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November 19, 2014

OIG Releases Annual “Top Management and Performance Challenges” Facing the Department of Health and Human Services

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Yesterday, the Office of Inspector General released their annual summary of the most significant management and performance challenges facing the Department of Health and Human Services (HHS). The 2014 Top Management and Performance Challenges lists ten issues reflecting continuing vulnerabilities that OIG has identified for HHS over recent years as well as new and emerging issues that HHS will face in the coming year. For each category, OIG outlines the challenge, the progress that has been made regarding the challenge, and recommendations they offer going forward.

Our coverage highlights a number of the challenges that OIG raises, with a focus on the recommendations for fighting healthcare fraud and abuse. 

Fighting Waste and Fraud and Promoting Value in Medicare Parts A and B

 “Waste in health care programs is a multi-dimensional problem,” states OIG. “Key areas of focus for reducing waste in Medicare Parts A and B include reducing improper payments, fighting fraud, fostering economical payment policies, and transitioning from volume to value in health care.”

OIG states: "Fraud schemes shift over time, but certain Medicare services have been consistent targets.” For example, OIG continues to “uncover fraud schemes and questionable billing patterns by durable medical equipment (DME) suppliers, home health agencies, community mental health centers, clinical laboratories, ambulance transportation suppliers, and outpatient therapy providers.”

OIG notes that there has been significant progress in combating fraud, including the work of the joint Health Care Fraud and Abuse Program, which has recovered $8 for every $1 invested. However, OIG states that “[w]hen Medicare improper payments occur, CMS needs to identify and recover them in a timely manner. CMS must also implement safeguards, as needed, to prevent recurrence." CMS "relies on contractors for most of these crucial functions; therefore, ensuring effective contractor performance is essential. Finally, the Medicare appeals system needs fundamental changes to resolve issues about improper payments efficiently, effectively, and fairly.”

Regarding "value," OIG recommends that HHS should continue to prioritize the effective transition to value-based payment mechanisms and the development and refinement of quality, outcomes, and performance metrics. "As demonstration programs continue to unfold, the Department should carefully monitor for successes and benefits that can be scaled and replicated, as well as for potential problems―including inefficiencies, misaligned incentives, or abuses," the report states. "As with any innovation and experimentation, missteps may occur; it is critical that the Department take effective and appropriate actions to address such missteps and prevent their recurrence."

Ensuring the Safety of Food, Drugs, and Medical Devices

OIG states that high risk areas for the FDA in ensuring drug, device, and biologics safety and efficacy include: drug compounding, imported drugs, and marketing requirements, including off-label promotion.

Regarding marketing, OIG states that HHS must “continue its efforts to eliminate off-label promotion and reduce the importation of unapproved drugs from foreign sources to protect patients and HHS health care programs.” Regarding foreign sources, OIG states that in July 2013, three physicians agreed to pay more than $4.25 million to resolve allegations that they purchased misbranded, unapproved chemotherapy drugs from foreign sources; used the drugs to treat their Medicare, Medicaid, and other patients; and billed federal health care programs for the drugs. The managing partner of the cancer center was sentenced to two years in prison.

OIG mainly focuses on drug compounding in its summary. After a 2012 fungal meningitis outbreak associated with contaminated compounded sterile drug injections, President Obama signed the Drug Quality and Security Act (DQSA) in November 2013. Among other things, the DQSA added a new section to the Food, Drug, and Cosmetic Act, section 503B, that provides a new pathway for entities called “outsourcing facilities” to legally compound human drugs.

OIG notes that in the past year, FDA increased inspection and enforcement efforts, while developing the regulatory framework to implement the DQSA. In 2014, FDA conducted over 85 inspections of compounding pharmacies and outsourcing facilities and issued 29 warning letters. In addition, since the DQSA was enacted, FDA issued numerous policy documents to implement both section 503A (concerning pharmacy compounding) as well as the new section 503B (concerning outsourcing facilities) and continues to work on additional rules and guidance

“FDA will need to continue to conduct inspections of compounding pharmacies and pursue regulatory action, as needed to protect public health, when deficiencies are identified,” advises OIG. 

Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid 

OIG states that CMS provides prescription drug coverage for 37.4 million Medicare beneficiaries through Part D and 59.4 million Medicaid beneficiaries. In 2012, combined Part D and Medicaid prescription drug expenditures totaled over $93 billion. Medicare Part D alone accounted for $66.9 billion of those expenditures.  In both the Medicare Part D and Medicaid programs, OIG states that they have uncovered improper and potentially harmful prescribing practices, pharmacies billing for drugs not dispensed, and diversion of prescription drugs.

