Medicare Program Integrity: Few Payments in 2011 Exceeded Limits under One Kind of Prepayment Control, but Reassessing Limits Could Be Helpful
Published: 2013-05-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: CMS has estimated improper Medicare fee-for-service payments of $29.6 billion in fiscal year 2012. To help prevent improper payments, CMS has implemented national MUEs, which limit the amount of a service that is paid when billed by a provider for a beneficiary on the same day. The limits for certain services that have been fraudulently or abusively billed are unpublished to deter providers from billing up to the maximum allowable limit.
GAO was asked to review issues related to MUEs. This report examines the extent to which CMS has (1) paid for services that exceeded the unpublished MUE limits and (2) examined billing from providers that exceeded unpublished MUE limits. GAO analyzed Medicare claims related to these limits in 2011, and interviewed CMS officials and selected contractors in states with high improper payments.
section_title: What GAO Found
paragraphs: Less than 0.1 percent of payments Medicare made in 2011 were for amounts of services that exceeded certain unpublished limits for excess billing and where the claims did not include information from the providers to indicate why the additional services were medically necessary. These limits are set by the Centers for Medicare & Medicaid Services (CMS)--an agency within the Department of Health and Human Services (HHS)--as a means to avoid potentially improper payments. To implement these limits, CMS established automated controls in its payment systems called Medically Unlikely Edits (MUE). These MUEs compare the number of certain services billed against limits for the amount of services likely to be provided under normal medical practice to a beneficiary by the same provider on the same day--for example, no more than one of the same operation on each eye. GAO analysis of 2011 claims data found approximately $14 million out of a total of $23.9 billion in Medicare payments for services that exceeded unpublished MUE limits and where the claims did not include information from the providers to indicate why the additional services were medically necessary. As GAO has previously reported, claims could exceed the limits because the MUEs are not set up as per-day limits that assess all services billed by a provider for a single beneficiary on the same day. CMS plans to begin implementing MUEs for some services as per-day limits for services where it would be impossible to exceed the limits for anatomical or other reasons. Medicare contractors that pay claims may develop local edits, which can set more restrictive limits for some services than the national unpublished MUE limits. GAO's analysis of claims data applying a few of these more restrictive local limits showed that by applying them instead of the relevant national MUE limits, CMS could have lowered payments by an additional $7.8 million. However, CMS is not evaluating these local edits to determine if these lower limits might be more appropriate. To the extent that these and other local edits are not evaluated more systematically, CMS may be missing an opportunity to achieve savings by revising some national MUEs to correspond with more restrictive local limits.
CMS and its contractors did not have a system in place for examining claims to determine the extent to which providers may be exceeding unpublished MUE limits and whether payments for such services were proper. CMS officials and contractors told us that they examine aberrant billing patterns at a provider level, that is, across all services billed by the provider, but not specifically for services with unpublished MUE limits. GAO found that payments that exceeded MUE limits were concentrated among certain providers and types of specialties, in certain states, and for certain services. For example, the top 100 providers with payments that exceeded the MUE limits accounted for nearly 44 percent of total payments that exceeded the MUE limits, although they accounted for only about 1 percent of total payments for all services with unpublished MUEs. Moreover, about 26 percent of the top 100 providers included clinical laboratories and durable medical equipment providers, both of which have been identified in the past as having high potential for fraudulent billings. Because unpublished MUEs were developed for services and items that have been fraudulently or abusively billed in the past, without systematically examining billing information and claims from the top providers exceeding those limits CMS may be missing another opportunity to improve its program integrity efforts.
section_title: What GAO Recommends
paragraphs: GAO recommends that CMS examine contractor edits to determine if any national unpublished MUE limits should be revised; and consider reviewing claims to identify providers that exceed the unpublished MUE limits, and determine whether their billing was proper. In its written comments, HHS concurred with both our recommendations.

