Medicare Improper Payment Rate Down to 8.12%, Lowest Since 2010

November 19, 2018 - CMS recently reduced the Medicare improper payment rate as well as the improper payment rates for Medicaid and the Children’s Health Insurance Program (CHIP) for the first time in reporting history, the head of the federal agency reported in a new official blog post.

“Our accomplishments over the past year were the result of a focused effort to target root causes of improper payments. CMS also implemented a targeted review strategy that focused on provider education, assistance and burden reduction,” wrote CMS Administrator Seem Verma.

“The agency’s actions emphasized prevention-oriented activities,” she continued. “These preventions included simplifying and clarifying policies as well as developing and implementing initiatives that ensure applicable coverage, payment and coding rules are met on the front end before services are rendered.”

Most notably, the 2018 Medicare improper payment rate for fee-for-service reimbursement fell to 8.12 percent, down from 9.51 percent the previous year, CMS reported in an accompanying fact sheet.

The 2018 Medicare improper payment rate is the lowest rate since 2010 and the second consecutive year that the rate is below the 10 percent threshold for compliance under the Improper Payments Elimination and Recovery Act of 2010.

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The reduction in Medicare improper payments represents savings of $4.59 million from FY 2017 to FY 2018.

The majority of the Medicare improper payment savings stemmed from home health corrective actions. The home health Medicare improper payment rate fell from nearly 59 percent in 2015 to 17.61 percent in 2018.

CMS decreased Medicare improper payments to home health agencies by about $6.92 billion from 2015 to 2018, the fact sheet added.

The federal agency also saw a reduction in Medicare improper payments for skilled nursing facility services.

Skilled nursing facility corrective actions result in a $1.04 billion drop in Medicare improper payments from 2017 to 2018, CMS reported. And the improper payment rate for Medicare skilled nursing facility reimbursement fell from 9.33 percent to 6.55 percent during the same period.

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Additionally, the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) improper payment rate fell from 46.26 percent in 2016 to 35.54 percent in 2018. Despite a small portion of total Medicare improper payments stemming from DMEPOS claims, the reduction in improper payments still represented about $1.14 billion in savings from 2016 to 2018, CMS pointed out.

“While we have made progress on reducing the improper payments rate, we are not satisfied and more work needs to be done to achieve increased and consistent reductions in the future by implementing already existing initiatives as well as innovative processes,” Verma wrote in the blog post.

“CMS’s program integrity initiative relies on a multifaceted approach that includes provider enrollment and screening standards, enforcement authorities, and advanced data analytics such as predictive modeling,” she continued. “This initiative strikes an importance balance by preventing improper payments while reducing the administrative burden on legitimate providers and suppliers.

To build on their recent success with reducing improper payments across the board, CMS plans to leverage provider outreach and education, the CMS Administrator announced.

Provider outreach and education provides greater transparency to providers and suppliers, which in turn helps them to understand program integrity. The outreach conducted by CMS uses education, data and process transparency, and strategic communications to help stakeholders submit compliant claims.

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CMS is also phasing in a targeted probe and educate initiative to continue reducing improper payment rates across Medicare, Medicaid, and CHIP. The initiative reaches out to individual providers to educate them on program integrity and complaint claim submissions.

The federal agency anticipated the targeted probe and educate initiative to not only reduce improper payments, but also decrease provider burden and claim denials and appeals while improving care quality and consumer experiences.

Reducing the number of Medicare appeals is a top HHS priority. A federal court recently ordered HHS to clear the Medicare appeals backlog by 2022 after the number of sitting appeals at the administrative law judge level reached over 426,000 appeals in FY 2018.

In addition, CMS is looking to the private sector to build on falling improper payment rates, Verma stated.

To maximize CMS efforts to reduce improper payments and provider burden, the federal agency is considering the implementation of a Documentation Requirement Lookup Service to allow documentation and prior authorization requirements to be visible to clinicians through their EHR system.

To implement the Documentation Requirement Lookup Service, CMS is partnering with the Da Vinci project, a private-sector initiative led by the health standards development company Health Level 7 (HL7). The Da Vinci project aims to develop a Fast Healthcare Interoperability Resources (FHIR) standard.

The Documentation Requirement Lookup Service is part of a use case for the project called “Coverage Requirements and Documentation Rules Discovery.” To support the project, CMS recently helped with the following through its Medicare fee-for-service space:

• Developing a prototype Documentation Requirement Lookup Service
• Populating the service with the list of items and services for which prior authorizations are required
• Populating the service with the documentation rules for oxygen and Continuous Positive Airway Pressure (CPAP) devices

HHS is already seeking private sector advice on healthcare innovation and investment, according to a June 2018 Request for Information (RFI) notice. The federal department floated the idea of forming a workgroup of private healthcare companies to “facilitate constructive, high-level dialogue between HHS leadership and those focused on innovating and investing in the healthcare industry,” the notice stated.

“These already-established initiatives and implementation of private-sector innovations will help us keep positive momentum moving forward to make even greater inroads in reducing improper payment rates,” Verma concluded. “A key to our continued success will be collaborating across CMS and with stakeholders to address potential vulnerabilities, strengthening our program integrity efforts, and minimizing unnecessary burden for our partners.”