) instruct Medicare administrative contractors to emphasize to hospitals the need for stronger utilization review controls for claims that include admissions for elective surgeries that did not occur. CMS generally agreed with the OIG’s recommendations.
A recent OIG report examined “Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries.” The report was conducted in response to concerns about hospitals’ use of observation stays, which may be resulting in Medicare beneficiaries paying more as outpatients than if they were admitted as inpatients, and which may prevent beneficiaries from qualifying under Medicare for SNF services following discharge from the hospital. In addition, CMS is concerned about improper payments for short inpatient stays when the beneficiaries should have been treated as outpatients. Based on a review of claims from 2012, the OIG found that Medicare beneficiaries had 1.5 million observation stays, commonly spending one night or more in the hospital. Beneficiaries had an additional 1.4 million long outpatient stays; some of these may have been observation stays. Beneficiaries also had 1.1 million short inpatient stays, which the OIG notes typically cost Medicare and beneficiaries more than observation stays. In addition, beneficiaries had more than 600,000 hospital stays that lasted 3 nights or more but did not qualify them for SNF services, while Medicare inappropriately paid $255 million for SNF services for which beneficiaries did not qualify (CMS will refer these SNFs to CMS so the agency can look into recoupment). The OIG points out that that the CMS proposed IPPS rule for FY 2014 (which subsequently was finalized, as discussed above) would substantially affect how hospitals bill for these stays. While the number of short inpatient stays would be significantly reduced under the proposed rule, the number of observation and long outpatient stays may not be reduced if outpatient nights are not counted towards the proposed two night presumption. The OIG suggests that CMS consider how to ensure that beneficiaries with similar post-hospital care needs have the same access to and cost sharing for SNF services. In a related matter, a nationwide class action lawsuit filed November 3, 2011 on behalf of 14 named seniors by the Center for Medicare Advocacy and the National Senior Citizens Law Center challenging CMS’s observation day policy and practice is still pending in federal district court. Bagnall v. Sebelius, No. 11-1703 (D. Conn. filed Nov. 3, 2011). The lawsuit alleges that the use of observation status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment to the Constitution.
The OIG has issued a report entitled “Data and Safety Monitoring Boards in NIH Clinical Trials: Meeting Guidance, But Facing Some Issues.” The report examines the effectiveness of data and safety monitoring boards (DSMB) – or committees of experts that provide ongoing reviews of clinical trial data to ensure the safety of study subjects and validity and integrity of data. Based on a review of 44 National Institutes of Health (NIH) funded Phase III multi-site clinical trials that were completed in 2009 and 2010 that entailed potential risk, the OIG concluded that DSMBs met general NIH guidance in this area, including with regard to the experience of DSMB members. The OIG identified several potential issues, however, including that NIH participation in closed DSMB meetings diminishes the appearance of independence and not all NIH Institutes and Centers (IC) policies reference DSMB access to unmasked data. Based on these findings, the OIG recommends that NIH: direct ICs to delineate the circumstances in which IC staff should participate in DSMB meetings; direct IC DSMB policies to explicitly reference DSMB access to unmasked data, and identify ways to recruit and train new DSMB members. NIH concurred with the recommendations.
On May 17, 2013, the HHS Office of Inspector General (OIG) published a final rule amending current regulations prohibiting State Medicaid Fraud Control Units (MFCU) from using federal matching funds to identify fraud through screening and analyzing State Medicaid data (known as data mining). In order to “support and modernize MFCU efforts to effectively pursue Medicaid provider fraud,” the OIG is permitting federal financial participation (FFP) in costs of defined data mining activities under specified circumstances. In addition, the OIG is finalizing requirements that MFCUs annually report costs and results of approved data mining activities to the OIG. The rule is effective on June 17, 2013.
The OIG has issued its latest Semiannual Report to Congress, covering the period of October 1, 2012 to March 31, 2013. For the first half of FY 2013, the OIG reported expected recoveries of about $3.8 billion, consisting of more than $521 million in audit receivables and about $3.28 billion in investigative receivables (which includes $642.3 million in non-HHS investigative receivables, such as states’ shares of Medicaid restitution). The OIG excluded 1,661 individuals and entities from participation in federal health care programs; 484 criminal actions for crimes against HHS programs; and 240 civil actions (including false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalty settlements, and administrative recoveries related to provider self-disclosure matters). The report also summarizes significant investigation and audit activities for the period.