section_title: Letter
paragraphs: In 2012, Medicare covered over 49 million elderly and disabled  beneficiaries and had estimated outlays of $555 billion. Because of its  size, complexity, and susceptibility to improper payments, we have  designated Medicare as a high-risk program. The Centers for Medicare  & Medicaid Services (CMS), an agency within the Department of Health  and Human Services (HHS), has estimated improper Medicare fee-for- service (FFS) payments of $29.6 billion in fiscal year 2012. Over half   (52 percent) of these improper payments were for services under  Medicare Part B, although these services accounted for 29 percent of  total Medicare FFS payments. One internal control strategy that CMS  uses to prevent improper payments is the application of “prepayment  edits”—automated checks in the electronic claims processing systems  that approve or deny claims on the basis of national Medicare coverage  and payment policies that apply to all beneficiaries. One type of these  national edits for Part B services is the “Medically Unlikely Edit” (MUE),  which sets limits on the maximum units of services that may be billed by a  provider for a beneficiary on a single date of service. For example, a  provider may bill for no more than five biopsies of soft tissue in the  forearm or wrist for a beneficiary on a given day. CMS allows additional  units in excess of the MUEs to be billed when providers believe the  services are clinically appropriate. In such cases, special codes, or  modifiers, may be included on the claim to indicate why the services were  clinically appropriate.
Each MAC covers one or more specific geographical jurisdictions, each made up of one  or more states. in how the MUEs were operationalized, and recommended that CMS  implement MUEs that assess all quantities of services provided to the  same beneficiary by the same provider on the same day, allowing  providers to bill for additional units if they included modifiers that  explained the medical necessity of exceeding the limits. HHS agreed to  further investigate how to address the recommendation and noted that  there are numerous clinical situations in which MUE limits can reasonably  be exceeded.
You requested that we further examine issues related to MUEs. This  report examines the extent to which CMS has (1) paid for services that  exceeded the unpublished MUE limits and (2) examined billing from  providers that exceeded unpublished MUE limits to determine if it was  proper.
To examine the extent to which CMS has paid for services that exceeded  the unpublished MUE limits, we analyzed Medicare claims data and  interviewed five MACs. Specifically, we analyzed Medicare paid claims in  calendar year 2011 from CMS’s Carrier Part B 100 percent Standard  Analytic File (which contains claims data about noninstitutional providers,  such as physicians and other practitioners), as well as their 100 percent  DME claims file. We obtained the unpublished MUE limits for calendar  year 2011 from CMS and analyzed the extent to which payments  exceeded the per-day MUE limits. About 1,800 of the 4,150 services with  unpublished MUEs were included in the Carrier Part B Standard Analytic  File and DME claims files, and these were the services we analyzed. We  excluded any services billed with modifiers that potentially explained the  reason for claiming additional units. We reviewed relevant  documentation describing how claims data are collected and processed,  and examined other research, including our prior reports, that have used  these data. We determined that the data we used were sufficiently  reliable for the purposes of our work. We also interviewed five Part A/B  and DME MACs in three states that CMS had identified as having high  improper billing and suspected fraud (California, Florida, and Texas).We requested local edits the MACs had developed for their jurisdictions  that, similar to the national unpublished MUEs, set limits on the number of  units of a service that could be billed by a physician for a beneficiary on  the same day. We selected 13 high-volume services where the local limits  were more restrictive than the national unpublished MUE limits. We  estimated the extent of potential savings if CMS were to implement these  local limits on a national basis in place of the unpublished MUE limits. We  consulted with the MACs and the MUE contractor on an ongoing basis to  ensure the validity of our results. Finally, we identified which internal  controls were significant for our engagement and then compared them to  the processes CMS uses to ensure adequate communication with, and  collection of information from, its contractors and adequate monitoring of  program activities.
To examine the extent to which CMS examined billing from providers that  exceeded the unpublished MUE limits, we interviewed officials from CMS  and the five MACs. We also reviewed materials from CMS regarding the  activities of its contractors that are tasked with reducing fraud and  improper payments.
