Big Data Tool Saves CMS $1.5B by Preventing Medicare Fraud

June 01, 2016 - Using big data tools and predictive analytics, the Centers for Medicare and Medicaid Services (CMS) has saved approximately $1.5 billion by preventing Medicare fraud in the traditional fee-for-service program, according to the official CMS blog.

Since June 2011, CMS has employed the Fraud Prevention System, which is a predictive analytics tool that identifies fraudulent claims and illegitimate Medicare payments. The tool analyzes about 4.5 million Medicare pre-paid claims each day to pinpoint potential issues before providers are paid.

“The Fraud Prevention System, or FPS, is innovative in that we have moved beyond the reactive ‘pay and chase’ approach toward a more effective, proactive strategy that aims to prevent these illegitimate payments in the first place,” wrote CMS Center for Program Integrity leaders in the blog post.

CMS reported that the Fraud Prevention System has been successful in saving the government from potentially wasteful spending. The system has accounted for $654.8 million in national savings growth since its inception.

The program has also contributed to the first-ever national return-on-investment of $11.60 for every dollar the federal government spends on the CMS integrity program.

By using the predictive analytics tool, CMS noted that it has established key partnerships with public and private predictive analytics professionals, big data scientists, and law enforcement officials. These collaborations have assisted the agency with addressing payment issues and removing fraudulent providers from the Medicare fee-for-service program.

For example, the Fraud Prevention System discovered that a home health agency in Florida was billing for healthcare services that it never performed. In response, CMS conducted a prepayment review, suspended payments to the home health agency, and contacted local law enforcement officials. The Florida-based healthcare system was eventually removed from Medicare enrollment.

The program has identified similar cases across the nation. CMS has been able to eliminate some fraudulent providers from the Medicare fee-for-service program by uncovering inappropriate billing, claims for non-covered services, questionable billing practices, and unnecessary treatments.

Additionally, the Fraud Prevention System has helped CMS to develop better methodologies for determining healthcare cost avoidance. The HHS Office of Inspector General has certified the program’s methods, which marks the first certification of its kind to be given to a federal healthcare program.

The blog post reported that CMS will continue to reduce Medicare fraud by investing in next-generation big data analytics tools.

“The CMS is now working to develop next-generation predictive analytics with a new system design that even further improves the usability and efficiency of the FPS [Fraud Prevention System],” added the blog post. “Using it and other advanced tools, we are committed to addressing fraud, waste and abuse in the Medicare program to better protect beneficiaries and taxpayers.”

Despite a new report that states healthcare fraud rates are declining, CMS has recently been the subject of several Medicare fraud and improper payment investigations led by federal agencies.

In May, the Office of Inspector General reported that Medicare and Medicaid paid providers for approximately $88.8 billion in improper payments in 2015. Out of the total inappropriate payments, improper Medicare fee-for-service payments accounted for $43.3 billion.

According to the Office of Inspector General testimony, CMS does not provide enough oversight on claims and payment data for terminated or ineligible providers, which has contributed to the billions in wasted healthcare spending.

“The Centers for Medicare & Medicaid Services and States can prevent inappropriate payments, protect beneficiaries, and reduce time-consuming and expensive pay and chase activities by ensuring that providers engaging in fraudulent or abusive activities are not allowed to enroll in Medicare and Medicaid,” stated Ann Maxwell, Assistant Inspector General. “Provider enrollment safeguards are important tools in helping prevent improper payments.”

In the same month, another report by the Government Accountability Office explained that CMS is vulnerable to Medicaid and Medicare fraud because its enrollment screening process does not accurately identify ineligible providers for the Provider Enrollment, Chain and Ownership System.

About 22 percent of practice locations addresses in the system were considered potentially ineligible, reported the Government Accountability Office. Out of the possible ineligible locations, about 2,600 belonged to providers that had claims of $500,000 or more per address.

The report also stated that CMS failed to gather adverse-action history or investigate other medical license violations for some providers even though these issues could result in enrollment termination.

While CMS has faced some serious Medicare fraud allegations, the agency has attempted to prevent improper payments and save healthcare budgets by using big data analytics tools to assess claims. The Fraud Prevention System is another step towards identifying healthcare fraud before providers receive the money.

Dig Deeper:

• How to Reduce Wasteful Spending in the Medicare Program

• Using Big Data in the Hunt for Healthcare Fraud, Waste, and Abuse