Medicare & Medicaid Costs and Increased Scrutiny

Gallagher Healthcare :: Industry Insights

By Hal Williams | 3/7/2016

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In April 2014, for the first time in 35 years, the Centers for Medicare and Medicaid Services (CMS) released data outlining provider reimbursements. A Wall Street Journal article noted at the time that the data, which was from calendar year (CY) 2012, indicated that the “top 1% of 825,000 individual medical providers accounted for 14% of the $77 billion in billing recorded in the data.” While this data is not new to fraud investigators, it certainly sheds light for the public on where investigators may focus their efforts.

We now have data available for CY2013. It’s no surprise that the total CMS billing increased by about 15% compared to the 2012 numbers. The total amount reimbursed in CY2013 was just over $89 billion. The top 1% of the 956,000 providers accounted for 23% of the $89 billion reimbursed in the 2013 data. The percentage increase in the total amount billed and the number of providers is about the same, but the share of billings reimbursed to the top 1% increased by nine percentage points or 60%.

None of this is to say that fraud or overbilling is the root cause of the statistics outlined above. The reimbursement amounts to individual providers are likely justified. For example, the highest average amounts paid per provider were to those specializing in hematology/oncology ($366,677). Cancer care is one of the most costly healthcare services to provide, so one would naturally expect reimbursement rates for oncologists to be higher than those for non-specialized general practitioners seeing patients only for primary care office visits.

Why does this matter to you?

The point we’re bringing to the conversation is the potential increased risk of scrutiny solely based on the specialty set with which a physician, surgeon, or healthcare facility is associated. Any physician or provider that receives CMS reimbursements or allows another provider to bill using their National Provider Identifier (NPI) will likely face a Recovery Audit Contractor at some point for an RAC Audit. However, certain specialties may receive additional attention due to the relatively high average reimbursement amounts per provider. Further, providers need to be prepared for more than just RAC Audits. A whole host of alphabet soup task forces and organizations regularly review medical practices to pinpoint fraud and abuse in the system. These reviews or audits can be performed passively or actively, and depending on the task force, they can occur without physician review in some cases.

These additional task forces include the following:

• Program Safeguard Contractors (PSCs)
• Health Care Fraud Prevention and Enforcement Action Team (HEAT; primarily focused on Durable Medical Equipment (DME) and Home Health )
• Medicaid Integrity Contractors (MICs)
• Medicare Administrative Contractors (MACs)
• Zone Program Integrity Contractors (ZPICs)

The top 15 medical specialties in order of average reimbursements in CY2013 per provider are shown in the chart below.

Adding in facilities, the top 15 classes in order of average reimbursement in CY2013 per provider are as follows.

You should be aware that relatively inexpensive insurance coverage is available for these audits and other types of regulatory actions. Very limited basic coverage is sometimes included on an individual malpractice policy, but this coverage would not be adequate in the event of a serious audit, which can sometimes take years to appeal and complete. The insurance policies available will help you throughout the audit process, providing coverage for legal assistance, defense costs, fines, and penalties for actual or alleged billing errors. These policies are not limited to governmental audits; they can also provide coverage during commercial payor audits.

Sources

1. https://www.cms.gov/Research-Statistics-Data-and-Systems/Research-Statistics-Data-and-Systems
2. https://www.wsj.com/articles/small-slice-of-doctors-account-for-big-chunk-of-medicare-costs-1397015936?tesla=y&mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj&url=http://online.wsj.com/article/SB10001424052702303456104579490043350808268.html?mod=WSJ_hp_LEFTTopStories&cb=logged0.10388778266496956&cb=logged0.25900006340816617