We conducted our work from August 2012 to May 2013 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Background
paragraphs: Most Medicare beneficiaries receive their care on an FFS basis, with  providers submitting claims for payment for each service provided. In  addition to the Part A/B and DME MACs that process and pay claims,  CMS also employs other types of contractors to specifically address fraud  and improper payments. These include: Recovery Audit contractors (RA),  which review claims postpayment in four RA jurisdictions to identify  improper payments and Zone Program Integrity Contractors (ZPIC),  which review claims on a pre- and postpayment basis in seven ZPIC  jurisdictions to identify potential fraud.
All of these contractors use data analysis to identify providers who bill  improperly, whether by mistake or intentionally, to help target their claims  review. CMS has expanded its Integrated Data Repository, which was set  up to integrate Medicare and Medicaid claims, beneficiary, provider, and  other data, and is currently populated with 5 years of historical Part A,  Part B, and Part D paid claims data. CMS’s contractors can use these  data to analyze previously undetected indicators of aberrant billing activity  throughout the claims processing cycle. CMS intends to develop shared  data models and is pursuing data sharing and matching agreements with  other federal agencies to identify potential fraud, waste, and abuse  throughout federal health care programs. CMS has set expectations that  RAs and ZPICs will provide information on types of potentially  problematic claims to help the agency identify vulnerabilities.
CMS has also recently developed a “Fraud Prevention System” which  uses predictive modeling technology to screen all FFS claims before  payment is made. Claims are streamed through the Fraud Prevention  System prior to payment and analyzed on the basis of algorithms that  include other information, such as past billing, to identify patterns of  potentially fraudulent billing by providers. The billing is prioritized for risk  of fraud, with the highest-priority cases investigated by ZPICs. Prior to  applying predictive models to claims prepayment, CMS tests the  algorithms to try to ensure that resources are targeted to the highest-risk  claims or providers while payment of claims to legitimate providers  continues to occur without disruption.
subsections: section_title: Development and Implementation of MUEs
paragraphs: Consistent with Medicare law, CMS sets national coverage and payment  policies regarding when and how services will be covered by Medicare,  as well as coding and billing requirements for claims.developed national payment policies related to MUEs to limit potentially   CMS has  improper and excess payments to providers for many services, especially  those that are prone to potential fraud or that result from billing errors. A  CMS MUE Workgroup, which includes staff from CMS and the MUE  contractor, is responsible for developing the national MUE limits, in  consultation with the medical community. MUE limits are developed as  per-day limits on the number of units of a given service or medical  product that can be provided by the same physician to the same  beneficiary. The limits are developed on the basis of coding conventions  defined in the American Medical Association’s (AMA) Current Procedural  Terminology manual, national and local policies and edits, coding  guidelines developed by national societies, analysis of standard medical  and surgical practice, as well as an analysis of current provider billing  practices. Prior to their implementation, proposed MUE limits are released  for a review and comment period to the AMA, national medical/surgical  societies, and other national health care organizations. However,  unpublished MUEs are not released for comment. The MUE files are  updated quarterly and new limits may be added at these times.
Although MUEs were developed as limits on the number of units of a  service a provider could bill for a beneficiary in a single day, as we  previously reported they are not implemented as such. Specifically, they  do not look at total units on all claims from one provider for the same  beneficiary across an entire day, and the limits may therefore be  exceeded. A claim can have multiple lines and providers may bill multiple  units of the same service for the same beneficiary on the same day on  multiple lines of a claim. In processing the claim, contractors’ automated  systems only examine the number of units on each claim line. If the  number of units on the claim line exceeds the MUE limit, the entire claim  line is denied. However, as long as the units on a claim line are at or  below the MUE limit, they are paid. Thus, the automated claims- processing systems allow the MUE per-day limits to be exceeded for a  beneficiary if providers bill multiple units of the same service on multiple  claim lines. The systems also allow limits to be exceeded for a beneficiary  if a provider bills for multiple units of the same service performed on the  same day on different claims. When claiming multiple units of the same  service for one beneficiary, providers may, but are not required to, include  a “modifier”— a special code that indicates why the additional units are  medically necessary.
