The GAO has issued a report, "Group Purchasing Organizations: Funding Structure has Potential Implications for Medicare Costs,” that examines the effects of group purchasing organization (GPO) contracting practices and their funding structure. The five GPOs in GAO’s review reported being predominately funded by administrative fees collected from vendors (totaling $2.3 billion in 2012), which were almost always based on a percentage of the purchase price of products obtained through GPO contracts. The five GPOs reported that nearly 70% of these fees were passed on to GPO customers or owners. The GAO points out that literature and expert views on the effects of this funding structure vary. To the extent that the vendor fee-based funding structure affects prices for medical products and services, Medicare payment rates could be affected since hospital cost reports impact annual payment updates. The GAO notes that repealing the safe harbor that allows administrative fees could eliminate the potential effects of the GPO funding structure on Medicare payment rates, but the agency cited concerns that this could be disruptive to the health care supply chain at least in the short term. The GAO recommends that the HHS Secretary determine whether hospitals are appropriately reporting administrative fee revenues on their Medicare cost reports and take steps to address any under-reporting that may be found.
A recent GAO report, “Medicare Program Integrity: CMS Pursues Many Practices to Address Prescription Drug Fraud, Waste, and Abuse,” lists current and planned CMS prevention, detection, and monitoring policies intended to promote program integrity in the Medicare Part D prescription drug program. The report does not include new recommendations.
The GAO recently examined the effectiveness of health cost and quality transparency tools available to consumers, including two private consumer health cost/quality websites and CMS “Compare” databases. The GAO determined that the CMS tools — Nursing Home Compare, Dialysis Facility Compare, Home Health Compare, Hospital Compare and Physician Compare — are limited in their provision of relevant and understandable consumer cost and quality information. For instance, the sites do not allow consumers to combine cost and quality information to assess the value of health care services or anticipate costs, and the sites lack clarity in how information is presented to consumers. The GAO also charges that CMS's process for developing and selecting cost and quality measures included in the Compare sites “has been heavily influenced by the concerns of providers rather than consumers.” With regard to the private sites, the GAO notes that the private consumer sites suggest a wide range of provider costs for the same service in the same geographic area, regardless of quality. The GAO recommends that CMS take steps to improve the information in its transparency tools and develop procedures and metrics to ensure that tools address consumers' needs. For instance, the GAO suggests that the CMS Compare websites include, to the extent feasible, estimated out-of-pocket costs for Medicare beneficiaries for common treatments that can be planned in advance, and allow consumers to customize information presented. For more information, see the full report, “Health Care Transparency: Actions Needed to Improve Cost and Quality Information for Consumers.”
The Government Accountability Office (GAO) has assessed the effectiveness of CMS controls intended to protect the security and privacy of the information and information technology (IT) systems used to support Healthcare.gov. The GAO determined that while CMS has taken steps to protect Healthcare.gov security and privacy, “weaknesses remain both in the processes used for managing information security and privacy as well as the technical implementation of IT security controls.” The GAO warns that until such weaknesses are fully addressed, risks remain with regard to unauthorized access, disclosure, or modification of the information collected and maintained by Healthcare.gov and related systems, along with potential disruption of services. The GAO made a series of recommendations to implement security and privacy management controls related to Healthcare.gov. For details, see the full report, “Healthcare.gov: Actions Needed to Address Weaknesses in Information Security and Privacy Controls.”
A new GAO report reviews CMS’s collection of Medicare Advantage (MA) encounter data, which includes detailed information on services and items furnished to enrollees. CMS plans to use MA encounter data in addition to current diagnosis data to risk adjust capitated payments to MA organizations in 2015. The GAO determined that CMS has not yet developed requirements for completeness and accuracy of the encounter data, nor has it performed statistical analyses that could detect complex data validity issues. The GAO recommends that CMS establish specific plans for using MA encounter data and thoroughly assess data completeness and accuracy before using the data to risk adjust payments or for other purposes.
