Detailed Information on the
Medicare Integrity Program Assessment

Refine the CERT process to increase the detail of the CERT error rates.

Integrate CERT error rates into contractor performance evaluations.

The Administration will pursue the "Performance-based Outcomes Pilot" that will explore linking award fees to performance

The Administration will complete development of contractor specific error rates and require contractors to commit to reducing their error rates.

Measure: Reduce the Percentage of Improper Payments Made Under the Medicare FFS Program

Explanation:Reduce the error rate percentage from baseline

Measure: Reduce the Medicare Contractor Error Rates

Explanation:Increase from baseline

Is the program purpose clear?

Explanation: "The Medicare Integrity Program (MIP) was created as part of the Health Care Fraud and Abuse Control (HCFAC) program. The purpose of the MIP program is to ensure that Medicare outlays are made to the appropriate provider on behalf of eligible beneficiaries for covered services. Specifically, the program: ?? Identifies, eliminates, and prevents Medicare fraud and abuse; ?? Decreases the submission of abusive and fraudulent Medicare claims; ?? Takes appropriate administrative action as necessary in accordance with Medicare laws and regulations, etc., to ensure that appropriate and accurate payments for Medicare services are made, which are consistent with Medicare coding and coverage policy. "

Evidence: "Section 1893 of the Social Security Act authorized the MIP program for the expressed purpose of protecting trust fund outlays form being made to inappropriate providers, ineligible beneficiaries, or non-covered services. www.ssa.gov/OP_Home/ssact/title18/1893.htm PSC statement of work at www.hcfa.gov/MEDICARE/MIP/INDEX.htm"

Does the program address a specific interest, problem or need?

Explanation: MIP was expressly created to address the Medicare Fee-for-Service improper payment rate. At the time MIP was created in 1996, the rate was estimated at 14 percent, or $23.2 billion, and was due to erroneous billing, waste, fraud and/or abuse. The FY 2001 error rate is 6.3 percent, or $12 billion, which indicates that while much progress has been made, the problem still exists.

Evidence: The Office of the Inspector General (OIG) has measured the Medicare Error Rate since FY 1996. The most recent report is for FY 2001 and is available at: http://oig.hhs.gov/oas/reports/cms/a0102002.pdf

Is the program designed to have a significant impact in addressing the interest, problem or need?

Explanation: The MIP program was created as part of comprehensive legislation to combat health care fraud and abuse through the HCFAC program. MIP is the largest component of HCFAC, with approximately 70 percent of the budget. It has a multi-faceted approach to combating fraud and abuse, including provider and supplier audits, medical reviews, cost report audits, beneficiary surveys, and provider education. CMS exercises the flexibility through MIP to contract with both Medicare claims processors and distinct fraud and abuse contractors to identify and root out improper payments. Through HCFAC, the MIP program also coordinates with the HHS OIG, the FBI, and other fraud and abuse programs to ensure that all aspects of safeguarding payments are addressed -- including preventing, identifying and/or resolving errors, fraud, waste and abuse.

Evidence: "The Health Insurance Portability and Accountability Act (P.L. 104-191) created the HCFAC program to combat health care fraud, waste and abuse. It includes four major components (figures are for FY 2004): (1) MIP ($710-720 million) focuses on ensuring payments are made correctly; (2) OIG ($150-160 million) focuses on investigations, inspections, audits, prosecutions; (3) FBI ($114 million) similar to OIG; and, (4) Other ($81-91 million) determined each year by the HHS Secretary and Attorney General."

Is the program designed to make a unique contribution in addressing the interest, problem or need (i.e., not needlessly redundant of any other Federal, state, local or private efforts)?

Explanation: Before HCFAC was created in 1996, there was no other program dedicated exclusively to reducing Medicare fraud, waste, and abuse. HCFAC legislation created a coordinated approach to fighting health care fraud, and specified unique and/or complementary activities for the agencies involved. The MIP statute outlines specific tasks for Medicare contractors and program safeguard contractors (PSCs) that emphasize prepayment reviews. (The tasks outlined for the OIG and the FBI emphasize post-payment reviews)

Evidence: "The HCFAC statute outlines the following activities for the MIP program (SSA Sec 1893(b)): (1) Medical, utilization, fraud and other reviews of providers (2) Cost report audits (3) Payment determinations and recoveries (4) Provider and beneficiary education (5) DME prior authorization schedule. The OIG and FBI activities include: (SSA Section 1817(k)(3)(C) (1) Prosecuting health care matters (2) Investigations (3) Financial and performance audits (4) Inspections and other evaluations (5) Provider and consumer education"

Is the program optimally designed to address the interest, problem or need?

