To provide for the establishment of a fraud, waste, and abuse detection and mitigation program for the Medicare Program under title XVIII of the Social Security Act.

SECTION 1. MEDICARE FRAUD, WASTE, AND ABUSE PREVENTION SOLUTION.

    (a) Establishment.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        develop and implement a fraud, waste, and abuse comprehensive 
        pre-payment review prevention system (in this section referred 
        to as the ``Prevention System'') for reviewing claims for 
        reimbursement under the Medicare Program under title XVIII of 
        the Social Security Act (in this section referred to as the 
        ``Medicare Program'').
            (2) Implementation.--The Secretary shall carry out the 
        Prevention System acting through the Center for Program 
        Integrity of the Centers for Medicare & Medicaid Services.
    (b) Selection of Claims Across All Provider Types.--The Prevention 
System shall cover all types of providers of services and suppliers 
under the Medicare Program, but may be limited to a subset of claim 
segments.
    (c) System Design Elements.--To the extent practicable, the 
Prevention System, shall--
            (1) be holistic;
            (2) be able to view and analyze all provider of services, 
        supplier, and patient activities from multiple providers of 
        services and suppliers under the Medicare Program;
            (3) be able to be integrated into the health care claims 
        flow in existence as of the date of the enactment of this Act 
        with minimal effort, time, and cost;
            (4) be designed to use technologies, including predictive 
        modeling, that can utilize integrated near real-time 
        transaction risk scoring and referral strategy capabilities to 
        identify transactions, patterns, anomalies, and linkages that 
        are statistically unusual or suspicious and can undertake 
        analysis before payment is made and that prioritizes unusual or 
        suspicious claims in terms of likelihood of potential fraud, 
        waste, or abuse to more efficiently utilize investigative 
        resources;
            (5) be designed to--
                    (A) allow for ease of integration into multiple 
                points along the claims flow under the Medicare Program 
                (pre-adjudication and post-adjudication of such claims) 
                in order to demonstratively show that the system ranks 
                the likelihood of high-risk behavior patterns and of 
                fraud, waste, or abuse; and
                    (B) utilize experimental design methodology to 
                monitor and measure the performance between the control 
                treatments (which shall be the methods and assessments 
                used as of the day before the date of the enactment of 
                this Act to address fraud, waste, and abuse under the 
                Medicare Program) and test treatments (which shall be 
                the Prevention System identification of such fraud, 
                waste, and abuse and actions taken pursuant to such 
                system to address such fraud, waste, and abuse); and
            (6) be provided through competitively bid contracts using 
        the Federal Acquisition Regulations.
    (d) System Operation.--
            (1) Scoring and near real-time analysis.--
                    (A) In general.--The Prevention System shall 
                identify high-risk Medicare claims by scoring all such 
                claims in near real-time, prior to the Centers for 
                Medicare & Medicaid Services making payment on such 
                claims under the Medicare Program.
                    (B) Use of scores.--The scores under subparagraph 
                (A) shall be communicated to the fraud management 
                system under subsection (f).
                    (C) Near real-time analysis.--Under the Prevention 
                System, the near real-time analysis of Medicare claims 
                data shall be conducted in a manner that ensures--
                            (i) prompt identification of fraud, waste, 
                        and abuse; and
                            (ii) prompt payment of legitimate claims.
            (2) Predictive modeling.--The Prevention System shall 
        involve the implementation of a statistically sound, 
        empirically derived predictive modeling technology that is 
        designed to prevent fraud, waste, and abuse (by identifying 
        such fraud, waste, and abuse before payment is made under the 
        Medicare Program on related claims). The Prevention System 
        shall use a predictive model to identify fraud, waste, and 
        abuse that is--
                    (A) based on historical transaction data, from 
                across all markets and regions available, to build and 
                continuously re-develop scoring models that are capable 
                of incorporating external data and external models from 
                other sources into the predictive model; and
                    (B) regularly updated, through the feedback loop 
                under subsection (g), to provide information and 
                incorporate data on reimbursement claims that is 
                collected through the Prevention System, including 
                information gathered through the investigation of 
                claims for reimbursement under the Medicare Program 
                that the system identifies as being potentially 
                fraudulent, wasteful, or abusive.
            (3) Protections for patients and providers.--The 
        identification of an unusual or suspect Medicare claim by the 
        Prevention System shall--
                    (A) not result in the denial of items or services 
                to an individual under the Medicare Program until such 
                claim is further reviewed by the Secretary; and
                    (B) not result in a failure to comply with prompt 
                payment requirements under applicable law.
            (4) Compliance with hipaa.--Any data collected, stored, or 
        reviewed under the Prevention System shall be treated in a 
        manner that is in accordance with the regulations promulgated 
        under section 264(c) of the Health Insurance Portability and 
        Accountability Act of 1996 (42 U.S.C. 1320d-2 note) and any 
        other applicable law.
    (e) Treatment of Data.--
            (1) In general.--The Prevention System shall be a high 
        volume, rapid, near real-time information technology solution, 
        which includes data pooling and scoring capabilities to quickly 
        and accurately capture and evaluate data.
            (2) Data sources.--The Prevention System shall, for 
        purposes of preventing fraud, waste, and abuse under the 
        Medicare Program--
                    (A) use data from claims for reimbursement under 
                the Medicare Program contained in existing files of 
                Medicare claims data, including the Common Working File 
