U.S. GOVERNMENT PUBLISHING OFFICE

33–613 WASHINGTON : 2019

EFFORTS TO COMBAT WASTE, FRAUD, AND ABUSE 

IN THE MEDICARE PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JULY 19, 2017 

Serial No. 115–OS05 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

SUBCOMMITTEE ON OVERSIGHT 

VERN BUCHANAN, Florida, Chairman 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

PAT MEEHAN, Pennsylvania 

GEORGE HOLDING, North Carolina 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 

SUZAN DELBENE, Washington 

EARL BLUMENAUER, Oregon 

iii 

C O N T E N T S 

Page 

Advisory of July 19, 2017 announcing the hearing ............................................... 2 

WITNESSES 

James Cosgrove, Director, Health Care, Government Accountability Office ...... 5 

Jonathan Morse, Acting Director, Center for Program Integrity, Centers for 

Medicare and Medicaid Services ......................................................................... 27 

MEMBER SUBMISSION FOR THE RECORD 

Miami Herald article and the corresponding DOJ press release ......................... 49 

QUESTIONS FOR THE RECORD 

Questions from The Honorable Brian Higgins, to James Cosgrove .................... 59 

Questions from The Honorable Vern Buchanan, to Jonathan Morse ................. 60 

Questions from The Honorable George Holding, to Jonathan Morse .................. 63 

Questions from The Honorable Brian Higgins, to Jonathan Morse .................... 63 

PUBLIC SUBMISSIONS FOR THE RECORD 

Alliance of Specialty Medicine ................................................................................ 66 

American Medical Rehabilitation Providers Association (AMRPA) .................... 70 

Council for Medicare Integrity ............................................................................... 76 

Dennis Byron, statement ........................................................................................ 79 

Federation of American Hospitals .......................................................................... 80 

Partnership for Quality Home Healthcare ............................................................ 83 

Secure ID Coalition ................................................................................................. 85 

(1) 

EFFORTS TO COMBAT WASTE, FRAUD, AND 

ABUSE IN THE MEDICARE PROGRAM 

WEDNESDAY, JULY 19, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:02 a.m., in Room 

1100, Longworth House Office Building, Hon. Vern Buchanan 

[Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

2 


Insert 33613A.001

@ 

WAYS AND MEANS 

CHAIRMAN KEVIN BRADY 

Chairman Buchanan Announces Hearing on Efforts to 

Combat Waste, Fraud, and Abuse in the Medicare Program 

House Ways and Means Oversight Subcommittee Chairman Vern Buchanan (R-FL) 

rumow1ced today that the Subcmnn1ittee will hold a hearing entitled "Efforts to Combat 

Waste, Fraud, and Abuse in the Medicare Program." The hearing will focus on how the 

Centers for Medicare aJld Medicaid Services (CMS) identifies and combats waste, fraud, 

and abuse in both traditional Medicare and the Medicare Advantage program. Reducing 

improper payments is critical for protecting the integrity of the program aJld ensuring that 

taxpayer dollars are well spent. The hearing will take place on Wednesday, July 19, 

2017 in 1100 Longworth House Office Building, beginning at 10:00 AM. 

In view of the limited time to hear witnesses, oral testimony at this hearing will be from 

invited witnesses only. However, any individual or organization may submit a wrillen 

statement for consideration by the Committee and for inclusion in the printed record of 

the hearing. 

DETAJLS .FOR SUBMISSION O.F WRJTTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments 

for the hearing record must follow the appropriate link on the hearing page of the 

Committee website and complete the informational forms. From the Committee 

homepage, http://waysandmcans.house.gov. select "Hearings." Select the hearing for 

which you would like to make a submission, and click on the link entitled, "Click here to 

provide a submission for the record." Once you have followed the online instructions, 

submit all requested information. ATTACH your submission as a Word document, in 

compliance with the formatting requirements listed below, by the close of business on 

Wednesday, August 2, 2017. For questions, or if you encounter technical problems, 

please call (202) 225-3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official heru·ing record. 

As always, submissions will be included in the record according to the discretion of the 

Committee. The Commiuee will not alter the content of your submission, but we reserve 

the right to format it according to our guidelines. Any submission provided to the 
3 

f 


Insert 33613A.002

announced charges of more than 400 individuals who claim more than $1.3 billion in 

fraudulent payments. Bad actors are real, and it is important that we continue to provide 

support for the effort to combat fraud. 

However, errors other th<m fraud require different approaches. This makes efforts to 

distinguish between fraud and improper payments important. In the end, we need to look 

for ways to reduce all types of errors and ensure that the mechanisms created to do this 

are working as intended. 

Today, we are looking at how CMS addresses improper payments to Medicare. Over the 

past decade, enrollment in Medicare Advantage has tripled. A third of all seniors on 

Medicare rely on it, and this number continues to grow. Because of this, we need to 

better understand the processes in place to oversee the program and what we can do to 

improve it. 

To that end, I look forward to the hearing and the witnesses today. I now yield to the 

distinguished Ranking Member from Georgia, Mr. Lewis, for the purposes of an opening 

statement. 

Mr.~ Good morning. Thank you, Mr. Chainnan, for holding this hearing. I also 

would like to thank our witnesses for being here today and for taking the time to be 

here. 

As you know, Mr. Chairman, this subcommittee's work touches many areas, and 

protecting and preserving Medicare is one of our most important duties. Last year, 

Medicare paid nearly $700 billion for health services-- $700 billion for health services. 

This program is a lifeline for over 57 million elderly and disabled beueficiaries, and we 

must ensure that Medicare remains sound and strong for all who rely on it. I deeply 

believe that preventing fraud is key to this mission. 

In 2016, the Medicare fee-for-service program paid an estimated $4 1 billion in improper 

paymentS, and the Medicare Advamage program paid about $ 16 billion in improper 

payments. We must work together to bring these numbers down. We cannot let the bad 

actions of a few ruin the promise and commitment of Medicare for generations yet 

unborn. 

Yet as we recommit to fighting fraud, we should be cautious. Our first priority should be 

to eusure that beneficiaries have access to quality and life-saving services. 

As Medicare transforms to reward quality instead of quantity, this administration must 

continue President Obama's work to fight new fom1s of fraud, and we must continue to 

act. We all must continue the Affordable Care Act investment and innovation in 

preventing fraud before it happens. Reduci11g fraudulent, wasteful, and improper 

payments is a critically important part to keeping the promise to protect the life of the 

Medicare Trnst Fund for all who rely on it. 
4 

Chairman BUCHANAN. The Subcommittee will come to order. 

Welcome to the Ways and Means Oversight Subcommittee hearing on ‘‘Efforts to Combat Waste, Fraud, and Abuse in the Medicare Program.’’ 

Nearly 60 million Americans, including four million in my home 

state of Florida, rely on Medicare programs to provide care. We 

have a responsibility to all of them and to the taxpayers to ensure 

that care is high quality and that CMS is paying accurate and appropriate amounts to those providing the care. As it stands now, 

the Center for Medicare Services has not been in a position to ensure that that is the case. 

A couple of weeks ago, I had a very helpful discussion with staff 

from CMS Center for Program Integrity about their efforts to address improper payments. One issue we discussed is the 10 percent 

error in the rate. So just to put that in perspective, the way I look 

at it, when you have a large program, 600 billion—650 billion, 10 

percent is over a billion dollars a week in improper payments, and 

that is really what we are talking about, how can we drive that 

down. 

So 10 percent error rate that is reported includes fraud, as well 

as overpayments, as well as underpayments. Put directly, that 10 

percent number doesn’t really tell us much about the program’s integrity. The problem with accurate and complete documentation 

makes up a substantial portion, and it is impossible to extrapolate 

how much of the payments are actually lost to trust funds and how 

much merely represent administrative errors. CMS treats them the 

same. 

When we try to understand how much fraud is in Medicare, the 

answer: We simply don’t know. Understanding payment errors is 

important, as every dollar reported lost in error serves to undermine the good works of the program and could represent a dollar 

that should be spent providing care to beneficiaries. 

However, different types of errors require different analytics and 

different solutions. Last week, the Department of Justice and the 

Department of Health and Human Services announced charges of 

more than 400 individuals who claim more than $1.3 billion in 

fraudulent payments. Bad actors are real, and it is important that 

we continue to provide support for the effort to combat fraud. 

However, errors other than fraud require different approaches. 

This makes efforts to distinguish between fraud and improper payments important. In the end, we need to look for ways to reduce 

all types of errors and ensure that the mechanisms created to do 

this are working as intended. 

Today, we are looking at how CMS addresses improper payments 

to Medicare. Over the past decade, enrollment in Medicare Advantage has tripled. A third of all seniors on Medicare rely on it, and 

this number continues to grow. Because of this, we need to better 

understand the processes in place to oversee the program and what 

we can do to improve it. 

To that end, I look forward to the hearing and the witnesses 

today. I now yield to the distinguished Ranking Member from 

Georgia, Mr. Lewis, for the purposes of an opening statement. 

5 

Mr. LEWIS. Good morning. Thank you, Mr. Chairman, for holding this hearing. I also would like to thank our witnesses for being 

here today and for taking the time to be here. 

As you know, Mr. Chairman, this subcommittee’s work touches 

many areas, and protecting and preserving Medicare is one of our 

most important duties. Last year, Medicare paid nearly $700 billion 

for health services—$700 billion for health services. 

This program is a lifeline for over 57 million elderly and disabled 

beneficiaries, and we must ensure that Medicare remains sound 

and strong for all who rely on it. I deeply believe that preventing 

fraud is key to this mission. 

In 2016, the Medicare fee-for-service program paid an estimated $41 billion in improper payments, and the Medicare Advantage 

program paid about $16 billion in improper payments. We must 

work together to bring these numbers down. We cannot let the bad 

actions of a few ruin the promise and commitment of Medicare for 

generations yet unborn. 

Yet as we recommit to fighting fraud, we should be cautious. Our 

first priority should be to ensure that beneficiaries have access to 

quality and life-saving services. 

As Medicare transforms to reward quality instead of quantity, 

this administration must continue President Obama’s work to fight 

new forms of fraud, and we must continue to act. We all must continue the Affordable Care Act investment and innovation in preventing fraud before it happens. Reducing fraudulent, wasteful, 

and improper payments is a critically important part to keeping 

the promise to protect the life of the Medicare Trust Fund for all 

who rely on it. 

This is not a partisan matter. It is a question of preserving the 

sacred trust of our seniors, families in need, and people living with 

disabilities. It is a question of doing what is right and what is just. 

And again, Mr. Chairman, thank you for holding this hearing. I 

look forward to the testimony of our witnesses. And I yield back. 

Chairman BUCHANAN. Without objection, other Members’ opening statements will be made part of the record. 

Today’s witnesses panel includes two experts, John Cosgrove, Director of Health Care at the Government Accountability Office; 

Jonathan Morse, Acting Director, Center for Program Integrity, 

Center for Medicare and Medicaid Services. 

The Subcommittee has your written statements, and they will be 

made part of the formal hearing record. You have five minutes to 

deliver your oral remarks, and we will begin with you, Mr. Cosgrove. 

STATEMENT OF JAMES COSGROVE, DIRECTOR, HEALTHCARE, 

GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. COSGROVE. Chairman Buchanan, ranking member—— 

Chairman BUCHANAN. Turn on your mike. 

Mr. COSGROVE. Is it on now? Sorry. 

Chairman Buchanan, Ranking Member Lewis, members of the 

subcommittee, I am pleased to be here today as you discuss Medicare program integrity issues. 

In 1990, GAO first designated Medicare as a high-risk program, 

in part due to the risk of improper payments. These are payments 

6 

that were either made in error or for incorrect amounts. Sometimes 

they may be the result of fraud, and according to HHS’ most recent 

estimate, Medicare improper payments totaled nearly $60 billion. 

My remarks today will focus on program integrity in Medicare 

part C, also known as Medicare Advantage, the private health plan 

alternative to the fee-for-service program. 

Chairman BUCHANAN. Could you speak up just a little bit, 

please. 

Mr. COSGROVE. Absolutely. 

Back in 1990, relatively few Medicare beneficiaries were enrolled 

in such plans. Since then, enrollment has grown substantially, and 

Medicare Advantage is a popular option. Today, one in three beneficiaries are enrolled, and payments to plan total about $200 billion. These magnitudes underscore the importance of addressing 

the 10 percent of plan payments that HHS estimates are improper. 

In Medicare Advantage, improper payments largely stem from 

beneficiary diagnoses that are unsupported by beneficiaries’ medical records. That is because CMS uses these diagnoses to adjust 

plan payments up or down, a process known as risk adjustment, 

to pay plans more for sick beneficiaries and less for healthy ones. 

If the beneficiary diagnoses that plans report to CMS are wrong, 

then plans can be paid too little or too much. 

To identify and recover improper payments from plans, CMS conducts audits known as risk adjustment data validation, or RADV 

audits. In a RADV audit, a contractor checks the medical records 

for a sample of plan beneficiaries to see if the plan reported diagnoses are accurate and supported. 

The first RADV audits checked payments from 2007 for 32 plan 

contracts. CMS’ intention is to conduct about 30 annual audits that 

would identify any improper payments to a plan based on a sample 

of beneficiaries, then extrapolate the finding to estimate the total 

amount of improper payments made to that plan, and finally, recover the overpayments. CMS has now additional RADV audits underway for payment years 2011, 2012, and 2013. 

We believe, based on our work, that fundamental changes are 

necessary to improve the RADV audits and recover additional substantial amounts of improper payments. First, RADV audits should 

be better focused on those plans with the highest potential for improper payments. Second, the RADV process must speed up for a 

variety of reasons, including a lengthy appeals process. None of the 

RADV audits has been completed. Third, recovery audit contractors, known as RACs, called for in the Affordable Care Act should 

be incorporated into the audit process. The RACs would work on 

a contingency basis and extend the resources available to conduct 

RADV audits. 

HHS agreed with our recommendations, and CMS has begun 

considering steps to address them, but the details of how the agency will address our recommendations have yet to be filled in. 

I also want to describe our concerns about the shortcomings in 

CMS’ efforts to validate and use the encounter data that plans 

must now submit to the agency. For years, MA plans have been 

somewhat of black boxes. We knew how much the plans were paid 

and who they enrolled, but very little about the services that they 

actually provided. Before 2012, plans simply submitted the beneVerDate Sep 11 2014 10:42 Feb 13, 2019 Jkt 033613 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33613.XXX 33613
7 

ficiary diagnoses needed for risk adjustment. However, starting in 

2012, CMS required plans to submit encounter data, which are 

similar to fee-for-service claims data, and contain information on 

all diagnoses and the medical services and items provided to the 

beneficiaries. In 2015, CMS began using diagnoses from these encounter data, along with other plan submitted data on diagnosis to 

risk adjust plan payments. 

In January of this year, we reported that CMS had made some 

progress in validating plans encounter data, but that certain important steps identified in our earlier report had not yet been fully 

addressed. For example, CMS had not fully established benchmarks for the completeness and accuracy of the data or it conducted analyses to compare submitted data with established benchmarks. We also found that CMS had not yet established specific 

plans for using the data for program integrity or other purposes 

that had been outlined, except for risk adjustment. 

We, therefore, continue to believe that CMS should implement 

our July 2014 recommendations by thoroughly assessing the data 

for completeness and accuracy and by establishing specific plans 

and timeframes for using these data for other purposes. 

This concludes my prepared remarks. I would be happy to answer any questions. 

[The prepared statement of James Cosgrove follows:] 

8 


Insert 33613A.003

For Release on Delivery 

Expected at 10:00 a.m. ET 

Wednesday, July 19, 2017 

GA0-17-761T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Oversight, 

Committee on Ways and Means, House 

of Representatives 

MEDICARE ADVANTAGE 

PROGRAM INTEGRITY 

CMS's Efforts to Ensure 

Proper Payments and 

Identify and Recover 

Improper Payments 

Statement of James Cosgrove 

Director, Health Care 
9 


Insert 33613A.004

GAO 

Highlights 

~ 01 QA0.17·111T, • eet~~mony 

~N~on~ 

eomtn.rt.e Oft Ways lind MNn:t, Hoi.IM ol ~ .... b .... 

Why GAO Old This Study 

GAO has destgnated Medicere as a 

hlgh·t1Sk pl~m I>Oc<lu.., of i1$ size. 

compleXIty. ond suSCOj)Clbohty to 

mismanagement and Improper 

payments, which reac::hed an estimated 

$60 billion On hscol )'Mr 2016. 

CMS oonlrOCISWitll MAOs to prOVI<Ie 

MNtCeS to abOuC one-third of al 

Mld.cere blnefJOaneS, and pad 

MAOs oboul $200 btllon lor o- c:ate 

tn 2018 CMS's poymenl$10 1he MAOs 

voty boSed on 1he _, otatus o1 

benefl08f\l$ For example, an MAO ,__ o high« rwk-edjuSted 

payrntftt tor an enrollee w•lh a 

d•agnolls of d .. betes Chan for an 

othec'Wise l<lentiCIIf enrollee without this 

d•agnosls Improper payments in MA 

arise prlmanly from dlagnos•s 

InformatiOn unsupported by medical 

reccwds that leads CMS to Increase its 

paymo<1ts 

Th11 tost1mony ts based on GAO's 

2018 and 2017 reports addressing MA 

1mpr-poymo<1ts and highlighto (I) 

fecloro lhot hove hondered CMS's elf-to identAy ond ,_.,., ;mproper 

poyments through poyment auditS and 

(2) CMS s --;n volodW>g encoootet deC. for UM 1"1 O$k adjusq 

ptymentS 10 MAOs Fe< lheH repOIIS, 

GAOre--rdl and agency 

-"· onolyzKdata from ongoong RADII lUCio. and~ 

CMS'o OCIM-With 1he agency's 

prOIOCCIIor vah<lalll>g Medoeai<l 

encountet CSita and federal mtemat 

control l l&lldll'ds GAO 1nleMeWed 

CMS offiCI&Is for bOCh reports, and also 

asked for updates on the stal\.ls of 

GAO's pflOf' recommendations for this 

statement 

VleWGA0-17•7t1T F01more~ 

con&IIC:l ...... CotvoYe et(202)5'f2·7114 Of 

~oov 

MEDICARE ADVANTAGE PROGRAM 

INTEGRITY 

CMS's Efforts to Ensure Proper Payments and 

Identify and Recover Improper Payments 

What GAO Found 

Tho C.,toro for Medlcere $ MediCaid Serviees (CMS) estimated that about $16 

billion-fleany 10 percent-of Medicare Advantage (MA) peymentoln lloeal year 

2016 v.e<e Improper. To ldenhly and raoover MA Improper payments, CMS 

conducts risk adJUStment data velld.ahon (RADV) audit$ of pnor peyments TheM 

oU<Iits detO<mlno whelhtf the dl<lgnosl$ """' submitted by Medicare Advontage 

O<ganiHIIOns (MAOs), ,.;,ieh o" er pm~ote plan oftemaiNeoto Iee-te< .. ......,. (FFS) 

Me<llc:aro, •• -od by o beMf'.aary's mediCal record. CMS peyo MAOs o 

predetermined monthly amount 101 each enrollee. CMS usa a proceso called 

riol< ..,.,_,to project eac:h enrolee's health care <OSlo USir1g ~data 

fran MAO$ and demogrOjlluc data from Medicare. In .. 2018 repo<~. GAO found 

se-fec~oro Ofi1*IOd CMS's otf<>rlstoidenOiy end-~-· indUding 

RAOV eudots -• nd laf9eled to oonlnlels with the higNII poeenbal lot 

lmpr- peymenta. The -nq's method of calculating lmt><-

payment rlok lot eac:h conlr8cl. baH<! on the diagnoses reponed lot 1he 

contract' a beneficiaries, had shotlcomings. and CMS did not use other 

available data to select the contracts with lhe greatest potent~l for 

impr-peymerll recovery. 

Substantial delays In RADV aud~s in progre$5 jeOpardize CMS's goal of 

e~n ually conducting annual RADV audhs. CMS had RAOV oudill 

underway lor payment years 2011, 2012. and 201 3. 

CMS hod not expended the u... ol Recovery AAJdit ContraciO<I (RAC) to 

tho MA program as required by law in 2010. RACs have been used In 

other Medteero programs lo recover improper pa~ts for • 

conbngoncy fM 

GAO recommended that CMS improve the accuracy o1 its mechodology for 

idenblying contracts With the greatest potenbal fO< in-payment racovoory, rno4ly the procesoeo for selecbng contrac1s to focus on lhooe mo.tllko!y 10 have 

inpr-payments. and lmt><ove 1he llmeliness of the RNJV audit proceso. CMS 

reponed in J<liy 2017 lhot A hod tal<en initial actions to address IMse 

recommendabenl. but none hod been fully implemented. GMJ o1so 

recommended that CMS dovolop specific plans fO< incorpofabng a RAC into 1he 

RNJV progrem. In July 2017. CMSrepotted that the agency is 0\'llluabng b 

otrategy fo< 1he MA RAC with CMS leadership. 

CMS has begun to uso encounter data. wl1ich are similar to FFS Claims data. 

along with dlagnoslo dale from MAO. to help ensure the proper uso o1 federal 

funds by improving risk adjustment In the MA program. Encounter data include 

more information about the care and heahh status of MA beneficiarlet than the 

data CMS uses now to risk adjust payments. In its January 2017 repor1, GAO 

found CMS had modo PrQ9ress in developing plans to use encounter data lot 

risk ed)u5tment. However. CMS had made limhed progress in validating tho 

completeness and aocurky of MA encounter data., as GAO recommended In 

2014. GAO oontinueo to bellO~ that CMS should establi$h plans for u~~ng 

~nter daUI and lhorougNy assess the daUI lor completeness ond aocuracy 

before uslng 1110 nsk adjUSt poyments. 

------------.............. .,.,.__-~ 
10 


Insert 33613A.005

Chairman Buchanan. Ranking Member Lewis, and Members of the 

Subcommittee: 

I am pleased to be here today to discuss program integrity in Medicare. 

particularly ongoing efforts to reduce and recover improper payments in 

Medicare Advantage (MA). GAO has designated Medicare as a high-risk 

program since 1990, because of its size, complexity, and susceptibility to 

mismanagement and improper payments. Improper payments, which are 

payments that either were made in incorrect amounts, such as over· or 

underpayments, or were made in error, are a significant risk for Medicare. 

In fiscal year 2016, improper payments in Medicare reached an estimated 

$60 billion. 1 Some improper Medicare payments are due to fraud, which 

involves willful misrepresentation. The Centers for Medicare & Medicaid 

Services (CMS), within the Department of Health and Human Services, 

faces many challenges related to implementing payment methOds that 

encourage efficient service delivery and safeguarding the program from 

loss as a resutt of improper payments. 