Explanation: "MIP is designed to reduce improper payments by entering into contracts with the entities most qualified to accomplish the task: (1) the FIs and carriers that pay claims and are 'on the front line,' and (2) program safeguard contractors (PSCs) that specialize in the detection of fraud and abuse. Following its success in reducing some of the most obvious and egregious improper payments, the program is making changes to more precisely identify and reduce the remaining fraud, waste, and abuse. The Comprehensive Error Rate Testing (CERT) program, which will calculate sub-national error rates, is an example of this. HCFAC activities are funded through direct spending authority, with funding fixed in statute. This is one element of the program's design that is not optimal because it does not allow for an annual review of funding for health care anti-fraud activities. " The agencies contend that having dedicated, mandatory HCFAC resources is an essential component of the program's design. However, there is no evidence to suggest that HCFAC could not be equally successful if these activities were discretionary. Moreover, the inherent annual review and evaluation of the discretionary process could improve a program whose success, or struggles, has no impact on its budget currently.

Evidence: MIP's ability to leverage these private sector entities through its contracting authority has proved effective. There is no evidence to suggest an alternative program mechanism would be more effective. However, the passage of contractor reform which would allow CMS to competitively bid contracts for FIs and carriers would enhance MIP's effectiveness.

Does the program have a limited number of specific, ambitious long-term performance goals that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The program has three goals that focus on the core program purpose - to pay claims to the appropriate provider on behalf of eligible beneficiaries for covered services. The first goal -- reducing the national Medicare fee-for-service improper payment rate -- aligns with the President's Management Agenda to improve financial performance. The second goal supports the first goal by breaking down the national improper payment rate into contractor-specific error rates. In FY 2003, for the first time, CMS will be able to identify and manage error rates at this more detailed contractor level. The third goal also supports the first goal and focuses on ensuring that provider's are submitting appropriate claims for payment.

Evidence: The first goal is to reduce the national Medicare error rate to 4 percent by FY 2008 from the FY 2001 current rate of 6.3 percent. This represents a 37 percent decrease in the current error rate. This is a sufficiently aggressive goal when considered in context: it follows on the heels of a 50 percent reduction in the Medicare error rate to 6.8 percent in FY 2000. While future reductions are attainable, it is reasonable to assume that may require more effort to achieve. The second goal is to reduce contractor specific error rates to at or below the national error rate by FY 2008. The third goal is to improve the provider compliance rate by 20% per year in FYs 2005-2008 (this is a developmental goal because there is currently no baseline).

Does the program have a limited number of annual performance goals that demonstrate progress toward achieving the long-term goals?

Explanation: The program has adopted annual goals that divide the long-term goals into intermediate annual targets. For the second and third goals, which are new to MIP, the baselines will be set in FY 2004 following the implementation of the Comprehensive Error Rate Testing (CERT) program.

Evidence: The first annual goal is to reduce the national Medicare error rate to 5 percent in FY 2003 and 4.8 percent in FY 2004. The second annual goal is to set a baseline for the contractor error rate in FY 2004. The third annual goal is to set a baseline for the provider compliance rate by FY 2004.

Do all partners (grantees, sub-grantees, contractors, etc.) support program planning efforts by committing to the annual and/or long-term goals of the program?

Explanation: The MIP program has two main partners (1) the fiscal intermediaries and contractors that process Medicare claims and also perform fraud and abuse prevention functions and (2) PSCs that contract with CMS to perform fraud and abuse prevention activities. Currently, FIs and carriers do not explicitly commit to the national or contractor specific error rates. However, CMS's CERT program will provide them with contractor specific error rates. CMS will require contractors to commit to reducing their error rates, as reflected in their second long-term goal. Additionally, as discussed in question #7, CMS is running a "Performance-based Outcomes Pilot" which will require contractors to commit to contractor-specific error rates to receive an award fee." Complete for PSCs

Evidence: CMS's performance requirements for FIs and carriers are outlined in the Budget and Performance Requirements (BPRs). The BPRs require contractors to develop strategies for fighting fraud and abuse that focus on reducing the error rate. However, contractors are not required to commit to error rate goals or similar goals that support reducing the error rate. Additionally, since contractors are paid on a cost basis by statute, their are no financial incentives or penalties if they were to be held to specific goals that support CMS strategic goal of reducing the error rate. (See question #7 for actions CMS is taking to address this situation). PSCs

Does the program collaborate and coordinate effectively with related programs that share similar goals and objectives?

