medicaid managed care integrity, compliance, and fraud ... · medicaid managed care integrity,...
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1/28/2014
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A subsidiary of
Medicaid Managed Care Integrity, Compliance, and
Fraud SurveillanceTimothy Champney, Ph.D.
Vice President of Advanced Analytics and Data Science, Integrity Management Services, LLC
HCCA Managed Care Compliance Conference
Scottsdale, AZ
February 10, 2014
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Learning Objectives
� Provide overview of risks and vulnerabilities to fraud,
waste, and abuse in Medicaid managed care programs
� Develop workflow of risk management, compliance
review, and fraud surveillance activity
� Apply logic model framework to consider inputs and
analysis methods in risk assessment, decision making
strategies, and possible corrective actions
� Explore lessons learned from over a decade of work with
Medicaid fee-for-service and managed care programs
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Introduction
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Background
� I serve as Vice President of Analytics at Integrity Management Services (IMS)
� IMS is a subsidiary of Strategic Management Systems (SMS)
� Parent company (SMS) was founded in 1992 by Richard Kusserow, former
Inspector General, DHHS
� My consulting work with Medicare, Medicaid, and managed care began in 1999
� IMS Program Integrity work began in 2007 with the expansion of our
government division
� SMS and IMS are Veteran-Owned Small Businesses
� SMS and IMS have headquarters in Alexandria, VA with staff associates
nationwide
� IMS ‘s focus is helping government agencies improve program efficiency and
effectiveness
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What is Medicaid managed care fraud?
Medicaid Managed Care Fraud is any type of intentional
deception or misrepresentation made by an entity or
person in a capitated MCO, PCCM program, or other
managed care setting with the knowledge that the
deception could result in some unauthorized benefit to
the entity, himself, or some other person.
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Source -- http://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-
Prevention/FraudAbuseforProfs/Downloads/GuidelinesAddressingfraudabus
eMedMngdCare.pdf
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Why are we interested in Medicaid managed care fraud?
� According to the IOM we waste $75 billion on health care fraud, waste, and abuse per
year in Medicare and Medicaid.
� According to a recent RAND study, Medicare and Medicaid fraud and abuse cost as
much as $98 billion per year. Waste and inefficiency may cost another $304 billion.
See http://www.rand.org/pubs/external_publications/EP201200117.html
� Total Medicaid outlays in fiscal year (FY) 2011 were $432.4 billion; $275.1 billion in
Federal spending, and $157.3 billion in State spending.
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Financing-and-Reimbursement/Downloads/medicaid-
actuarial-report-2012.pdf
� Medicare expenditures totalled $554.3 billion in 2011 according to CMS.
� Consequently, fraud and abuse alone is about 10% of spending for Medicare and
Medicaid and the situation is expected to get worse.http://www.iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path-to-Continuously-Learning-Health-Care-in-America/Press-
Release.aspx
� In 2011 74% of Medicaid beneficiaries were enrolled in managed care and the
number is growing.