section_title: MAC Local Coverage Policies
paragraphs: MACs may develop local coverage policies as long as these policies are  consistent with national policies. To implement these local policies, some  MACs have developed local edits for certain services. Similar to the  national MUEs, these local edits set limits on the maximum number of  units that may be billed by a provider for the same beneficiary on the  same day. Providers may not exceed the local limits by billing additional  units on multiple claim lines, unless they include modifiers to explain why  the additional units are medically necessary. The local edits were  developed for services that may be overused or abused in their  jurisdiction, including services for which the MUE limits were being  frequently exceeded. Without these local edits, the MUE limits would be  exceeded much more frequently. The local limits were developed on the  basis of clinical input from the MAC’s medical directors and other  clinicians, as well as analysis of claims data.
section_title: Almost All 2011 Payments for Services with Unpublished MUEs Were within Established Limits
paragraphs: The vast majority of Medicare payments in 2011 for services with  unpublished MUEs were for services where the numbers of units were at  or below the per-day MUE limits. However, because the MUE limits were  not implemented as per-day limits, approximately $14 million was paid for  services that exceeded MUE limits. Moreover, by applying on a national  basis the more restrictive local limits used by some contractors, (which  are implemented as per-day limits), we found that CMS could have  lowered payments by an additional $7.8 million. We also found that  payments exceeding unpublished MUE limits were concentrated within  certain services and states.
subsections: section_title: Over 99 Percent of 2011 Payments Were for Services under Unpublished MUE Limits
paragraphs: In 2011, Medicare paid approximately $23.9 billion for 1,845 types   of services with unpublished MUEs. The vast majority—about   99.9 percent—was paid for services where the number of units providers  billed was at or below the per-day MUE limits. The MUE contractor  indicated that the limits were generally set high, so that the MUEs would  not deny claims for medically necessary services.
However, because MUEs were not implemented as per-day limits,  approximately $14 million was paid for services where total units billed by  a provider for a beneficiary on the same day exceeded the MUE limits.  These payments were made for units of services exceeding MUE limits  that were billed on multiple lines of a claim or across multiple claims.  Although the automated claims-processing systems check each claim  line, they do not check all units billed by a provider for a beneficiary on  the same day to see if they exceed the limit. While providers may use  modifiers on claim lines to indicate when it is medically necessary to  exceed the MUE limits, no modifiers were included for the approximately  $14 million in payments that we identified as exceeding the unpublished  MUE limits to explain why the additional units were medically appropriate.  CMS does not expect its contractors to check claims to determine if  modifiers are included when billing additional units of services related to  unpublished MUEs on multiple lines. CMS officials stated that because  the MUEs are unpublished, providers may not know a given service has  an MUE and therefore may not include a modifier when billing for  services.
See GAO-13-102. some MUEs that are likely to become DOS edits include those where it is  anatomically impossible to exceed the MUE limit. For example,  anatomical limits such as having only two eyes limits the number of times  a given procedure could be performed for which a provider could submit a  claim on the same day for the same patient. CMS officials told us that  they probably will not apply this policy to some of the unpublished MUEs  where clear anatomical or other restrictions may not exist, such as those  for some Part B drugs and DME. Contractors that we interviewed were  aware of the new policy, had seen the draft version, and were generally  supportive of the effort.
section_title: Use of More Restrictive Local Contractor Edits for Certain Services Could Have Reduced Payments by an Additional $7.8 Million
paragraphs: Our examination of 13 services where MACs developed more restrictive  local edits than the unpublished MUEs showed Medicare payments could  have been reduced had CMS examined these edits and adopted them as  part of its program integrity responsibilities. If CMS had used these limits  and implemented them as per-day edits, instead of using the unpublished  MUE limits on these services, Medicare payments would have been  lowered by an additional $7.8 million. This indicates that there is a  potential for additional savings if some of these local edits were applied  nationally. Four of the MACs from whom we requested local edits had  implemented edits related to unpublished MUEs. At least three of the  contractors had more restrictive limits for the 13 services we analyzed.