The Government Accountability Office (GAO) has issued a report entitled “Medicare Program Integrity: Increased Oversight and Guidance Could Improve Effectiveness and Efficiency of Postpayment Claims Reviews." In the report, the GAO assesses CMS policies and procedures to prevent certain Medicare contractors (Medicare Administrative Contractors, Zone Program Integrity Contractors, Recovery Auditors, and the Comprehensive Error Rate Testing contractor) from conducting duplicative postpayment claims reviews. According to the GAO, while CMS has taken steps to avoid duplicative reviews, the agency “neither has reliable data nor provides sufficient oversight and guidance to measure and fully prevent duplication.” Since ineffective requirements and lack of oversight in this area create “an unnecessary administrative and financial burden for Medicare-participating providers and the Medicare program,” the GAO recommends that CMS provide additional oversight and guidance regarding contractor claims review data collection, duplicative reviews, and contractor correspondence with providers.
The OIG has issued two reports on implementation of the ACA health insurance “Marketplaces.” The first report, “Marketplaces Faced Early Challenges Resolving Inconsistencies with Applicant Data,” looked at the extent to which the federal and state health insurance marketplaces ensured the accuracy of information submitted by insurance applicants, including information related to eligibility for premium tax credits and cost sharing reductions. According to the OIG, marketplaces were unable to resolve most data inconsistencies, particularly involving citizenship and income information (although the OIG cautions that inconsistencies do not necessarily indicate that incorrect information was provided or that financial assistance is inappropriate). The report recommends additional planning and oversight to resolve inconsistencies.
A related OIG report questions the effectiveness of internal controls implemented by the federal, California, and Connecticut marketplaces in ensuring that individuals were enrolled in qualified health plans (QHPs) according to federal requirements. In particular, the OIG identified deficiencies in internal controls that could limit the marketplaces’ ability to prevent the use of inaccurate or fraudulent information when determining applicant’s eligibility for enrollment in a QHP. The OIG recommended steps to verify applicant data, determine enrollment and cost sharing assistance eligibility, and maintain and update enrollment data.
Finally, the GAO released a report that concentrates on contractor performance related to the Healthcare.gov portal. The GAO points cost increases and delayed system functionality for the federally facilitated marketplace that resulted from CMS’s lack of effective planning, changing requirements and oversight gaps. GAO recommends that CMS take immediate steps to address contract costs, acquisition strategies, and use of oversight tools. In its response to the report, CMS discussed improvements it was making in the management of the Marketplace (including a stronger CMS management structure, an improved structure of Marketplace contracts, and a strengthened acquisition workforce). CMS expressed confidence that “its contractors will deliver the needed capabilities for the 2015 open enrollment period in a timely and cost-efficient manner.”
The Government Accountability Office (GAO) has released data comparing retail prescription drug prices paid by the Department of Defense (DOD), Medicaid, and Medicare Part D for a sample of 78 high-utilization/high-expenditure drugs. In general, the GAO determined that Medicaid paid the lowest average net prices for both brand-name and generic drugs in the sample based on data for the third quarter of 2010. For the entire sample, Medicare Part D paid an estimated 32% higher average net price than Medicaid, while DOD paid 60% more than Medicaid (although Medicare Part D paid more for brand-name drugs than did DOD). Key factors affecting net prices paid by each program included the amount of any post-purchase price adjustments (e.g., refunds, rebates, or price concessions received by each program from drug manufacturers), which equaled approximately 15% of the gross price for Medicare Part D, 31% for DOD, and almost 53% for Medicaid across the entire sample.