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Costs are Trending Upward
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Source: http://www.rand.org/pubs/external_publications/EP201200117.html
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Top 40 Service Categories CMS-64 Report 2011
7Service Category Total Federal Share State Share
Medicaid - MCO 92,273,486,789 59,091,502,817 33,181,983,972
Nursing Facility Services - Reg. Payments 49,455,654,998 31,415,137,706 18,040,517,292
Inpatient Hospital - Reg. Payments 39,591,194,329 25,235,875,356 14,355,318,973
Home & Community-Based Services - Reg. Pay. (Waiv) 37,073,562,579 23,460,504,641 13,613,057,938
Prescribed Drugs 29,830,823,638 19,353,808,959 10,477,014,679
Inpatient Hospital - Sup. Payments 17,763,346,519 11,445,911,014 6,317,435,505
Inpatient Hospital - DSH 14,349,578,699 8,147,596,942 6,201,981,757
Other Care Services 13,471,561,328 8,328,220,211 5,143,341,117
Outpatient Hospital Services - Reg. Payments 12,730,398,229 8,428,515,765 4,301,882,464
Personal Care Services - Reg. Payments 12,568,946,438 7,597,153,934 4,971,792,504
Physician & Surgical Services - Reg. Payments 12,118,148,478 8,061,263,051 4,056,885,427
Medicare - Part B 10,313,971,585 6,647,353,979 3,666,617,606
Prepaid Inpatient Health Plan 9,030,676,971 5,970,682,242 3,059,994,729
Intermediate Care Facility - Public 8,245,388,243 5,163,144,339 3,082,243,904
Clinic Services 6,901,101,442 4,535,440,158 2,365,661,284
Dental Services 5,500,043,724 3,567,410,875 1,932,632,849
Intermediate Care - Private 5,307,744,887 3,419,663,546 1,888,081,341
Home Health Services 4,990,102,594 3,069,777,814 1,920,324,780
Outpatient Hospital Services - Sup. Payments 4,422,654,522 2,725,647,656 1,697,006,866
Mental Health Facility Services - Reg. Payments 3,492,537,593 2,238,140,697 1,254,396,896
Medicare - Part A 3,145,324,249 1,912,299,920 1,233,024,329
Federally-Qualified Health Center 3,112,782,028 1,942,218,828 1,170,563,200
Mental Health Facility - DSH 2,941,707,519 1,666,699,092 1,275,008,427
Rehabilitative Services (non-school-based) 2,653,900,956 1,814,499,228 839,401,728
Hospice Benefits 2,431,999,394 1,580,133,713 851,865,681
Targeted Case Management Services - Com. Case-Man. 2,277,133,259 1,439,845,790 837,287,469
Other Practitioners Services - Reg. Payments 2,182,213,118 1,414,791,495 767,421,623
Emergency Services for Undocumented Aliens 2,169,684,721 1,325,650,828 844,033,893
School Based Services 2,013,726,186 1,294,592,208 719,133,978
Laboratory/Radiological 1,771,204,530 1,214,216,791 556,987,739
Nursing Facility Services - Sup. Payments 1,560,740,804 1,011,426,674 549,314,130
Emergency Hospital Services 1,368,248,494 940,053,951 428,194,543
Prepaid Ambulatory Health Plan 1,349,449,083 919,030,602 430,418,481
EPSDT Screening 1,290,306,114 899,031,818 391,274,296
Non-Emergency Medical Transportation 1,174,620,636 788,303,722 386,316,914
Physician & Surgical Services - Sup. Payments 1,123,530,898 752,973,870 370,557,028
Rural Health 1,076,159,508 708,674,827 367,484,681
Inpatient Hospital - GME Payments 1,053,576,762 710,369,951 343,206,811
Coinsurance 927,811,871 614,038,121 313,773,750
All-Inclusive Care Elderly 916,414,624 553,868,697 362,545,927
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Medicaid Managed Care Penetration
� States allowed to adopt mandatory enrollment in managed care
plans except for Children with Special Health Care Needs
(CSHCN), dual eligibles, and Native Americans
� New initiatives under ACA encourage states to develop fully
integrated managed care for dual eligibles
� As states look to managed care to control costs, managed care
penetration is trending upward in most states
� States may choose capitated or fee-for-service (FFS)
arrangements to reimburse managed care plans
� Managed care plans may choose capitated or FFS arrangements
to reimburse providers
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Medicaid Managed Care Enrollment
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
FFS
Managed Care
Percent
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Managed Care Penetration Rates 2010
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http://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/MedicaidDataSourcesGenInfo/Downloads/2010July1.pdf
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Who may commit Medicaid managed care fraud?