Contractors told us that they had developed more restrictive edits  because the MUE limits were being exceeded frequently or they had  observed potentially fraudulent or abusive billing for these services. While  the unpublished MUE limits were implemented at a claim-line level,  contractors told us that their local limits were implemented as per-day  limits. Contractors also told us that CMS does not request information on their local edits, nor do they routinely share them with CMS. The MUE  contractor told us that the MUE Workgroup was aware of one contractor’s  local edits for certain services with unpublished MUEs, but was not aware  of other contractors’ local edits for these services. Because CMS has not  communicated with its contractors regarding their local edits or monitored  their use, it is not evaluating these local edits. As a result, it may be  missing an opportunity to identify situations in which savings could be  achieved by implementing some of the local edits nationally.
section_title: Payments That Exceeded MUE Limits Were Concentrated within Certain Services and States
paragraphs: Payments for services that exceeded the per-day MUE limits were  concentrated within certain services. For example, of the over   1,800 services with unpublished MUEs, 717 had payments that exceeded  the MUE limits. Of these, 20 services accounted for almost half of all  payments that exceeded the MUE limits, with the top service alone  accounting for over 8 percent of such payments. Many of these top   20 services were for prescription drugs, DME, and clinical laboratory  services.
Payments for services that exceeded the unpublished MUE limits also  tended to be concentrated in certain states. Five states with the highest  payments that exceeded the MUE limits (Arkansas, California, New York,  Pennsylvania, and Texas) accounted for almost half of these payments,  although they accounted for 30 percent of total payments for all services  with unpublished MUEs.
section_title: CMS Has Not Systematically Examined Claims That Exceeded Unpublished MUE Limits to Determine Whether They Were Proper
paragraphs: CMS and its contractors do not have a system in place for examining  claims to determine the extent to which providers may be exceeding  unpublished MUE limits and whether payments for such services were  proper. Payments that exceeded MUE limits were concentrated among  certain providers, which could facilitate such examination.
subsections: section_title: CMS’s Contractors Did Not Systematically Examine Claims for Services above Unpublished MUE Limits to Determine If They Were Appropriate
paragraphs: CMS officials and contractors that we interviewed said they do not have a  system in place for regularly examining claims related to services with  unpublished MUEs from providers that most often exceeded MUE limits.While CMS has several strategies to reduce improper payments, and it  reviews aberrant billing patterns at a provider level, that is, across all  services billed by the provider, officials told us that they have no plans to  review services specifically related to MUEs. Similarly, contractors told us  that they do not examine claims specifically related to MUEs, although  they do review claims to detect other aberrant billing patterns and identify  emerging new vulnerabilities. For example, one contractor told us it  evaluates weekly billing reports to examine whether its medical review  strategies are appropriate and focused on problem areas. It also reviews  data from multiple other sources including reports from the Office of the  Inspector General and those we have issued, and findings from the RAs.  However, the contractor’s reviews are conducted at a provider level, that  is, across all services billed by the provider but not specifically for  services with unpublished MUE limits. As a result, providers may be  unlikely to have their billing reviewed more closely if they frequently bill  above unpublished MUE limits, but do not have other aberrant billing  patterns.
We provided a list of 10 providers with payments of at least $3,000 that  exceeded the unpublished MUE limits in each contractor’s jurisdiction to  the contractors we interviewed to determine if they were scrutinizing  these providers’ billing patterns. One contractor told us that it was  reviewing claims submitted by 1 of the 10 providers that was included on  the list we had forwarded to them. The contractor had received a potential  fraud referral on this provider, although not specifically related to billings  for services with unpublished MUEs. However, the remaining contractors  were not reviewing any of the providers we identified.
section_title: Payments That Exceeded MUE Limits Were Concentrated among Certain Providers
paragraphs: We found that a small number of providers accounted for a large share of  payments for services that exceeded the unpublished MUE limits. For  example, 419 providers received at least $5,000 for services that  exceeded the unpublished MUEs in 2011. Of these, the 100 providers  with the highest payments that exceeded the MUE limits accounted for  nearly 44 percent of total excess payments, although they accounted for  only about 1 percent of total payments for all services with unpublished  MUEs. In addition, the provider with the highest payments that exceeded  the unpublished MUE limits alone accounted for about 4 percent of these  payments, although this provider accounted for less than 0.1 percent of  total payments for all services with unpublished MUEs.