The GAO recently examined “self-referral” for outpatient physical therapy (PT) services, which the GAO defines as a provider referring patients to entities in which the provider or the provider's family members have a financial interest. According to the GAO, non-self-referred PT services per 1,000 Medicare FFS beneficiaries increased by 41% from 2004 to 2010, while the number of self-referred PT was generally flat. Expenditures associated with non-self-referred PT services also grew at a higher rate than for self-referred services. The GAO observed that these findings differ from its prior reviews of self-referrals involving advanced imaging, anatomic pathology, and intensity-modulated radiation therapy, in which the GAO found that self-referred services and expenditures grew faster than non-self-referred services and expenditures. The GAO suggests that a potential reason for this difference is that non-self-referred PT services can be performed by providers who can directly influence the amount, duration, and frequency of PT services through the Medicare written plan of care, whereas radiologists, for example, generally do not have the discretion to order more imaging services or more intense imaging procedures.
In addition, the GAO found that the relationship between provider self-referral status and PT referral patterns was mixed, and varied on the basis of referring provider specialty, Medicare beneficiary practice size, and geography. Self-referring providers in the three specialties that GAO examined (family practice, internal medicine, and orthopedic surgery) generally referred more beneficiaries for PT services on average than non-self-referring providers, but ordered fewer PT services per beneficiary compared to non-self-referring providers. The GAO also found that PT service referrals in the year a provider began to self-refer increased at a higher rate relative to non-self-referring providers of the same specialty.
In the report, “Medicare Physical Therapy: Self-Referring Providers Generally Referred More Beneficiaries but Fewer Services per Beneficiary,” the GAO concluded that regardless of referral patterns, the substantial growth in PT services raises concerns about costs for Medicare and beneficiaries. The GAO suggests that CMS’s initiative to collect additional information on beneficiary functional status on all PT claims may help CMS better assess the appropriateness of PT treatment provided by both self-referring and non-self-referring providers.
The GAO has issued a report entitled “Medicaid: Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage.” The report highlights ways applicants in Florida, New York, and South Carolina reduce their countable assets to qualify for Medicaid nursing home coverage, including (1) spending countable resources on goods and services that are not countable towards financial eligibility, such as prepaid funeral arrangements; (2) converting countable resources into noncountable resources that generate an income stream for the applicant (e.g., an annuity or promissory note); (3) giving away countable assets as a gift to another individual (which could lead to a penalty period that delays Medicaid nursing home coverage); and (4) for married applicants, increasing the amount of assets a spouse remaining in the community can retain (e.g., through the purchase of an annuity). The report does not include recommendations.
A recent GAO report, “Medicaid Program Integrity: Increased Oversight Needed to Ensure Integrity of Growing Managed Care Expenditures," identified gaps in both state and federal Medicaid managed care program integrity efforts. For instance, based on a review of Medicaid activities in seven states, the GAO found that five state program integrity units and four Medicaid Fraud Control Units focused on Medicaid FFS claims and do not closely examine Medicaid managed care activities. Likewise, the GAO concluded that federal entities have taken few steps to address Medicaid managed care program integrity. As a result, federal and state entities may not be able to ensure that managed care organizations are taking appropriate actions to identify, prevent, or discourage improper payments. Given the expanding role of Medicaid managed care, inadequate managed care program integrity efforts “will leave a growing portion of federal Medicaid dollars vulnerable to improper payments.” The GAO therefore recommended that CMS: require states to audit payments to and by managed care organizations; update its guidance on Medicaid managed care program integrity; and provide states additional support for managed care oversight, such as audit assistance from existing contractors.
A recent GAO report looked at how private health care entities provide performance data to physicians, and how such practices could be used to improve CMS efforts to provide feedback to providers. The GAO determined that the nine health insurers and statewide collaboratives it reviewed typically employ multiple benchmarks (e.g., peer group averages or past performance), while CMS only compares results to the national average rates of all physician groups that submitted data on any given measure. The GAO observes that CMS’s approach precludes physicians from viewing their performance in fuller context. The private entities also sent reports more than once a year, in contrast to CMS annual reports that may limit physicians' opportunity to make improvements in advance of their annual payment adjustments. The GAO suggests that as CMS implements and refines its physician feedback and Value Modifier programs, it should consider comparing physicians' performance against additional benchmarks, such as state or regional averages, and disseminating performance reports more frequently. The report is entitled “Medicare: Certain Physician Feedback Reporting Practices of Private Entities Could Improve CMS's Efforts.”