In 2016, Medicare was projected to finance health services for more than 

57 million elderly and disabled beneficiaries with expenditures of $696 

billion. About two-thirds of Medicare beneficiaries are enrolled in 

traditional, fee-for-service (FFS) Medicare, with the remaining third 

enrolled in MA. In 2016, Medicare paid about $200 billion to MA 

organizations (MAOs), which are entities that offer a private plan 

atternative to FFS Medicare. CMS estimates that improper payments in 

MA totaled about $16.2 billion in fiscal year 2016, nearly 10 percent of 

CMS's payments to MAOs that year. • 

Under MA, CMS contracts with MAOs to provide services to beneficiaries. 

MAOs may have multiple contracts with CMS; for example, plans with 

varying benefit levels would each have a separate contract. CMS pays 

MAOs a predetermined monthly amount for each beneficiary, no matter 

how many services are provided or how much they cost. CMS adjusts 

payments to MAOs to reflect enrollees' projected health care costs-a 

process known as risk adjustment. CMS pays MAOs more for enrollees 

1

GAO, High-RiSk SttriGs: Ptogftlss ort Many High-Risk AAMs. whiM SubstantiM E/fort$ 

No<icledon Others, GA0.17-317 (Washington, D.C.: Feb. 15, 2017). 

2

See Department of Hea11h and Human SeMoes. FY 2016 Agency FVfancial Reporl 

(Washington, D.C.: Nov. 2016). In fisc.al Y')ar 2016. CMS estimated tllat the net 

overpayments In MA (overpayments minus ooderpayments) were abOut S7 btllion, or 4 

pe<cent. 

Po1ge 1 GA0.17-761T 
11 


Insert 33613A.006

who are projected to have higher medical costs, based on prior-year 

diagnoses and demographics (such as age and gender), and less for 

those projected to have lower costs. For example, a MAO receives a 

higher risk-adjusted payment for an enrollee with a diagnosis of diabetes 

or heart disease than for an otherwise identical enrollee without those 

diagnoses. The purpose of risk adjustment is to pay MAOs fairly and 

accurately, thereby decreasing incentives for MAOs to avoid enrolling 

sicker beneficiaries. MAOs can incur losses if their aggregate spending 

exceeds payments, but they can retain savings if their aggregate 

spending is less than payments. Because MAOs are paid a 

predetermined amount for each enrollee that is based on prior diagnoses, 

improper payments primarily result from unsupported diagnosis 

information from MAOs that lead to increased payments. 3 CMS conducts 

risk adjustment data validation (RADV) audits of past payments to verify 

the accuracy of the diagnosis information submitted by MAOs. 

Additionally, CMS has begun to use encounter data. which are similar to 

FFS claims data. to help ensure that CMS appropriately risk adjusts MAO 

payments.• 

My testimony summarizes the findings and recommendations of two of 

our recent reports relevant to MA improper payments. In particular, I will 

describe (1) factors that have hindered CMS's ability to identify and 

recover MA improper payments through payment audits. and (2) progress 

CMS has made in validating encounter data for use in risk adjusting 

payments to MAOs. 

My remarks on factors that have hindered CMS's ability to recover MA 

improper payments are based on our 2016 report examining the extent to 

31ntentional manipulation of diagnostic information may be sli)jecl to the false ()aims A/:;1. 

(FCA), which plohibils certain actions, including the knowing presentation of a ratse claim 

tot payment by the fed&tal government. The Department of Justice (DOJ) is responsible for enforoement of the FCA FCA claims may also be bro~.~gh' by private parties on behaU 

of the federal government. which OOJ may elect to join, and these "-'histleblowe($" can 

receive a share of a monetaJy settlement or recovery plus exp&nses and attorneys' f&es and oosts. Some whisttebk>wers have filed FCA clajms against health plans alleging ttley 

manipulated data to overbill the MA program and improperly boost profits. For example. in 

one lawsuit joined by the OOJ in May 2017, an MAO was accused of knowi1'19tyignori1'19 lnfonnation in medical charts that did not support invatid diagnoses that it submitted to 

CMS to inetease payments. 

•enooonter data are detailed information about the care and lleatth status of MA 

enrollees. 

Page 2 GA0·17·761T 
12 


Insert 33613A.007

Background 

which CMS has addressed improper payments In the MA program.• For 

that report, we reviewed research and agency documents, and we 

analyzed data from ongoing RADV audits of 2007 and 2011 payments, 

which were CMS's two initial contrael-level RADV audits. We also 

interviewed CMS officials. My remarks on the progress CMS has made in 

validating encounter data and its plans to use the data are based on our 

2017 report examining these issues.• For that report, we compared 

CMS's activities with the agency's protocol for validating Medicaid 

encounter data, which are comparable data collac1ed and submitted by 

entities similar to MAOs, and federal Internal control standards. We also 

reviewed relevant agency documents and Interviewed CMS offiCials about 

MA encounter data oollac1ion and reporting. More detailed Information on 

our Objectives, soope, and methodology for this work can be found in lhe 

issued reports. For this statement, we also asked CMS officials for 

updates on the status of our prior racommendations. 

We conducted the work on which this statement is based in aooordance 

with generally a<:cepted government auditing standards. Those standards 

requ~e that we plan and perform the audit to obtain suffiCient, appropoate 

evidence to proVIde a reasonable basis for our find~~~gs and oondus.ons 

based on our audd objectives. We beloeve lhatlhe IIV!denee obtaoned 

provides a reasonable basis for our r.ndings and eotldus.ons based on 

our audn objectivesFFS Medicare generally pays providefs dore<:lly for the S«V~Ces they 

perform-such as paying physiCians for olfoce 111S~s-based on 

predetermined payment fomlulas FFS payments are based on daoms 

data received directly from providers CMS rehes pnmarily on prepayment 

automated cheeks and postpayment medical reviews to identofy and 

recover FFS improper payments. Under the Improper Payments 

Information Act of 2002 (IPJA). as amended, CMS reported that the FF$ 

'GAo, Medicore Advlii>IO!JO F"""""*>tol ...,_,.,, -it> CMS'I Effl>rliO 

R-s.t>sllNIOol Amounts of 1-P•ymor>ll, GA0-18-78 (WMIIonglOO. D.C .. Apf'O 

8.2016). 

8

GAO, Medicare AdVantage; L.Jmi ~ ~U Ml~ to VMJdtr. ErlcounlM Dat8 Uud to £n$UI'$ ~r Pllymtnt&, GA0-17 -223 (WaShington. D.C .. Jan 17, 201 7). For ltlis rtpOft. 

we updated findings from our 2014 rtport on lhe aame subfecl. See GAO, IMdJ'ctw AdvNJt8ge: CMS Sltoutd FuJty O.vtiOp Plan• lor Encounttr O.la Mtd Assen O.ta QtHttity 

before Us.e, GAQ- 14·571 (Washington, O.C.: July31, 201<4) In Che2014 ttp011, we fOund 

that CMS had 1aken some, but not all, appropriale act»on• to tns.urt the compl•ten.u 

and &ccutaey of MA encounter data. 

Page3 GN:J-17-7$1T 
13 


Insert 33613A.008

improper payment rate was 11 percent for fiscal year 2016.7 Two-thirds of 

the FF$ improper payment rate, according to CM$, was a result of 

insufficient documentation.

3 

CMS and Us contractors engage in a number of activities to prevent, 

identify, and recover improper payments in FFS. The Patient Protection 

and Affordable Care Act of 2010 included provisions designed to 

strengthen Medicare's provider enrollment and screening requirements. 

Subsequently, CMS implemented a revised screening process for new 

and existing providers and suppliers based on the potential risk of fraud, 

waste, and abuse. In November 2016, we evaluated this revised 

saeening process and found that CMS used the new process to screen 

and revalidate over 2.4 million unique applications and existing enrollment 

records• As a result of this process, over 23,000 new applications were 

denied or rejected, and over 703,000 existing enrollment records were 

deactivated or revoked. CMS estimates that this process saved $2.4 

billion in Medicare payments to ineligible providers and suppliers from 

March 2011 to May 2015. 

Also in FFS, CMS uses different types of contractors to conduct 

prepayment and postpayment reviews of Medicare claims at high risk for 

improper payments. We examined the review activities of these 

contractors and in April 2016 reported that using prepayment reviews to 

deny improper claims and prevent overpayments is consistent with CMS's 

goal to pay claims correctly the first time. In addition. prepayment reviews 

can better protect Medicare funds because not all overpayments can be 

collected. •• We recommended that CMS seek legislation to allow 

71PIA. as amended by the ~roper Payments Elimination and: Reoo.,.ery ~ ot 2010 aod the Improper Payments Etimin&tion and Recovery Improvement Act of 2012, require$ 

executive branch agencies to annually identify programs and activities susceptible to signifiCant improper payments, estimate the amount of improper payments, and report 

theS« estimates alOng with actionS planned or taken te> r6due& them. 

8rnsufficient documentation occuts in FFS when the daJm reviewefs cannot conclude that 

the billed services were actually p~ec:l . were provided at the level billed, or were me<hcany neceu.ary. Claims are aiS() placed into this category Yftlen a speCifiC 

dOCI.I "twmcation element that is required Is missing. sU¢h as a physician $ignature on an 

order. or a form that is required to be completed in its entirety. 

9See GAO, Medicare: Initial Resufts of Revjsed Process to ScrHn ProvidfHS and 

$tJPpl/6rs. and NHd for ~iwls and PMorm8nu M&8Si.lr$$, GA0.17-42 (WaShington, 

O.C.; Nov. 15, 2016). 

10

see GAO, M6dicar•: Claim R'view Progt<ltn$ COuld Be lmproV$d with Additk>nal Ptttp&ymtlflt Rov,'ttws and S.ttiN' Data, GA0-16-394 (Washrlgton, O.C.: April13, 2016}. 

Page• 
14 


Insert 33613A.009

Re<:overy Auditors, who are currently paid on a postpayment contingency 

basis from recovered payments, to conduct prepayment reviews. 

Although CMS did not concur with this recommendation, we continue to 

believe CMS should seek legislative authority to allow Recovery Auditors 

to conduct these reviews. 

Medicare Administrative Contractors (MACs) process Medicare claims, 

identify areas vulnerable to improper billing, and develop general 

education efforts focused on these areas. In March 2017, we evaluated 

MACs' provider education efforts to help reduce improper billing. n We 

found thai CMS collects limited information about how the efforts focus on 

the areas MACs identify as vulnerable to improper billing, and 

recommended that CMS require MACs to report in sufficient detail to 

determine the extent to which their provider education efforts focus on 

vulnerable areas. According to CMS, the agency has updated its 

reporting guidance and MACs will begin reporting more detailed 

information beginning in July 2017, 

Whereas Medicare pays FFS providers for servioes provided, Medicare 

pays MAOs a fixed monthly amount per enrollee regardless of the 

services enrollees use. To identify and recover MA improper payments 

resulting !rom unsupported data submitted by MAOs fO< risk adjustment 

purposes, CMS conducts two types or RADV audits: national RADV 

activities and contract-level RADV audits. Both types determine whether 

the diagnosis codes submitted by MAOs are supported by a beneficiary's 

medical record. CMS conducts national RADV activities annually to 

estimate the nationaiiPIA improper payment rate lor MA. Fe< 2016, CMS 

estimated that 71 percent or the improper payments resulted !tom the 

insufficient medical record documentation MAOs submitted to CMS that 

did not support diagnoses they had previously submitted to CMS." The 

second type of RADV audit, contract-level audits, seeks to identify and 

recover improper payments from MAOs, and thus deter MAOs from 

submitting inaccurate diagnosis information. CMS conducted contractlevel audits or 2007 payments lor a sample or enrollees in 32 MA 

contracts. CMS's goal is to conduct contracHevel audits annually to 

11S&e GAO, Medicare Provider Education: Oversight of E/fOit$ to R$dJ.JCIJ lrnpt"Op&r Bifling 

/IIH<Js lm{J(t>WtMtlf, GA0-17 -290 (Washington, D.C.: Mardl10. 2017), 

1

2cMS also estimated that 29 percent of MAO's improper payments in 2016 wet'e due to 

administrative Of process errors. 

Pages GAo.17.761T 
15 


Insert 33613A.010

recover improper payments efficiently. among other things. '

3 1t plans to 

recoup overpayments by calculating a payment error rate for a sample of 

enrollees in each audited oontract and extrapolating the error rate to 

estimate the total amount of improper payments made under the contract. 

CMS has RADV audits underway for three payment years-2011, 2012, 

and 2013. In general, CMS audits about 5 percent of contracts for each 

year, or roughly 30 contracts." 

CMS calculates a benefiCiary's risk score-a relative measure of 

projected Medicare spending-based on both demographic 

characteristics and health status (diagnoses). The agency uses Medicare 

data to determine a beneficiary's demographic characteristics; however, it 

must rely on data submitted by MAOs for health status information. CMS 

requires MAOs to submit diagnosis codes for each beneficiary in a 

contrad in order to calculate risk scores. Since 2004, CMS has used the 

Risk Adjustment Processing System (RAPS) to collect diagnosis 

information from MAOs. In 2012, CMS began requiring MAOs to submit 

encounter data. Such data include diagnosis and treatment information 

for all medical services and items provided to an enrollee, with a level of 

detail similar to FFS claims. Since 2015, CMS has used both RAPS and 

encounter data submitted by MAOs to risk adjust MA payments." 

When CMS proposed collecting encounter data in 2008, the agency 

stated~ would use the data for risk adjustment and may also use them for 

specified additional payment and oversight purposes. CMS has 

recognized the importance of ensuring that the data collected are 

complete-representing all encounters for all enrollees-and accuraterepresenting a correct record of all encounters that occurred-given the 

important functions for which the data will be applied. 

13CMS al.so elq)eds that the RAOV audits wil have a sentin~ effect on lhe quality of riSk 

ed~us-tment data submitted by the MAOs 

t-'ln fiscal yeat 2016, CMS selected conttaets tor au<it to lnlliat• contract.,evet RAOV 

au<'its of2013payments. SeeOepartmentof Heartnand HurnanSeMces, FY2016 

~ Rn8f>Cilli Report (Woshlngtoo, O.C.: Nov. 2016). 

For 2015 MAO payments, CMS used encounter data diagnoses as an additional source 

of diagnoses to compute risk scores. CMS $upplemented the dia~es from each 

enrollee's RAPS data file \\oith trte diagnoses trom eaOh enrollee's MA encwntet data te. 

For 2016, CMS used a different proeeu that increased the importance of eoooooter data 

in computing risk scores. CMS intends to incfease the weight of enoountM data in the risk 

score calculation in lhe next 4 years so that encounter data will be the sole source of 

diagnoses by 2020. 

Page6 GA0-17·761T 
16 


Insert 33613A.011

Several Factors 

Hinder CMS's Efforts 

to Recover MA 

Improper Payments 

CMS Did Not Focus RADV 

Audits on Contracts with 

Highest Potential for 

Improper Payments 

In our 2016 report, we foulld several factors that hamper CMS's recovery 

activities, including ils failure to select contracts for audit that have the 

greatest potential for payment recovery, delays in conducting CMS's first 

two RAOV payment audits, and its lack of specific plans or a timetable for 

incorporating Recovery Audit Contractors (RACs) into the MA program to 

identify improper payments and help v.ith their recovery." 

Our 2016 report found that the results from the RADV auditS of 2007 

payments indicated that the scores CMS calculates to identify contracts 

that are candidates for d~. catted coding Intensity scores, were not 

strongly correlated with the percentage of unsupported diagnoses. CMS 

defines coding intensity as the average change in the risk score 

component specifiCally associated v.ith the reported diagnoses for the 

beneficiaries in each contract. Increases in coding intensity measure the 

extem to which the estimated medical needs of the benefiCiaries in a 

contract increase from year to year. thus, contracts whose benefiCiaries 

appear to be getting "sicker" at a relatively rapid rate, based on the 

information submitted to CMS, WIN have relatively high coding mlensity 

scores. FIQure 1 shows, for example, that CMS reponed that the 

peroentage of unsuwoned diagnoses among the htgh cod1'1Q intensity 

oonvac:ts ~ audited (36 peroent) was nearly idenbealto the percemage 

among tihe medium coding intens.ty conuaets (35 7 peroent). Our report 

also foond that tihe RADV audits were not targeted to contracts With the 

highest potential for inproper payments 

~Cs have been used In various indv5triel, Including hulth 01,. PfOQram&, to identify 

and oollect overpayments. Medicert AACt &rt peld oo 8 oontingtney '" bMi$ trom 

r600Yered ~paymen1s. 

P1$e7 GA0·17·7G1T 
17 


Insert 33613A.012

Figure 1: Percentage of Unsupported Diagnoses within Medlcare Advantage (MA) 

Contracts by the Centers for Medicare & Medicaid SeMces (CMS) Coding Intensity, 

2007 Risk Adjustment Data Validation (RADV) Audits 

Raw ot unsupportltd dl~u 

" 

.. 

.. 

... 0 

o: 0 oo .. 0 :0 

• 

*• ._,.. . .... • • ~ ... • • : . 

• --------------~------------------------- - 0.00 0.02 .... .... .... MO 

Cocll,gintent-ity 

[=:J ~COI"Mt(::.~IO\frt~lnlensil)'(rlleott,~t~Wppot'led~•·z""> 

~ ~COI'Ot<U'Mth~codng~(rtltof~~·3S.7%) 

~ MAOOI"'hcts-.l"lhhlphoodlngimMsify(rateCC~ ilinoses lS O'A) 

We identified two reasons that the RADV audits were not targeted on the 

contracts with the greatest potential for recoveries. The first reason is that 

the coding intensity scores have shortcomings. For example, our report 

found that CMS's calculation may be based on scores that are not 

comparable across contracts, because the years of data used for each 

contract maydrtfer, and there are known year-to-yeardifferences in 

coding intensity scores. In addition, CMS's calculation does not 

distinguish between diagnoses likely coded by providers and diagnoses 

subsequently coded by MAOs. Medical records that providers create from 

diagnoses are apt to support the diagnoses better than diagnoses 

subsequently coded by the MAO through medical record review. CMS 

has a method available to it-the Encounter Data System-that will 

distinguish between the two diagnoses. Although using encounter data 

would help target the submitted diagnoses that may be most likely related 

to improper payments. CMS has not outlined plans fO< using it. 

Furthermore. CMS follows contracts that are renewed or consolidated 

Page a GA0-17.761T 
18 


Insert 33613A.013

under a different existing contract within the same MAO, but CMS's 

coding intensity calculation does not incorporate prior risk scores from an 

eartier contract into the MAO's renewed contract. This could result in an 

improper payment risk ff MAOs move beneficiaries with higher risk 

scores, such as those with special needs, into one consolidated 

contract. '

7 

The second reason audits are not targeted to the contracts with the 

greatest potential for recovery is that CMS does not always use the 

information available to it to select audit contracts with the highest 

potential for improper payments. CMS did not always target the contracts 

with the highest coding intens~y scores, use results from prior contractlevel RADV audits, account for contract consolidation, or account for 

contracts with high enrollment. For example, only four of the contracts 

selected for the 2011 RADV audit had coding intensity scores at the 90th 

percentile or above. Even though we found that ooding intensity scores 

are not strongly correlated with diagnostic discrepancies, they are still 

somewhat correlated. Also, CMS's 2011 contract selection methodology 

did not consider results from the agency's prior RADV audits, potentially 

ovettooking information indicating contracts with known improper 

payment risk. Finalty, even though the potential dollar amount of improper 

payments to MAOs ~h high rates of unsupported diagnoses is likely 

greater when contract enrollment is large. CM$ officials stated that the 

2011 contract·level RADV audrt contract selection did not account for 

contracts 'W'ith high enrollment. 

We made two recommendations to address these issues: 

We recommended that (1) CMS improve the accuracy of coding 

intensity calculations. and (2) modify its processes for selecting 

contracts for RADV audit to focus on those most likely to have 

improper payments. In July2017, CMS officials told us that the 

"To help beneficiaries select an tM. plan, CMS rates MAO contracts on a flve·star scale 

A contract's rating indicates its performance relative to th.at of al other plans on about 50 

measures of dinical quality, patienl experience. and contractOf performance. CMS permits 

MAOs to move enrollees from a contract with a low rating to a oootract \'Aih a highes 

Nlting, The Medie&re Payment Advisory Commission has reported ltlat contr&c:ts with low 

quality Nlting:t tend to disproportionately serve beneficiaries \'lith $p(!:(ial ne-eds. including 

those under age 65 who are cisablecl. Medicare Payment Advisory Commission, Report 10 the Cong!&s.s: MedicJArtt Payment Pdtey: OniWI ~ndrxes, Chapter 14 (Wastmgtoo, 

O.C.: MatCh 2013), 6 and RtJporllo tM COtlgrtJss: MlldiciJte PaymMt Pdky{Wa:Shington, 

O.C.: MatCh 2015), 337. 

Page t GA0-17·761T 
19 


Insert 33613A.014

RADV Process Incurred 

Substantial Delays 

Completing Contract-level 

Audits and Appeals 

agency is wO<I<ing to implement these recommendations regarding the 

selection of contracts for audit. These officials said that CMS is 

reevaluating the design of the RADV audits to ensure its rigor in the 

context of all the payment error data acquired since the original 

design of the RADV audits, including an examination of whether 

coding intensity is the best criterion to use to select contracts for audit. 

Our 2016 report found that prior contract-level RADV audits have been 

ongoing for years, and CMS tacks an annual timetable to conduct and 

complete audits. 11 CMS officials reported at that time that the current and 

previous contract-level RADV audits had been ongoing for several years. 

CMS has audits for payment years 201 1, 2012, and 2013 underway. We 

concluded that this stow progress in completing audits conmcted with 

CMS's goat of conducting contract-level RADV audits annually, and 

stowed recovery of improper payments. CMS tacked a timetable that 

would help the agency complete these contract-level audits annually. In 

this regard, CMS had not followed established project management 

principles, Which call for developing an overall plan to meet strategic 

goats and to complete projects in a timely manner." 

In addition to the lack of a timetable, we found other factors that 

lengthened the time frame of the contract-level audit process. The 

sequential notiftcation of MAOs that identify contracts selected for audit 

and then, sometimes months tater, identify the beneficiaries under these 

contracts creates a time gap that hinders the agency from conducting 

annual audits, 20 Technology problems with CMS's system for receiving 

medical records are the main cause of the delay in completing CMS's 

contract-level audits of 2011 payments. Additional technical issues with 

other systems led CMS to more than triple the medical record submission 

time frame for the 2011 audits. 

Our report found that disputes and appeals of contract-level RADV audits 

have also continued for years, and CMS has not incorporated measures 

to expedite the process. Nea~y all of the MAOs whose contracts were 

18GA0-16-76. 

1

$GAO, GAO Cost Estimating and Assessment Guid&; 8esl Ptacticeslor Developing and Managing Cspitsl Program Costs, GAQ..09.3SP (Washington. D.C.: March 2, 2009). 