� Managed care organization (MCO)
� Contractor (of the MCO or government entity)
� Subcontractor (e.g., behavioral health or pharmacy
benefit management organization)
� Health care provider, pharmacy, or supplier
� Government employee
� Medicaid beneficiary or managed care plan member
� Organized crime
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Examples of Types of Fraud and Abuse
� Specific to Managed Care
� Bid rigging in procurement
� Marketing, enrollment, and disenrollment fraud
(e.g., cherry picking and lemon dropping)
� Underutilization
� Fee-for-Service and Managed Care
� False claims submission
� Overbilling
(e.g., upcoding and unbundling)
� Antitrust violations and kickbacks
� Embezzlement and theft
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Recent Examples of Managed Care Fraud
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$319.85 million settlement
State paid an MCO rates for long-term-care certified (LTC) patients that were over the
legal ceiling set by State statute and regulations
$137.5 million settlement
Violated the false claims act
Engaged in sales and marketing abuses, including "cherrypicking" of healthy patients to
avoid future costs
CMP of $325,000
Failed to comply with CMS requirements governing the processing of Part C and D
grievances, organization/coverage determinations, and Part C and Part D appeal
$26 million settlement
Knowingly failed to provide required screening, assessment and case management for
adults, and children with special health care needs. Also, submitted false data to the
State.
$35 Million Settlement with State Attorney General
Compensated marketing representatives based on productivity
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Risk Areas
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Risk Areas
� Procurement and contracting
� Marketing and enrollment
� Inadequate provider networks
� Underutilization and barriers to access
� Claims submission and billing procedures
� Fee-for-service and capitated reimbursement of providers
� Theft and embezzlement including diversion of funds for unallowable costs
� Cost accounting and rate setting
� Falsification of data or quality and outcome measures
� Rebates, drug pricing, and formulary issues for pharmacy benefit
management
� New initiatives such as certain provisions of the Affordable Care Act
� Medicaid expansion, incentive payments, ACOs, and special programs
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Forces Driving Risk
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New Initiatives and Threats
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Eligibility and Enrollment Systems & Expansion
� Note: eligibility and enrollment systems are being revamped under the ACA to
better handle Medicaid expansions and coordinate enrollments with
insurance benefit exchanges. New eligibility categories in 2014 include:
� Adult Group (new)
� Parents
� Pregnant Women
� Children under Age 19
� New eligibility and enrollment systems utilize web-based electronic
applications with data matching to SSA for verification
� States can expand to 138% FPL but not required due to Supreme Court ruling
See: http://kaiserfamilyfoundation.files.wordpress.com/2013/05/8401.pdf
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Many from the new Medicaid single adult
group are expected to be enrolled in
managed care.
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Demonstrations
� CMS Center for Medicare and Medicaid Innovation
(CMMI) is charged with developing new demonstration
programs under the ACA to produce better quality and
improved health at a lower cost
� Accountable Care Organizations (ACOs)
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Managed Care for Dual Eligibles
� ACA directs CMS to develop integrated care innovative programs for dual
eligibles.
� CMS has established a Medicare-Medicaid Coordination Office and Integrated
Care Resource Center to this end
� CMS has solicited proposals from states to set up demonstration programs to
align care for dual eligibles
� Managed care organizations may enter into 3-way contracts with states and
CMS to establish Fully Integrated Dual Advantage (FIDA) plans
� Alignment can be achieved through either fully capitated managed care or
fee-for-service (FFS) models.
For example: NY has responded and established a demonstration program
applying both models.