The Government Accountability Office (GAO) has issued its second statutorily-mandated report regarding implementation of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) accreditation requirement for Medicare suppliers that furnish the technical component of advanced diagnostic imaging (ADI) services. The first report assessed CMS's standards for ADI accreditation and the agency’s oversight of the accreditation requirement. In the second report, "Medicare Imaging Accreditation: Effect on Access to Advanced Diagnostic Imaging Is Unclear amid Other Policy Changes," the GAO concentrates on the Medicare beneficiary impact of the accreditation requirement, focusing on beneficiary use of magnetic resonance imaging, computed tomography, and nuclear medicine (including positron emission tomography services). The GAO found that the number of such ADI services provided to Medicare beneficiaries in the office setting declined at similar rates both before and after the accreditation requirement went into effect on January 1, 2012, which suggests that the overall decline was driven at least in part by factors other than accreditation. The GAO also observed that the effect of accreditation on access is unclear given the other recent policy changes implemented by CMS and private payers (e.g., payment reductions and prior authorization requirements) that also could have contributed to the decline in the number of these services. CMS officials, accrediting organization representatives, and accredited ADI suppliers that the GAO interviewed suggested that any effect of accreditation on access was likely limited.
On April 8, 2014, the OIG and GAO each issued reports focusing on different aspects of the “Round 1 Rebid” of the Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program. By way of background, under DMEPOS competitive bidding, only suppliers that are winning bidders, meet licensing and other standards, and enter into a contract with CMS may furnish selected categories of DMEPOS to Medicare beneficiaries in competitive bidding areas (CBAs), with very limited exceptions. Contract suppliers are paid based on the median of the winning suppliers’ bids in the CBA, rather than the DMEPOS fee schedule amount. The Round 1 Rebid was in effect for a 3-year period, from 2011 through 2013, involving nine DME product categories in nine CBAs. CMS subsequently “recompeted” contracts in the Round 1 areas (including additional products), with three-year contracts effective January 1, 2014. CMS also established a second round of bidding covering 100 CBAs, along with a national mail-order diabetic testing supplies competitive bidding program; those three-year contracts went into effect July 1, 2013.
The OIG report assesses CMS compliance with DMEPOS bidding rules in the Round 1 Rebid. The OIG concluded that CMS generally followed its competitive bidding program rules when it selected suppliers and computed single payment amounts for the Round 1 Rebid – although a number of CMS errors were identified. Specifically, the OIG conducted a review based on a random sample of 100 of the 3,011 established DMEPOS single payment amounts in the Round 1 Rebid Program and the selection process for 266 winning suppliers associated with the sampled payment amounts. The OIG determined that CMS followed all applicable requirements for 255 of the 266 winning suppliers, but nine winning suppliers did not meet financial documentation requirements, and CMS incorrectly used two suppliers in one single payment computation. While the OIG characterizes the overall effect on Medicare payments to suppliers as “immaterial,” the OIG estimates that CMS paid suppliers $34,000 less than they would have received without any errors (less than 0.1 percent of the $113 million paid under the Round 1 Rebid Program during the first 6 months of 2011). The OIG recommends that CMS: (1) follow its established program procedures and applicable federal requirements consistently in evaluating the financial documents of all suppliers, and (2) ensure that all bids of winning suppliers are included in the calculation of single payment amounts before offering contracts. CMS concurred with the recommendations, and pointed out that it has enhanced the financial review process to ensure that all reviewers are accountants or certified public accountants. Looking ahead, the OIG will be conducting a similar analysis for Round 2 of competitive bidding; this analysis may include an analysis of CMS’s procedures for ensuring supplier compliance with applicable state licensure requirements (depending on the results of an ongoing limited scope review).
