OIG Identifies Top HHS Financial, Medicare Fraud Challenges

November 18, 2016 - The Office of the Inspector General (OIG) recently found the most significant management and performance challenges facing the Department of Health and Human Services (HHS), including financial management and Medicare fraud prevention inefficiencies.

Even though HHS managed about $1 trillion in 2015, OIG stated that the federal department could still improve its financial and administrative management techniques to strengthen financial management systems, reduce improper payments, improve contracts management, and implement financial data standards.

“Responsible stewardship of HHS programs is vital, and operating a financial management and administrative infrastructure that employs appropriate safeguards to minimize risk and provide oversight for the protection of resources remains a challenge for HHS,” the report stated.

OIG identified “a material weakness” in the department’s financial management systems associated with insufficient internal controls over segregation of duties, configuration management, and accessibility to HHS financial systems.

As a result of this vulnerability, the federal watchdog stated that HHS did not comply with federal financial management systems requirements that are in place to ensure operational efficiency, financial reporting reliability, and compliance.

HHS also did not appropriately report improper payment rates and many of its federal healthcare programs had rates that exceeded thresholds, OIG stated. The federal department reported in May that improper payments totaled $89.7 billion in 2015, but an OIG audit of the report showed that HHS did not comply with the Pursuant to the Improper Payments Information Act of 2002 that aims to standardize improper payment reporting in effort to reduce them.

“Specifically, we found that HHS did not report an improper payment rate for the Temporary Assistance for Needy Families (TANF) program, reported that the improper payment rate exceeded 10 percent for the Medicare Fee-for-Service program, reported four other risk-susceptible programs that did not meet their FY 2015 target error rates, and did not perform a risk assessment of payments to employees and charge card payments,” wrote OIG.

In addition, the watchdog group identified contract management vulnerabilities, such as closeout issues. CMS, a HHS agency, did not properly close out contracts totaling $25 billion, OIG reported. Closeout delays imposed a significant financial risk because HHS could not conduct a final review for or recover potential improper payments.

OIG also listed several other contracts management weaknesses, including acquisition planning and procurement, contract monitoring, payments to contractors related to the Federal Health Insurance Marketplaces, and oversight and performance measurement for benefit integrity contractors.

Standardization of financial and payment data was another major challenge for HHS, OIG added. Under the Digital Accountability and Transparency Act, HHS must start using government-wide data standards to submit financial information by May 2017, but the federal department has yet to complete the initial steps of the implementation plan.

“Specifically, we found that HHS did not complete detailed project plans or determine how it will certify that the data is accurate and complete,” wrote OIG. “Given the difficulty of defining and developing common data elements across multiple reporting areas and the volume of diverse programs administered by HHS, we determined that HHS will face challenges implementing these uniform data standards within the required timeframe.”

To overcome financial and administrative challenges, OIG recommended:

• HHS should continue to identify and resolve financial management system vulnerabilities

• HHS should meet improper payment reduction goals and decrease the rate to less than ten percent for all programs as well as conduct root cause analyses and risk assessments

• CMS should strengthen departmental coordination to improve contract closeout responsibilities and implement better contracts oversight

• HHS must comply with timeframes to implement government-wide data standards and ensure that financial data is “complete, accurate, and timely”

Additionally, OIG pinpointed several Medicare fraud prevention weaknesses, such as inadequate fraud detection and responses, certain claim reimbursement policies, and high improper payment rates.

CMS uses program integrity tools to prevent and detect Medicare fraud schemes. However, OIG found that the federal agency did not have strong provider enrollment screenings to identify ineligible providers and beneficiaries, causing them to receive inappropriate payments.

“The weaknesses included gaps in the verification of key information, inconsistencies in site visit procedures, and failures to use site visit results for enrollment decisions,” wrote OIG. “Further, CMS's Provider Enrollment, Chain and Ownership System (PECOS) is incomplete and, in some cases, inaccurate.”

Medicare reimbursement policies also contributed to Medicare fraud rates, OIG continued. For example, some reimbursement systems may incentivize providers to bill for greater levels of services than beneficiaries need because of higher payment rates. OIG found that many skilled nursing and hospice facilities bill for more expensive therapies or provide care for longer than necessary to receive more reimbursement.

CMS also did not effectively manage payment policies relating to site of care, stated the federal watchdog. For instance, OIG noted that Medicare could have saved $4.1 billion over six years if payments for swing-bed services were made to facilities at the skilled nursing facility rate rather than the higher critical access hospital rate.

Improper payments were also an issue for Medicare fraud prevention activities, stated the report. The Medicare improper payment rate was 12.1 percent in 2015, totaling $43.3 billion.

For the Part A program, OIG found that home health and hospice providers received more improper payments than other providers because of insufficient clinical documentation, medical necessity issues, and inappropriate homebound determinations.

Certain Part B providers also had higher improper payment rates, including chiropractors, physical therapists, and some durable medical equipment supplies. OIG reported that these providers had a 50 percent or greater error rate.

OIG suggested that the following fixes for Medicare fraud prevention challenges:

• HHS should strength provider enrollment screenings, including better oversight of contractors that conduct screenings

• CMS should enhance completeness, accuracy, and timelines of provider ownership data

• HHS should address and resolve program integrity weaknesses by increasing hospice general inpatient claims oversight, conducting prepayment reviews, and improving home health claims oversight

• HHS should modify Medicare reimbursement policies that address rate differences among differing sites of care

 Dig Deeper:

• Preparing the Healthcare Revenue Cycle for Value-Based Care

• Strong Compliance Programs Key to Avoiding Healthcare Fraud