20Aocording to CM$ official$. once MAO contracts: are no!if* ol selection for RADV audit, 

the agency prevents the MAO from submitting any additional payment data that could 

affect CMS's selection of beneficiaries fot aud"rt. 

Page 10 GA0.17-761T 
20 


Insert 33613A.015

included in the 2007 contract-level RI>J)V audit cycle disputed at least 

one diagnosis finding following medical reoord review. CMS stated that 

MAOs disputed a total of 624 (4.3 percent) of the 14,388 audited 

diagnoses, and that the determinat.ions on these disputes, which were 

submi«ed from March through May 2013, were not complete until July 

2014. In addition. because the dispute process took a year and a half to 

oomplete. CMS officials stated that it did not receive all 2007 appeal 

requests for hearing officer review until August2014. The hearing officer 

adjudicated or received a withdrawal request for 377 of the 624 appeals 

from August 2014 through September 2015. 

For the 2011 audit cycle, CMS officials stated that the medical reoord 

dispute process will be inoorporated into the appeal process. Thus, MAOs 

can request reconsideration of medical record review determinations 

concurrent with the appeal of payment error calculations, rather than 

sequentially, as was the case for the 2007 cycle. While this change may 

help, the new process does not set time limits for when reoonsideration 

decisions must be issued. Lack of explicit time frames for appeal 

decisions at reconsideration hinders CMS's collection of improper 

payments because the agency cannot recover extrapolated 

overpayments until the MAO exhausts all levels of appeal. and the lack of 

time frames is inconsistent with established project management 

principles. 21 

We made two recommendations to address these issues: 

We reoommended that CMS take steps to improve the timeliness of 

the RI>J)V audit process. In July 2017, CMS officials told us that, as 

part of the agency's efforts to consolidate program integrity initiatives 

into one center, the decision was made to transition RADV contractlevel audits to the CMS Center for Program Integrity (CPI) at the end 

of 2016. With the transition, CMS is implementing a formal project 

management structure to facilitate the timeliness of the audit process. 

We also reoommended that CMS require that reconsideration 

decisions be rendered within a specified number of days, similar to 

other time frames in the Medicare program. In July 2017, CMS 

officials told us that the agency is actively considering options for 

expediting the appeals process. 

Page11 GA0-17·761T 
21 


Insert 33613A.016

CMS Made Little Progress 

toward Incorporating a 

Recovery Audit Contractor 

inMA 

Our 2016 report found that CMS had not expanded the RAC program to 

MA, as it was required to do by the end of 2010 by the Patient Protection 

and Affordable Care Act. Implementing an MA RAC would help CMS 

address the resource requirements of conducting contract-level audits. In 

2014, CMS issued a request for proposals for an MA RAC. which would 

audit improper payments in three areas of MA, but CMS officials tokl us 

that CMS did not receive any proposals to do the work in those audit 

areas. and that its goal was to reissue the MA RAC solicitation in 2015. 

CMS reconsidered the audit work in the request for the MA RAC. In 

December 2015, CMS issued a request for information seeking industry 

comment on how an MA RAC could be incorporated into CMS's existing 

contract-level RADV audit framework. 22 In the request. CMS stated that tt 

was seeking an MA RAC to help the agency expand the number of MA 

contracts subject to audit each year. and stated that its ultimate goat is to 

have all MA contracts subject to either a contract4evel RADV audit or 

another audit that would focus on specific diagnoses determined to have 

a high probability of being erroneous. Officials from three Medicare FFS 

RACs all told us their organizations had the capacity and willingness to 

conduct contract4evel RADV audits. 

We recommended that CMS develop specific plans for incorporating a 

RAC into the RADV program. In July 2016, CMS described to us its 

initial steps to meet this goal. In July 2017, CMS officials told us that 

the agency is evaluating its strategy for the MA RAC with CMS 

leadership. 

2'2centet$ let "'te<lleare & Medlcakl Services. Me<lte3re Advantage Part C Reocwery Av<litor Request for Information. December 22. 2015, RF -cMS 2016 RADV-RAC. 

accessed July 14,2017, 

https:/Jwww.lbo.gov/index?s:.opportunity&mode=form&id:S3t1ec085e52a81a6a6oe7cba3f 

rtx6d&tab.:c::«e&_evtew:o. 

Page 12 
22 


Insert 33613A.017

CMS Has Made 

Limited Progress 

Validating Encounter 

Data Used to Ensure 

Proper Payments 

In July 2014, we recommended that CMS complete all the steps 

necessary to validate encounter data, including performing statistical 

analyses, reviewing medical records, and providing MAOs with summary 

reports on CMS's findings, before using the data to risk adjust payments 

or for other intended purposes. 23 In our 2017 report, we found that CM$ 

had made limited progress toward validating encounter data. 

2

' (See fig. 

2.) As of January 2017, CMS had begun compiling basic statistics on the 

volume and consistency of data submissions and preparing automated 

summary reports for MAOs indicating the diagnosis information used for 

risk adjustment; however CMS had not yet taken other important steps 

identified in its Medicaid protocol, which we used for comparison. •• 

Figure 2: Ch.~nge fn Status of the Centet$ for Me<l ~re & Medle#!ld Services· 

Actions to Valklate Medicare Adv:lntage (MA) Encounter Data, from July 2014 to 

Oc:tober 2016 

Activity J ufy 2014 st.o'llut Ottober 2016 status 

=-==--"'"""""*"""""""'"" () () 

~Of'!'l'lfVI~~on~dNrot • • 

~~lXI~ 

___ .. ___ 0 0 

·

()Pa--i'~Wy~se4 

0 "" ......... 

23.GAO·t4.S71 . 

24GA0-17 ·223. 

25we compared CMS's activities to the principal activities identified in it$ 2012 prOiocol for validating Medjcaid encounter data that states receive from managed care 

Otgani:a:ations-.ntities that provide Medicaid be~Ms in exd\ang& tor a fixed montNy 

payment The ptoto¢01 spceifies a procedure fOt assessing lhe oornpJetcness and 

acc:::uracy of encounter data that Medicaid managed care organizations are required 10 

submit to state agencies. See Centers tor Medicare & Medicaid Services. EQR Protocol 4: 

Validation of Encount&r Data Repott&d by the MCO (Baltimore. Md: September 20t2). 

Page 1S GA0-11-761T 
23 


Insert 33613A.018

The steps CMS had not yet taken as of our January 2017 report are: 

Establish benchmarks for completeness and accuracy. This step 

would establish requirements for collecting and submitting MA 

encounter data. Without benchmarks, CMS does not have objective 

standards against which to hold MAOs accountable for complete and 

accurate data reporting. 

Conduct analyses to compare with established benchmarks. This 

would help ensure accuracy and completeness. Without such 

analyses, CMS has limited ability to detect potentially inaccurate or 

unreliable data. 

Oetenmine sampling methodology for medical record review and 

obtain medical records. Medical record review would help ensure 

the accuracy of encounter data. Without these reviews, CMS cannot 

substantiate the information in MAO encounter data submissions and 

lacks evidence for determining the accuracy of encounter data. 

Summarize analyses to highlight individual MAO issues. This 

step would provide recommendations to MAOs for improving the 

completeness and accuracy or encounter data. Without actionable 

and specific recommendations from CM$, MAOs might not know how 

to improve their submissions. 

In July 2014, we also recommended that CMS establish specific plans 

and time frames for using the data for all intended purposes in addition to 

risk adjusting payments to MAOs. We found in our 2017 report that CMS 

had made progress in defining its objectives for using MA encounter data 

for risk adjustment and in communicating its plans and time frames to 

MAOs. CMS reported it plans to fully transition to using MA encounter 

data for risk adjustment purposes by 2020. However, even though CMS 

had formed general ideas or how it would use MA encounter data for 

purposes other than risk adjustment, as of January 2017 ~had not 

specified plans and time frames for most of the additional purposes for 

which the data may be used. These other purposes include activities to 

support program integrity.,. 

26AJt~ CMS had not speclfte<S pJans Ot 6me frames fOf using encounter data for 

program Integrity a<:tlvitiH. OMS offiCial$ told U$ at the time th&t they anticipate including MA encounter data in the Fraud Prevention System to hetp identify abusrve bilbng 

practices and that. to date, CPI has begun using encounter data to determine impcoper 

payments to ptovidGrs, aiTIOt'lg otM:r thing$. 

Page 14 
24 


Insert 33613A.019

GAO Contact and 

Staff 

Acknowledgments 

(102151) 

In July 2017, CMS officials lold us that the agency had not taken any 

further actions in response to our July 2014 recommendations. Because 

CMS is making payments that are based on data that have not been fully 

validated fO< completeness and accuracy, the soundness of billions of 

dollars in Medicare expenditures remains unsubstantiated. In addttion. 

without planning for all of the authorized uses, the agency cannot be 

assured that the amount and types of data being collected are necessary 

and sufficient for specific purposes. Given CMS's limited progress in 

planning and time frames fO< all authorized uses of the data. we continue 

to believe CMS should implement our July 2014 recommendations that 

CMS should 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. In response to our 2014 

recommendations, the Department of Health and Human Services did not 

specify a date by which CMS would develop plans fO< all authorized uses 

of the data and did not commit to completing data validation before using 

the data for risk adjustment in 2015. CMS began using encounter data for 

risk adjustment in 2015, although it had not completed activities to 

validate the data. 

In conclusion, Medicare remains inherently complex and susceptible to 

improper payments. Therefore, actions CMS takes to ensure the integrity 

of the MA program by identifying, reducing, and recovering improper 

payments would be critical to safeguarding federal funds. 

Chairman Buchanan. Ranking Member Lewis, and Members of the 

Subcommittee. this concludes my prepared statement. I would be 

pleased to respond to any questions that you may have. 

For questions about this statement. please contact James Cosgrove at 

(202) 512-7114 or cosgrovej@gao.gov. Contact points fO< our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. 

Individuals who made key contributions to this testimony include Martin T. 

Gahart (Assistant Director), Aubrey Naffis (Analyst-in-Charge), Manuel 

Buentello. Elizabeth T. Morrison. Jennifer Rudisill, and Jennifer 

Whilw0<1h. 

Page 15 GACM7·761T 
25 


Insert 33613A.020

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26 

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Insert 33613A.021

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27 

Chairman BUCHANAN. Thank you. 

Mr. Morse, you are recognized. 

STATEMENT OF JONATHAN MORSE, ACTING DIRECTOR, 

CENTER FOR PROGRAM INTEGRITY, CMMS 

Mr. MORSE. Chairman Buchanan, Ranking Member Lewis, and 

members of the subcommittee, thank you for the invitation and the 

opportunity to discuss the Centers for Medicare & Medicaid Services program integrity efforts in the Medicare program. 

We share this subcommittee’s commitment to protecting beneficiaries, ensuring taxpayer dollars are spent appropriately, and 

identifying and correcting improper payments. 

As required by statute, each year, CMS estimates the improper 

payment rate and projected dollar amount of improper payments 

for the Medicare program. CMS takes seriously our responsibility 

to make sure our programs pay the right amount to the right party 

for the right beneficiary in accordance with the laws and regulations. 

It is important to remember that while all payments made as a 

result of fraud are considered to be improper payments, improper 

payments typically do not involve fraud. Rather, for CMS programs, improper payments most often occur when there is insufficient documentation to determine whether the service was medically necessary. 

CMS’ approach to program integrity in the Medicare fee-for-service and Medicare Advantage programs are determined by inherent 

differences in the programs themselves. I want to spend some time 

highlighting our program integrity work in Medicare fee-for-service 

and our approach to Medicare Advantage, and also the cross-cutting work we do with the help of our public and private partners, 

including our colleagues at the GAO and the Justice Department. 

To estimate the Medicare fee-for-service improper payment rate, 

CMS reviews a statistically valid random sample of Medicare feefor-service claims. Most recently, the Medicare fee-for-service improper payment rate was 11 percent in 2016. Unlike Medicare feefor-service in Medicare Advantage, CMS makes prospective monthly per capita payments to the MA organizations. As a result, CMS 

uses a different methodology to calculate the Medicare Part C improper payment rate. In 2016, the Medicare Part C improper payment rate was 9.9 percent. 

The Part C improper payment rate estimate is based on medical 

record review conducted by the CMS’ annual risk adjustment data 

validation, or RADV, process, where the unsupported diagnoses are 

identified and corrected as risk scores are recalculated. 

In an effort to reduce the Medicare improper payment rates, 

CMS has instituted many program improvements, and is continuously looking for ways to refine and improve our program integrity 

activities. We are always working to more closely align payments 

with the cost of providing care, encouraging healthcare providers to 

deliver better care, and improving access to care for our beneficiaries. 

CMS estimates that, through our program integrity activities, 

Medicare prevented or recovered $17 billion in fiscal year 2015. For 

example, our fraud prevention system resulted in $604 million in 

28 

fraudulent payments being stopped, prevented, or identified last 

year. CMS also recently updated the version of the FPS, which is 

now called FPS 2.0, which improves our model development time 

and expands CMS predictive analytics capabilities. CMS also saved Medicare approximately $400 million in 2016, 

using the National Correct Coding Initiative, or NCCI edits, which 

promote correct coding methodologies and control improper payments in Medicare Part A, Part B, and for durable medical equipment. 

CMS also conducts various medical review activities to help prevent improper payments. For example, CMS uses Medicare Administrative Contractors, or MACs, to review claims submitted by providers and suppliers on a prepayment basis. In fiscal year 2015, 

MAC prepayment medical review resulted in nearly $5 billion in 

improper payments being prevented. Overall, these efforts help us 

to avoid pay and chase, as well as promote provider compliance. 

CMS and the Justice Department have also developed a partnership with private health plans and State Medicaid programs to 

fight healthcare fraud, known as the Healthcare Fraud Prevention 

Partnership. The partnership provides visibility into the larger universe of healthcare claims beyond those encountered by any single 

payer. The goal of the partnership is to exchange data and identify 

trends and patterns that will uncover fraud, waste, and abuse. 

CMS now has 79 public-private and State organizations as part 

of the partnership. And just last week, HHS, along with the Justice 

Department, announced the largest ever healthcare fraud enforcement action by the Medicare Fraud Strike Force. The takedown involved 412 charged defendants across 41 Federal districts for their 

alleged participation in healthcare fraud schemes involving approximately $1.3 billion in false billings. Over 120 defendants, including doctors, nurses, and pharmacists, were charged for their 

roles in prescribing and distributing opioids and other dangerous 

narcotics. In addition, HHS suspended the Medicare payments of 

295 providers. 

CMS also takes seriously our commitment to combatting the 

opioid epidemic, and works to address abusive prescribing through 

data monitoring, information sharing with Medicare Part D, and 

law enforcement. 

CMS appreciates the work of the GAO on their recommendations 

of ways to improve Medicare program integrity. We look forward 

to continuing to work with them to improve and protect the Medicare Trust Fund, while providing beneficiaries with high quality 

care. I look forward to answering the subcommittee’s questions on 

how we can improve our commitment to protecting taxpayer funded 

dollars, while also protecting beneficiaries’ access to care. 

[The prepared statement of Jonathan Morse follows:] 

29 


Insert 33613A.022

JONATHAN MORSE 

ACTING1>IRECTOR OF THE CENTER FOR PROGRAM INTEGRITY, 

CENTERS FOR MEDICARE & MEDICAID SERVICES 

ON 1: 

~ 55\ "EFFORTS TO COMBAT WAS11E, FRAUD, AND 

~ ABUSE IN THE MEDICARE P~OGRAM" 

~ 

~~ BEFORE THE 

U.S. HOUSE W A YS.!AND MEANS COMMITTEE, 

SUBCOMMITTEE ON OVERSIGHT 

JULY 19,2017 
30 


Insert 33613A.023

U.S. House Ways a nd Means Committee, 

Subcommittee on Oversight 

"Efforts to Combat Waste, Fraud, and Abuse in the Medicare Program" 

j uly 19, 2017 

Chairman Buchanan, Ranking Member Lewis, and members of the Subcommittee, thank you for 

the mvitation and the opportunity to d1scuss the <.:enters for Medicare & Med1ca1d Services' 

(CMS) Medicare program integrity efforts, including in Medicare Part C. We share this 

Subcommittee's commitment to protecting beneficiaries, ensuring taxpayer dollars are spent 

appropriately, and identifying and correcting improper payments. These efforts are at the 

forefront of our program integrity mission. Medicare Advantage (MA) has been successful in 

allowing innovative approaches that give Medicare enrollees options that best fit their individual 

health needs. Maintaining a strong Medicare program is critical for the over 57 million 

beneficiaries enrolled in Medicare fee-for-service (Parts A and B) and MA. 

CMS uses a multi-faceted approach to strengthen Medicare by more closely aligning payments 

with the costs of providing care, encouraging healthcare providers to deliver better care and 

better outcomes for their patients, and improvi ng access to care for beneficiaries. We have 

instituted many program improvements aud are continuously looking for ways to refme and 

improve our program integrity activities. 

Under the MA program (also known as Medicare Part C), Medicare beneficiaries have the option 

of et\rolling in a private healtl1 plan to receive coverage for medical care. Beneficiaries can also 

enroll in a Medicare Advantage Prescription Drug (MA-PD) plan to receive prescription drug 

benefits. More than 18 million individuals (over 32 percent of those enrolled in the Medicare 

program) are enrolled in Medicare Advantage plans as of June 2017. CMS data conftrms that 

about 99 percent of Medicare beneficiaries have access to at least one Medicare Advantage plan 

in 2017. Additionally, while average premiums have remained stable, access to most Medicare 

Advantage supplemental benefits has increased, and enrollment is growing faster than in original 

Medicare. Medicare Advantage plans may offer additional benefits and cost-sharing 

arrangements that are at least as generous as the standard Parts A and B benefits under original 

Medicare. In addition to the regular Part B premium, beneficiaries who choose to participate in 
31 


Insert 33613A.024

MA may pay momhly plan premiums, which vary based on the services offered by the plan and 

the efficiency of the plan. 

Unlike original Medicare, CMS makes prospective, monthly per-capita payments to MA 

organizations. Each per-person paymem is based in pan on a bid amount, approved by CMS, that 

reflects the plan's estimate of average revenue required to provide coverage of original Medicare 

(Pans A and B) benefits to an enrollee with an average risk profile. CMS risk-adjustS these 

payments to take into account expected costs for enrolled beneficiaries based on the individual 

enrollee's health status and demographic factors. In general, the current risk adjustment 

methodology relies on enrollee diagnoses to prospectively adjust capitation payments for a given 

enrollee based on the enrollee's health status. Diagnosis codes submitted by MA organizations 

and encounter data from claims are used to detennine beneficiary risk scores, which in turn 

detennine risk adjustment payments. This methodology is designed to compensate MA 

organizations appropriately so they can provide needed benefits for patientS enrolled in their 

plans. 

M edicare FFS Improper Paymen/ Role Measuremellls and Prevemion 

Each year, CMS estimates the improper payment rate and a projected dollar amount of improper 

payments for Medicare, Medicaid, and Children's Health losurance Program (CHIP).' CMS 

takes seriously our responsibiliry to make sure our programs pay the right amount, 10 the right 

party, for the right beneficiary, in accordance with the law and agency policies. It is important to 

remember that while all payments made as a result of fraud are considered improper paymentS, 

improper payments typically do not involve fraud. Rather, for CMS' programs, improper 

payments are most often payments for which there is no or insufficient supporting 

documentation to detennine whether the service of item was medically necessary. 

CMS uses the Comprehensive Error Rate Testing (CERT) program to review a stratified random 

sample of Medicare fee-for-service (FFS) claims to estimate an improper payment rate. The 

CERT methodology is based on results from both data processing and medical record reviews for 

a national random sample of claims and primarily identifies payments that did not meet Medicare 

1 tmps·//v1·ww bhs goy/sitesfdcfault/Gics/fy·20 16·hhs·agcncy.financjaJ.n:pon pdf 
32 


Insert 33613A.025

coverage, coding, and billing mles. The Medicare FFS improper paymem rate decreased from 

12. 1 percem in 20 15 to 11.0 percent, or $41.08 billion, in 2016. The decrease from the prior 

year's reponed error estimate was primarily driven by a reduction in improper payments for 

inpatient hospital claims. However, improper payments for home health and lnpatiem 

Rehabilitation Facility (IRF) claims were the largest contributors to the 2016 Medicare FFS 

improper payment rate. 

CMS achieved significant savings through activities aimed at preventing improper paymeots 

before they go out the door.2J The Fraud Prevention System (FPS) resulted io $604.7 million in 

fraudulent payments being stopped, prevented, or identified during FY 2015. In March 2017, 

CMS launched an updated version of the Fraud Prevention System (called, "FPS 2.0"), which 

modernizes system and user interface, improves model development time and perfo•mance 

measurement, and aggressively expands CMS' program integrity capabilities. 

CMS also saved the Medicare program S393.9 million in FY 20 16 using National Correct 

Coding Initiative (NCCI) edits. The NCC! is intended to promote national correct coding 

methodologies and control improper coding in Medicare Pan A, Part B, and durable medical 

equipment (DME) claims. In addition, CMS had 435 active payment suspensions during FY 

2015. 

Medicare Administrative Contractors (MACs) request and review medical documemation from 

providers and suppliers on a prepayment and post-payment basis. In FY 20 15, MAC prepayment 

medical review resulted in nearly $5.0 billion in improper payments being prevented. These 

efforts avoid "pay and chase," as well as promote provider compliance. 

Medicare Advantage Improper Payme/11 Rate Measurements and Prevention 

Due to the capitated payment stmcrure of the MA program, CMS uses a different methodology 

to calculate the Medicare Pan C improper payment rate. The 2016 Medicare Part C gross 

improper payment estimate was 9.99 percent, or $ 16.18 bill ion. TI1e Part C payment error rate 

reflects errors in risk adjustment data (clinical diagnosis data) submitted by Part C plans to CMS 

2 hllps://oig hhs.gov publ cationsidoc~n,cr.1c!FY2016-hcf.1c.pdf 

' hltps://www.cms.gov/ About·CMS/Componcnts/CPI/Downloads/20 15-final-rtc-062320 17.pdf 
33 


Insert 33613A.026

for payment purposes. Specifically, the estimate reflects the extent to which diagnoses that plans 

report to CMS are not supported by medical record documentation. 

The largest component of a beneficiary's risk score is currently based on clinical diagnoses 

submitted by plans. If the diagnoses submitted to CMS are oot supported by medical records, the 

risk scores wi II be inaccurate and result in payment errors. The Part C improper payment 

estimate is based on medical record reviews conducted under CMS' annual National Risk 

Adjustment Data Validation (RADV) process, where unsupported diagnoses are identified and 

corrected risk scores are calculated. 

CMS uses several tools to address the Part C improper payment rate: contract-level Risk 

Adjustment Data Validation (RADV) audits, requirements that MA organizations report and 

return overpayments, and program and financial audits. 