Explanation: MIP coordinates closely with a number of related programs that share similar goals and objectives. HCFAC was established in large part to facilitate coordination of fraud and abuse activities among different health care industry participants. Via HCFAC, MIP coordinates with the OIG and the FBI. It also coordinates with local law enforcement entities that are responsible for pursuing fraud cases. Additionally, MIP coordinates with CMS program management on initiatives to improve provider education and, therefore, compliance. MIP also coordinates with other programs, such as Medicaid, to share best practices.

Evidence: CMS coordinates with the OIG, FBI and other law enforcement personnel primarily through their contractors and PSCs. CMS contractor BPRs and PSC statements of work require contractors to establish processes along many dimensions, such as timeliness of responding to beneficiary referrals and law enforcement requests. Additionally, PSCs will soon be eligible for award fees based on performance against key process measures such as those listed above.

Are independent and quality evaluations of sufficient scope conducted on a regular basis or as needed to fill gaps in performance information to support program improvements and evaluate effectiveness?

Explanation: The MIP program is evaluated through both regular, scheduled independent studies and as needed reviews. The OIG has calculated the Medicare error rate since 1996 (although this activity will be done by a PSC contractor in the future, it will still be conducted independent of CMS).The GAO conducts regularly scheduled audits on HCFAC to determine whether funds were expended in keeping with the stated purpose of HCFAC and to ensure that, as appropriate, funds were returned to the trust fund each year. Additionally, the GAO has released a number of reports on CMS's MIP activities. CMS also undertakes a substantive test of its claims payment system in order to determine compliance with Medicare laws, regulations and guidance.

Evidence: The OIG releases a report every year on the Medicare error rate. The most recent report is for FY 2001 and is available at: http://oig.hhs.gov/oas/reports/cms/a0102002.pdf ) The GAO's most recent report on HCFAC, GAO-02-731, reports favorably on the disposition of funds. Additionally, the GAO has reported on CMS's management of its contractors, CMS's use of PSCs, and other aspects of CMS fraud and abuse activities.

Is the program budget aligned with the program goals in such a way that the impact of funding, policy, and legislative changes on performance is readily known?

Explanation: "Total funding for MIP activities is set in statute. In the aggregate, there is no alignment between budget, policy and legislative changes and program performance. Below the line, there are multiple budget layers to consider with regard to MIP: (1) MIP budget for FIs and Carriers. Funds are used by FIs and carriers to conduct medical review, MSP and benefit integrity activities. The large majority of the MIP budget (>90 percent) goes to FIs and carriers and is primarily allocated between these contractors based on activity level rather than performance. (See question #7 for CMS actions on tying contractor budgets and performance) (2) MIP budget for program safeguard contractors (< 10 percent). This portion of MIP funds is more closely tied to performance than other portions. CMS awards these contracts for specific fraud and abuse activities and has established an award fee that PSC contractors can earn based on their performance against certain criteria. (3) Program managment funds that contractors receive for processing Medicare claims. As required by statute, these funds currently are paid based on the number of transactions rather than contractor performance. (See question #7 for CMS actions on tying contractor budgets and performance) "

Evidence: "(1) The HCFAC statute provides between $710-$720 million for MIP activities for fiscal years after 2002. (2) Contractors and FIs MIP budgets are developed through negotiations between CMS and contractors based primarily on activity levels. For example, contractors may receive funds based on the percent of claims subject to a medical review. (3) The PSCs are eligible for an award fee based on their performance against four predominantly process measures - customer satisfaction, timeliness of responses to law enforcement, beneficiary complaint response time, and acceptance of fraud and abuse cases by law enforcement. (4) Currently, contractors are paid for claims processing activities based on the number of claims processed, rather than being paid on outcomes such as their error rates. "

Has the program taken meaningful steps to address its strategic planning deficiencies?