Certain provider types were more likely to have payments that exceeded  the MUE limits. About 26 percent of the top 100 providers exceeding  unpublished MUE limits included clinical laboratories and DME providers.  Researchers have noted that there is potential for fraud and abuse with  some laboratory services that can be self-referred, such as certain  pathology tests. For example, a pathologist examining a surgical  pathology specimen may self-refer by ordering and performing additional  tests on the pathology specimen without seeking the consent of the  original ordering physician. Some contractors we interviewed told us that  certain DME items, such as diabetic testing supplies, are prone to  potentially fraudulent billing. CMS has also estimated improper DME  billing of 66 percent in fiscal year 2012—higher than for any other service  measured.
section_title: Conclusions
paragraphs: Developing more cost-effective strategies for ensuring the  appropriateness of Medicare payments could help ensure the long-term  sustainability of the program. Although almost all payments for services  with unpublished MUEs were made for services at or below the MUE  limits, we found that there are still opportunities to realize savings. When  analyzed on a per-day basis, payments that potentially should not have  been made for services that exceeded the unpublished MUE limits totaled  approximately $14 million. In November 2012, we recommended that  CMS implement MUEs that assess all quantities of services provided to  the same beneficiary by the same provider on the same day—in other  words, as per-day limits—but allow the limits to be exceeded if the  provider included modifiers to explain the medical necessity of exceeding  the limits. The MUE contractor recently announced that CMS began  implementing our recommendation for certain services as of April 1, 2013.  However, CMS officials told us these are unlikely to be applied to some of  the services with unpublished MUEs, such as Part B Drugs and DME  services. We continue to believe that our recommendation should be  implemented for all MUEs to help strengthen the financial health of the  program.
Continuously seeking new methods for improving oversight of provider  payments is another important way to strengthen program integrity.  Contractors’ local edits could serve as a resource for CMS to use in  developing or revising MUEs and in reducing payments for services that  are potentially improperly billed. Unpublished MUEs were developed for  services and items that have been fraudulently or abusively billed in the  past. Therefore, systematically examining billing information and claims  from providers that exceed these limits and do not use modifiers to  indicate the excess units are medically appropriate, could help identify  improper payments and could inform CMS’s program integrity efforts.
section_title: Recommendations for Executive Action
paragraphs: To improve the effectiveness of the unpublished MUEs and better ensure  Medicare program integrity, we recommend that the CMS Administrator  take the following two actions: examine contractor local edits related to unpublished MUEs to  determine whether any of the national unpublished MUE limits should  be revised; and  consider periodically reviewing claims to identify the providers  exceeding the unpublished MUE limits and determine whether their  billing was proper.
section_title: Agency Comments
paragraphs: We provided a draft of this report to HHS for comment and received  written comments, which are reprinted in appendix I. In its written  comments, HHS concurred with both our recommendations. For the  recommendation to examine contractor local edits related to unpublished  MUEs, HHS concurred and indicated that CMS would review making  revisions to the MUEs in order to ensure that the edit levels are  appropriate on the basis of input from national health care organizations,  providers, Medicare Administrative Contractors, and CMS personnel, as  well as data analysis. For the second recommendation, HHS concurred  and indicated that CMS would conduct further analysis to determine the  appropriate actions, if necessary.
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If you or your staffs have any questions regarding this report, please  contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix II.
section_title: Appendix I: Comments from the Department of Health and Human Services
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Sheila K. Avruch, Assistant  Director; Iola D’Souza; Eagan Kemp; Richard Lipinski; and Laurie Pachter  made key contributions to this report.