OIG looked into utilization and billing in a 2014 report examining questionable utilization patterns for HIV drugs by beneficiaries. The report revealed claims on behalf of many beneficiaries with no indication of HIV in their Medicare histories, claims for excessive doses or supplies of HIV drugs, claims for HIV drugs from a high number of pharmacies or prescribers, or claims for contraindicated drugs.

OIG notes that CMS has taken steps to strengthen oversight of appropriate drug utilization in Medicare Part D. For example, CMS strengthened the Medicare Drug Integrity Contractor’s (MEDIC) monitoring of pharmacies and its ability to identify pharmacies with questionable billing patterns and develop pharmacy risk scores. In June 2013, CMS and the MEDIC developed pharmacy risk scores and released a list of “high risk” pharmacies to Part D plans. CMS instructed Part D plans to use the risk score information in conjunction with their own data analysis to combat fraud, waste, and abuse. CMS suggested that plans use the list of high risk pharmacies to target pharmacies for audits and further review.

Moreover, OIG recommended that CMS require Part D sponsors to verify that prescribers have the authority to prescribe drugs. Beginning June 1, 2015, physicians and eligible professionals must be enrolled in Medicare to prescribe Part D drugs. In addition, to identify the prescribing physician or eligible professional, CMS will require that a pharmacy claim for a Part D drug contain the National Provider Identifier. This will enable CMS, Part D plans, and the MEDIC to verify that prescribers have the authority to prescribe Part D drugs before the claims are paid.

In addition to taking the steps described above, OIG advises CMS to increase Part D plan sponsors’ abilities to limit questionable utilization of drugs, particularly drugs that are vulnerable to diversion and recreational abuse. “For example, CMS should expand sponsors' drug utilization review programs and use of beneficiary-specific controls,” OIG states. “CMS should also restrict certain beneficiaries with questionable utilization patterns to a limited number of pharmacies or prescribers.” OIG also states that CMS should improve existing safeguards to prevent improper payments in Part D.

Protecting an Expanding Medicaid Program From Fraud, Waste, and Abuse

“As of October 2014, 27 states and the District of Columbia (28 states) are expanding Medicaid coverage to include qualifying adults earning up to 133 percent of the federal poverty level, pursuant to Affordable Care Act and Medicaid waivers,” states OIG. The report notes that in addition to facing the challenges in implementing expanded eligibility, Medicaid programs face long-standing program integrity challenges. These include improving the effectiveness of Medicaid data; preventing and addressing fraud, waste, and abuse, including avoiding or recovering Medicaid improper payments; ensuring access to care in Medicaid managed care programs; and curbing state Medicaid policies that inflate federal costs.

“As Medicaid expands, implementing a functional, national Medicaid database is essential to effective oversight of Medicaid payments and services,” states the report. “OIG continues to find that the existing national Medicaid data are not complete, accurate, or timely and that additional data are needed to conduct national Medicaid program integrity activities.”

OIG also addresses six other significant issues that have affected HHS over the last year and will continue to pose challenges:

  • Implementing, Operating, and Overseeing the Health Insurance Marketplaces: 2015 will be a big year for the exchanges. OIG states that fundamental challenges will include: ensuring accurate eligibility determinations; processing enrollments, re-enrollments, and qualifying life change events; and communicating timely and accurate information to health insurance issuers and consumers. “The Department must operate a well-run second open enrollment period for individuals and small businesses, employing lessons learned, taking all steps practicable to avoid problems that marred the first open enrollment period and rapidly and effectively addressing any problems that arise
  • Ensuring Quality in Nursing Home, Hospice, and Home- and Community-Based Care

  • The Meaningful and Secure Exchange and Use of Electronic Health Information: OIG highlights challenges with the Medicare and Medicaid EHR incentive programs, the need to protect sensitive information from data breaches, and safeguarding EHRs from fraud.
  • Effectively Operating Public Health Programs To Best Serve Program Beneficiaries: OIG states that recent natural disasters, such as Hurricane Sandy, and disease outbreaks, such as the Ebola virus outbreak, “highlight the importance of an agile public health infrastructure that can rapidly and capably respond to emergencies at home and abroad.” HHS funds and operates public health and human services programs that promote health and economic and social well-being, and OIG notes that key challenges going forward include: (1) ensuring effective preparedness and response to current and future public health emergencies, (2) protecting the health and safety of America’s vulnerable populations, and (3) ensuring access for intended beneficiaries and delivery of quality services such that beneficiaries’ needs are met.
  • Ensuring Effective Financial and Administrative Management
  • Protecting HHS Grants and Contract Funds From Fraud, Waste, and Abuse


Here is the full report, which also contains many useful links to previous OIG guidance sorted by the applicable category. 

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