Explanation: CMS has a number of programs in focused on further strengthening strategic planning. The CERT program will allow CMS to measure the improper payment rate by contractor, provider and benefit type. The contractor error rates from this program will be incorporated into CMS long-term strategic goal (Question #1 - Goal #2). The CERT program will allow them to address issues raised in question #3, since CMS plans to require contractors, its main partners, to commit to the error rate goals established through the CERT program. CMS is also attempting to address the issues raised in question #6 by testing methodologies to tie payments to performance through the Performance Based Outcomes Pilot.

Evidence: "CERT - CMS has already released contractor specific error rates for its durable medical equipment (DMERC) regional carriers. It has also committed to long term and annual goals based on contractor error rates. Performance Based Outcomes Pilot - CMS is currently running a small study (3 sites with a total admin budget of approximately $80 million - total CMS contractor budget is approximately $1.2 billion) that will evaluate contractors on 24 different performance criteria and pay an award fee worth up to 4 percent of the contractors budget. At least one of these criteria will be the contractor error rate. CMS has also proposed legislation that would allow it to competitively bid for contractors, allowing them much more leverage to pay for performance."

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: CMS collects different types performance data to support its long-term goals. The CERT program will provide CMS with very detailed information about payment error rates. Additionally, CMS collects volume data from contractors on claims paid, denied, reviewed, etc. Beginning in 2002, CMS conducted a Program Integrity Customer Service Survey designed to gain more insight into the perceptions of both beneficiaries and health care providers regarding specific program integrity-related services they received. In addition, each year, CMS undertakes a substantive test of its claims payment system in order to determine compliance with Medicare laws, regulations and guidance.

Evidence: The CERT program is using an representative sample of claims to establish national, contractor, provider type, and benefit category error rates. CMS has also developed a program integrity customer service action plan aimed at improving the service provided by MIP contractors.

Are Federal managers and program partners (grantees, subgrantees, contractors, etc.) held accountable for cost, schedule and performance results?

Explanation: The CMS Administrator is currently held accountable for achieving the national error rate goals set out for CMS. Additionally, program partners such as FIs and contractors are currently held to process goals related to their cost contracts. Their accountability will be strengthened significantly by CERT. Under the CERT program, FIs and carriers will be held to attaining their contractor specific goals.

Evidence: The CMS Administrator's performance plan includes the national error rate goal. Additionally, CMS has committed to a long term strategic goal of reducing all contractor error rates to the national rate or below by 2008 (see Strategic Management, question #1)

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: 73 percent of MIP funds are obligated on October 1. The lapse rate for MIP appropriations is 1 percent. All CMS administrative expenditures are approved by an internal Financial Management Investment Board (FMIB) to ensure that expenditures are consistent with CMS appropriations.

Evidence: Assessment based on status of funds report.

Does the program have incentives and procedures (e.g., competitive sourcing/cost comparisons, IT improvements) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: By statute, CMS currently contracts with FIs and carriers on a cost basis for claims processing. Additionally, they budget most of the MIP funds for FIs and carriers based on activity level (e.g. number of claims subject to a medical review). PSC contractors, in contrast, are competitively bid and are eligible for an award fee if they achieve certain performance targets, some of which are efficiency targets.

Evidence: By statute, CMS is required to contract with FIs and carriers on a cost basis. HHS has proposed legislation for contractor reform which would, among other things, allow CMS to competitively bid for contractors. This authority would allow CMS to achieve greater efficiencies and performance in claims processing and reducing payment errors, fraud and abuse.

Does the agency estimate and budget for the full annual costs of operating the program (including all administrative costs and allocated overhead) so that program performance changes are identified with changes in funding levels?

Explanation: MIP funds are direct spending, limited by statute. Funding for program operation comes from CMS' discretionary account. The law prohibits using MIP funds to pay for CMS staff.

Evidence:  

Does the program use strong financial management practices?

Explanation: Medicare has received a clean opinion on its Chief Financial Officer Audit for the past 3 years.

Evidence: Assessment based on CFO audits

Has the program taken meaningful steps to address its management deficiencies?

Explanation: CMS has proposed contractor reform legislation that would allow it to competitively bid contracts for claims processing. This authority would allow CMS to select contractors with exceptional payment accuracy rates and hold contractors accountable for achieving accuracy goals. Absent this authority, CMS is pursuing the Performance-Based Outcome Pilot discussed in Section 2, question 7.