The OIG has issued an ACA-mandated report on Medicare Part D prescription drug plan and MA drug plan coverage of drugs commonly used by full-benefit dual-eligible individuals (that is, individuals eligible for Medicare and Medicaid and who receive full Medicaid benefits and Medicare premium and cost-sharing assistance). The OIG determined that for 2013, Part D/MA plan formularies include 96% of 195 commonly-used drugs, with 64% of the commonly-used drugs included in all such formularies. Plans applied utilization management tools to 28% of the unique drugs reviewed in 2013, compared to 24% in 2012 (mainly attributable to an increase in the use of quantity limits).
Providers and suppliers use G modifiers on claims they expect to be denied as either not “reasonable and necessary” (GA and GZ modifiers) or because the items or services are not covered by Medicare (GY and GX modifiers). Such modifiers may be used when the provider is uncertain if a claim should be paid (for instance, when the provider does not know if a beneficiary already has had a test that is covered only one per year), or if the beneficiary needs Medicare to deny the claim so it can be submitted to the beneficiary’s secondary insurance. Medicare paid about $744 million for Part B claims with G modifiers in 2011. The OIG found vulnerabilities payments for such claims, since Medicare contractors often do not consider the modifiers to indicate that providers expect the services or items to be denied as not reasonable and necessary or not covered by Medicare. The OIG also reports that Medicare paid $4.1 million for claims with inappropriate combinations of G modifiers from 2002 to 2011. The OIG discusses ways CMS and its contractors could address the vulnerabilities presented in this report through automatic claims denials.
The OIG has issued a report entitled “Medicare and Beneficiaries Could Save Millions If Dialysis Payments Were Adjusted for Anemia Management Drug Utilization.” The OIG estimates that if CMS had adjusted the payments for dialysis services to incorporate anemia management drug utilization in 2011 -- rather than use 2007 data reflecting higher utilization -- the Medicare program could have saved $510 million for erythropoiesis-stimulating agents (ESAs) and $19 million for iron supplements. The OIG also identified limitations in the use of ESRD claims data for program oversight, including inaccuracies in the quantities of drugs claimed and the inability to determine the extent of drug waste or overfill usage. The OIG recommends that CMS: (1) adjust the bundled dialysis base rate to capture savings from decreased utilization of ESAs and iron supplements, (2) remind dialysis facilities of the importance of claims accuracy, and (3) develop guidance for recording drug waste and overfill on ESRD claims. CMS concurred with the recommendations.
All private health insurers in the individual and small group markets must submit data to the HealthCare.gov Plan Finder, an online portal created to help consumers compare health insurance coverage options. According to a recent OIG report, "Oversight of Private Health Insurance Submissions to the HealthCare.gov Plan Finder," while most private insurers reported data to the Plan Finder, the OIG found inconsistent data displayed for a sample of products and plans. The OIG also identified gaps in CMS’s oversight of compliance with reporting requirements, such as a lack of targeted follow-up with insurers that did not report detailed pricing and benefit information. The OIG recommends that CMS: implement procedures to identify and pursue insurers that do not submit required data; require each private insurer’s Chief Executive Officer or Chief Financial Officer to certify to the completeness of data submitted to the Plan Finder; and take certain other steps to ensure the accuracy of Plan Finder data and the availability of plans identified on Plan Finder.. CMS generally concurred with the recommendations.
The OIG has examined the extent to which long-term care hospitals (LTCHs) that are co-located with another hospital-level provider or a skilled nursing facility disclose their co-location status to their Medicare contractor. Because co-located status can impact Medicare payments, co-located LTCHs and satellite facilities must notify their MAC and CMS Regional Office about the provider(s) with which they are co-located within 60 days of their first cost-reporting period. Based on a review of 141 LTCHs that the OIG had previously determined were co-located, the OIG found that only 44 had notified their Medicare contractor of their co-located status. While the report, Co-Located Long-Term Care Hospitals Remain Unidentified, Resulting in Potential Overpayments, does not contain recommendations, the OIG observes that “inaccurate data on LTCHs’ co located status could result in overpayments.” In addition, the OIG noted that it continues to study Medicare payments to LTCHs for interrupted stays. The OIG intends to provide additional information on interrupted stays and make recommendations to CMS in a final report.
