Life Science Compliance Update

June 17, 2015

E&C Committee Requests Government Accountability Office Look Into CMS's Fraud Prevention System


Bipartisan leaders of the House Energy and Commerce and House Ways and Means Committees on Monday sent a letter to the Government Accountability Office (GAO) requesting a review of the Fraud Prevention System (FPS) at the Centers for Medicare and Medicaid Services. The FPS was implemented in July 2011 in an effort to more proactively prevent fraud in the Medicare program, as opposed to a “pay and chase” approach that still provides the bulk of the enforcement activities.

The leaders explain, “GAO has previously identified key practices for using predictive analysis systems, including leveraging the results of predictive analysis to address service- or system-specific weaknesses that can lead to payment errors, such as gaps in prepayment edits. It is unclear whether CMS is using FPS to identify these broader program vulnerabilities in Medicare and taking action based on these vulnerabilities throughout the program.”

The letter requests GAO study the following questions:

  • What types of potentially fraudulent payments have been denied by FPS prepayment edits, and how do the FPS prepayment edits differ from those implemented by the Medicare Administrative Contractors?
  • How many administrative actions has CMS taken against providers since 2010, what types of actions were taken, and how many of these actions were a direct result of FPS? How do these actions compare with non-FPS-initiated actions?
  • How has the FPS led CMS to identify program vulnerabilities that could lead to payment errors, and what steps has CMS taken to address any identified vulnerabilities.
  • What percentage of savings attributable to FPS are also attributable to prepayment  denials compared to post-payment recoveries? How do these savings compare with other traditional program integrity efforts?
  • What are CMS’s plans for using FPS with Medicaid and the Children’s Health Insurance Program (CHIP) as directed under federal statute? If this is unworkable due to the nature of Medicaid and CHIP claims, what is a recommended alternate approach?
  • How do the program outlays for FPS compare with the actual and projected savings attributable to FPS-initiated actions?

The letter was signed by:

  • Energy and Commerce Committee Chairman Fred Upton (R-MI)
  • Ways and Means Committee Chairman Paul Ryan (R-WI)
  • Energy and Commerce Subcommittee on Oversight and Investigations Chairman Tim Murphy (R-PA)
  • Ways and Means Subcommittee on Oversight Chairman Peter Roskam (R-IL)
  • Energy and Commerce Subcommittee on Health Chairman Joe Pitts (R-PA)
  • Ways and Means Subcommittee on Health Chairman Kevin Brady (R-TX)
  • Energy and Commerce Committee Ranking Member Frank Pallone, Jr. (D-NJ)
  • Ways and Means Committee Ranking Member Sander Levin (D-MI)
  • Energy and Commerce Subcommittee on Oversight and Investigations Ranking Member Diana DeGette (D-CO)
  • Ways and Means Subcommittee on Oversight Ranking Member John Lewis (D-GA)
  • Energy and Commerce Subcommittee on Health Ranking Member Gene Green (D-TX)
  • Ways and Means Subcommittee on Health Ranking Member Jim McDermott (D-WA)

The Energy and Commerce Subcommittee on Oversight and Investigations held a hearing in early June to discuss a report from GAO on fraud in the Medicaid program, entitled, “Additional Actions Needed to Help Improve Provider and Beneficiary Fraud Controls.” 

GAO’s report “found thousands of Medicaid beneficiaries and hundreds of providers involved in potential improper or fraudulent payments during fiscal year 2011 – the most-recent year for which reliable data were available in four selected states: Arizona, Florida, Michigan, and New Jersey. These states had about 9.2 million beneficiaries and accounted for 13 percent of all fiscal year 2011 Medicaid payments.”


  • About 8,600 beneficiaries had payments made on their behalf concurrently by two or more of GAO's selected states totaling at least $18.3 million, even though federal regulations do not permit beneficiaries to have payments made on their behalf by two or more states concurrently
  • The identities of about 200 deceased beneficiaries received about $9.6 million in Medicaid benefits subsequent to the beneficiary's death.
  • About 50 providers were excluded from federal health-care programs, including Medicaid, for a variety of reasons that include patient abuse or neglect, fraud, theft, bribery, or tax evasion.