Evidence: Contractor reform legislation was most recently proposed in the President's FY 2003 budget.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: CMS closely monitors contractors, providing guidance for claims processing and fraud and abuse activities. CMS staff review contractors plans for fraud and abuse activities. Additionally, CMS Regional Office staff closely oversee the day-to-day activities of Medicare contractors through reviews and audits.

Evidence: CMS monitoring of contractors is documented in the Regional Office manual, and is also evident by the organizational structure of the MIP program and the Regional Offices.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: CMS collects different types of performance data to support its long-term goals. Presently, it collects volume and performance data from contractors to manage the cost contract . More importantly, its new CERT program will provide CMS with very detailed information about payment error rates. Additionally, Beginning in 2002, CMS conducted a Program Integrity Customer Service Survey designed to gain more insight into the perceptions of both beneficiaries and health care providers regarding specific program integrity-related services they received.

Evidence: Examples of the data contractors submit to CMS include claims paid, denied, reason for denials, etc. Valid CERT program results for DMERCs have been released, and CMS is on track to toll out the program in 2004. CMS has created a customer service action plan based on the results of the customer service survey.

Has the program demonstrated adequate progress in achieving its long-term outcome goal(s)?

Explanation: The program has extended its national error rate goal through 2008 and adopted two new goals that measure contractor error rates and provider compliance. CMS has made significant progress toward achieving its national error rate goal and is on track to complete the CERT program, which will provide them with significant new management data to assist them in attaining their 2008 goal. They are also on track to complete the development of the contractor and provider compliance rate baselines.

Evidence: As noted below, CMS has reduced the national error rate by over 50% since 1996, demonstrating significant progress towards their long-term goal of 4 percent by 2008. Thus, although they missed by a small amount their FY 2001 goal of 6 % (actual = 6.3%) their overall progress is very strong. CMS has also shown progress towards developing the contractor error rates, releasing DMERC error rates in Sept 2002.

Does the program (including program partners) achieve its annual performance goals?

Explanation: CMS has significantly reduced the national error rate since the baseline was set in FY 1996. It exceeded both its FY99 and FY00 goals, and missed its FY01 goal by only a very small margin (however, CMS set aggressive goals for itself - committing to reduce the error rate by 33% from FY 99 to FY01, from 9% to 6%)

Evidence: CMS has met or exceed its target for FY99 (7.97 % vs. 9% target) and FY00 (6.8% vs. 7% target) and came very close to its FY01 target (6.3% vs. 6% target)

Does the program demonstrate improved efficiencies and cost effectiveness in achieving program goals each year?

Explanation: "As mentioned in the program management section, PSC contracts are competitively bid. Cost effectiveness is a factor in each bid, and, furthermore, PSCs are eligible for an award fee if they achieve certain performance targets, some of which are efficiency targets. However, CMS is required by statute to contract with FIs and carriers on a cost basis for claims processing. These contractors make up by far the majority of MIP spending. Additionally, they budget most of the MIP funds for FIs and carriers based on activity level (e.g. number of claims subject to a medical review). "

Evidence: "PSC contractor award fees are based on a number of efficiency goals, such as timeliness of responses to law enforcement and beneficiary requests, and acceptance of fraud cases by law enforcement. Contractor reform legislation allowing CMS to competitively bid claims processing would enable CMS to achieve greater efficiencies in program integrity efforts."

Does the performance of this program compare favorably to other programs with similar purpose and goals?

Explanation: Very few other health care or health care payment integrity programs measure their success at paying claims correctly. CMS is a front runner in both the public and private sector at measuring and achieving success at reducing health care claims payment errors.

Evidence: Other health care programs are in much earlier phases of measuring their error rates. The FBI and HHS OIG use measures of successes that are not directly comparable with MIP, such as expected recoveries from health care cases. (It is important to note, though, that the OIG and FBI are critical to helping CMS achieve success in this area.) Private sector health care insurers either do not directly measure improper payments or do not publicize this information (according to a recent benchmarking study completed by KPMG). CMS, conversely, has been measuring and reducing improper payments since 1996.

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: CMS's success in reducing the improper payment rate is measured annually by the HHS OIG's calculation of the FFS improper payment rate. (This will be calculated by a PSC contractor going forward.)

Evidence: OIG has measured the improper payment rate since 1996. The FY 1996 rate was 14%, or $23.2 billion. The FY 2001 rate was 6.3%, or $12.1 billion.