HHS to use data analytics to uncover Medicare, Medicaid fraud

In an effort to plug one of the largest sources of fraud and waste in government, the Health and Human Services Department plans to install data analysis tools to root out fraudulent payments in the Medicare, Medicaid and children's health insurance programs, an official said on Monday.

A proposed rule introduced on Thursday requires the Centers for Medicare and Medicaid Services to screen providers and suppliers to find waste and fraud, including reprimanding the organizations. The rule also extends to those participating in the children's health insurance program.

"The proposed regulations [provide] important new tools to help us move from a 'pay-and-chase' approach," which identifies unscrupulous acts after the government has issued a check, "to one that makes it harder to commit fraud in the first place," said CMS Administrator Donald Berwick during a conference call with reporters Monday.

Medicare is the source of some of the largest amounts of improper payments in government. Agency officials estimated the health program for the elderly issued $24.1 billion in improper payments in 2009, according to a report the Government Accountability Office issued in June. That amount is most likely much higher, GAO added, "because some improper payments may not be detected and hence may not be reflected in the improper payment rate."

In all, the government loses about $98 billion a year because of fraud and payment errors, an amount that has raised concerns in the White House. In July, President Obama signed the 2010 Improper Payments Elimination and Recovery Act, saying it would reduce waste and fraud by $50 billion by 2012. The law requires agencies to conduct recovery audits for programs that spend $1 million or more annually. They also must review programs that could be susceptible to significant improper payments every three years and produce corrective action plans for preventing future waste.

CMS will deploy a number of computer applications that weed out potential incidents of fraud by flagging suspicious activities and anomalies in the systems that process requests, including unusual patterns in billing and applying for services. The agency also will buy more sophisticated analytical tools to screen applications to enroll in the program.

"We get 19,000 new applications every month, and most are legitimate," said Peter Budetti, deputy administrator of the Center for Program Integrity at CMS. "But we want to use more advanced technologies to [identify] those who should not be let into the program."

The agency also will analyze more phone calls to the toll-free-Medicare hotline, which provides beneficiaries with direct access to customer service representatives.

"Any beneficiary can call, but we notice quite a few raise suspicions about possible problems in the program," which triggered about 30,000 investigations in 2009, Budetti said. "We're looking now at applying analytic tools at the point of collection of calls [to identify] patterns, so we can then investigate the issue raised by those beneficiaries" that might implicate suppliers and providers in fraudulent behavior.

CMS also is seeking comment on the possibility of collecting fingerprints from providers and suppliers, which would be checked against appropriate law enforcement databases.