Contract-level RAOV audi ts verify whether the diagoosis codes submitted for payment by MA 

organizations are supported by medical record documentation. RADV audits are CMS' primary 

corrective action to recoup improper paymeots. These audits recover overpayments identified by 

RADV; encourage accurate coding; increase the incentive forMA organi zations to submit valid 

and accurate diagnosis codes; and encourage MA organizations to self-identify, report, and 

return overpayments they have received. 

RADV audits consist of multiple steps including plan selection, document review, error 

calculation, appeals, and recoupment. During the annual RADV audit, CMS reviews a sample of 

approximately 30 MA organization contracts based on diagnosis coding intensity, or the average 

change in the risk score component specifically associated with the reported diagnoses for the 

beneficiaries covered by the contract. CMS ranks all contracts by coding intensity and divides 

them into three categories: high, medium, and low. CMS then randomly selects contracts for 

audit: 20 from the high coding intensity category, 5 from the medi um category, and 5 from tbe 

low category. CMS then selects beneficiaries whose medical records will be the focus of the 

review based on their risk scores. Once beneficiaries are selected, CMS requests supporting 

medical record documemation for all diagnoses submitted to adjust risk in the payment year. 

CMS contractors then review the medical records to determine if the MA organization submitted 

the correct diagnoses. 

4 
34 


Insert 33613A.027

CMS works closely with plans as pan o f the RADV audit process. When submitting a record for 

RADV, CMS encourages plans to consider a number of factors. As an example, for conditions 

that warrant an inpatient hospitalization (such as septicemia, cardio respiratory failure, or shock), 

an inpatient record, a stand-alone inpatient consultation record, or a stand-alone discharge 

summary may be appropriate for submission. When possible, plans are encouraged to obtain a 

record from the specialist treating the condition, e.g. an oncologist for a cancer diagnosis. 

Otherwise, a notation indicating "history of cancer," without an indication of current cancer 

treatment, may not be sufficient documentation for validation. 

CMS began the RADV initiative by conducting two sets of audits starting with the 2007 payment 

year: Pilot 2007, which involved 5 MA contracts, and Targeted 2007, which involved 32 

contracts. CMS reviewed medical record documentation provided by each audited Medicare 

Advantage organization to substantiate conditions reported by the Medicare Advantage 

organization for bene ficiaries in each audit sample. CMS' findings are reponed to each 

Medicare Advantage organization. Medicare Advantage organizations that disagree with CMS' 

error detemtinations may challenge them through a three-stage administrative process 

established in the RADV Appeals regulation. For the 2007 RADV audits, CMS recouped $13.7 

million in overpayments associated with sampled beneficiaries. CMS is currently conducting the 

appeals process for plan year 2007. CMS is currently c-onducting RADV audits for plan years 

201 I, 2012, and 2013. The 201 I RADV audits have completed the payment error calculation 

phase; the 2012 RADV audits are in the payment error calculation phase; and the 2013 RADV 

audits are in the medical record review phase. 

RADV and other program integrity effon s can have a sentinel effect on the quality of risk 

adjustment data submitted for payment and may help reduce the Part C improper payment rate4 

The impact of the RADV audits on enhancing program integrity should be examined 110t only in 

terms of RADV recoveries, but also through changes in the behavior ofMA organizations. 

CMS appreciates the work of the Government Accountability Office (GAO) and the ir 

reconunendations on ways to improve the RADV audit program. As GAO has recommended, 

CMS is working to enhance the timeliness of our RADV audits and our RADV appeals process. 

• bllps:/fv.,vw.cms.gov/ Aboui-CMS/Cornponcms/CPI/Downloads/20 15-fuml-nc-062320 17.pdf 

5 
35 


Insert 33613A.028

CMS is also reviewing our contract-level RADV methodology to determine other data sources 

that can be used to help us conduct a more targeted approach to our audits. 

As required by the Social Security Act, CMS regulations specifY that MA organizations report 

and return overpayments that they identify no later than 60 days after the date on which it 

identified it received an overpayment. The MA organization must notify CMS of the amount 

and reason for t11e overpayment. In FY 20 16, MA organizations reported and returned 

approximately $317 million in self-reported overpayments. MA organizations have reported and 

returned just over S2 billion in self-identified overpaymentS for payment years 2006 through 

2014. 

Figluing Fraud. Waste. and Abuse through the Healthcare Fraud Prevemion Parlllership 

Since FY 2012, HHS and Department of Justice (DOJ) have developed a partnership that unites 

public and private organizations in the fight against healthcare fraud, known as the Heahhcare 

Fraud Prevention Partnership (HFPP). The HFPP is a platform for sharing skills, assets, and data 

among parmers in accordance witl1 applicable laws to address fraud issues of mutual concern. 

The HFPP provides visibility into the larger universe ofhealthcare claims and claimants beyond 

those encountered by any single partner. The ultimate goal of the lfFPP is to exchange data and 

information to improve detection and prevention of healthcare fraud. 

The voluntary, collaborative partnership includes the federal government, state officials, many of 

the leading private health insurance organizations, and other heahhcare anti-traud groups. The 

Partnership has completed several studies associated with fraud, waste or abuse that have yielded 

suc<:essful results for participating partners. Studies have examined such subjects as "false store 

fi-onts" or "phantom providers" and top billing pharmacies. Additional studies are underway and 

the Partnership has established a Trusted Third Party (TTP) which conducts HFPP data 

exchanges, research, data consolidation and aggregation, reporting, and analysis. Partners 

participated in the HFPP's first case information sharing session in 2015, resulting in an average 

of seven new traud leads per partner. TI1e HFPP currently has 79 partner organizations from the 

public and private sectors, law enforcement, and other organizations combatting fraud, waste, 

and abuse. lo all, HFPP Partner data includes nearly 70 percent of covered li ves in the United 

States. 

6 
36 

f 


Insert 33613A.029

Given the HFPP's broad membership encompassing a variety of players interested and involved 

in detection of fraud, waste, and abuse in the health care system, it is uniquely positioned to 

examine emerging trends and develop key recommendations and strategies to address them. 

Today, with the authorities and resources provided by Congress, CMS has more tools than ever 

before to move beyond "pay and chase" and to implement important strategic changes in 

preventing fraud, waste, and abuse. 

Conclusion 

CMS' goal is to empower Medicare enrollees to choose options that best fit their individual 

health needs. CMS also strives to provide appropriate payment to Medicare Advantage 

organizations that serve those enrollees. Reducing improper payments helps to safeguard trust 

fund dollars and to make sure that the fee-for-service Medicare program and Medicare 

Advantage are strong and available to the beneficiaries we serve. We share this Subcommittee's 

commitment to protecting taxpayer and trust fund dollars, while also protecting beneficiaries' 

access to care, and look forward to continuing this work. 
37 

Chairman BUCHANAN. Thank you. 

And I thank both of you for your excellent testimony. 

We will now proceed to a question and answer session. In keeping with my past precedent, I will hold my questions until the end. 

I now recognize Mr. Schweikert. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

I want to work through, first, a couple of conceptual things, because we were actually trying to take some of the GAO report and 

make some charts, but it probably would have been easier just to 

pick up the phone and call you. 

First off, in my fee-for-service compared to, we will call it the 

managed care option, it is, what, a two-thirds/one-third mix right 

now? 

Mr. COSGROVE. That is correct. 

Mr. SCHWEIKERT. If I look at payments in error, doesn’t mean 

they are fraud, payments in error, I pay too much, pay too little, 

most of those sit in the fee-for-service side, correct? 

Mr. COSGROVE. Because of the volume of dollars—— 

Mr. SCHWEIKERT. But even as a ratio. 

Mr. COSGROVE. The improper payment rate is fairly similar 

across fee-for-service and Medicare Advantage. 

Mr. SCHWEIKERT. And the collection side for both an overpayment and underpayment? The cleanup, recapture. 

Mr. COSGROVE. On the Medicare Advantage side, let me speak 

to that right now, that is the intention of the RADV audits. There 

is a national RADV audit that is done every year to estimate the 

improper payment rate. But to go into the collection, I was talking 

about the annual RADV audits that are done. Those began with 

the 2007 payment year. When we did our report, I think something 

like $14 million had been recovered, and more was expected, based 

on the determination of the appeals. 

Mr. SCHWEIKERT. And we are right now auditing what year? 

Mr. COSGROVE. We are in 2017, which is why we think these 

need to be speeded up. 

Mr. SCHWEIKERT. We are in 2017? So the RADV audit, if I 

would ask for it right now, saying where we are, you are actually 

doing current year? 

Mr. COSGROVE. The most recent payment year that is going 

under the RADV audits, I believe, is 2013, unless you have—— 

Mr. SCHWEIKERT. Yeah. That is what I was saying—sorry, we 

must have had a miscommunication. So it is 2013 you are doing 

in 2017? 

Mr. COSGROVE. Correct. 

Mr. MORSE. Yes. 

Mr. SCHWEIKERT. Okay. Now, if I were to come back to you 

and say, all right, those are our payments in error world, and 

sometimes there is no malicious intent, sometimes it is poorly documented, sometimes it is too much, too little. Okay. In actual fraud, 

can you help me understand my fraud mix on something such as, 

the—you called it the takedown, but what just happened. How 

much of this was actually in the fee-for-service side, how much was 

in the managed side? 

Mr. MORSE. For the takedown, I mean, it would be—most of it 

would be in Medicare fee-for-service, however, it is—I don’t think 

38 

the Justice Department or the Inspector General’s Office distinguished between how those providers were being—— 

Mr. SCHWEIKERT. Can you speak up for me? 

Mr. MORSE. I don’t think the Justice Department or the Inspector General’s Office was distinguishing how they were being paid. 

They were looking at Medicare fee-for-service. It could be Medicare 

Advantage plans, it also could be Medicare Part D, which is the 

prescription drug program, as well. 

Mr. SCHWEIKERT. Is there a disproportionate portion of this 

that might have been in D? I am trying to understand where we 

actually have mechanisms that are working, why in some ways in 

the report GAO says, ‘‘We should do more audits,’’ and then says, 

‘‘But the audits are poorly modeled.’’ I mean, that is actually in 

your report saying we need more audits, but the audits have problems. 

Mr. COSGROVE. Right. 

Mr. SCHWEIKERT. So I am just trying to work through what 

my solutions are. 

Mr. MORSE. So we appreciate the GAO’s recommendations. Actually, in fiscal year 2015, we released an RFI for a Part C RAC 

as required under statute. One of the things that we actually contemplated and proposed to the various stakeholders was changes to 

the methodology, in part, in response to the GAO’s recommendation. So we are taking those under advisement and are working to 

implement everything—— 

Mr. SCHWEIKERT. Okay. In my last 50 seconds, if I were to ask 

for just what we have documented as fraud, what is my mix? How 

much is durable equipment? How much is in pharmaceuticals? 

How much is blatant miscoding, patients that were never there? If 

I were to look at what are our areas of fragility, what are we seeing 

in actual fraud? 

Mr. MORSE. We look at—you know, the challenge from our perspective is we look at improper payments, whether it is fraud, 

waste, or abuse. The challenge—— 

Mr. SCHWEIKERT. The question is purely on fraud. 

Mr. MORSE. But the challenge of fraud is we won’t know if it 

is fraud until the Justice Department or the Inspector General’s 

Office makes that determination as part of the legal requirements. 

So it is postpayment and end of settlement into the—— 

Mr. SCHWEIKERT. So we are in a world where we don’t really 

know what fraud is until Justice actually does their work? 

Mr. MORSE. Fraud requires that intent element. 

Mr. SCHWEIKERT. So how do you build a model that quickly 

reacts to noise in the data systems you told us you are building? 

Mr. MORSE. Sure. What we look at are potential sort of just suspicious payments, abhorrent billing patterns, things that would 

just be outside the norm that we want to flag, but for us to also 

identify if it is potentially fraud, we have to do sort of on-theground investigating, we have to collect the medical records. It is 

a much more time-consuming process. 

Mr. SCHWEIKERT. I am way overtime, but thank you for your 

tolerance, Mr. Chairman. 

Chairman BUCHANAN. I now recognize the Ranking Member, 

Mr. Lewis. 

39 

Mr. LEWIS. Thank you, Mr. Chairman. I want to thank the two 

of you for being here and for your testimony. 

Mr. Morse, I want to thank you for your dedication as a career 

civil servant, as well as the nearly 4,000 other career employees 

still at the agency. 

Like many people in this room, I am very concerned that the administration has not yet appointed a Director of Program Integrity. 

We need someone at this post to combat fraud, and the position has 

been vacant for 6 months. 

Waste, fraud, and abuse must be taken seriously, and it is not 

clear that this administration has a vision of how Medicare should 

be moving forward in these matters. 

From the oversight perspective, waste, fraud, and abuse are very 

different. Are they all issues of program integrity? They are not the 

same. 

So, Mr. Morse, can you discuss the differences between waste, 

fraud, and abuse, and how to address them through policy? 

Mr. MORSE. Sure, I would be happy to. So we as an agency look 

at waste, fraud, and abuse collectively, because the challenge becomes for us, we are not really trying to distinguish necessarily between the two, we are just trying to make sure that Medicare is 

correctly paying, regardless of whether it is fraud, waste, or abuse. 

So we have implemented the improper payment rate for Medicare 

looks at just improper payments writ large. And as I mentioned in 

our testimony, as Chairman Buchanan mentioned in his opening 

statement, most of our improper payments are actually documentation errors. About 60 percent of them are documentation errors, 

which really means a physician or another provider may have forgotten to sign something that was important for the order that we 

consider to be required. That doesn’t mean that the payment was 

fraud, waste, or abuse; it just means that it was improper. So by 

our standard, it still is an improper payment, but that service could 

have been medically necessary. It could have been received by the 

beneficiary and needed. We are just doing it—we do that as part 

of the—our statutory obligation to monitor improper payments. 

When it gets to waste and abuse, we have a number of initiatives 

that we have in place that really help us identify what is potentially more problematic. We have got our fraud prevention system, 

which as I mentioned at the outset, is an advanced data analytics 

system, which looks at all of Medicare’s Part A and B claims before 

we pay them, and it tries to identify any sort of abhorrent billing 

patterns and looks for changes in the data, spikes in billing patterns, things that maybe should not be combined in a particular 

service, and those get flagged for our potential followup, potential 

auditing of the medical records on an onsite investigation. 

We also receive numerous complaints from, whether it is the Inspector General’s Office with potential leads, beneficiaries, other 

healthcare providers. We have got a number of measures around 

provider enrollment where we very carefully monitor provider behavior. We provide systems that run sort of in the background 24 

hours a day, 7 days a week, that look for things like whether or 

not a felony conviction of a particular provider, whether they have 

lost their license. 

40 

So we do a number of potential background checks to look at potential waste and abuse as well. 

Mr. LEWIS. How do you go about weeding out bad players? 

There are certain institutions or groups located in one State or 

maybe one county, one city, and they just pick up and move someplace else under a different name. 

Mr. MORSE. That is a great question. And, actually, it is a moving target, and it is a challenge for us, because one of the things 

that we have learned is that as our advanced data systems get 

more advanced, the fraud schemes have to get more advanced as 

well. So one of our challenges is to stay ahead of that. 

We have got field offices in several of the large cities. We, again, 

do a lot of data analytics work. We look at a lot of the claims data, 

identify potential leads. We work very closely with law enforcement, both at the State level and at the Federal level, and really, 

spend a lot of our time and effort trying to identify where those 

emerging trends might be occurring. Based on something that we 

may have seen in one particular area, we can take that data and 

try to flag it and sort of put that into our different data systems 

around the country and see if we end up seeing similar patterns. 

Mr. LEWIS. Thank you very much, Mr. Morse. Thank you. 

I yield back, Mr. Chairman. 

Chairman BUCHANAN. Mrs. Walorski, you are recognized. 

Mrs. WALORSKI. Thank you, Mr. Chairman. 

Mr. Morse, according to this report, and many of us are talking 

about reports today, this is the HHS report, Office of Inspector 

General, on Medicare Part D, and it is on this issue of opioids that 

you touched on just at the end of your testimony, and I appreciate 

that. But what I think is interesting about this and draws a red 

flag for me is one of the things they talk about in here is a prescriber in my home state of Indiana wrote an average of 24 opioid 

prescriptions each for 108 beneficiaries in a year, costing Medicare 

Part D $1.1 million just to that Indiana physician. And I guess— 

I am not a health person professional, it draws a red flag to me. 

And I guess my question is, and I know you were probably getting to this on your statement, but what processes does CMS have 

in place to flag and investigate these suspicious prescribing practices like this, and what do you think needs to be done to improve 

the system? Because I am guessing that you are going to say that 

here’s what we do, and then you are going to say we need to do 

more. And so my question is, what is the ‘‘more’’? And to have gone 

through—whatever the filters are, to have gone through one doctor 

in my State to be able to produce these kinds of records I think is 

astounding. So just from your professional opinion, where do we go 

on this? What else has to happen? And then what do we need to 

do as Congress to help you get those filters? 

Mr. MORSE. Thank you. So, we have reviewed that opioid report 

from the Inspector General’s Office also, and it is quite concerning. 

We have got a number of efforts underway in Medicare, both 

through the service and in Medicare Part D, that try to address 

opioid-prescribing abuses, as well as it has obviously been a major 

focal point of this administration, of the Secretary of the past administration. CMS has an opioid strategy that it published in January of 2017 on this very issue in looking at sort of all the various 

41 

levers that an agency as a payer can potentially be sort of pulling 

to help to address the opioid epidemic. 

From the program integrity side, we have a number of things we 

look at. We work with the Medicare program on the overutilization 

monitoring system. This looks at it largely from the beneficiary 

perspective, but looks at does the beneficiary potentially have too 

many prescriptions? Are there too many, potentially in this case, 

opioid prescriptions being prescribed in overlapping ways? And how 

do we kind of make sure that that is not—— 

Mrs. WALORSKI. Right. But obviously, the filters that you are 

talking about didn’t catch this. And so from your perspective, if you 

had the magic wand and you could say, look, I am over this, I studied this, I am the professional, here’s exactly what we need to do, 

let’s at least try this, what would it be? 

Because the other thing disturbing about this, is that there are 

a half of a million beneficiaries receiving high amounts of opioids. 

Mr. MORSE. That is correct. 

Mrs. WALORSKI. So the filters aren’t working. Whatever was 

done prior to January of 2017 is not working. So we take that off 

the chart here, and we say that you say what is it that we are not 

seeing here, and what can we in Congress do to help you get there? 

Mr. MORSE. We also have abusive prescribing authorities within 

Program Integrity at CMS—— 

Mrs. WALORSKI. Do you use them often? 

Mr. MORSE. We have used them only a handful of times at this 

point, because part of it is we need to be able to establish sort of 

that pattern and the practice. And when we see a pattern and the 

practice, it often is then referred to—— 

Mrs. WALORSKI. How long is a pattern and a practice? So who 

is your doctor here that took this to the limit and over the top? He 

is writing an average of 24 prescriptions each for 108 people in a 

year, and that wasn’t flagged. 

Mr. MORSE. But when we do see something like that in our 

data, we flag it for law enforcement. So, I mean, that is how those 

cases begin, though. So in that case, you know, there may have 

been data that is from CMS in this particular case. There may 

have been data from CMS that we then flag for our law enforcement partners, who then begin those investigations. 

So when the behavior is that egregious, if it is something that 

we can see in our data, it is something that we need to be able to 

send to the Inspector General’s Office, the State law enforcement, 

to DOJ, and then they begin sort of the more serious criminal and 

civil prosecutions. 

Mrs. WALORSKI. So what happens now as a result of this report? Because still, what you are describing is what is happening 

pre-2017. As a result of these egregious violations, what new things 

are going into play now? 

Mr. MORSE. Well, we are actually very pleased that the CARA 

legislation from about a year ago was passed, and CMS is working 

to implement the Medicare lock-in program. So lock-in is something 

that has been used very effectively by both State Medicaid programs, as well as by private payers to be able to lock in a single 

beneficiary and a single prescriber. So essentially, it helps monitor 

42 

that overutilization, and it helps sort of prevent that abuse from 

happening. 

Mrs. WALORSKI. Sure. I appreciate it. 

Thank you, Mr. Chairman. 

Chairman BUCHANAN. Mr. Holding, you are recognized. 

Mr. HOLDING. Thank you, Mr. Chairman. 

I think we are getting a pretty solid impression that CMS audits 

are not timely, and this is unfair to both the plans and the taxpayers. 

So starting with focusing on Medicare Advantage, and CMS’s use 

of the Risk Adjustment Data Validation (RADV) audits, Mr. Morse, 

could you talk a little bit about how an audit process works for 

Medicare Advantage, and how often does CMS conduct these audits? 

Mr. MORSE. Sure. I would be happy to do that. So CMS started 

with a pilot in 2007 where we identify the plans. So we look at 30 

plans each year. The plans are then notified for the audit, and they 

have about 20 weeks to respond to us, would then submit medical 

records. And in order to do that they have got to go back to all the 

various providers who make up that patient’s medical record and 

submit the documentation to the plan and then to us. 

We then begin the review of the medical records, and make the 

determination of whether the diagnoses are there for which we 

paid the plans. We calculate any payment variation by removing 

diagnoses that were not supported by the medical record. So for example, if there is a diagnosis of a hypertension in the medical 

record that we have paid for the plan but not in the medical record, 

we will make a cost adjustment to downgrade that medical record 

because hypertension was not one of the factors that was mentioned in the medical record. 

So the auditing process itself takes at least 18 months. We do 

multiple rounds of documentation review and medical record review. And it is a very sort of thoughtful and time-consuming process for us to be able to go through and make sure that we are calculating everything correctly. 

Mr. HOLDING. So I have in my notes that the most recent data 

related to the RADV is from the 2007 plan year, and that that currently is under appeal. Is that correct? 

Mr. MORSE. That is correct, yes. 

Mr. HOLDING. So what takes so long to do these audits? And 

when you go into the audits what is your goal? I mean, are you hitting your goal as far as the timeframe is concerned? And if so, I 

mean, what is taking so long? 

Mr. MORSE. Sure. Thank you. Let me take the first part of your 

question. So the length of time—in part, the 2007 audit was a pilot 

program, so essentially, it was a demonstration as to thinking 

through the methodology—— 

Mr. HOLDING. Does it demonstrate that it doesn’t work? 

Mr. MORSE. To demonstrate the methodology and make determinations as to whether or not it is a fair and accurate way to calculate overpayments. 

So we did the demonstration in 2007. We then needed to be able 

to solicit stakeholders’ feedback in subsequent years to make sure 

43 

that this payment methodology was going to be accurate and would 

be one that we would be able to use going forward. 

We are in the process of identifying the actual overpayment 

amounts in 2011, 2012, and 2013. And in those years, as part of 

the methodology that we determined from the 2007 pilot, we also 

will be extrapolating against the findings, so essentially, they will 

be extrapolated overpayments at that point. 

Mr. HOLDING. So getting to the second part of my question, 

what do you anticipate is a reasonable timeframe for these audits 

to take place? What is your goal? 