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Source: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-
Medicaid-Coordination-Office/FinancialModelstoSupportStatesEffortsinCareCoordination.html
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Medicare Advantage Special Needs Plans
� Under provisions of the MMA, the Medicare Advantage
program (Part C) , health plan organizations may work
with CMS and states to set up Dual eligible Special Needs
Plans (D-SNPs) to provide managed care and pharmacy
using blended funding from both the Medicare and
Medicaid
� While less than 25% of dual eligibles are enrolled in
Medicare Advantage plans, enrollment is growing
� States are seeing the potential of these programs to
provide higher quality coordinated care at a lower cost
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http://www.cms.gov/Medicare/Health-Plans/SpecialNeedsPlans/DualEligibleSNP.html
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Long-term Care Plans
� Focus on candidates for nursing home placement
� Continuum of long-term care (LTC) includes home health,
assisted living, basic nursing facilities, skilled nursing facilities,
and institutional care
� Incentivize placement in lower levels of care
� LTC eligibility limited by assets as well as income. 5 year look
back helps limit people transferring assets to family members to
gain eligibility. Spousal residence exception
� Vulnerable to gaming capitation rates, recruiting ineligible
patients (cherry picking), and selective admission (lemon
dropping)
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OutsideThreats
� Cyber-terrorism
� International organized crime
� Provider and patient recruiting
� Identity theft
� Drug diversion
� Human trafficking
� Enrollment fraud in Medicaid and State- and Federally-
based Exchanges under the ACA
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Key Components of Managed Care Fraud Control
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Medicaid Managed Care Functional Areas
Surveillance and Utilization
Review (SURS)
IT Systems and Data Analysis
Payment Processing
Provider Network
Enrollment & Member Services
Contracting and Financial
Management
Human Resources
Pharmacy Benefit
Management
Program, Policy, and Quality
Special Investigations
Unit (SIU)
FWA Control
Touches All
Functional
Areas
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Surveillance and Utilization Review
� Surveillance and Utilization Review System (SURS) is a
component of each state’s MMIS
� MCOs should consider establishing a similar unit
� SURS:
� staff utilize business intelligence and statistical software to monitor
Medicaid utilization patterns for potential fraud, waste, and abuse
� units vary widely in their sophistication in use of detection tools and
in their effectiveness
� Potential fraud cases should be referred to the MCO’s SIU
for investigation
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Medical Review
� Medical review:
� may be housed within the SURS unit
� includes pre-payment and post-payment review
� Methods:
� Reviews may consider a probe or comprehensive sample of claims
� Claims are compared to medical records and evaluated against
coverage policies
� Reviewers should be training to look for evidence of fraud such as
forged signatures, repetitive patterns in service notes, and use of
unqualified staff
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IT Systems and Data Analysis
� MCOs are adopting “big data” approaches to fraud surveillance
including data warehousing and software detection tools
� Effective systems combine sophisticated algorithms with expert
clinical judgment (domain expertise) to rule out false positives
� Data mining may utilize a quality improvement life-cycle
approach such as CRISP-DM* and champion and challenger
predictive models
� Data security is also a critical component, to prevent system
intrusions, denial of service attacks, and identity theft
� IT and data analysis staff should work closely with other units,
for example to implement sophisticated prepayment edits and
provider vetting methods
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*ftp://ftp.software.ibm.com/software/analytics/spss/support/Modeler/Documentation/14/UserManual/CRISP-DM.pdf
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Data Analysis Methods
� Rule-based algorithms
� Normative comparisons
� Anomaly detection and clustering
� Predictive modeling
� Link and geospatial analysis
� Complaint and social media monitoring using text mining
� Sampling and extrapolation
� Encounter data validation
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Payment Processing
� FFS and capitated payment processing my MCOs can build
in many of the same fraud controls as in Medicaid FFS:
� Prepayment edits including risk scoring that incorporates claims
history, provider, and member characteristics
� Auto-denials and claims payment suspensions that are provider
specific
� Preauthorization
� Continuous monitoring for billing spikes and other anomalies
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Provider Network
� Controlling the gate to enter the provider network also
helps reduce improper payments and fraud. Control
methods include:
� Screening and credentialing
� Background checks
� Matching against state, federal, and commercial insurance exclusion