A new OIG report, “Part B Payments for Drugs Infused through Durable Medical Equipment,” calls for changes in the Medicare reimbursement methodology for Part B infusion drugs administered in conjunction with DME in light of potentially inaccurate pricing. By way of background, DME infusion drugs are reimbursed at 95% of the drug’s average wholesale price (AWP) in effect on October 1, 2003, compared to 106% of the average sales price (ASP) for most Part B drugs. Based on a comparison of actual Medicare reimbursement and the amount that would have been paid under the ASP methodology for each DME infusion drug from 2005 to 2011, the OIG found that payment exceeded ASPs by 54%-122% annually. On the other hand, reimbursement for up to one-third of DME infusion drugs were below the ASP, indicating that in some cases Medicare may underpay for these drugs. On the whole, the OIG estimates that Medicare spending on DME infusion drugs would have been cut by 44% ($334 million) between 2005 and 2011 if payment had been based on ASP. The OIG recommends that CMS either (1) seek legislation requiring DME infusion drug payment to be based on ASP, or (2) include DME infusion drugs in the next round of the DMEPOS competitive bidding program. CMS was noncommittal on legislative changes, but said it would include ME infusion drugs in the next round of competitive bidding (CMS has not yet provided other details on future expansion of competitive bidding).
A recent OIG report, “Gaps in Oversight of Conflicts of Interest in Medicare Prescription Drug Decisions,” examines how Medicare Part D drug plan pharmacy and therapeutics (P&T) committees ensure that formulary decisions are not biased by conflicts of interest. Based on a survey of P&T committees and a review of their written policies, along with interviews with CMS, the OIG concluded that “both sponsors and CMS conduct limited oversight of P&T committee conflicts of interest, compromising their ability to ensure that financial interests do not influence formulary decisions.” For instance, most sponsors’ P&T committees have limited definitions of conflicts of interest (more than half did not define any financial interests with sponsors or pharmaceutical manufacturers as conflicts of interest), which the OIG believes could prevent them from identifying conflicts. Moreover, many sponsors’ P&T committees rely on their members to determine and manage their own conflicts. CMS also does not adequately oversee compliance with the regulatory requirement that at least two members on each P&T committee be independent and free of conflict relative to the plan sponsor and pharmaceutical manufacturers, according to the OIG. The OIG makes a series of recommendations intended to strengthen conflict-of-interest policies, including recommending that CMS: require P&T committee members to be free of conflict with any pharmacy benefit manager that manages a sponsor’s prescription drug benefit; direct sponsors to ensure that objective processes are used to determine and manage conflicts; and oversee sponsors’ compliance with the requirement that at least two committee members be independent and free of conflict.
For the 29th time, the OIG has issued a report comparing Medicare Part B drug average sales prices (ASP) and average manufacturer prices (AMP), this report covering all of 2011. The OIG again concludes that the Medicare would realize savings if it exercised its authority to lower reimbursement for Part B drugs when the drugs ASP exceeds its drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. Although CMS has finalized regulations specifying the circumstances under which AMP-based price substitutions could occur, no such substitutions have been made to date. The OIG estimates that if CMS’s price substitution policy had been in effect, Medicare would have saved about $7 million in 2011; this amount would have been doubled if the substitution policy were applied to all codes that exceeded the 5% threshold in one or more quarters of 2011 when complete AMP data were used. CMS concurred with an OIG recommendation to finalize its substitution policy, but it did not support OIG recommendations to expand the substitution policy to include all codes with complete AMP data and certain codes with partial AMP data. CMS also rejected an OIG recommendation to seek a legislative change to require manufacturers of Part B-covered drugs to submit both ASPs and AMPs.
The OIG has examined CMS efforts to prevent fraud and abuse at community mental health centers (CMHCs), which provide partial hospitalization program services (structured outpatient mental health treatment programs) to qualifying Medicare beneficiaries. The OIG has previously reported that CMHCs may be particularly vulnerable to fraud, waste, and abuse involving PHP services, with approximately half of CMHCs exhibiting questionable billing in 2010. The OIG’s new report is entitled, Vulnerabilities in CMS's and Contractors' Activities to Detect and Deter Fraud in Community Mental Health Centers. The OIG found that most Medicare Administrative Contractor (MAC) and Zone Program Integrity Contractor (ZPIC) activities to detect and deter CMHC fraud in 2010 were actually performed in conjunction with the CMS-led South Florida High-Risk Provider Enrollment Project; other MACs and ZPICs performed minimal activities to detect and deter fraudulent CMHC billing despite having jurisdiction over fraud-prone areas. The OIG also found that Medicare paid noncompliant CMHCs after their revocations were effective and while their revocations were being approved. To address program vulnerabilities, the OIG recommends that CMS: implement additional CMHC fraud mitigation activities in fraud-prone areas; improve tracking of revocations; coordinate activities to deter CMHC fraud in Florida; and follow up on payments made to CMHCs after revocations.