Mr. MORSE. We certainly would like the audit timeframes to be 

in the roughly 18 months to 2 years, just given they are done 

manually, and they are labor intensive for us to do, because it 

takes clinical expertise to be able to go through the medical record, 

make sure everything is there, make sure that everyone is reading 

it accurately and that we agree on the assessment and then make 

the calculation—— 

Mr. HOLDING. Do you use any statistical software, predictive 

statistical analysis that can identify and kind of batch these things 

for you to look at manually? 

Mr. MORSE. We do. We use software for both the data collection 

in getting the medical records in, as well as a notice to calculate 

the overpayments. But the actual review of the medical records 

themselves has to be done by someone with clinical knowledge, because you have got to look at a patient medical record and know, 

you know, is that diagnoses supported by the findings? And that 

actually takes a real person. We can’t duplicate that with just software and data analytics. 

So there is data analytics in the program, certainly, but that 

work is actually done by people. 

Mr. HOLDING. All right. Thank you. 

Mr. Chairman, I yield back. 

Chairman BUCHANAN. Mr. Crowley, you are recognized. 

Mr. CROWLEY. I thank the chairman. Thank you for yielding 

me the time, and thank you for holding this hearing here today. 

Regardless, I think, of party line, we can all agree that fraud is 

a serious crime, and given human nature, as our Founding Fathers 

recognized as well, are prone to corruption from time to time, that 

as we change the system, there are always those who are looking 

to exploit or manipulate it for nefarious purposes. 

I hope we as a committee can use today’s hearing to explore what 

steps HHS and CMS are taking to ensure we continue the progress 

we have been making to combat waste, fraud, and abuse in the 

Medicare program. 

I want to thank both of our witnesses for being here today, for 

the valuable information they are presenting to us as a subcommittee. 

Mr. Morse, though the future of the ACA has been in the news 

every day, I think most people don’t realize the extent to which the 

ACA changed the fraud-fighting landscape in the Medicare system. 

It gave increased funding to combat fraud, provided new tools to 

screen providers so they can prevent criminals from getting into 

the system on the front end, improved data analytics, and instiVerDate Sep 11 2014 10:42 Feb 13, 2019 Jkt 033613 PO 00000 Frm 00047 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33613.XXX 33613
44 

tuted more payment review to check for problems before our money 

goes out the door. 

Mr. Morse, can you talk about how the Medicare program has 

improved as a result of these ACA provisions? And what would 

have been the status of the Medicare program integrity without 

these tools added by the ACA? 

Mr. MORSE. Thank you, Mr. Crowley. So, Congressman Crowley, I would say the ACA is just one of a number of pieces of legislation, though, passed through this committee that have been actually extremely helpful to us in fighting fraud, waste, and abuse in 

Medicare. 

And if you look at just after the ACA passage, the Small Business Jobs Act of 2010 allowed us to be able to implement the Fraud 

Prevention System, which is the advanced data analytics system 

that we use. It works somewhat similar to sort of what the credit 

card companies use to be able to flag potential bad actions or suspicious—essentially, suspicious behavior. 

The CARA legislation that I just referred to with Congresswoman Walorski a moment ago, allows us to be able to do lock-in 

for Medicare, which we are currently implementing for the Part D 

program. So locking in a single beneficiary to a single prescriber. 

We have got the—MACRA has been extremely helpful for us as we 

are beginning to remove the Social Security number now for the 

beneficiary ID cards. 

So we do have a number of authorities, even outside the ACA, 

that have actually been extremely helpful. 

Mr. CROWLEY. No. And I recognize those additions, but I was 

just focusing specifically, because those other provisions are not 

under attack, so to speak, in the same way that the ACA has been, 

and maybe we are coming to the end of that attack, but we will 

see. Only time will tell. 

And I would hate to see these ACA provisions and the program 

integrity efforts initiated by the Obama administration be reversed. 

So that is why I was specifically speaking about the ACA provisions as it pertains to attacking fraud and abuse within the system 

itself. 

Our witnesses have highlighted the gains we have achieved in 

combatting waste, fraud, and abuse in the Medicare program, 

through the ACA and through executive action, as well as the other 

bills that you have mentioned, Mr. Morse, and HHS and CMS 

under President Obama in particular. Our role as Congress should 

be to strengthen the integrity of the Medicare program, strengthen 

Medicare Trust Fund, and protect taxpayers from billions of dollars 

of loss that had played out. 

So I think it is in the interest of the taxpayer to look at the benefits of the ACA as it pertains to health benefits itself, but these 

other benefits that are derived in terms of fighting waste, fraud, 

and abuse. So I thank you all for your testimony today. 

I thank the chairman for this hearing today. Thank you. 

Chairman BUCHANAN. Mr. Meehan, you are recognized. 

Mr. MEEHAN. Thank you, Mr. Chairman. 

I want to thank the panel, not just for your presence here today, 

but for the important work that you do. I know it is not easy, and 

you have got a big responsibility, but we are also grateful for you 

45 

allowing us to get the benefit of your experience and wisdom so we 

can determine how things can be done better. 

Some of my colleagues have recognized we are seeing not only a 

growth in concern about fraud, but also the opioid epidemic. Both 

on the front end with overprescribing, and also a growing concern 

about those who have entered into the treatment space, and questions about how people are being recruited. And I know you don’t 

get into the value of the services, but there are real questions 

about the competency of what is being delivered and payment 

schemes as well. 

In general, a recent report from the Permanent Subcommittee on 

Investigations in the Senate found that only a small percentage of 

potential incidents of fraud and abuse on the Part D program were 

brought to the attention of the medic were actually investigated. In 

fact, from 2015 statistics, there were 8,900 total actionable complaints, yet only about seven percent were investigated. 

In light of the opioid epidemic and the real concerns that have 

been pointed out here, can you explain why 93 percent of the cases 

of potential fraud and abuse regarding prescription drugs did not 

seem to be acted upon? 

Mr. MORSE. So when we are looking at potential fraud and 

abuse, we also have to look at and balance that with sort of the 

burden on the providers. So one of the things we need to be careful 

of is really describing whether or not it is just fraud and abuse in 

looking at the prescribers’ billing patterns. Anything that is flagged 

for us that is potentially abusive behavior and really egregious behavior is actually referred often—if it is not referred to the law— 

whether it is referred to the medic or not, also goes through to law 

enforcement, to the private plans to take action, but we also have 

to balance that with sort of the latitude that we need to be able 

to give prescribers in their prescribing patterns as well. 

So, the challenge for us is really kind of balancing that fine line 

of being thoughtful for allowing, you know, beneficiaries who often 

need a certain amount of prescriptions and certain amounts of, 

whether it is opioids or other pain medication, to be able to, you 

know, receive those, you know, receive that medication following 

the CDC guidelines that were published about 11⁄2 years ago with 

something that potentially, you know, moves into the fraud, waste, 

and abuse area. 

When it is something that is potentially fraudulent, we do our 

best to make sure that we flag that, either for action ourselves and 

also to be able to be action that is taken by law enforcement, Inspector General’s Office—— 

Mr. MEEHAN. You know, you mentioned some standard there. 

What kind of metrics do you use? How do you calculate where a 

prescription may be in a volume that is appropriately related to a 

particular condition versus those who we know are overprescribing, 

particularly in the opioid area, where we believe the prescriptions 

are not going to a particular recipient, but are finding their ways 

out into an open market and leading to further abuse? 

Mr. MORSE. So the volume question is one that I have to refer 

to my colleagues in the Medicare program who set sort of the requirements for what Medicare will pay for under certain prescription drug guidelines. So it is not really a program integrity quesVerDate Sep 11 2014 10:42 Feb 13, 2019 Jkt 033613 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33613.XXX 33613
46 

tion for me, per se. We just then enforce what the guidelines are 

and what has been set through the Medicare program. And then 

the Part D plan sponsors who administer the prescription drug program under Part D will do the same, you know, in their programs 

as well. 

Mr. MEEHAN. Okay. I am not sure I completely understand 

that. But tell me, if there is a seven percent rate right now of investigations, so to speak, does that reflect the complete utilization 

of the resources at your disposal or should we be doing more? Or 

is there a more effective way to get at a higher percentage? What 

is the right balance there? 

Mr. MORSE. I think one of the things that we are very much 

looking forward to is the implementation of lock-in, which allows— 

as I mentioned before, it has been very effectively used by the private plans and by State Medicare—— 

Mr. MEEHAN. Would you speak on that in the remaining moments? Because the private plans seem to do a better job than the 

government at getting to the bottom of this. Why do they do a better job? What metrics are they using? And why aren’t we doing 

that with the government programs? 

Mr. MORSE. One of the things that we have seen that we have 

been actually working with the plans to think about is so—is they 

do a couple things. One is limits on, you know, potential—the volume of potential drugs, and then they use lock-in. 

The lock-in program that was enacted through this committee 

under CARA is one of the most effective tools that we have seen 

and that we are working to implement now, so—— 

Mr. MEEHAN. Well, thank you. 

Mr. Chairman, my time is up, and I yield back. 

Chairman BUCHANAN. Mr. Bishop, you are recognized. 

Mr. BISHOP. Thank you, Mr. Chairman, and thank you for your 

leadership on this issue. And thank you to the panel for being here 

today and sharing your time with us. It is enlightening, and we appreciate it. 

Last Congress, I was on the Judiciary Committee, and we were 

actively involved in addressing the opioid epidemic. And I know 

that you have heard questions from this panel about that, and it 

is simply because all of us have had some real concerns in our districts and across this country at the duration of the epidemic and 

how quickly it is moving. 

Last year, the House Judiciary Committee equipped law enforcement and first responders with ways in which to deal onsite with 

the overdosing that is going on. Thousands and thousands of situations where police and first responders had no way to respond, and 

Congress came up with a plan and a solution, and we provided the 

community programs resources to enhance diversion programs, lots 

of great solutions, but there is so much more to be done. 

And in the midst of this crisis and what is going on with the 

news with the DOJ and the crackdown you have seen on prescription drugs, I know that you are in the heat of this battle as well 

and doing the best you can to address the problem. 

Mr. Morse, I understand in the cases where Medicare data finds 

that the ratio of beneficiaries to providers is abnormally high, CMS 

has a process in place to set up what you call a moratorium area. 

47 

And I am wondering—Mr. Meehan raised the issue earlier—what 

specifically the evidence is considered to developing something like 

this? Can you tell us a little bit about how you do that, historically 

how you have applied this, and whether or not you have seen an 

uptick in this process of developing moratoria areas around the 

country? 

Mr. MORSE. Sure. When we thought about doing a moratoria, 

the concept began from us looking at data around potential patterns of services that were being abused. So whether it is—as far 

as a fraud, waste, or abuse, it was services that we were looking 

at that we were finding some significant improper payments, and 

most often, home health, what is called nonemergency ambulance 

transportation, so someone using an ambulance service that is not 

going to an emergency room, so often to go to a doctor’s appointment in some way. And then for something like durable medical 

equipment. 

One of the things that we have found is, you know, by placing 

a moratoria or a cap on the number of providers in that area, it 

helps us to limit sort of what the universe is of the providers who 

are supplying those particular services. In order to make those determinations, we look at the number of beneficiaries to the number 

of providers, both in that area and then in surrounding areas, and 

then also in other parts of the country, because not every area is 

going to have—so if we put a home health moratoria in Illinois, for 

example, some parts of Illinois are more rural than others, so we 

also look at specific ZIP Code by ZIP Code, what does it look like, 

making sure that we have enough beneficiaries or enough providers 

to serve those beneficiaries, as compared to sort of any other parts 

of the country that might be relevant in terms of the size. 

In some of those States where we have, you know, put the moratoria in place, the number of—again, just for home health as an example—the number of home health providers dramatically will exceed what we have found to be helpful and when we think it has 

been an indicator of potential fraud and abuse. 

Mr. BISHOP. Can you talk about the history of imposing these 

moratoria across the country? Has there been an uptick in your decision to do that over previous years? 

Mr. MORSE. No. Actually, in recent years, the home health moratoria has held fairly steady. We have increased them. The home 

health moratoria has been increased from a county-based system to 

a State-based system, so they are statewide in five States. In part 

because we were finding that home health organizations were setting themselves up just right outside sort of the jurisdiction that 

we were putting the moratoria in and then, essentially, just eluding the idea of the moratoria. So we put them in statewide where 

we thought that the number of providers would still be sufficient 

for those beneficiaries. But otherwise, they have largely held steady 

the last couple of years. 

We found them to be an effective method of at least capping that 

number of suppliers and providers in that area, because often the 

concern otherwise is if there is a huge uptick in the number of providers and suppliers in any one particular area, and there is sort 

of a limited or finite number of beneficiaries needing the services, 

does that potentially contribute to some fraud or abusive behavior? 

48 

Mr. BISHOP. Thank you for your efforts. We appreciate it. 

Mr. Chairman, I yield back. 

Chairman BUCHANAN. Mr. Curbelo. 

Mr. CURBELO. Mr. Chairman, thank you very much for this 

hearing, and I thank the Ranking Member as well. 

This issue is of critical importance to my community in south 

Florida. Most people know south Florida is one of the most beautiful parts of this country, a lot of hard working entrepreneurial 

people. But we have another distinction, which isn’t as attractive 

or as desirable. And I will just read the first line from a Miami 

Herald article published recently. ‘‘With Federal agents leading 

Medicare fraud busts nationwide and in the nation’s Medicare 

fraud capital of Miami, last week, a drug-dealing Miami doctor 

pleaded guilty to conspiracy to commit healthcare fraud, $4.8 million.’’ 

Now, people in my community are sick and tired of having this 

reputation, and people in my community ask me, how come a Visa 

and American Express and MasterCard can prevent fraud, yet we 

are always reading about the Medicare fraud that is being chased 

in the newspaper? 

And I want to know today, from both of our witnesses, if there 

is any more authority that Congress can give CMS to remedy this 

situation. 

By the way, Mr. Chairman, I would like to submit for the record 

this Miami Herald article and the corresponding DOJ press release. 

Mr. SCHWEIKERT [presiding]. Without objection. 

[Member Submission for the Record follows:] 

49 


Insert 33613A.030

JUSTICE NEWS 

Department of Justice 

Office of Public Affairs 

FOR IMMEDIATE RELEASE Thursday, March 23, 2017 

Miami-Based Physician Charged for Role in Pain Pill Diversion and 

Medicare Fraud Scheme 

A physician licensed in Puerto Rico, who was practicing medicine in Miami, was charged in a 16-count 

indictment unsealed today for his alleged participation in a multi-faceted $20 million health care fraud 

scheme involving the submission of false and fraudulent claims to Medicare and Medicaid and the illegal 

distribution of oxyoodone and other controlled substances. 

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department's Criminal Division, Acting 

U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida. Special Agent in Charge George 

L. Piro of the FBI's Miami Field Office, Special Agent in Charge Shimon R. Richmond of the U.S. 

Department of Health and Human Services Office of Inspector General's (HHS-OIG) Miami Regional Office 

and Special Agent in Charge Brian Swain of the United States Secret Service's (USSS) Miami Field Office 

made the announcement. 

Roberto A. Fernandez, M.D .. 51. of Miami, was charged with one count of conspiracy to commit health care 

fraud and wire fraud, 11 counts of health care fraud, one count of conspiracy to defraud the United States 

and pay and receive health care bribes and kickbacks, one count of conspiracy to distribute controlled 

substances and two counts of distribution of controlled substances. Fernandez was arrested on March 22, 

2017, and made his initial appearance today before U.S. Magistrate Judge Andrea M. Simonton of the 

Southern District of Florida. 

According to the indictment. from approximately December 2009 to March 2017, Fernandez owned and 

operated Florida-based Latin Foundation for Health Inc. and purported to practice medicine as an •area of 

critical need" doctor at Latin Foundation for Health and other facilities in Miami-Dade County. 

The indictment alleges that from approximately January 2011 through l'ebruary 2017, Fernandez referred 

Medicare beneficiaries and Medicaid recipients who were purportedly under his care to Calan Pharmacy & 

Discount Service LLC, a Medicare Part D provider, and several Miami-area home health agencies in 

exchange for illegal bribes and kickbacks from his co-conspirators. The indictment further alleges that 

Fernandez submitted false and fraudulent claims through Medicare Part B for services, office visits and 

procedures that he never provided, such as therapeutic injections and removal of lesions from patients' 

faces, and provided prescriptions for home health services and medications regardless of whether they 

were medically necessary. 

The indictment further alleges that Fernandez illegally dispensed controlled substances, including but not 

limited to the Schedule II controlled substances Oxycodone and Hydrocodone and the Schedule IV 

controlled substance Alprazolam, to his co-conspirators. 
50 


Insert 33613A.031

According to the indictment, Fernandez and his co-conspirators caused Medicare to pay at least 

approximately S4.4 million based on false and fraudulent claims that they caused to be submitted. The 

indictment also alleges that Medicare, through Part D. paid a total of approximately $20 million as a result of 

claims submitted listing Fernandez as the prescribing physician. 

An indictment is merely an allegation and the defendant is presumed innocent unless and until proven guilty 

beyond a reasonable doubt in a court of law. 

The FBI, HH$-OIG and USSS investigated the case, which was brought as part of the Medicare Fraud 

Strike Force, supervised by the Criminal Division's Fraud Section and the U.S. Attorney's Office for the 

Southern District of Florida. Former Fraud Section Trial Attorney and current Assistant U.S. Attorney Usa 

H. Miller of the Southern District of Florida and Fraud Section Trial Attorney Adam G. Yoff.e are prosecuting 

the case. 

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the 

country, has charged nearly 3,000 defendants who have collectively billed the Medicare program for more 

than $11 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction 

with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent 

providers. 

Topic(s): 

Healthcare Fraud 

Prescription Drugs 

Component(s): 

Criminal Division 

Criminal - Criminal Emud Sactjon 

USAO • Florida Southern 

Press Release Number: 

17-306 

Updated March 24, 2017 
51 


Insert 33613A.032

MIAMI-DADE COUNTY JULY17, 201710:40 AM 

Opioid -pushing Miami doctor pleads guilty to $4.8 

million Medicare fraud 

BY DAVID!. NEAL 

dneal@mtamihera/d.,om 

With federal agents leading Medicare fraud busts nationwide and in the nation's 

Medicare fraud capital of Miami last week, a drug-dealing Miami doctor pleaded 

guilty to conspiracy to commit healthcare fraud. 

The case of Miami's Roberto Fernandez, similar to Miramar doctor Joaquin 

Mendez's Friday guilty plea to the same charges in a different case, demonstrates if 

greed fuels these schemes, doctors can be the engine. Fernandez admitted in court 

documents that just hjs role in the schemes cost Medicare $4.8 million. His guilty 

plea could cost hin1 a maximum of 10 years in prison. 

Working from 2011 to earlier this year with pharmacy owners Niurka Fernandez 

(doing 10 years on fraud charges) and Aro Oms (eight years), Fernandez wrote 

prescriptions and made referrals of Medicare beneficiaries for Medicare kickbacks. 

ADVERTISING 
52 


Insert 33613A.033

All three billed Medicare for drugs that weren't necessary and sometimes not given 

to the patients in whose names they were billed to Medicare. And he used name 

brand drugs for the unnecessary prescriptions, allowing for more fraudulent billing 

from Fernandez and Oms. Like Mendez, he contributed his signature to care and 

prescription plans that allowed for fraud in home health care. 

Fernandez admitted to billing Medicare for services not rendered. But, perhaps 

most damagingly, Fernandez admitted to being part of the state's opioid crisis by 

prescribing controlled substances oxycodone, hydrocodone and alprazolam to 

patients and patient recruiters for $100 to $200 per prescription. 

"Too many trusted medical professionals like doctors, nurses, and pharmacists have 

chosen to violate their oaths and put greed ahead of their patients," Attorney 

General Jeff Sessions said in a statement after Thursday's monsoon of healthcare 

fraud arrests. "Amazingly, some have made their practices into multimillion dollar 

criminal enterprises. They seem oblivious to the disastrous consequences of their 

greed. Their actions not only enrich themselves often at the expense of taxpayers 

but also feed addictions and cause addictions to start. The consequences are real: 

emergency rooms, jail cells, futures lost, and graveyards." 

In announcing the 412 arrests Thursday, the Department of Justice said, "The 

charges also involve the individuals contributing to the opioid epidemic, with a 

particular focus on medical professionaO nvolved in the unlawful distribution of 

opioids and other prescription narcotics." 
53 

f 


Insert 33613A.034

David f. Neal: 305-376-355~ @DavidjNeal 

O COMMENTS v 

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54 

Mr. CURBELO. And we are very pleased, we are very pleased 

that there was this massive Medicare fraud bust all over the country recently, but that is an indication of a far greater problem, and 

this is what we are catching. We can only imagine what we are not 

catching. 

So I want to know, Mr. Morse, is there anything else that this 

institution can do to empower you to focus more on prevention so 

that we can hopefully stop reading all these articles about chasing 

fraud and putting people in jail? 

Mr. MORSE. Thank you for that question. Actually, this institution has done a fantastic job of doing that already. The Ways and 

Means Committee has increased HCFAC funding for Medicare in 

recent years. You have given us the authority—actually, as you 

talk about the ability of credit cards to find fraud, we use actually 

a similar system from the Small Business Jobs Act of 2010, which 

allows us to do very advanced data analytics and identify potential 

patterns of fraud and abuse there. We have found that to be extremely effective. That program alone has saved over $1 billion in 

the last 2 years in terms of preventative dollars before they go out 

the door. 

One of the challenges that you speak to, though, is the complexity of actually detecting and preventing fraud, because a lot of 

it takes on-the-ground investigations. It takes looking through a 

medical record from a provider, making sure that that medical 

record actually meets what the beneficiary actually received in 

terms of the services or needed in terms of services. And that often 

is—it is labor intensive. It is potentially burdensome on the provider. So we do very cautiously balance that burden, you know, 

with our investigative work. 

But we actually have been very appreciative with everything the 

committee has done. Even most recently, in MACRA removing Social Security number from the beneficiary ID card in Medicare is 

going to help us along for identity theft. We have a number of authorities that we found to be extremely helpful, and we, you know, 

continue to do better and continue to make progress going forward, 

but—— 

Mr. CURBELO. So, Mr. Morse, you don’t think there is anything 

we can do on the front end as these potential providers, candidates 

to become Medicare providers are applying? Because I hear from legitimate healthcare providers all the time: The easiest thing to do 

is to set up a Medicare fraud scheme because you automatically get 

approved. 

Now, you have told me here today that it is a burdensome process to get approved as a Medicare provider? How do I reconcile that 

with what I am hearing from healthcare providers back home? 

