2002.05.07: (Fact Sheet) Reducing Payment Errors and Stopping Fraud in Medicare

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May 7, 2002

Contact:

HHS Press Office
(202) 690-6343

REDUCING PAYMENT ERRORS AND STOPPING FRAUD IN MEDICARE

Overview: The Department of Health and Human Services (HHS) plays a critical role in ensuring that beneficiaries and taxpayers get their money's worth from the Medicare program. Each year Medicare spends more than $240 billion on health care benefits for nearly 40 million senior citizens and other Americans with disabilities. As steward of the Medicare program, the Center for Medicare & Medicaid Services (CMS) is responsible for ensuring Medicare pays correctly for covered services. CMS implements the coverage and reimbursement policies that Congress establishes in the law.
To achieve this goal, HHS has expanded efforts to help doctors and health care providers understand and follow Medicare law and regulations. CMS also is working to simplify requirements to further reduce payment errors. These efforts are showing significant results. Medicare's estimated error rate has fallen by more than half, from 14 percent in fiscal year 1996 to 6.3 percent in fiscal year 2001, according to annual independent reviews conducted by the HHS Office of Inspector General (OIG). The error rate measures payments made by Medicare which are not properly supported by health care providers' documentation or which otherwise do not meet Medicare reimbursement requirements. The error rate does not measure fraud or abuse in the Medicare program.

In cases where evidence may suggest fraudulent billing practices, HHS works closely with its OIG, other law enforcement agencies and CMS to investigate and enforce the laws in order to protect beneficiaries and taxpayers. Health care providers are not subject to civil or criminal penalties for innocent errors, as the laws only cover offenses involving actual knowledge, reckless disregard or deliberate ignorance of the falsity of claims. In fiscal year 2001, the federal government recovered more than $1.3 billion in judgments, settlements, and administrative impositions in health care fraud cases and proceedings - including more than $1 billion returned to the Medicare Trust Fund.

BACKGROUND

HHS' strategy to reduce Medicare payment errors includes efforts focusing both on helping providers to file Medicare claims correctly so that Medicare pays it right the first time and on vigilant oversight of claims payments to stem fraud, waste and abuse. Specific efforts include:

Increasing the focus of CMS and its claims processing contractors on provider education as a means to decrease errors.
Clarifying Medicare's reimbursement and coverage requirements to make it easier and simpler for physicians, providers and suppliers to bill for the services they perform.
Addressing program vulnerabilities by promoting voluntary compliance while focusing anti-fraud resources on the small fraction of providers trying to defraud the program.
Strengthening oversight of Medicare contractors and enhancing Medicare's financial accountability.

These efforts have helped reduce Medicare's estimated payment error rate in half, from 14 percent in fiscal year 1996 to 6.3 percent in fiscal year 2001. Although Medicare pays virtually all claims correctly based on the information submitted, payments are considered "improper" if they lack sufficient documentation, if the service provided is found to have been unnecessary, or if the service is coded improperly by a physician or other health care providers. Medicare's "improper payment" estimate is not a measure of fraud, though it may include fraud.

IMPROVING PROVIDER, SUPPLIER AND PHYSICIAN EDUCATION

CMS is enhancing its education activities and improving carriers' and fiscal intermediaries' communications with physicians and providers. The Medicare program primarily relies on these private sector contractors to process and pay Medicare claims, to educate physicians and providers, and to communicate policy changes and other helpful information to them. CMS is taking a number of steps to ensure Medicare contractors provide consistent, unambiguous, timely, and accurate information to physicians and other providers.

Centralized education efforts. CMS has centralized educational efforts in the Division of Provider Education and Training, whose primary purpose is to educate and train both the contractors and the physician and provider community about Medicare policies. CMS is providing contractors with in-person instruction and a standardized training manual for them to use in educating physicians and other providers. These programs help ensure that the contractors speak with one voice on national issues.

Improved customer service. CMS is working to improve the quality of the Medicare contractors' customer service to physicians and other health care providers. In 2001, the carriers and fiscal intermediaries answered 24 million telephone calls from physicians and providers. CMS has developed performance standards, quality call-monitoring procedures, and contractor guidelines to make the Agency's expectations clear and to ensure that contractors are reaching those expectations.

Customer Service Training Plan. To improve responsiveness to the millions of phone calls the provider call centers handle each year, CMS is collecting detailed information on call center operations, including frequently asked physician questions, the call centers' use of technology, and the centers' training needs. CMS will analyze this information to further improve the quality of customer service to health care providers. CMS has also developed a new Customer Service Training Plan to bring uniformity to contractor training and improve the accuracy and consistency of the information that contractor service representatives deliver over the phone.