House Energy and Commerce Subcommittee on Oversight and Investigations chair Rep. Tim Murphy (R-PA) noted, “Last year the Medicaid program provided medical services for approximately 60 million people at a cost of $310 billion. But during that same year, the Centers for Medicare and Medicaid Services estimated that the improper-payment rate was 6.7 percent or $17.5 billion. This is an increase of almost 1 percent or over $3 billion from the previous year.

This is a troubling trend, especially as the program continues to expand.” Full committee Chairman Fred Upton (R-MI) said, “Medicaid is supposed to provide our most vulnerable with vital medical services, but continued waste and fraud undermines this important goal.” Dr. Shantanu Agrawal, Deputy Administrator and Director of the Center for Program Integrity at CMS, testified about steps currently being taken by CMS to reduce waste, fraud and abuse, but agreed that continued oversight is essential. Dr. Agrawal told Rep. Joseph Kennedy (D-MA), “Holding our feet to the fire is appropriate.”



June 08, 2015

Results from the First Two Years of the Pioneer Accountable Care Organization Model


On May 22, the Government Accountability Office (GAO) released a study evaluating the financial and quality outcomes for each accountable care organization (ACO) within the Pioneer Accountable Care Model for 2012 and 2013. The Pioneer ACO was created under the Affordable Care Act and is made up of health care providers and suppliers that voluntarily form individual ACOs to provide coordinated care to patients. The ultimate goal of this, and other ACOs, is to reduce spending and improve quality of care.

The Pioneer ACO model allows ACOs to earn additional Medicare payments if they generate savings but must pay CMS a penalty if spending is higher than expected. In this study GAO analyzed ACOs’ spending benchmarks, amount saved and lost, and payment amounts for shared savings or losses. The GAO found that fewer than half of the ACOs in the Pioneer ACO program earned shared savings in 2012 and 2013, although overall the Pioneer ACO Model produced net shared savings in each year.

The GAO report’s overview notes that 41% of the ACOs produced $139 million in total shared savings in 2012, and 48% percent produced $121 million in total shared savings in 2013. In 2012 and 2013 CMS paid ACOs $77 million and $68 million, respectively, for their shared savings. The Pioneer ACO Model produced net shared savings of $134 million in 2012 reflecting 2 percent of total expenditures for all 32 ACOs that participated in 2012. In 2013, it produced net shared savings of $99 million reflecting 1.4 percent of the total expenditures for the 23 ACOs that participated. The GAO also found that ACOs that participated in both years had significantly higher quality scores in 2013 than in 2012 for 67 percent of the quality measures.

ACOs with higher levels of prior spending likely had more capacity for achieving cost savings in the first two years of the model, for example, by reducing unnecessary services. As part of the GAO’s analysis, it compared the average expected expenditures (the spending benchmarks) for the Pioneer ACOs that achieved shared savings to the average expected expenditures for those ACOs that did not produce shared savings. In each year, GAO observed that the ACOs with shared savings had average expected expenditures that were about $1,100 higher, per beneficiary, compared to those ACOs that did not generate shared savings, absent other differences. For example, in 2013 the average expected expenditures for the 11 ACOs with shared savings ($12,426) was $1,160 higher, per beneficiary, than the average expected expenditures for the 12 ACOs without savings ($11,266).

The Department of Health and Human Services (HHS) provided technical support to assist the GAO in this study. HHS also offered general comments on the report. In its response, the agency stressed its commitment to ACOs like the Pioneer Model, calling it an “innovative initiative that is being used to test the impact of different payment arrangements in helping organizations who already have experience operating in ACO-like arrangements achieve the goals of providing better care to patients, and reducing Medicare costs.” HHS highlighted the fact that ACOs participating in the Pioneer Model for 2012 and 2013 had higher quality scores for a majority of the measures in the second year. Aside from trumpeting positive data, HHS concluded by stating the CMS will continue to test payment models that “incentivize providers to improve patient care and lower costs.”

With the recent MACRA SGR repeal legislation pushing physicians to choose between an unclear merit-based formula and alternative payment models like ACOs, it will be increasingly important to monitor developments in programs like the Pioneer Model. HHS continues to push post-Affordable Care Act projects, like their Health Care Payment Learning and Action Network, which strives to move healthcare from fee-for-service to quality and value-based care. We will continue to monitor these issues throughout the coming years.


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