Mr. MORSE. We have got a number of provider screening requirements that are already in place. So we screen for whether or 

not a provider is potentially, you know, a felon or they have any 

sort of felony conviction. We make sure that they are properly licensed in their jurisdiction. And then we also do, even if they are 

enrolled, we do continuous monitoring in the background. We have 

data systems that actually do that electronically without actually 

any burden on the provider, the provider doesn’t know this is going 

55 

on, and we are able to kind of look and make sure that that provider is maintaining their compliance with our program standards. 

But, you know, we will then take action if we find that there is 

any potential abuse of billing or any issues that arise from that 

provider’s behavior. 

Mr. CURBELO. Thank you, Mr. Morse. 

And, Mr. Chairman, I want to thank you again. Whatever it 

takes, I think this Committee, this Congress needs to empower 

these agencies to remedy this situation for taxpayers, for Medicare 

beneficiaries. It is very demoralizing to read on a weekly basis in 

Miami these articles about people running these schemes that have 

cost the taxpayers billions and billions of dollars, and by the way, 

threaten the solvency of Medicare, Social Security, and many other 

of our entitlement programs. 

I thank our witnesses. We need to do much better. Thank you, 

Mr. Chairman, for this opportunity. 

Chairman BUCHANAN. [Presiding.] Thank you. 

I want to thank our witnesses. A couple of questions. When we 

talk about a number of $60 billion, is that a ballpark? Could it be 

$80 billion, $90 billion? Do we really know what that number is? 

I mean, is that just an estimate? 

Mr. MORSE. Thank you. Actually, so building on the conversation that we had with you a couple of weeks ago, it really is an estimate, because we are required under statute to estimate improper payments, and there is the IPERA legislation that gives 

guidance in terms of the things that we need to be able to measure 

for improper payments. So especially on the fee-for-service side, a 

lot of that improper payment error rate of that 60 billion, roughly 

43 of it is Medicare fee-for-service. Of that 43 billion about 60 percent of that is documentation errors. So for us to look at that—— 

Chairman BUCHANAN. What about the other 40 percent, what 

happens there? 

Mr. MORSE. The other 40 percent is potentially more suspect behavior, and it is more challenging for us to make those determinations, in part, for the—— 

Chairman BUCHANAN. It is an overpayment, but it might not 

beput in the category of fraud. 

Mr. MORSE. That is the challenge, yes, is making those determinations over—at that time, as to what constitutes the overpayment. Is it potential abuse or fraud or is it simply just an overpayment and something that Medicare otherwise should have paid, 

even if the documentation didn’t line up at the time? 

Chairman BUCHANAN. So Medicare pays out a lot in terms of 

overpayments. What do they get back? Do we have any sense of 

that number? 

Mr. MORSE. We have prevented—well, we look at the improper 

payment rate as just an estimate. So the improper payment rate 

is just a random sample of a number of claims. 

We, from the program integrity side, at CPI, have a number of 

initiatives, many of which have been through authorizations from 

legislation from this committee, look at our potential return on investment. 

56 

In 2015, we determined that we prevented or identified about $17 billion in improper payments to Medicare alone. That is mostly—almost all Medicare fee-for-service. 

Chairman BUCHANAN. Someone mentioned earlier, one of the 

Members, about auditing and going back four or five years. What 

is the likelihood of collecting anything when you go back that far? 

Mr. MORSE. But it is our duty to go back that far regardless. 

I mean, the challenge is, you know, making sure that the trust 

funds are—we are able to recover the dollars, to the extent that we 

can, that have gone out the door, if we do—— Chairman BUCHANAN. What was the $60 billion number three 

years ago or four years ago? Has that number climbed? Has it 

stayed the same percentage? The programs increased. Is it that you 

use just a standard 10 percent? Is that what it historically has 

been or did it used to be seven or eigth and it has gone to 10 percent? 

Mr. MORSE. Medicare—the fee-for-service improper payment 

rate in Medicare has actually come down in recent years as we instituted a number of provisions. So 2 years ago, it was just over 

12 percent. This past year, it was 11 percent. So we are working 

to, obviously, get it as low as we can be because, clearly, it is too 

high, even from our perspective. 

Chairman BUCHANAN. One of the thoughts I have is that there 

is a saying, if you can’t measure it, you can’t manage it. And we 

need to make sure we have good, accurate information in terms of 

trend lines and where all this is going. 

Because, obviously, 10 percent of a huge program, 700 billion, someone mentioned 650, that is $70 billion a year in overpayments 

of fraud. That is outrageous. That is why it caught so much of my 

attention in these big programs, Social Security and Medicare. 

It doesn’t take a big percentage to get to a gigantic number, and 

that is why I think we need to use whatever resources we can to 

take the trend line and move it in the other direction. 

What could we do as a Committee or in terms of policies to help 

get that number moving in the other direction? Because I am concerned. I mean, take a number, 60 billion, let’s say we are still out 

of pocket 20, 30 billion, net, net, net. That is still way too much 

money that could be used for other things. 

Mr. MORSE. We actually—I mean, so we appreciate everything 

this committee has already done. You know, even in the time that 

I have been at CMS—the couple years that I have been at CMS, 

Ways and Means Committee has increased our HCFAC funding, 

the Healthcare Fraud and Abuse Control account funding, which is 

a funding source and authorization for a lot of Medicare’s program 

integrity dollars. 

MACRA legislation has been extremely helpful for us. The Small 

Business Jobs Act has been helpful for us, the CARA legislation. 

So we actually feel as though the committee has been extremely 

supportive of program integrity work. 

Chairman BUCHANAN. One thing I would just keep in mind because it is such a big number is we need to have a mindset of continuous improvement. It doesn’t matter what the number is until 

it gets to zero, which it probably never will, obviously. We need to 

be moving in that direction. 

57 

Mr. Cosgrove, what are your thoughts on what we could be doing 

better or differently? What could we do as a Committee to help you 

guys be more successful in getting that number down, that percentage down? 

Mr. COSGROVE. I think that CMS has made a lot of improvements. We have made several recommendations to CMS that they 

need to do a better job in cases of setting objectives and monitoring 

performance, so that for the activities that are underway currently, 

they know how well they are working and how they can be improved. 

One recommendation that we put into our high-risk report was 

intended to help move past pay and chase by doing more prepayment reviews before the money actually goes out to the provider. 

Currently, the prepayment reviews are done mostly by the MACs, 

by the Medicare administrative contractors. 

There was a demonstration where the recovery audit contractors, 

who typically do postpayment reviews and collect fees on a contingency basis, did some prepayment reviews. We recommended that 

CMS seek legislative authority to allow the RACs to do prepayment 

reviews. 

We think that prepayment reviews are more effective and efficient than trying to collect the money later on, and that this would 

add additional resources to the battle against improper payments. 

So I think that is one area to consider, allowing the RACs to do 

prepayment reviews. 

Chairman BUCHANAN. Well, I think that is something we 

should look into. I think anybody knows, in business, once the 

money goes out, it is tough, especially if you are going four or five 

years later to get it back. So if you can prevent it from going out— 

if it is something that is a legitimate service or equipment that has 

been provided, it is different—but it is not. 

Okay. Well, let me just close with, I would like to thank our witnesses for appearing before us today. Please be advised that Members have two weeks to submit written questions to be answered 

later in writing. Those questions and your answers will be made 

part of the formal hearing record. 

And with that, the Subcommittee stands adjourned. 

[Whereupon, at 11:08 a.m., the Subcommittee was adjourned.] 

[Member Questions for the Record follow:] 

58 


Insert 33613A.035

GAO u.s. GOVERNMENT ACCOUNTABILITY OFFICE 

441 GSt. N.W. 

Washington, DC 20548 

August22, 2017 

The Honorable Brian Higgins 

House of Representatives 

Dear Congressman Higgins, 

This Jetter responds to your request that we address a question submitted for the record 

related to the July 19, 2017 hearing entitled Efforts to Combat Waste, Fraud, and Abuse 

in the Medicare Program. GAO's response to this question is enclosed. 

If you have any questions about this response or need additional information, please 

contact James Cosgrove at cosgrovej@gao.gov or call (202) 512-71 14. 

Sincerely yours, 

!)# 

James Cosgrove_ 
59 


Insert 33613A.036

Question for the Record to the Witnesses 

The Honorable Brian Higgins 

As you know, on May 15, 2017, The New York Times detailed a story of a 

whistleblower exposing a Medicare Advantage plan's alleged fraud. This report 

joins other whistleblowers with similar accounts of the practices of similar 

organizations and multiple lawsuits filed by the Department of Justice alleging 

fraud by insurers. The cases demonstrated the dire need for a robust Recovery 

Audit Contractor program to recoup Medicare Advantage overpayments. I am 

aware that a Request for Proposals was released in December 2015, more than 18 

months ago. However, as of today's date, this increased auditing has yet to 

begin. 

What do you think needs to be done to fully implement Section 1893(h) of the 

Patient Protection and Affordable Care Act of 2010, which provides CMS with 

general authority to enter into contracts with Recovery Audit Contractors to 

identify and reconcile overpayments in Medicare Advantage (Part C)? 

During my testimony I noted several factors that hinder CMS's efforts to recover 

Medicare Advantage (MA) improper payments, including the agency's lack of specific 

plans or a timetable for incorporating Recovery Audit Contractors (RAGs) into the MA 

program to identify improper payments and help with their recovery. In April 2016, we 

recommended that CMS develop specific plans for incorporating a RAC into the risk 

adjustment data validation (RADV) program. 1 In July 2016, CMS described to us its 

initial steps to meet this goal. In July 2017, CMS officials told us that the agency is 

evaluating its strategy for the MA RAC with CMS leadership. We continue to believe 

that CMS should develop specific plans for incorporating a RAC into the RADV program 

to help the agency address the resource requirements of conducting contract-level 

audits. 

1

GAO, MOOicare AdviJf) agt~: Fundamental Improvements Needed in CMS's Effort to Recover SubstanVal Amounts of 

Improper Payments, GA0.16-76 (Washingtoo. O.C.: April S, 2016). 

Page 2 
60 


Insert 33613A.037

Jonathan Morse's Hearing on 

"Medicare Advantage" 

W&MO&I 

July 19, 2017 

Ouest ions rrom Chairman Vern Buchanan 

1. Can you describe wh at efforts CMS bas taken to quantify the amount of 

Medicare dollars lost because of fraud? How does CMS distinguish fraud 

related losses from oth er payment errors such as those stemming from 

missing documentation? 

Answer: Each year, CMS estimates the improper payment rate and a projected dollar amount of improper 

payments for Medicare.' CMS takes seriously our responsibility to make sure our programs pay the right 

amount, to the right party, for the right beneficiary, in accordance with the law and agency policies. It is 

imponautto remember that while all payments made as a result of fraud are considered improper 

payments, improper payments typically do not involve fraud. Rather, for CMS' programs, improper 

payments are most often payments for which there is no or insufficient supporting documentation to 

determine whether the service of item was medically necessary, and there is no information or indication 

suggesting that the provider knowingly failed to create or maintain such documentation. Fraud itself is a 

legal term, and cases of alleged fraud are investigated and prosecuted through civil and/or criminal law 

enforcement processes. CMS works closely with our colleagues in law enforcement and refers cases of 

suspected fraud to them for funher investigation and additional actions if necessary. 

During Fiscal Year (FY) 201 6, the Federal Government won or negotiated over $2.5 billion in health 

care fraud judgments and settlements1, and it anained additional administrative impositions in health 

care fraud cases and proceedings. As a result of these effons, as well as those of preceding years, in FY 

2016 over $3.3 billion was returned to the Federal Government or paid to private persons. Of this $3.3 

billion, the Medicare Trust Funds received transfers of approximately S I. 7 billion during this period.3 

As pan of these effons, CMS uses the Comprehensive Error Rate Testing (CERT) program to review a 

stratified random sample of Medicare fee-for-service (FFS) claims to estimate an improper payment 

rate. The CERT metl10dology is based on results from both data processing and medical record reviews 

for a national random sample of claims and primarily identifies payments that did not meet Medicare 

coverage, coding, and billing rules. The Medicare FFS improper payment rate decreased from 12.1 

percent in 2015 tO 11.0 percent, or $41.08 billion, in 20 16. The decrease from the prior year's reponed 

error estimate was primarily driven by a reduction in improper payments for inpatient hospital claims. 

CMS achieved significant savings tltrough activities aimed at preventing improper payments before they 

go out the door

4 ' The Fraud Prevention System (FPS) resulted in $604.7 million in fraudulent 

1 buns·ttwww hhs.goW$jtcs(dcfqu!liOksffy. ?O 16-hbs-agcncx-Dnancial-rcpon pdf 1 T11e amoum reponed as won or negotiated only reOccu the federal recoveries and d1crefore does not reflect state Medicaid 

monies ~covered as part of any global fcderal-suttc settlements. l hnos://oig.h11s.gov/publkationsldocslhcfac/FY2016.hcfae.odf 

~ httos·/loig hhs gov/publica!ionsfdocslhcfnciFY201(thCfu£pdf 

~ httus;//www.cms.gov/ About-CMSfComoonemsiCPIIOown1oadsf20J 5-final-rtc-06232017 .Pdf 
61 


Insert 33613A.038

payments being stopped, prevented, or identified during FY 2015. 

CMS also saved the Medicare program $393.9 million in FY 2016 using National Correct Coding 

Initiative (NCCI) edits. The NCCI is intended to promote national correct coding methodologies and 

control improper coding in Medicare Part A, Pan B, and durable medical equipment (DME) claims. ln 

addition, CMS had 435 active payment suspensions during FY 20 15. 

Medicare Administrative Contractors (MACs) request and review medical documentation from 

providers and suppliers on a prepayment and post-payment basis. In FY 2015, MAC prepayment 

medical review resulted in nearly $5.0 billion in improper payments being prevented. These efforts 

avoid "pay and chase," as well as promote provider compliance. 

2. Are there a ny additional authorities or other actions from Congress that can 

assist CMS in combatting Medicare fraud ? 

Answer: CMS appreciates the additional authorities and tools that Congress has provided in recent 

legislation, including the Medicare Access and CHIP Reauthorization Act of 20 15 (MACRA) and 2 1" 

Century Cures Act. The President's Budget strengthens the integrity and sustainability of Medicare and 

Medicaid by investing $751 million in discretionary Health Care Fraud and Abuse Control (HCFAC) 

funding, which is S26 million above the FY 2017 Omnibus. 

This enhanced funding would allow CMS and their law enforcemelll partners to continue the shift away 

from a "pay-and-chase" model toward identifying and preveming fraud and abuse before it happens. 

CMS will use additional resources to target program integrity activities toward high risk providers and 

reduce burden on compliant providers. 

3. In your testimony, you wrote that RADV audits in Medicare Part C 

"recover overpayments identified by RADV; encourage accurate coding; 

increase the incentive forMA organizations to submit valid and accurate 

diagnosis codes. " I understand that CMS does not share with plans 

information on how CMS approaches diagnosis codes in their audits to 

ensure their validity and accuracy, is this true? 

I. Why doesn't CMS make this information public? 

2. What other actions does CMS take to ensure that plans have adequate 

guidance ou complying with CMS coding requirements? 

Answer: CMS hosts training sessions for MA organizations and provides instructional materials for the 

audits, such as checklists and submission instructions, which explain how CMS approaches diagnosis 

codes to ensure their validity and accuracy (e.g., coded according to official coding guidelines and 

following risk adjustment methodology). CMS established the payment error calculation methodology 

for the RADV audits through a public notice and comment process. In Febmary 20 12, CMS provided 

information about the RADV audits in a payment error calculation methodology paper titled, "Notice of 

Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data 

Validation Contract-Level Audits.''

6 

6 hnps://www.cms..gov/Rcsearch·St.·uistics.·Data·and·Svstems/Monitoring·ProgramVrecove.rv·audit·prowm-pans-c,..and· 

d/RADV-Resources bun! 
62 


Insert 33613A.039

CMS has also issued guidance regarding a requirement that MA organizations report and return 

overpayments that they identify, including those overpayments resulting from submission of improper 

risk adjustment data. The regulation codifying these requirements was finalized in May 2014 for 

Contract Year 2015, and specifies that a MA organization has identified an overpayment when the 

organization has detenuined, or should have detenuined through the exercise of reasonable diligence, 

that it has received an overpayment. Subregulatory guidance has also been issued to MA organizations 

with further policy and operational guidance. 

4. Recently, GAO raised concerns about CMS's progress in validating encounter 

data. 

Since then, what steps has CMS taker~ to validate encounter data accuracy and 

reliability? 

I. When does CMS anticipate the validation process to be completed? 

2. How will the transition to more complete encounter data impact 

CMS efforts to audit plans? 

Answer: Risk adjustment data validation (RADV) audits of Medicare Advantage organizations 

(MAOs) are designed to ensure the accuracy and integrity of risk adjustmem data and Medicare Pan C 

program risk adjusted payments in order to protect the Medicare Trust Funds. RADV audits verify 

whether the diagnosis codes submitted for payment by MAOs are supported by medical record 

doc.umentation. Historically, CMS has used MA diagnoses submitted into CMS' Risk Adjustment 

Processing System (RAPS). In recent years, CMS began collecting encounter data from MA 

organizations. In 2015, CMS used encounter data as an additional source of diagnoses for enrollee risk 

scores. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending 

encounter data-based risk scores with RAPS-based risk scores. In 2017, CMS continued using a blend, 

incorporating a higher percentage of encounter data-based risk scores. lo tl1e 2018 Advance Notice, we 

proposed to continue using the 2017 blend of75% RAPS and 25% encounter data for payment. CMS 

also solicited comments on whether and how to apply a uniform industry-wide adjustment to the 

encounter data-based portion of the blended risk score under the Pan C and End-Stage Renal Disease 

(ESRD) models for payment to MAOs in 2018. 

CMS is committed to open data and transparency to empower patients and doctors to make decisions about 

their care and to suppon innovative approaches to improve qualitY. accessibi litY, and affordabilit)' in the 

healthcare system. In the 2018 Call Lener7

, CMS defined six measures that we expect to use to assess plans' 

performance. In the Call Letter, we established performance thresholds for two of the measures and 

announced that we will establish thresholds for the remaining measures. The Call Letter also noted that we 

will identii)' contractS failing to meet the performance thresholds for follow up communication, technical 

assistance, and tracking, and will conduct monitoring and compliance activit)', including but not limited to 

notices of non·compliance. warning letters. and corrective action plans as needed to improve performanc,e. 

CMS has taken several steps to provide specific recommendations to MA organizations to help improve the 

quality of data including: monthly user group calls; one-on-one calls; on-site '•is its; repon cards (which 

provide MAOs with infomJalion on frequency, volume. and accuracy of their submissions by service type. 

compared tO MA regional and national benchmarks and the FFS national benchmark): providing technical 

assistance to 1\>IA organizations; and researching plan-specific issues. 

7 hnps:Uwww cuu gov/NcwsroornfMediaRtlcascDatabasc/fact-shecuno 17-Fact-Shctt-itemsf2017-04-03 hunJ 
63 


Insert 33613A.040

Ouestjons from Reo George Ho ldjno 

During the hearing, I asked about t he contract-level RADV audit process and why it takes so 

long to conduct. I have a few follow u p q uestions on CMS's use of a Fee-For-Ser vice Adj uster 

in the RADV process. 

1. Describe the purpose of the FFS adjuster and bow CMS uses it in the contract-level 

RADV audit 1>roccss? 

Answer: CMS described a Fee-For-Service Adjuster in a methodology notice published on February 24, 

2012.

8 

2. Has the adjuster played a r ole in t he delay in concluding 2011-2013 contract-level RADV 

aud its? If so, how? 

Answer: The payment year 2011 , 2012, and 2013 audits are in various stages of the RADV audit 

process. During RADV audits, MA organizations submit medical records to validate the diagnosis 

information they submiued for payment These records are reviewed for CMS by medical record coders, 

referred to as the medical record review phase. Based on the diagnoses found during medical record 

review, CMS recalculates the payment the plan should have received and compares it to the payment the 

plan actually received. This process is referred to as the payment error calculation phase. Following 

paymem error calculation, audit repons are generated and released to MA organizations. The RADV 

audits for payment year 20 II have completed the payment error calculation phase. For payment year 

2012, the audit is in the payment error calculation phase. The audit for payment year 20 I 3 is in the 

medical record review phase. 

3. How was t he adj uster dete rmined? Docs the agency intend to I>Ublish information on 

the methodology behind its development? Lf not, why? 

Answer: CMS described a Fee-For-Service Adjuster in a methodology notice published on February 24, 

2012.

9 

Questions from Ren. Brian Higgins 

As you know, on May 15, 2017, Tlte New York Times detailed a story of a 

whistleblower exposing a Medicare Ad vantage plan's alleged fraud. This re)lOrt joins 

other wbistl eblowers with simila r accounts of th e practices of simi.lar organizations 

and multiple laws uits filed by the Department of Justice a lleging fraud by insurers. 

The cases demonstra te the dire need for a robust Recovery Audit Contracto r 

program to r ecoup Medi care Ad,•ant age overpayments. I am aware that a Request 

for Proposals was r eleased in Decembe r 20l5, more t han 18 months ago. However, as 

of today's date, this increased auditing has yet to begin. 

' hnos:!/www cms.goviResearch-Smtistics-Data-and-SvsJcms!Molliloring-Progmms/rccoverv-audit-prowam-oans-c-alldd/Othcr-Contcnt-Types/RADV -Docs/RADV -Mcthodologv pdf 9 huDt//www cms.gov/Rcscarch-Stmistics-Oata-and-Systcms!Moniloring-Progmms/rccovcry-audit-progmm-pans-s:-andd/Oihcr-ComC!tt·Types/RADY-Docs/RADV-Mcthodo!ooy pdf 
64 

f 


Insert 33613A.041

1. What do you th ink need s to be done to fully imp lement Section 1893(h) oft he 

Pat ient Protection a nd Afforda ble Care Act of 2010, which provides CMS with 

genera l a ut hority to enter into con tracts with Recovery Audit Contractors to 

identify and reconcile overpayments in Medica re Ad vantage (Par t C)? 

Answer: CMS is strongly commiued to program integrity in the MA program and takes seriously our 

responsibility to protect taxpayer dollars by identifying and correcting improper payments. CMS uses 

several tools to address the Part C improper payment rate: contract-level Risk Adjustment Data 

Validation (RADV) audits, requirements that MA organizations report and rentrn overpayments, and 

program and financial audits. 