Internet options. CMS has implemented new website architecture and is tailoring it to be intuitive to physicians to help meet their office and billing needs. Once this new website is successfully implemented, CMS will organize similar web navigation tools for other Medicare providers. The Frequently Asked Questions section has been improved, making it more intuitive and easier to search.

Expanding the Medicare Learning Network. The Medicare Learning Network homepage ( cms.hhs.gov/medlearn) provides timely, accurate, and relevant information about Medicare coverage and payment policies, and serves as an efficient, convenient physician education tool. In the Fall of 2001, the MedLearn website averaged more than 250,000 hits per month, with the Reference Guides, Frequently Asked Questions, and Computer-Based Training pages having the greatest activity. Physicians and other providers can email their feedback directly to the MedLearn mailbox on the site.

Providing free computer and web-based training courses. Interested physicians, providers, practice staff, and others can access a growing number of web-based training courses designed to improve their understanding of Medicare. Some courses focus on important administrative and coding issues, such as how to check in new Medicare patients or correctly complete Medicare claims forms, while others explain Medicare's coverage for home health care, women's health services, and other benefits.

Installing a Satellite Learning Channel. CMS recently completed the installation of a network of satellite dishes at all contractor call centers to improve training efforts with contractor customer service representatives to improve their customer service skills and expand their knowledge of the Medicare program.

CLARIFYING MEDICARE REQUIREMENTS

Clarifying and streamlining Medicare rules represents another significant way to further reduce Medicare payment errors. HHS is committed to taking steps to make Medicare more understandable and user-friendly to help physicians and other providers avoid unintended errors.

HHS Regulatory Reform Committee. Secretary Thompson has formed a regulatory reform group to identify ineffective regulations that prevent physicians, hospitals, and other health care providers from providing quality care to their patients. The panel will make recommendations about how to change or revise regulations that interfere with providers' ability to provide quality care to patients. The committee is now conducting hearings across the country to gather suggestions from patients and providers for specific changes in regulations.

The Physicians' Regulatory Issues Team (PRIT). In 1998, CMS created the PRIT to improve the agency's responsiveness to the daily concerns of practicing physicians as the agency reviews and creates Medicare requirements. The team, which includes physicians working throughout CMS, seeks to make Medicare simpler and more supportive of the doctor-patient relationship. PRIT members work within the Agency to serve as catalysts and advisors to policy staff as changes and decisions are discussed. Team members have assisted in:

Streamlining Medicare forms, including the physician enrollment form;
Improving operational policies;
Working to improve current channels of input from practicing physicians;
Clarifying oversight policies; and
Identifying and changing excessively burdensome requirements.

The Practicing Physicians Advisory Council (PPAC). The council, established by Congress in 1990, advises CMS on proposed changes in Medicare regulations and manual instructions related to physician services. A CMS physician leads the PPAC, and all 15 members are practicing physicians who bill Medicare and represent a wide variety of specialties and both urban and rural areas. More information about PPAC is available at cms.hhs.gov/faca/ppac/.

Open Door Policy Forums. In 2001, CMS Administrator Tom Scully established 13 Open Door Policy Forums to interact directly with physicians, hospitals, nursing homes, health plans and other health care providers and suppliers, as well as beneficiary groups, to strengthen communication and information sharing between these stakeholders and CMS. The Open Door Policy Forums facilitate information sharing and enhance communication between CMS and its partners and beneficiaries.

CMS Expert Panel. Chaired by a practicing emergency room physician, this panel of CMS staff is being challenged to suggest meaningful changes and develop ways that we can reduce burden, eliminate complexity, and make Medicare more "user-friendly" for everyone.

Clinical Preceptorships. CMS is participating in and co-sponsoring "preceptorships" with local county medical societies, where policy staff "shadow" physicians, watching them provide care, listening to lectures, and even observing operating room procedures. This program provides CMS staff with a first-hand observation of clinicians' daily work life and the challenges they face in providing care to Medicare beneficiaries.

TARGETING PROGRAM VULNERABILITIES

Full Implementation of Program Safeguard Contractor Strategy. Since 1999, CMS has used special contractors with program integrity experience to target problem areas, such as reviewing claims for therapy services and developing data analysis centers to identify and stop payment errors and possible fraud. This year CMS is significantly expanding this program by separating out the fraud and abuse prevention and detection activities from all fiscal intermediaries and carriers and competing that workload among our program safeguard contractors. This split of functions will enable the carriers and fiscal intermediaries to focus their efforts on educating and providing feedback about Medicare's billing rules and policies to all providers. At the same time, it allows the program security contractors to focus their resources and energies on detecting the true problems in the program: those entities and individuals who are in the program solely to take advantage of the system.

