To advance CMS’s efforts to prevent fraud, waste, and abuse in the Medicare fee-for service program, the Small Business Jobs Act of 2010 appropriated $100 million for CMS to implement a data analytic system. The law required CMS to implement a system that could analyze claims prior to payment to identify suspect claims and provider billing patterns and prevent payment of improper and potentially fraudulent claims, among other things. In April 2011, CMS awarded almost $77 million to a contractor to implement, operate, and maintain FPS and design analytic models for the system. CMS awarded about $13 million to a second contractor in July 2011 to develop additional analytic models for FPS. As the original FPS contract was set to end, CMS awarded a nearly $92 million contract in April 2016 for a new, upgraded FPS system—FPS 2.0. FPS 2.0 was fully implemented in March 2017. CMS’s Center for Program Integrity (CPI)—which oversees the agency’s Medicare program integrity efforts—employs FPS as a key component of its strategy to move beyond the “pay and chase” approach of recovering improper and potentially fraudulent payments to focusing on prevention. FPS screens fee-for-service claims prior to payment in order to help identify and prevent improper and potentially fraudulent payments by performing two primary functions: Develop leads for fraud investigations. FPS compares provider billing patterns and other data against models of potentially fraudulent behavior to identify providers with suspect billing patterns. For example, an FPS model identifies providers that bill for a disproportionate number of services in a single day relative to other providers. FPS simultaneously risk-scores providers identified by the models to prioritize them for potential investigation. In developing these leads, FPS is intended to help CMS prevent potentially fraudulent payments by furthering the agency’s ability to more quickly identify and investigate suspect providers, and take more timely corrective actions. Execute automated prepayment edits. FPS edits deny certain improper payments, and some edits compare information from multiple claims to do so. For example, FPS may deny physician outpatient claims based on information from an inpatient claim associated with the same episode of care. CMS submitted three annual reports on FPS’s implementation to Congress in response to requirements established by the Small Business Jobs Act of 2010. In these reports, CMS provided information on the corrective actions taken and savings achieved from FPS. In its most recent report, CMS reported that FPS had cumulatively helped prevent or identify nearly $1.5 billion in improper and potentially fraudulent payments from its implementation through the end of calendar year 2015. CMS uses contractors to support the agency’s program integrity activities, including program integrity contractors to identify and investigate providers engaged in potential Medicare fee-for-service fraud. CMS is currently in the process of transitioning Medicare program integrity contracts from ZPICs to new contract entities, UPICs. ZPICs operated in seven geographical jurisdictions across the country. UPICs will operate in five jurisdictions and combine Medicare and Medicaid program integrity efforts under a single contracting entity (fig. 1 depicts the geographic jurisdictions of ZPIC and UPIC zones). As of May 2017, two of the five UPICs—the Midwestern and Northeastern—were operational. The program integrity contractors identify leads for provider investigations from three categories of sources: Referrals. A number of entities, including CMS, law enforcement agencies, and the MACs, refer leads about suspect providers to the program integrity contractors. The program integrity contractors also receive leads based on beneficiary and provider complaints and allegations. Program integrity contractor data analysis. Program integrity contractors use postpayment claims to conduct their own data analyses to identify providers with suspect billing patterns. FPS. FPS identifies providers with suspect billing patterns and prioritizes leads based on provider risk-scores. The program integrity contractors generally have a triage process to review leads and determine whether the leads are indicative of potential fraud (see fig. 2 for information on program integrity contractor investigation processes). Leads that are determined to be suspect become formal investigations, and the program integrity contractors perform a range of investigative activities to gather evidence and determine if providers are engaged in potential fraud. These activities include conducting beneficiary and provider interviews, site visits of provider facilities, and manual reviews of provider claims. Based on their investigations, the program integrity contractors may take corrective actions by referring providers engaged in potential fraud to law enforcement and initiating administrative actions. Specifically, if the program integrity contractors uncover evidence of potential fraud, they refer the investigation to the Department of Health and Human Services Office of Inspector General (HHS OIG) for further examination, which may lead to possible criminal or civil prosecution by the Department of Justice. The program integrity contractors may also recommend a range of administrative actions to CMS for approval and implementation. Such actions include revocation of providers’ billing privileges and payment