and sanction lists, including other states
� Provider audits
� Site visits
� Provider education and feedback
� Surveys of provider satisfaction
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Marketing, Enrollment, and Member Services
� Close attention to members also limits fraud. Control
methods include:
� Enrollment monitoring
� Marketing surveillance
� Education and training
� Call center and complaint monitoring
� Member satisfaction surveys
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Contracting, Financial Management, and HEOR
� Build fraud and abuse controls into contract language
including ability to audit and recoup overpayments
� Monitor components of medical loss ratio, administrative
costs, and related party transactions
� Engage in health economics and outcome research
(HEOR), and cost effectiveness monitoring to provide
essential feedback for program and process improvement
and help eliminate waste
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Human Resources
� Train all staff in FWA control processes, business ethics,
and corporate compliance
� Publicize whistleblower processes
� Offer staff incentives to reduce waste and suggest quality
improvements
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Pharmacy Benefit Management
� Drug utilization review applied to prescribers, pharmacies, and
members
� Control and monitor
� Rebates
� Drug pricing
� Formulary
� Retail dispensing
� Outsourced PBM and specialty pharmacies
� Screen and vet pharmacies
� Conduct pharmacy audits using team approach
� Provide data-based feedback
� Promote mail order prescription use
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Program, Policy, and Quality
� Case management and care management
� Compliance program assessment
� Monitor performance in all functional areas, not just a checklist
� Regulatory analysis
� Continuous quality improvement
Note: fraud and poor quality often go hand-in-hand
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Special Investigations Unit
� Works closely with other functional units
� Combines subject matter knowledge, clinical expertise,
data and systems knowledge, cost accounting, and policy
analysis using a team approach
� Collaborates with other SIUs and the state
� Shares data and case information as appropriate
� Utilizes FWA case tracking system integrated with data
warehouse and fraud detection systems
� Ready to support hearings and appeals including expert
witnesses from your team
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Fraud Surveillance Workflow
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Fraud Surveillance Workflow
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Tried and True Approaches
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MCP Tried and True Approaches
� Anomaly detection, rule-based algorithms, and predictive
modeling applied on a pre-pay and post-pay basis
� Prepay edits and provider and beneficiary restrictions
� Data matching and cross-claims analysis
� Provider vetting and credentialing
� Staff training
� Provider education
� Self-assessments and self-audits
� Revise/update fraud and abuse policies and procedures
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State-based Approaches
� Compliance reviews and audits
� Whistleblower incentives
� Medical loss ratio evaluation
� Encounter data mining and data validation
� Monitoring marketing practices
� RACs (optional for managed care)
� Work with CMS and federal contractors (MIC and Medi-Medi)
� System hardware and software upgrades
� Revise fraud and abuse surveillance plans
� RACs
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New Approaches
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New Approaches
� Contracting with strong fraud compliance and
recoupment provisions
� Collaboration across plan organizations, payers, FFS,
states, and CMS
� Bidding systems that incentivize savings
� Feedback to plan organizations and providers
� Developing a corporate compliance culture
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Lessons Learned
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Lessons Learned
� Simple fraud detection methods may perform as well as
sophisticated predictive models – use both
� Software can’t do it all – combine data-based methods with
expert clinical judgment and business knowledge
� Prevention is more effective than pay and chase
� Engage in networking and collaboration
� Monitor third party transactions and coordinate benefits
� Prioritize - conduct risk assessments and risk management
� Fraud cases often start with complaints, tips, or whistle blowers
� Follow through - fraud cases are often overturned on appeal
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Suggested Reading
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Suggested Reading
� Biegelman, M.T. & Bartow, J.T. (2012). Executive Roadmap
to Fraud Prevention and Internal Control, 2nd Ed.
Hoboken, NJ: John Wiley & Sons.
� Moon, C.T. (2013). Chapter 19, Health Care Fraud and
Abuse. In P.R. Kongstvedt, Essentials of Managed Care, 6th
Ed. Burlington, MA: Jones & Bartlett Learning, LLC.
� Sparrow, M.K. (2000). License To Steal: How Fraud Bleeds
America's Health Care System. Boulder, CO: Westview
Press.
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Question and AnswerDiscussion
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