Developing contractor-specific error rates. In 2000, CMS began developing error rates for each of the private insurance companies that pay Medicare claims. Over time, these error rates will guide error-prevention efforts, such as education and program integrity efforts, at each contractor in more detail than Medicare's overall report can.

Medicare/Medicaid Datamatch Project. CMS entered into a statutorily required Computer Matching Act (CMA) agreement with the State of California to share and compare Medicare and Medicaid data to help find fraudulent or abusive billing patterns. While these may not be evident when billings for either program are viewed in isolation, they can become evident when they are compared. It is expected this project will serve as a model for similar efforts in other states.

Promoting voluntary compliance. With extensive input from health care businesses, the OIG has developed a series of voluntary compliance guidelines for hospitals, medical equipment suppliers, clinical laboratories, home health agencies, third-party billers, Medicare+Choice organizations, and other providers. These guidelines identify reasonable steps to take to improve adherence to Medicare and Medicaid laws, regulations and program directives.

Medicaid Error Rate Project. CMS is working with states to develop Medicaid payment accuracy measurement (PAM) methodologies that can be used both on a state-specific and national basis. In fiscal year 2002, CMS received $2.7 million in Health Care Fraud and Abuse Control (HCFAC) Program funds to continue an initiative that would develop a single payment accuracy measurement methodology appropriate to all states. The nine states that applied and were approved to participate in a pilot program were Louisiana, Minnesota, Mississippi, New York, North Carolina, North Dakota, Texas, Washington and Wyoming. While most of the pilots are focusing on fee-for-service payments, Minnesota will be addressing the validation of managed care encounter data. The initial pilot studies will be completed by the end of 2002. CMS plans to expand the PAM pilot to about 15 states in fiscal year 2003

Anti-fraud hotline. The OIG maintains an anti-fraud hotline to report potential fraud and abuse in the Medicare and Medicaid programs. The hotline, 1-800-HHS-TIPS (1-800-447-8477), provides assistance to callers in English, Spanish and Chinese. Tips involving potential errors in beneficiaries' Medicare statements are generally referred to the claims-processing contractors for further review, while suspected fraud is referred to appropriate law enforcement agencies for investigation. The hotline received more than 430,000 calls last year and has fielded about 2.1 million calls since its creation in 1995.

Senior Medicare Patrol grantees. The HHS Administration on Aging (AoA) provides grants to 52 state and local organizations to help older Americans be better health care consumers and to help identify and prevent fraudulent health care practices. These Senior Medicare Patrol projects teach volunteer retired professionals, such as doctors, nurses, accountants, investigators, law enforcement personnel, attorneys and teachers, to help Medicare and Medicaid beneficiaries to become better health care consumers. Since 1997, these projects and other AoA grants have trained more than 48,000 volunteers, conducted more than 60,000 community education events reaching nearly 10 million people.

IMPROVING OVERSIGHT OF MEDICARE CONTRACTORS AND
STRENGTHENING FINANCIAL SYSTEMS

Strengthening oversight of private contractors. By law, Medicare must rely on private insurance companies to process and pay Medicare claims. In 1999, CMS created national review teams to evaluate contractors' fraud and abuse identification efforts and other key functions, using standardized reporting and evaluation protocols. These teams cut across regions and use their specific expertise to assure more effective evaluations of contractor performance. CMS continues to develop additional defined, measurable standards to support consistent reviews of specific areas of contractor performance.

Upgrading Medicare's accounting systems. Medicare's claims-processing contractors do not currently use a uniform financial management system, increasing the risk of administrative and operational errors and misstatements. HHS' proposed fiscal year 2003 budget includes $51 million to continue to develop state-of-the-art accounting systems for Medicare. The funding will help to develop both an Integrated General Ledger Accounting System for CMS to replace the fragmented, outdated systems now in use by CMS's claims-processing contractors, and a new Financial Accounting and Control System to improve internal financial management controls.

Assessing Contractor Customer Service for Program Integrity Activities. Beginning in 2001, CMS began surveying Medicare providers and beneficiaries about their views on how well contractors perform certain program integrity functions, including enrollment, cost report audit, medical review and complaint tracking. The results of these surveys are helping the program direct resources to ensure that contractors are providing the highest quality service in these areas.

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