The GAO issued a broader review focusing on data from the second year of the Round 1 Rebid contracts, covering the Round 1 Rebid’s effects on Medicare beneficiaries, contract suppliers, and non-contract suppliers. Among other things, the GAO observed that:
- The number of beneficiaries furnished DME items included in the competitive bidding program generally decreased more in CBAs than in demographically similar “comparator” areas. CMS suggests that such declines may be attributable to reduced inappropriate usage of DME and do not necessarily reflect beneficiary access issues. In fact, CMS stated in comments on the report that its “sophisticated real-time claims monitoring system has continuously found that beneficiary access to all necessary and appropriate competitive bid items has been preserved since the program began” – a conclusion generally disputed by industry.
- A small number of contract suppliers generally had a large proportion of the market share in the nine competitive bidding areas.
- The total number of DME suppliers and Medicare allowed charges decreased more in CBAs than in the comparator areas. For instance, the number of suppliers with Medicare allowed charge amounts of $2,500 or more per quarter decreased an average of 27% in the CBAs compared to 5% in the comparator areas.
- The number of grandfathered suppliers had so diminished that CMS was no longer monitoring them after the second quarter of 2012.
- The program did not appear to have adversely affected beneficiary access to covered items, although additional monitoring would be needed to monitor the impact of the national mail-order diabetic testing supplies program and Round 2.
The GAO recently issued a report on CMS efforts to implement Medicaid drug pricing reforms mandated by the Affordable Care Act (ACA). Specifically, the report discusses CMS development of the National Average Drug Acquisition Cost (NADAC) benchmark of retail pharmacy acquisition costs, and how NADAC amounts compare to ACA-based federal upper limits (FULs). Based on first quarter 2013 data, GAO found that draft FUL amounts calculated under the ACA formula were about 1.4% lower than the total NADAC amount in aggregate for 1,035 outpatient drugs. On the other hand, ACA-based FULs for individual drugs ranged from 96% lower than to 404% higher than the NADACs for the same drugs. The GAO also found large differences between the total ACA-based FUL amount and the total NADAC amount for generic and for branded generic versions. According to the GAO, total ACA-based FUL amount for the generic versions was 19% higher than the total NADAC amount, but for the branded generic versions the ACA FUL amount was 26% lower than the NADAC.
The GAO concluded that CMS is close to having a formula under which FULs would better reflect pharmacy acquisition costs, but it observes that CMS continues to apply FULs that were calculated more than four years ago. The GAO also observed that the relationship between ACA-based FULs and NADACs may be affected by factors such as rebates and discounts that are not reflected on pharmacy invoices, which will necessitate continued CMS monitoring. The GAO therefore recommended that CMS (1) expeditiously implement the ACA-based FUL formula and (2) monitor the relationship between the ACA-based FULs and the NADACs on an ongoing basis. HHS concurred with these recommendations; noting that it intends to finalize the ACA Medicaid FULs for multiple source drugs in July 2014 (CMS indicated to GAO that the agency was still considering how the ACA-based FULs would apply to branded generic versions in the final rule).
On February 10, the House Energy and Commerce Subcommittee on Health held a hearing entitled “Examining Drug Shortages and Recent Efforts to Address Them.” In connection with the hearing, the Government Accountability Office (GAO) released a report that concluded that the number of shortages remains high, even though the FDA has taken steps to prevent and mitigate shortages (e.g., expediting application reviews and inspections, exercising enforcement discretion in appropriate cases, and helping manufacturers respond to quality problems). Some of the causes of shortages are beyond the agency’s authority, however, since the FDA “does not have control over private companies’ business decisions,” and cannot, for example, require manufacturers to start producing or continue producing drugs, or to build redundant manufacturing capacity. Nevertheless, the GAO called on the FDA to strengthen its internal controls over its drug shortage data, conduct periodic analyses to routinely and systematically assess drug shortage information, and use this information to proactively identify drug shortage risk factors.
GAO Report Confirms Insurance Coverage Prior to Medicare Linked to Better Health, Lower Program Spending
This post was written by Nancy Sheliga.