CMS is always interested in additional input on how we can improve our programs. CMS is required to 

implement Recovety Audit Contractor (RAC) Programs in Medicare under Section 1893(h) of the 

Social Security Act. In 2014, CMS issued a Request for Proposal for a Pan C RAC; however, no 

proposals were received. In December 20 15, CMS issued a Request for Information seeking industty 

input on expanding tbe RAC Program to include the identificatioo and correction of overpayments and 

underpayments associated with diagnosis data submitted to CMS by Medicare Advantage Organizations 

for Pan C payment, as well as input on the level of contractor imerest and capability to conduct this type 

o f work. The Administration is currently evaluating its Part C RAC strategy. We are working to revise 

the Part C RAC Program design to create a more robust business model for potential contractors that fits 

imo CMS's larger Part C program integrity efforts. 
65 

[Public Submissions for the Record follows:] 

66 


Insert 33613A.042

Alliance of Specialty Medic.ine 

Statement for t he Record 

Before the House Ways and Mea ns Committee 

Subcommittee on Oversight 

"Efforts to Combat Waste, Fraud, and Abuse in the Medica re Program" 

Wednesday, J uly 19, 2017 

Chairman Buchanan, Ranking Member Lewis, and members of the Subcommittee, the Alliance of 

Specialty Medicine (the Alliance) would like to thank the House Ways and Means Oversight 

Subcommittee for the opportunity to provide input on efforts by the Centers for Medicare and 

Medicaid Services (CMS) to identify and combat waste, fraud, and abuse in the Medicare program. 

The Alliance is a coalition of medical specialty societies representing more than l 00,000 

physicians and surgeons from specialty and subspecialty societies dedicated to the development of 

sound federal health care policy that fosters patient access to the highest quality specialty care. As 

patient and physician advocates, the Alliance welcomes the opportunity to provide input in the 

formulation of health and Medicare policy. 

While we recognize the importance of improving program integrity for Medicare to protect 

taxpayer dollars, the Alliance is increasingly concerned with CMS' approach to program integrity, 

which places numerous, burdensome requirements on physician practices. These initiatives are 

duplicative, disruptive to physician practices, and often lead to penalties based on technicalities or 

inconsistent application of program requirements. CMS also provides little transparency with 

respect to the scope, authority, and operations of initiatives they undertake, thereby creating 

additional uncenainty for the physician community and limiting accountability for CMS and its 

contractors. 

To address these concerns, the Alliance urges Congress to: 

Streamline Medicare program integrity efforts to minimize burden and duplication; 

Increase transparency in Medicare medical review and audit initiatives; 

Enforce transparency in the development of local coverage and payment policies; 

Implement safeguards to ensure that Medicare denials and overpayment recoupments are 

proper; and 

Promote improvement through education and corrective action plans (CAPs) rather than 

penalties. 

Additional details on these reconunendations are provided below. 

Streamline Program Integrity Efforts to Minimize Burden and Duplication 

CMS and its contractors conduct multiple types of pre-payment review, post-payment review, and 

medical record auditing to determine the accuracy of Medicare payments to physicians and other 

providers. These may include reviews by Medicare Administrative Contractors (MACs), 

Recovery Audit Contractors (RACs), Unified Program Integrity Contractors (UPICs). and 
67 


Insert 33613A.043

Supplemental Medical Review Contractors (SMRCs), to name a few. Further, CMS also 

undertakes medical reviews as part of its Comprehensive Error Rate Testing (CERT) program. As 

a whole, these reviews are often duplicative, burdensome, and disruptive to physician practices, 

requiring time and resources of clinicians and administrative staff and preventing physicians from 

focusing on delivering high-quality care to the patients they serve. 

To address this burden and duplication, the Alliance recommends that Congress require CMS to 

streamline its efforts related to medical reviews and auditing. For example, CMS should conduct 

a comprehensive review of its program integrity initiatives to assess their effectiveness, identify 

areas of duplication as well as opportunities for collaboration or consolidation across program 

integrity contractors, and discontinue efforts that are not focused on those claims and providers 

with the highest risk for improper payment. For initiatives that remain, CMS should adopt a 

streamlined approach to conducting reviews that all contractors should be required to follow. As 

pan of this effort, CMS should ensure that contractors' efforts are coordinated such that the same 

records are not requested and the same claims are not reviewed multiple times, and that record 

requests are consolidated across contractors such that physicians are not barraged with record 

requests throughout the year. 

Improve Transparency in Medicare Medical Re,•icw and Aud.it Initiatives 

In addition to the duplication and burden they present, CMS' numerous medical review and audit 

initiatives lack transparency that is needed to hold CMS and its contractors accountable. As such, 

the Alliance has identified several recommendations for improving transparency for these 

initiatives. 

First, CMS should be required to establish a new web portal for consolidating information on 

CMS' program integrity efforts, including information on contractors and their perfom1ance. The 

portal should include clear information on the function and scope of authority used to engage with 

each of the various Medicare program integrity contractors. CMS should also include infonnation 

on each contractor, including its sampling and extrapolation methodologies. For each contractor, 

CMS should also annually publish key data related to its performance on audits, including the 

number of denials and appeals, net denials (defined as total denials minus denials overturned on 

appeal), and overall appeal rates. 

Additionally, to ensure that they are targeting their efforts appropriately, Medicare auditors should 

be required to submit potential audits for review and approval by the Secretary. The Secretaty 

should specify through a notice-and-comment process the criteria upon which proposed audits are 

assessed, and approved audits should be posted on the program integrity web portal. 

Enforce Transparency i.n the Development of Local Coverage and Payment Pol.icies 

Too often, improper payments are identified on the basis of inconsistent or unclear Medicare 

coverage and payment policies. Additionally, contractors regularly do not follow proper notice 

and comment processes when developing or updating local coverage detenninations. To address 

these challenges, the Alliance urges Congress to enforce transparency in the development of local 

coverage and payment policies by requiring contractors to adhere to CMS' established 

2 
68 


Insert 33613A.044

requirements for soliciting comments and recommendations and for obtaining input from 

representatives of relevam specialty societies, as part of the contractor's notice and comment 

period for new or revised local coverage detem>inations (LCDs). Local contractors must also be 

required to provide a formal notice-and-comment process for any and all changes they intend to 

implement that would revise coverage and payment policies. Contractors who fail to meet these 

standards should be subject to successive penalties, up to and includiug termination. 

Implement Safeguards to Ensure t bat Medica re Denials and Overpayment Recoupments are 

Proper 

CMS' current program integrity contracts do not include sufficient safeguards to ensure that 

contractors make appropriate detemJinations with respect to denial of claims or services or 

identification of overpayments. For example, the individuals responsible for making denial 

detem>inations may not have the right expertise or training to assess the medical necessity of a 

given clinical scenario. Additionally, contractors often have limited accountability for making 

proper detenninations that are upheld upon appeal, which enco urages them to pursue 

overpayments even when evidence for improper payment is limited. 

To mitigate physician burden and hassle associated with improper denials and overpayment 

determinations, the Alliance recommends that CMS be required to implement safeguards to ensure 

that Medicare denials and overpayment recoupments are proper. Specifically, CMS should 

mandate physician review for Medicare denials by requiring a physician practicing in the same 

specialty or sub-specialty and with clinical expertise or knowledge of the service in question to 

validate whether a medical necessity denial is warranted. Additionally, for those contractors 

whose determinations are ovent•med on appeal, Congress should require that they face financial 

penalties that, at a minimum, cover providers' administrative costs in pursuing the appeal, as an 

incentive to ensure contractor determinations are correct from the start. 

Promote Improvement through Ed ucation and Corrective Action Plans Rather than 

Penalties 

In recognition of the fact that improper payments are largely due to unintended coding and billing 

errors of providers acting in good faith, rather than bad actors committing fraud, the Alliance 

recommends that Congress should institute an approach for addressing improper payments in the 

Medicare program that prioritizes education and infonnation-shariog, rather than harsh financial 

penalties. For example, CMS should be required to publicly report on common coding and billing 

errors and omissions, including providing detailed break-o uts by error or omission type, physician 

specialty, contractor, and region, among others. CMS should also be required to provide enhanced 

educational offerings to physician practices on how to avoid common coding and billing mistakes. 

Congress should also replace financial penalties with corrective action plans (CAPs) that provide 

clear steps for physician practices to reduce their improper payment rates. To support 

improvement under the CAPs, CMS should also be required to institute a program that would 

provide technical assistance to physician practices while they work to address internal deficiencies 

that may have led to a high volume of coding and billing errors and inappropriate payments. 

3 
69 

f 


Insert 33613A.045

Conclusion 

Addressing fraud, waste, and abuse in the Medicare program must be a priority for CMS, and the 

Alliance recognizes the imponance of targeted, high-value initiatives that address those providers 

or claims at the highest risk of fraud or improper payment. However, CMS must balance its 

program integrity objectives against the burden and disruption they create. The recommendations 

detailed above outline specific and actionable steps that can be taken to reduce the negative impacts 

of CMS' program integrity initiatives on physician practices to allow physicians to focus their 

attention and resources on providing the high-quality care Medicare beneficiaries need. 

Thank you again for taking our written comments into consideration. The Alliance of Specialty 

Medicine looks forward to working with the Subcommittee on improving CMS' program integrity 

effons. 

4 
70 


Insert 33613A.046

I 

AMRPA 

July 19, 2017 

~stimo y ofthe American Medical Rehabilitation Providers Association (AMR PA) 

To the Ways a nd Means Committee Oversight Subcommittee Hearing on 

"Efforts to Combat Waste, Fraud, and Abuse in the Medicare Program" 

The American Medical Rehabilitation Providers Association (AMRPA) thanks Chairman 

Buchanan, Ranking Member Lewis, and Members of the Oversight Subeommiuee for holding 

this hearing to examine efforts to combat waste, fmud, and abuse in the Medicare progmm. 

AMRPA is the national trade association representing more than 500 freestanding inpatient 

rehabilitation hospitals and units of general hospitals (fRFs). outpatient rehabilitation service 

providers, and other medical rehabilitation providers working with more than 600,000 patients 

each year to maximize their health, functional skills, independence, and participation in society . 

AMRPA supports the Conm1iuee's efforts to ensure that the Centers for Medicare and 

Medicaid Services (CMS) preserve the integrity of the Medicare program by paying accurate and 

appropriate amounts to providers. The proper management of Medicare funds and payment of 

claims is central to ensuring rehabilitation providers' ability to serve seniors and persons with 

disabilities. We look forward to working with the Committee on policies that reduce payment 

errors, preserve program resources, and promote access to medically necessary. quality 

rehabil itative care. 

As Chai1man Buchanan noted in his opening staternelll. the overall Medicare payment 

error rate yields little infom1ation about the program's integrity . Many payment errors are 

attributable to faulty 01· incomplete documentation and therefore it is difficult to determine 

whether they represent a loss to the Medicare trust fund or, in his words, simply "typographical 

errors." AMRPA agrees with the Cba.irman that different types of payment errors require 

different solutions. To that end, ow· testimony summarizes the reasons which may underlie IRF 

payment errors and offers solutions to reduce error rates and alleviate provider burdens that 

threaten beneficiaries' access to care. 

IRF Payment Error Rates Result f•·om a "Perfect Storm" of O ver ly Burdensome 

Documentation Requirements a nd O verzealous Contractors 

Jonathan Morse, Acting Director of CMS' Center for Program integrity. testified that 

improper payments most often occur where there is insufficient documentation to determine 

whether an item or service was medically necessary. Although Director Morse acknowledged 

that an " improper payment" is not necessarily - or typically - fraudulent. he stated that improper 

payments for lRF and home health claims were "the largest contt ibutors to the 20 16 Medicare 
71 


Insert 33613A.047

AMRPA Testimony 

Page 2 of6 

FFS improper payment rate." However, Director Morse did not discuss the data underlying this 

statement or seek to explain to the Commiuee why increasing numbers of IRFs are finding it 

difficuh to meet CMS' extensive documentation requirements. 

A review of the HHS FY2016 Agency Financial Report is instructive. From FY 20 15 to 

FY 2016, the improper payment rate for freestanding IRFs increased from 55.7 to 73.2 percent, 

while the rate for hospital-based units grew from 34.4to 53 percent. In FY 20 16, 99.7 percent of 

improper payments to freestanding IRFs rcsuhed from missing or insufficient medical necessity 

documentation, versus 87.2 percent in FY 2015. For lRFunits, improper paymems based o n lack 

of medical necessity documemation increased from 51.6 to 83.7 percent. 

According to HHS' findings, the overaiiiRF improper payment rates increased 37 

percent from 2015 to 2016 and improper payments to IRF units based on medical necessity bas 

apparently increased by a dramatic 62 percent in a single year. However, it defies logic that such 

significant changes could be due to providers, which are unrelated and geographically diverse 

due to the CERT sampling process, engaging in the same new panem of behavior. As noted in 

d1e HHS repon, the CERT program ensures a statistically valid random sample; d1erefore, the 

improper payment rate calculated from d1at sample reflects all Medicare FFS paymems over the 

repon period. 

Because the CERT sample includes different, random groups of providers from year to 

year, we think HHS' findings are more reflective of changes in the CERT review criteria or 

processes rather than actual shifting provider behavior. Contractor behavior may also contribute 

to increases in rates of"improper payments'' as their coverage criteria and corresponding 

documentation requirements changes over time as well, even where there is no underlying 

change in the regulations or CMS' subrcguhllOJ)' guidance, such as the Medicare Benefit Policy 

Manual (MBPM). 

Thus, the more rational - and factual ly based - explanation is that rising fRf improper 

paymem rates and claim denials have been driven by providers' inability to satisfy increasingly 

burdensome documentation requirements, coupled with contractor audit procedures that are 

designed to penalize providers for even the most minor documentation errors. In many instances 

contractors apply overly subjective interpretations of vague policies governing IRF services, 

including where no regulation exists. The imensive therapy requirement (also known as the 

"Three-Hour Rule") in the regulations is a prime example. CMS has repeatedly stated that the 

"preponderance" of therapy and rehabilitation services received by IRF patients must be 

delivered in a "one-on-one" modality, i.e., a single therapist working with the patient. For 

example, contractors will often deny fRf c laims for failure to satisfy the Three-Hour Rule when 

in excess of80 percent of a patient's therapy is individualized. 

Current IRF medical necessity requirements are heavily document-laden and lend 

themselves to easy, accounting-style audits based on technical noncompliance. As a result, 

legitimate, medically necessary rehabilitative care is not recognized and is instead categorized as 
72 


Insert 33613A.048

AMRPA Testimony 

Page 3 of6 

an "improper payment." The problem is exacerbated by the fact that many contractors 

responsible for reviewing IRF claims are paid on a contingency fee basis-the higher the denial 

rate, the higher their fees. Additionall y, beyond returning the contingency fee itself, there are no 

financial penalties for contractors incorrectly denying payment. Together, these factors converge 

to create a "perfect stom1" in which [Rfs are found to have improper payment rates of up to 73 

percent. 

While AMRPA shares the Committee's goal of combatting waste, fraud, a nd abuse in the 

Medicare program, the vast majority of claim denials o ur members experience are related to 

technical violations of subregulatory coverage policies. For example, one of our members 

recently experienced claim denials for each of the fol lowing reasons during a contractor payment 

review: 

Pre-admission physician examination did not indicate the prior level of function -

even though the prior level of function is documented elsewhere in the medical 

record; 

The Individualized Plan of Care (IPOC) was not completed within four days; 

No physician signature on pre-admission review or the signature is outside the 48-

hour window or was done with an e lectronic medical record (EMR) that somehow 

does not meet CMS' requirements; and 

The interdisciplinary team conference was missing documentation from one team 

member (e.g., case manager, therapist, e tc. such as a signature on the team note). 

In addition, contractors often go beyond the policies o utlined in CMS coverage manuals 

to impose even stricter requirements on lRFs. For example, despite comrary assurances from 

CMS, contractors have misconstrued 42 C.F.R. § 412.622 to impose an absolute requireme nt that 

each document identified in regulation be completed exactly as specified, including rigid 

timelines for each, and thus denied coverage when the patient's medical record clearly 

demonstrates medical necessity. In so doing, they far exceed the scope of their authority. These 

ovedy restrictive interpretations of coverage policies result in claim denials for medically 

necessary and appropriate rehabilitative care, harming both patients and IRF providers. 

Moreover, the preadmission documentation requirements in CMS coverage manuals have 

themselves been found to exceed the scope of agency regulations. In Cumberland County 

Hospital System v. Price, a U.S. District Court recently held that the preadmission requirements 

for IRFs set forth in the MBPM are far more detailed and impose significantly greater 

documentation burdens on providers than those set forth in the correspond ing CMS regulations. 

The court noted that 

The list of criteria in the MBPM does not merely clarify or 

interpret the requirements in the regulation, but creates a new 

standard by specifying particular items of infom1ation not provided 
73 


Insert 33613A.049

AMRPA Testimony 

Page4 of6 

for in the regulation. Significanc ly, these criteria are not simply 

precatory. . . Rather, the MBPM states that they are mandatory. ft 

provides that the preadmission screening documentation "must 

indicate" certain matters and "must also include" the remaining 

matters specified. MBPM ch. I § I I 0. 1.1. 

In the face of these increasingly detailed and more restrictively interpreted requirements, it is no 

surprise that the improper payment rate for IRFs is increasing. 

Further, the current Medicare appeals process offers little hope of any timely resolution 

of disputes over disallowed "improper" claims. The average processing time for appeals at the 

Office of Medicare Hearings and Appeals (OMHA) is now 1,057 days (over three years!), 

despite statutory requirements that redetermination appeals be completed within 60 days and 

administrative law judge (ALJ) and Medicare Appeals Council (MAC) decisions be rendered 

within 90 days. Many of AMRPA's members have been wa iting three to four years even for a 

hearing before an AU, without access to the funds in controversy. However, once they reach this 

level of appeal, IRFs are successful in getting the substantial majoritv of dettials overturned. A 

data collection effort by the IRF stakeholders, representing 22 percent of the industry, fow1d a 

statistic of Overturn Rate In Favor of Providers (i n Dollars) of 86.8 percent, and an Overtum 

Rate in Favor of Providers (i n Number of Cases) of 80.2 percent. 

This combination of overzealous contractors and a hopelessly backlogged appeals system 

has resulted in an oversight system that diminishes patient access, rather than maximizing it. As 

lRFs have payments withheld at higher rates due to technical denials, they must put funds in 

reserve to offset the witWtoldings until an appeal can be processed years later. Further, they must 

dedicate resources to complying with documentation requests and filing appeals with their 

contractors. This puts a strain on rRF funds that would otherwise be used to provide intensive 

rehabilitation services to Medicare beneficiaries. This trend is untenable and underscores the 

need for legislative action to address the issue of wtduly burdensome auditS and the resulting 

explosion in the number of Medicare appeals. 

Proposals to Reduce IRF Payment Err or Rates and Alleviate Provider Burdens That 

Threaten Access to Medically Necessar y Rehabilitative Care 

Reining in the most arbitrary documentation requirements on which auditors rely to deny 

claims would, over time, substmllially reduce the strain that Medicare claii11S appeals arc placing 

on our administrative law system. judicial system, and taxpayers. These types of reforms, such as 

Limiting technical denials, would not result in Medicare paying for medically unnecessary care. 

Contracto•·s should be prohibited from using isolated documentation or minor technical 

irregularities as the principal basis for denying payment for medically necessary services. This 

proposed change would prevent claims from being denied for perfunctory reasons such as failing 

to check a box on a form or documenting the post·admission one or a few hours late, unless they 

arc systematic or can othcnvisc be shown to impact patient care. 
74 


Insert 33613A.050

AMRPA Testimony 

Page 5 of 6 

To prevent contractors from engaging in abus.ive auditing practices, AMRPA urges 

Congress to amend section 1893(h) of the Social Security Act to eliminate the contingency fee 

structure for Recovery Audit Contuctors (RACs). As noted above, this structure incentivizes 

.inappropriate contr actor behavior, such as opportunistic audits focused on minor technical flaws 

that deny payment for medically necessary care without regard to the actual appropriateness of 

the care provided or any evidence of improper intent or fraud. 

In addition, Medicare contractors should be barred from conducting payment reviews 

based solely on statistical analyses when a provider demonstrates why its cascload is at variance 

with the applicable regional or national analyses. Tn recent years, Medicare contractors have 

increasingly audited cases citing statistical analysis as their rationale. For example, the 

contractor's leuer may state tbat documents are requested because the provider exceeds the 

regional average for the particullu types of cases audited, such a Stroke. In reality, the multitude 

of factors that influence individualized post-acute care placement decisions are not conducive to 

an oversimplified and overgeneralized audit-by-number approach. Such statistical analyses 

merely demonstrate variation from a mean, not improper practices. Audits on this basis alone are 

therefore harassing, unwarranted, and add to the overall burden of a flawed recovery audit 

program. 

Finally, to address the issue of excessive appeal wait times, AMRPA recommends that 

Congress enact legislation, such as tbe Audit & Appeal Fairness, Integrity, and Reforms in 

Medicare (A FIRM) Act, that would: 

provide additional resources for OMHA and the Departmental Appeals Board to increase 

the volume of adjudications 1111d decrease processing times; 

penalize inaccurate contractors by reducing their ability to request additional 

documentation from providers; 

provide a one-year exemption from post-payment review of claims to providers that 

achieve a low rate of claims denials over a two-year period; 

establish a method to exempt compliant providers from audits; and 

• reestablish tbe use of clinical inference and judgment by requiri ng claims reviews to be 

conducted or approved by physicians. 

In addition, Congress should consider including in such legislation provisions that 

penalize contractors with high rates of denials ove11Umed on appeal by subjecting them to 

reductions in their fees where there is a repeated pattem of overturned claims den.ials. 

While these recommendations are not exhaustive, not only would these reforms help to 

address Medicare's broken claim review and audit system, and the years-long appellate backlog 

that has resulted, but they are in line with broader initiatives of this Committee to cut through red 
75 

f 


Insert 33613A.051

AMRPA Testimony 

Page 6 of6 

tape, simplify regulations, and ultimately help make delivering health care to Medicare 

beneficiaries more efficient, clinically driven, and patient-centric. 

* * 

In closing, AMRPA thanks and commends the Commiuee for its efforts to elimi nate 

fraud, waste, and abuse in the Medicare program. We appreciate the opportunity to provide 

testimony for the hearing record and stand ready to work with the Comrniuee on policies that 

reduce payment enors, preserve program resources, and promote access to medically necessary, 

quality rehabilitative care. 
76 


Insert 33613A.052

July 25, 2017 

Committee on Ways and Means 

Oversight Subcommittee 

To Whom It May Concern: 

COUNCIL FORMEDICARE 

-·INTEGRITY 

On behalf of the Council for Medicare Integrity, which works to ensure the future solvency of the Medicare 

Trust Fund for the 55 million Americans who rely on the program every day, we thank you for the opportunity 

to submit our statement for the record in response to the July 19'' hearing entitled Efforts to Combat Waste, 

Fraud and Abuse in the Medicare Program. 

A.s you are aware, Medicare loses more money to improper payments than any other program governmentwide. The Recovery Audit Contractor (RAC) Program is a vital tool in the fight against such rampant misbilling. 

A Medicare improper payment is made when a provider misbills a claim- billing to the wrong code, 

duplicating the submission of claims, failing to provide the needed documentation or even providing services 

that are not medically necessary. Over the past four years, more than $166 billion has been lost from the 

Medicare program due to these types of preventable billing mistakes. 

