Reducing Improper Payment: A Collaborative Effort

By Patrick Conway, MD

CMS Principal Deputy Administrator and Chief Medical Officer

CMS is dedicated to promoting better care, protecting patient safety, reducing health care costs, and providing people with access to the right care, when and where they need it. This includes continually strengthening and improving Medicare and Medicaid programs that provide vital services to millions of Americans. We take our responsibility to deliver better care at a better value seriously.

This week, the Department of Health and Human Services released our annual Agency Financial Report, which includes an update on the improper payment rate for a variety of our programs, including Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).

When we talk about improper payments, it’s important to remember what they are and why they happen. To be clear, improper payments are not typically fraudulent payments. Rather, they are usually payments made for items or services that do not meet Medicare or Medicaid’s coverage and medical necessity criteria, that are incorrectly coded, or that do not include the necessary documentation. Correctly recording and documenting medical services is an important part of good stewardship of these programs, and we strive to improve these practices among providers serving Medicare, Medicaid, and CHIP beneficiaries.

I am pleased that this year’s report shows progress is being made to reduce improper payments. The Medicare fee-for-service improper payment rate decreased from 12.7 percent in 2014 to 12.1 percent in 2015. CMS’s “Two Midnight” rule and corresponding educational efforts led to a reduction in improper inpatient hospitals claims, reducing the improper payment rate from 9.2 percent in 2014 to 6.2 percent in 2015. The improper payment rate for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) also decreased from 73.8 percent in 2010 to 40.1 percent as of September 2015. Corrective actions implemented over a six-year period, including the DMEPOS Accreditation Program, contractor visits to large supplier sites, competitive bidding, and a demonstration testing prior authorization of power mobility devices, contributed to the reduction in the improper payment rate for these items and supplies.

While progress has been made, we must continue our work to reduce the improper payment rates in Medicare, Medicaid, and CHIP.

For instance, in the Medicare Part D program, there’s been a 0.3 percent increase in the composite improper payment rate – an increase from 3.3 percent in the 2013 calendar year to 3.6 percent in 2014. This increase is primarily related to long-term care medication orders. We are continuing to work on education and outreach with plans and sponsors to correct for these improper payments. In addition, Medicaid and CHIP experienced increases with their improper payment rates – Medicaid increased from 6.7 percent in the 2014 fiscal year to 9.8 percent in 2015, and the improper payment rate for CHIP increased from 6.5 percent in fiscal year 2014 to 6.8 percent in fiscal year 2015. These increases are largely attributable to new provider enrollment and screening requirements from the Affordable Care Act and Health Insurance Portability and Accountability Act of 1996. We often see such increases when new requirements take effect, as states and providers often need time to modify their operations in order to comply with the updated standards. We believe, however, that these requirements will ultimately strengthen the Medicaid and CHIP programs, and that the improper payment rates will again decrease with state and provider experience. Without these new requirements, the Medicaid improper payment rate would have decreased to 5.1 percent, and the CHIP improper payment rate would have decreased to 5.7 percent.

We believe that increased transparency will help us make additional progress towards reducing improper payments in these programs. In an effort to foster increased transparency, CMS is exploring additional improper payment rate data releases in multiple sectors, including Medicare Part C and D Plans, and contractor level information for Medicare (including fee-for-service, Parts C and D) and Medicaid. This increased focus on transparency and accountability can help CMS encourage states and Medicare stakeholders to take additional actions to help reduce future improper payment rates.

As CMS begins these conversations, we will also refine and enhance the technical assistance provided to states and others to ensure compliance with regulations and reporting requirements that impact the improper payment rate.

We believe these steps – and a continued focus on transparency – will lead to a lower rate of improper payments while continuing to transform our health system to achieve better care, smarter spending, and healthier people.

 

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