The Government Accountability Office (GAO) has released a report examining the effect of prior health insurance coverage on Medicare beneficiaries. The report specifically focuses on the health status, program spending, and use of services by Medicare beneficiaries with and without continuous health insurance coverage before Medicare enrollment. According to the GAO, Medicare beneficiaries with prior insurance initially used fewer or less costly medical services than those without prior insurance. Because the difference in total spending was the greatest during the first year in Medicare, the GAO hypothesizes that beneficiaries without prior continuous insurance may have had a pent-up demand for medical services in anticipation of coverage at age 65. In addition, the report finds that beneficiaries without prior continuous insurance have higher total and institutional outpatient spending but not higher spending for physician and other noninstitutional services, suggesting that they require more costly and intensive medical services or that they are continuing prior patterns of visiting hospitals more than physician offices. Finally, in line with previous research, the GAO found that beneficiaries with continuous health insurance coverage for approximately six years before enrolling in Medicare were more likely than those without prior continuous insurance to report being in good health during their first six years in Medicare.
A recent GAO report assesses the effectiveness of Medicare Zone Program Integrity Contractors (ZPICs) -- contractors that perform program integrity activities designed to fight Medicare fraud, waste, and abuse. While the GAO notes that ZPICs take credit for over $250 million in Medicare savings in 2012 from actions such as stopping payment on suspect claims, the GAO observes that CMS would benefit from more data on whether quicker ZPIC action would lead to greater savings. The GAO therefore recommends that CMS (1) collect and evaluate information on the timeliness of ZPICs' investigative and administrative actions, and (2) develop ZPIC performance measures explicitly linking ZPICs' work to Medicare program integrity performance measures and goals.
This post was written by Nancy Sheliga.
At the request of Senate Republican policymakers seeking a better understanding regarding the impact of supplemental coverage on overall Medicare spending, the Government Accountability Office (GAO) recently compared the health care expenditures of beneficiaries with only traditional fee-for-service (FFS) Medicare coverage to those of beneficiaries who have supplemental coverage from either private insurance companies (a.k.a., Medigap) or employer-sponsored plans. Based on a review of 2010 data, the GAO concluded that health care expenditures are higher for beneficiaries with supplemental coverage than for beneficiaries with FFS Medicare only. More specifically, both average Medicare spending and out-of-pocket expenses for beneficiaries with Medigap were significantly greater than for those with Medicare FFS coverage only. Within the FFS only group, those who are enrolled in Medicare's Part D prescription drug program spent considerably more on health care than those who are not enrolled in Part D.
While other research has found similar patterns, and Congressional policymakers have expressed concern that those with supplemental coverage may be less cost-conscious in their use of medical services, the GAO report also found that those with poorer health status and greater age have higher average health care expenditures in general. In addition, the GAO report references other past studies that have indicated that (1) characteristics such as health status and age may influence the decision to purchase supplemental coverage, possibly providing a partial explanation of the differences in expenditures, and (2) reducing supplemental coverage may cause some individuals to consider forgoing necessary services, possibly exacerbating their health care needs and perhaps increasing their long-term health care costs.
Medicare electronic health records (EHR) incentive payments to hospitals and health care professionals topped $6.3 billion for 2012 – more than twice the $2.3 billion awarded for 2011 -- according to a GAO report entitled Electronic Health Records: Number and Characteristics of Providers Awarded Medicare Incentive Payments for 2011-2012. The proportion of eligible hospitals and professionals receiving payments also grew from 2011 to 2011, with 48% of eligible hospitals (2,291) receiving payments in 2012 compared to 777 hospitals (16%) in 2011. For 2012, 31% of eligible professionals (183,712) were awarded payments, up from 10% (58,331) in 2011. Among hospitals and professionals awarded an incentive payment for 2012, the largest proportions were in the South, the smallest proportions were in the West, and a majority were in urban areas. More than four-fifths of the hospitals were acute care hospitals and three-fifths were nonprofit hospitals, while more than half of professionals were specialty practice physicians.