                of the Centers for Medicare & Medicaid Services; and
                    (B) to the extent practicable, pool data from all 
                available Government sources (including the Death 
                Master File of the Social Security Administration).
            (3) Data storage.--The Prevention System shall be stored in 
        an industry standard secure data environment that complies with 
        applicable Federal privacy laws for use in building Medicare 
        fraud, waste, and abuse prevention predictive models that have 
        a comprehensive view of provider and supplier activity across 
        all markets, geographic areas, and provider and supplier types.
    (f) Fraud Management System.--
            (1) In general.--The Prevention System shall utilize a 
        fraud management system containing workflow management and 
        workstation tools to provide the ability to systematically 
        present score, reason codes, and treatment actions for high-
        risk scored transactions, as determined under subsection (d).
            (2) Review of claims.--The fraud management system under 
        paragraph (1) shall ensure that analysts who review Medicare 
        claims have the capability to access, review, and research 
        claims efficiently, as well as decline or approve payments on 
        claims in an automated manner.
    (g) Feedback Loop.--
            (1) In general.--The Prevention System shall utilize a 
        feedback loop to gain access to outcome information on 
        adjudicated Medicare claims so future system enhancements can 
        utilize previous experience.
            (2) Purpose.--The purpose of the feedback loop under 
        paragraph (1) is to--
                    (A) enable the Secretary to measure--
                            (i) the actual amount of fraud, waste, and 
                        abuse under the Medicare Program; and
                            (ii) any savings to the Medicare Program 
                        resulting from implementation of the Prevention 
                        System; and
                    (B) provide necessary data to develop future, 
                enhanced models for use in the Prevention System.
            (3) Analysis of final claims status.--The feedback loop 
        under paragraph (1) shall analyze data from all carriers to 
        provide post-payment information about the eventual status of a 
        Medicare claim as ``Normal'', ``Fraud'', ``Waste'', ``Abuse'', 
        or ``Education required''.
    (h) Claims Review Prior to Payment.--
            (1) Review before payment.--Subject to paragraph (2), if a 
        claim for reimbursement under the Medicare Program is selected 
        for review under the Prevention System, the Secretary shall not 
        make a payment on such claim until such claim has been reviewed 
        under the system. In order to carry out this paragraph, the 
        Secretary shall ensure that appropriate controls and technology 
        are in place to assess and measure the effectiveness of the 
        Prevention System, predictive models used under such system, 
        and the overall strategy for Medicare claims review.
            (2) Timely review.--
                    (A) In general.--The review of a claim under the 
                Prevention System shall occur in a timely manner.
                    (B) Application of prompt payment requirements.--
                The limitation on payment under paragraph (1) shall not 
                interfere with the prompt payment of a Medicare claim 
                in accordance with applicable law.
            (3) Manual review.--If automated technology presents a 
        score, reason code, or treatment action for a claim that is 
        scored as ``high-risk,'' the Prevention System shall provide 
        for manual review of medical records related to such claim by 
        both clinical and fraud investigators to ensure accuracy and 
        mitigate false positive events.
            (4) Self-audit review.--The Secretary may use self-audit 
        practices by providers and suppliers under the Prevention 
        System in a manner such that once high-risk claims are 
        identified through the predictive modeling, providers and 
        suppliers are offered the opportunity to adjust or withdraw 
        their claims.
            (5) Denial of payment for fraudulent claims.--Under the 
        Prevention System, if automated technology of a claim under 
        paragraph (3) and manual review under paragraph (4) confirm 
        fraud has occurred, the Secretary may deny payment of such 
        claim.
    (i) Annual Assessment Report.--
            (1) In general.--Not later than 2 years after the 
        implementation of the Prevention System, the Secretary, through 
        the Office of the Inspector General of the Department of Health 
        and Human Services, shall submit to Congress a report on the 
        implementation of such system.
            (2) Contents.--The report submitted under paragraph (1) may 
        contain--
                    (A) a detailed assessment of the Prevention 
                System's success in identifying fraud, waste, and 
                abuse;
                    (B) the costs of operating the Prevention System; 
                and
                    (C) an analysis of the overall return on investment 
                for the Prevention System.
    (j) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section such sums as may be necessary.
    (k) Expansion.--If the Secretary determines that the Prevention 
System results in savings to the Medicare Program, the Secretary shall 
expand the project throughout Federal health programs, including the 
Medicaid Program under title XIX of the Social Security Act and the 
Children's Health Insurance Program under title XXI of such Act.

Summary: Directs the Secretary of Health and Human Services (HHS) to develop and implement a fraud, waste, and abuse comprehensive prepayment review Prevention System for reviewing claims for reimbursement under title XVIII (Medicare) of the Social Security Act. Requires the Secretary to carry out the system acting through the Center for Program Integrity of the Centers for Medicare and Medicaid Services (CMS). Requires the Prevention System to cover all types of providers and suppliers under the Medicare program, but allows it to be limited to a subset of claim segments. Requires the Prevention System to: (1) be a high volume, rapid, near real-time information technology solution which includes data pooling and scoring capabilities to quickly and accurately capture and evaluate data. (2) identify high-risk Medicare claims by scoring all such claims in near real-time before payment is made, (3) involve a statistically sound, empirically derived predictive modeling technology. And (4) utilize a fraud management system that presents score, reason codes, and treatment actions for high-risk scored transactions, and a feedback loop to gain access to outcome information on adjudicated Medicare claims. Prohibits the Secretary from making a payment on a claim selected for review until it has been reviewed under the System.