suspensions (table 1 describes the administrative actions the program integrity contractors may recommend against providers). CMS’s claims processing systems apply prepayment edits to all Medicare fee-for-service claims in an effort to pay claims properly. Most of the prepayment edits are automated, meaning that if a claim does not meet the criteria of the edit, it is automatically denied. Other prepayment edits flag claims for manual review, in which trained clinicians and coders examine claims and associated medical records to ensure that the claims meet Medicare rules and requirements. Many improper and potentially fraudulent claims can be identified only by manually reviewing associated medical records and beneficiary claim histories, and exercising clinical judgment to determine whether services were reasonable and necessary. Whereas automated edits are applied to all claims, manual edits are applied to very few—less than 1 percent of claims undergo manual review. CMS contracts with the MACs to process and pay Medicare fee-for- service claims and implement prepayment edits in the Medicare claims processing systems. The claims processing systems consist of three systems—the MAC front-end systems, shared systems, and Common Working File—that carry out a variety of functions and execute prepayment edits (see fig. 3). When implementing FPS, CMS integrated FPS with the claims processing systems and claims are screened by FPS prior to payment. Unlike the claims processing systems, CPI maintains FPS. HFPP is a voluntary public-private partnership established by HHS and the Department of Justice to facilitate collaboration in addressing healthcare fraud. The membership includes Medicare- and Medicaid- related federal agencies and several state agencies, other federal agencies with responsibility for federal health care programs such as the Department of Defense and Department of Veterans Affairs, law enforcement agencies, private payers, and antifraud and other healthcare organizations. HFPP was established, in part, to help payers identify schemes and providers engaged in potential fraud that individual payers may not be able to identify alone. HFPP began in 2012 with 20 members and, as of June 2017, had grown to 79 members. As of the end of calendar year 2016, CMS had cumulatively spent $30.3 million on HFPP. ZPIC officials stated that FPS helps them identify suspect providers quickly. Because FPS analyzes claims prior to payment, providers with suspect billing patterns can be identified quickly relative to other sources of leads. In particular, several ZPIC officials stated that the leads they develop from their data analyses of postpayment claims are not as timely. Officials from two ZPICs estimated that the postpayment claims they use for their analyses may have been for services rendered 1 to 2 months prior, while the claims analyzed by FPS may have been for services recently rendered. ZPIC officials also said the information associated with FPS leads allows them to examine and triage those leads quickly to determine whether to initiate investigations. FPS leads provide specific information about the type of potential fraud identified, along with claims data and other supporting information. ZPIC officials further stated that they use information from FPS when triaging leads from other sources. In contrast to FPS leads, several ZPIC officials noted that reviewing and triaging leads based on referrals often necessitates additional time and resources. In particular, allegations associated with some referrals can be vague, which makes it difficult for ZPICs to identify the relevant provider claims data and other information needed to assess the validity of the allegations. However, once an investigation is initiated, officials stated that FPS has generally not sped up the process for investigating providers. Several ZPIC officials noted that investigations based on FPS leads are similar to those from other sources in that they require further investigation, such as manual claim reviews or site visits of provider facilities, to substantiate the leads and gather evidence of potential fraud. However, while ZPIC officials said that FPS does not speed up investigations, officials from several ZPICs noted that FPS can help improve the quality of beneficiary interviews. Since FPS leads are based on prepayment claims data, ZPICs can conduct beneficiary interviews shortly after the services have been rendered, when beneficiaries may be better able to recall details about their care. CMS has not tracked data to assess FPS’s effect on the timeliness of investigation processes. CMS has lacked such timeliness data because of limitations with its IT system for managing and overseeing ZPICs. However, as of May 2017, CMS was in the process of implementing a new IT system that could be used to assess FPS’s effect on the timeliness of program integrity contractor investigation processes. In transitioning to UPICs, CMS is implementing a new contractor workload management system that will capture data on the timeliness of UPIC investigation processes. For example, the system will be able to capture information on the amount of time it takes a UPIC to evaluate a lead or conduct an investigation. CMS officials said that the agency plans to use the information tracked by the system to monitor program performance, including assessing FPS’s effect on UPIC investigation processes and the timeliness of corrective actions.