Year Medicare FFS CERT Medicare Improper Payments 

Billing Error Rate By Year 

FY2013 10.1% $36 billion 

FY2014 12.7% $46 billion 

FY2015 12.1% $43 billion 

FY2016 11.0% $41 billion 

Medicare Trustees have recently reported that at current spending levels the Part A Trust Fund faces 

insolvency in just 12 short years (2029). After that, Medicare will have to reduce coverage to 88 percent of 

what is covered today, relying solely on dwindling payroll deductions to fund the program. These coverage cuts 

will greatly impact the financial security of all current and future American seniors. 

It's more important than ever that Medicare improper payments are reduced and the recovered dollars 

channeled back into the Trust Funds to prolong the life of the program. 

Since the RAC Program began in 2009, recovery auditors have returned more than $10 billion in improper 

Medicare FFS payments to the Trust Funds and more than $800 million in underpayments to providers, all 

while reviewing fewer than 2 percent of all program claims. This work has extended the life of the Medicare 

program by two full years. Independent third-party validators, hired by CMS, have shown that recovery 

auditors consistently have an average accuracy rate of 96 percent. 

www.medicareintegrity.org 
77 


Insert 33613A.053

Council for Medicare Integrity Comments 

July 25, 2017 

Page2 

Recently, the Centers for Medicare and Medicaid Services (CMS) chose t o scale back the RAC Program- greatly 

reducing the amount of improper payments that can be identified, leaving billions in taxpayer dollars 

unrecovered. Currently, a Medicare provider can bill erroneously 91 percent of the time and yet only have 5 

out of every 100 claims reviewed for accuracy. 

Increase the Volume and Type of Claims Reviewed 

Private health insurance payers generally have all claims reviewed for billing accuracy by an outside contractor 

both before and after they are paid. With Medicare however, CMS determines a set of billing issue 

areas/scenarios can be reviewed for accuracy and then sets the additional document request (ADR) limit, 

which determines the percenta.ge of those claims that can be reviewed. 

The contrast between Medicare auditing practices and the auditing conducted by private payers is startling. 

Despite the dire need to safeguard Medicare dollars, CMS currently allows RACs to review fewer than 20 

Medicare claim types (down from 800 claim types previously} and now only allows auditors to review a mere 

o.s percent of Medicare provider claims after they have been paid. Considered a basic cost of doing business, 

the same providers billing Medicare comply, without issue, with the more extensive claim review requirements 

of private health insurance companies. 

Given the state of Medicare solvency and the loss of more than $40 billion each year t o Improper payments, 

the number and type of claims that are reviewed for billing accuracy must be increased to recover more 

improper payments. 

Similar to the state Medicaid waiver discussions, the audit scenario review process should also be revisited to 

create efficienctes and expedited processes to allow previously approved audit issue areas to be reapproved 

for review. 

Add Prepayment Reviews 

like private payers, CMS can also leverage prepayment audits to catch billing mistakes before claims are paid. 

In 2012, a Recovery Audit Contractor Prepayment Review Demonstration Project was implemented in eleven 

states to audit a limited number of certain error·prone claim types before they were paid. The short 

demonstration was greatly successful, saving Medicare $192 million. Despite this success, the demonstration 

was paused in 2014 and never restarted. 

For the past two years, the Government Accountability Office (GAO) has consistently urged CMS to ask for 

the legislative authority to add a permanent Medicare prepayment review program to prevent improper 

payments from leaving the program erroneously. The GAO has said that "CMS may be missing on 

opportunity to better protect Medicare funds and agency resources. 

11 Despite this, CMS has thus far declined 

to implement prepayment reviews. 

As James Cosgrove, director, healthcare for the GAO, testified during the Ways and Means hearing, it would be 

beneficial for Congress to step forward to help fun her reduce improper payments by providing CMS with the 

authorization to implement a permanent RAC prepayment review program to allow claims to be reviewed for 

accuracy before they are paid - ensuring that our tax dollars are spent more efficiently. 

Expanded Recovery Audit ing Efforts Can Protect Medicare Solvency 

Recovery auditing is a tool that's proven very successful for Medicare. Recovery audits are also budget neutral. 

www.medicareintegrity.org 
78 


Insert 33613A.054

Council for Medicare Integrity Comments 

July 25, 2017 

Page 3 

Recovery auditors are active partners with the federal government working hard to determine where 

Medicare billing problems exist and helping CMS drive discussions regarding which billing areas need to be a 

focus of concern and which do not. 

RACs ensure that when billing errors are made, providers are educated to help reduce the likelihood those 

errors will be repeated. RAC reviews can also help prevent patients from being billed for unnecessary services 

and ensure that patients receive the right care in the right setting. Recovery audits have absolutely no direct 

impact on the Medicare providers working hard to deliver much needed healthcare services to beneficiaries. 

RAC audits serve purely as an important financial safeguard for the Medicare program by ensuring payment 

accuracy. 

We thank you again for your consideration and ongoing efforts to improve oversight of this vital healthcare 

program. Our goal is to ensure that Medicare has a strong financial future for the millions of Americans who 

rely on the program. 

Sincerely1 

Kristin Walter 

The Council for Medicare Integrity 

www.medicareintegrity.org 

About the Council for Medicare Integrity 

The Council for Medicare Integrity is a 501(c){6) non-profit organization. The Council's mission is to educate 

policymakers and other stakeholders regarding the importance of healthcare integrity programs that help 

Medicare identify and correct improper payments. 

www.medicareintegrity.org 
79 

f 


Insert 33613A.055

James Cosgrove's printed testimony at a recent subcommittee hearing ("Hearing on Effons to 

Combat Waste, Fraud, and Abuse in the Medicare Program") claims: 

"CMS estimates that improper payments in MA totaled about S 16.2 billion in fiscal year 2016, 

nearly 10 percent ofCMS's payments to MAOs that year." 

That statement is followed by a footnote. The footnote reads: 

"See Depanment of Health and Human Services, FY 2016 Agency Financial Repon 

(Washington, D.C.: Nov. 2016). In fiscal year 2016, CMS estimated that the net overpayments in 

MA (overpayments minus underpayments} were about S7 billion, or 4 percent." 

It is clear that by making it a foomote, the GAO clearly did not want you to see the facts. 

And if you read the repon funher you find that 700/o of the 4% is associated with risk scoring and 

30% is associated witb typical government SNAFUs. 

Since no one (specifically not the GAO) has found anything significantly wrong with risk 

scoring after 20 years of claiming risk adjustment is a problem (clearly not all risk adjustment is 

calculated incorrectly or is fraud), it is likely that incorrect risk adjustment ca lculating and 

reporting is about or less than I% of public Pan C health plan program spend. That's I% too 

much in my opinion but to have the GAO beating on my non-profit Medicare health plan 

sponsored by a chariry all the time while never saying a thing about the real problems in Original 

for-profit Democratic Parry Medicare, where the net improper payment rate is 10% -- $40 billion 

-- and there are stories every day about massive fraud, is a perfect example of why we real 

people want tbe swamp drained. 

Dennis Byron 

PO 8ox826 

Dennis MA 02638 

508-385-2517 

(No fax) 

I represent myself, a person on a public Pan C health plan which Mr. or Ms. Cosgrove of GAO 

attacks constantly (while never analyzing fee for service Medicare) 
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Insert 33613A.056

Charles N. Kahn Ill 

President and CEO 

Representative Vern Buchanan 

August 2 , 2017 

Chairman, Ways & Means Subcommiuee on Oversight 

2 1 04 Ray bum House Office Building 

Washington, D.C. 205 15 

RE: Clarifying Testimony Regarding Improper Payments in IRFs 

Dear Chairman Buchanan: 

The Federation of American Hospitals (FAH) is the national representative of more than 

I ,000 investor-owned or managed community hospitals and health systems throughout the 

United States. Our members include teaching and non-teaching, inpatient, rehabilitation, 

long-tenu acute care, psychiatric, and cancer hospitals in urban and rural America, and provide a 

wide range of acute, post-acute and ambulatory services. The FAH appreciates the opportunity to 

submit this leuer for the record in connection with the House Ways and Means Oversight 

Subcomminee's July 19 hearing, "Efforts 10 Combat Waste, Fraud, and Abuse in the Medicare 

Program." 

The FAH believes it is important to clarify and provide additional context to the wrinen 

testimony of Jonathan Morse, the Acting Director of the Center for Program Integrity within the 

Centers for Medicare & Medicaid Services (CMS). Specifically, the testimony stating that 

"improper payments for home health and Inpatient Rehabilitation Facility (IRF) c laims were the 

largest contributors to the 20 16 Medicare FFS improper payment rate," may be misunderstood. 

Mr. Morse correctly cautioned the Subcommittee against assuming that improper payments 

necessarily indicate bad actors, and further stated that improper payments "typically do not 

involve fraud" but instead involve technical coverage issues or medical necessity. However, the 

potential for a misunderstanding of his testimony warrants additional clarification. 

IRF Medicare claims are uniquely susceptible to being swept up in Medicare 's overall 

improper payment rate due to technicalities, varying Medicare contractor regulatory 

interpretations, and a significant backlog of appeals before the Office of Medicare Hearings and 

Appeals (OMHA). Unfortunately, however, the improper payment rate often inaccurately 

150 9'" Street. NW, Suite 600, Washington. DC 20001 • 202-624-1500 • FAX 202-737-6462 • www.fah.org 
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Insert 33613A.057

characterizes our I RF members as treating patients who may not need their services, rather than 

entities treating complex Medicare beneficiaries under complex coverage and payment 

requirements. TI1e fol lowing examples illustrate that the lRF improper payment error rate is 

arguably overstated. 

IRFs Claims Must Ad here to a Myriad of Technicalities: IRFs must meet an unusually 

large number of both operational and patient admission requirements. IRF claims 

therefore are flagged and reviewed for technicalities that have nothing to do with a 

patient's actual need for, and ability to benefit from, IRF treatment. For example, timing 

of physician signatures (by as little as one hour or less), ambiguous board cenification 

requirements arbitrarily imposed by contractors but not actually required by Medicare, or 

a patient's medication list deemed not " unique" to an IRF are minor technicalities that 

can result in a claim being wrapped up into an improper payment estimate without any 

relation to the necessity of the services provided. 

Medicare Contractors Apply Unsupported Regulatory Interpretations: Medicare 

contractors (MACs, RACs, ZP!Cs, etc.) are charged with reviewing Medicare claims for 

erroneous payments, but they often justify their payment denials with interpretations of 

policies that have no basis or suppon in applicable laws or regulations. The I RF-specific 

"3-hour Rule" is a good example. This Ru le stipulates that alllRF patients must receive 

and be reasonably expected to tolerate and benefit from at least 3 hours of intensive 

rehabilitation therapy. There are three "modes" of intensive therapy in an lRF: individual 

therapy (one-on-one with a therapist), concurrent therapy (two or more patients who are 

each receiving different therapy activities or interventions from a single therapist), or 

group therapy (where two or more patients are all performing the same therapy with a 

single therapist). CMS has only stated that the "preponderance" of intensive therapy must 

be in the form of individual therapy, but has not specified details beyond that standard 

Nevenheless, Medicare contractors are applying their own definitions of 

"preponderance," causing significant confusion within IRFs about how long patients can 

receive therapy in each mode. Regardless of the patient's qualification for and benefit 

from IRF treatment, claims are being denied when the time allocation of a patient's 

therapy modes does not meet a contractor's imerpretation of"preponderance." 

Successful Appeals Are Not Ren ected in IRF Improper Pavment Rate: The improper 

payment rate does not adequately account for reversals of claims denials on appeal to 

OMHA. I RFs achieve better than a 70 percent ovenum rate of such denials when they 

appeal such denials to Administrative Law Judges (AUs). Yet the severe backlog of 

appeals awaiting an AU hearing at OMHA substamially distons IRFs' claim denial rates. 

It currently takes years for an appeal to be heard at OMHA, thus preventing CMS from 

capturing its outcome in the improper payment estimate, even when the appeal is 

successful. Some of our lRF members have claim denials awaiting adjudication for 

services provided to Medicare beneficiaries dating back to 2008. Our IRF members 

strongly desire to have an oppornmity to settle the thousands of IRF claim denials sitting 

in OMHA. awaiting adjudication. If these successful appeals were accounted for in the 

improper payment estimate, the IRF improper paymem rate would be much lower than 

published. 
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We tmderstand the importance of examining improper payments in Medicare and the 

need to take steps to avoid such payments, and appreciate the Subcommittee's efforts in th is 

area. However, discussion of the Medicare improper payment rate as related to IRFs must have 

appropriate context, witb tbe recognition that many key factors contribute to a 

mischaracterization of the IRF improper payment rate, as discussed above. The reality is that IRF 

patiems overwhelmingly receive medically necessary care, and a significant amount of IRF 

denials are based on technicalities, complex and misinterpreted Medicare policies, and a 

Medicare appeals backlog that prevents an accurate representation of improper payments. 

We appreciate the opportunity to provide our views on these important matters, and look 

forward to working with the Oversight Subcommittee as it continues its efforts to ensure 

appropriate payments in Medicare. 

Sincerely, 
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Insert 33613A.059

The Honorable Vern Buchanan 

Chair 

Subcommittee on Oversight 

Committee on Ways and Means 

Partnership for 

Quali!Y. Home 

Health care THERE'S NO PlACE UK£ HOME 

The Honorable John Lewis 

Ranking Member 

Subcommittee on Oversight 

Committee on Ways and Means 

1102 Longworth House Office Building 

Washington, DC 20S15 

1102 Longworth House Office Building 

Washington, DC 20515 

August 2, 2017 

Dear Chairman Buchanan and Ranking Member Lewis: 

The Partnership for Quality Home Healthcare (PQHH} is pleased to submit t hese supplemental 

comments to your July 19 hearing entitled "Efforts to Combat Waste, Fraud and Abuse in the 

Medicare Program." The PQHH is a leading-edge organization of Medicare home health 

services providers, representing about 20 percent of the industry overall, and we take program 

integrity seriously. 

We have a strong record of collaboration with both your committee and with CMS in bringing 

forth proposals to reduce or eliminate waste, fraud and abuse in the system. For Instance, we 

have offered proposals that would simplify Medicare home health eligibility determinations, 

thereby making them less prone to error and/or categorization as "improper payments." 

We have called for reduced subjectivity in the review of home health agency claims, possibly 

through the use of streamlined forms or a "check box" solution t hat cuts down on contractor 

confusion and the inappropriate labeling of bono fide home health claims as improper. In short, 

we believe a good way to reduce improper payments further in home health is to reduce 

subjectivity and improve standardization in the eligibility determination process, a policy option 

that would cut back on the number of payments deemed improper and reduce the backlog of 

Administrative Law Judge appeals. 

We note that the w ri tten testimony of Jonathan Morse, Acting Director of the Center for 

Program Integrity, Centers for Medicare Services, Mr. Morse asserted that improper payments 

for home health claims, along w ith claims for Inpatient Rehabilitation Facility services, were 

among the largest contributors to the 2016 fee-for-service improper payment rate of 11.0 

percent. 
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Insert 33613A.060

The PQHH believes that that figure is artificially high, in part because home health agency 

claims are frequently mislabeled "improper" when in fact, they are the outgrowth of 

documentation errors that could be avoided if more streamlined and less subjective standards 

were applied to the eligibility determination process, which Involves multiple writings from the 

physician that the beneficiary (1) is confined to the home; (2) in need of intermittent skilled 

care; and (3) had a face-to-face encounter with a physician before or immediately after the 

start of the home health episode. 

While the PQHH does not contest these eligibility criteria for the home health benefit, we 

remain critical of the subjective nature in which they are applied by Medicare contractors, 

which in some instances will deem the same or similar claims "clean" and in others determine it 

is insufficient or improper. 

The PQHH believes that a standardized system of forms, check boxes or attestations the 

physician can sign can help remove subjectivity at the contractor level, lower physician burden, 

and reduce the improper payment rat e for home health services substantially, simply because 

such streamlined systems lower chances that documentation errors by physicians will result in 

"improper payments" to home health agencies. 

We urge the committee and CMS to take our views into consideration as both continue their 

work to reduce waste, fraud and abuse in the Medicare program, and we welcome the 

opportunity to discuss our policy ideas for reducing improper payment s in the Medicare home 

health program in greater detail at the committee's convenience. 

Sincerely, 

LHC Group 

Chairman, Partnership for Quality Home Health care 

901 Hugh Wallis Rd South 

Lafayette, LA 70S08 

Toll Free: 1.866.LHC.GROUP 1.866.542.4768 
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Insert 33613A.061

Statement of the 

SECURE ID COALITION 

Before the 

U.S. House of Representatives 

Committee on Ways & Means 

Oversight Committee 

For the Hearing 

Efforts to Combat Waste, Fraud and Abuse 

in the Medicare Program 

On 

July 19, 2017 
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Insert 33613A.062

Comments of the Secure ID Coalition 

The Secure 10 Coalition is pleased to submit for the record to U.S. House of Representatives 

Committee on Ways & Means, Oversight Subcommittee hearing titled Efforts to Combat Waste, 

Fraud and Abuse in the Medicare Program the following statement. 

Concerns about fraud, waste and abuse have plagued Medicare for over twenty years. 

According to the Centers for Medicare and Medicaid Services (CMS), the federal government 

spent over $569 billion on Medicare in 2015. 1 CMS reports the 'improper payments' rate- also 

known as waste, fraud and abuse- has risen to 10.5% of Medicare's cost, to over $59.7 billion 

per year. While some headway with the Fraud Prevention System (FPS) has been made in 

identifying and preventing fraud and false claims in FYlS, it only accounts for $604.7 millionor 1.013% of the total amount of improper payments.2 With total Medicare spending projected 

to increase by 5.6% per year over the next nine years, the FPS success is unfortunately reduced 

to nothing more than a rounding error in light of the bigger picture. More needs to be done. 

Part of the problem is that the FPS data analytics helps Medicare contractors see trends in 

payment disparities, but much of the data is limited to claims for payment that have already 

been submitted, and even then, not in real-time. Critically, there are no safeguards in place to 

ensure that the claims are legitimate or that the claimants are really who they say they are, 

before the claims are submitted for payment. This kind of oversight is akin to a bank verifying 

the identities of those withdrawing funds days after the funds have been disbursed and the 

customer has left the parking lot. 

The Secure 10 Coalition proposes using a smart card to verify Medicare beneficiaries and 

providers at the point-of-care, before services have been provided. Based on the same chip 

technology used by the financial services industry to protect credit and debit cards, a smart 

Medicare card would be able to authenticate beneficiaries and providers in real-time at the 

front-end of a transaction, affirming the rightful beneficiary was present for a legitimate 

treatment or service. Such a verification would properly inform the CMS billing process, as the 

verification would be matched to the ultimate bill submitted by providers, creating an 

authenticated chain of trust. 

Most government run healthcare programs around the world use a similar smart card based 

system to verify beneficiaries and providers in order to ensure that only actual services and 

treatments are paid. 

1 Department of Health and Human Services Centers for Medicare & Medicaid Services, Improper Payments 

Information Act Report for FY2015. https:lfwww.hhs.gov/afr/fy·2015·hhs-agency·financial·report/other· 

information-2.html. Accessed July 17,2017. 1 Department of Health and Human Services Centers for Medicare & Medicaid Services, Annual Report to Congress 

on the Medicare and Medicaid Integrity Programs for Fiscal Year 2015. https:l/www.cms.oov/AboutCMS/Comoonents/CPI/Downloads/2015-final-rtc-06232017.odf. Accessed July 17, 2017. 
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Insert 33613A.063

Smart Card Healthcare Deployment Data 

,..., ... ......... ......... ..,._ .. ~ .... .. _ ....... ....... .. ... _ .. - ·- - ._..., , .... ..... K I"' ,-...,. .. ... ....... ,.,ot.ulolouh 

- ....... ::::::... .... _. - ,. .. 

- ........,. ·- -· .... .... .......... - .......... '""' ..... . .... _ . .... .. .. ... ...._ 

t.b.d .. • o~ dtfln~ ; MoH • M!n1stry of He~lth; Mol • Mlnbtty of llntertor; PC • P~tknt ~rd; HPC • e~ th Pr feulon~l Card; 

CR • Card Ruder, PKI • Publk Kty Infrastructure 

-

·-

While the use of back·end analytics is important in helping mitigate fraud, incorporating 

preventative fraud blocking mechanisms can help CMS further combat the problem of 

fraudulent and improper payments. In January 2016, the GAO reported that a modernized 

Medicare smart card could assist with fraud prevention and provide overall program savings. 

Based only on successfully prosecuted Medicare fraud cases, the GAO found that a smart 

Medicare card could have prevented almost a quarter of the fraudulent or improper payments. 

Since only a small percentage of fraud cases are put forward for prosecution, the actual amount 

of savings would be closer to sixty-percent, based on the cost savings of other national 

healthcare systems implementing smart beneficiary credentials. 

A Medicare smart card would also help to strike at the heart of the opioid·related crime and 

public health crisis now facing our nation. The U.S. Department of Justice recently charged 

more than 400 people across the nation for healthcare fraud that cost the federal government 

over $1.3 billion in false Medicare and Medicaid billings, specifically by charging CMS for drugs 

that were never purchased- a problem that could have been prevented by authenticating the 

transaction and its participants prior to the transaction using a smart benefits card. 

The Secure ID Coalition supports continued steps to better authenticate Medicare beneficiaries 

and providers are who they claim to be, as well as verifying that the services provided (and 

billed to CMS) have actually been received. Such a verification is another tool that CMS can use 

to incorporate better data into the Medicare program making it easier to limit fraud within the 

system. The implementation of a smart Medicare card not only benefits the taxpayer, but also 

the beneficiary's identity and privacy by encrypting the electronic t ransaction data. 
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Insert 33613A.064

Medicare faces many challenges, and in its current state, an uncertain future. Congress has the 

ability to prevent a significant portion of its funds from being stolen, using an inexpensive and 

well-trusted tool used world-wide by the healthcare and financial services industries to prevent 

fraud: the smart card. The Secure 10 Coalition stands ready to assist the Subcommittee, and 

answer any questions it may have. 

About the Secure 10 Coalition 

A non-profit founded in 2005, the Secure 10 Coalition (SIOC) works w ith industry experts, public 

pol icy officials, and Federal and state agency personnel to promote identity policy solutions 

that enable both security and privacy protections. Because of our commitment to citizen 

privacy rights and protections we advocate for technology solutions that enable individuals to 

make decisions about the use of their own personal information. Members of the Secure 10 

Coalition subscribe to principles that include the increased deployment of secure identity 

solutions, as well as advise on and advocate for strong consumer privacy protections and 

enhanced security to reduce waste, fraud, theft and abuse. Our mission is to promote the 

understanding and appropriate use of technology to achieve enhanced security for 10 

management systems while maintaining user privacy. 

To learn more about the Secure 10 Coalition, please visit us at www.SecureiOCoalition.org. 
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Insert 33613A.065