Medicaid: Auditing in the Managed Care Era May 23, 2016 Darnell Dent
About FirstCare Health Plans At FirstCare, we believe that all Texans and our communities should be healthy and that health care should be accessible to everyone. We serve 110 counties, with local offices in Abilene, Amarillo, and Lubbock; and, corporate offices in Austin. FirstCare was founded in Amarillo in 1985, and we re still locally owned and Texas-based. We put down roots and we ve watched them grow from our humble beginnings to now serving more than 190,000 members. In fact, we re owned by two Texas hospitals Covenant Health and Hendrick Health System and through them, are even more connected with our communities. FirstCare is the registered service mark of SHA, LLC (SHA) 2 Confidential. Do not distribute without appropriate permission.
Goals of the Special Investigations Unit (SIU) Primary purpose of the SIU is to detect, prevent and eliminate fraud, waste and abuse at the provider, recipient, and health plan level Investigate all issues of possible fraud, waste and abuse Develop and implement training for fraud, waste and abuse prevention Collaborate with internal functional units within the health plan Data mine to identify patterns and detect other indicators of potential fraud, waste and abuse 3 Confidential. Do not distribute without appropriate permission.
Responsibilities of the SIU Track, triage, and investigate potential fraud, waste, and abuse cases (FWA) Report and refer cases to regulatory law enforcement and government agencies Maintain FWA referral mechanisms: o Telephone/FWA Hotline referrals o Email referrals o Internal/External Fraud Reporting Forms 4 Confidential. Do not distribute without appropriate permission.
Tools of the SIU LexisNexis Intelligent Investigator-Data Analytics Software that analyzes suspicious billing patterns and provider outliers PLATO-CMS tool for reporting potential fraud, waste, and abuse and cross-references other plans investigations of a particular provider/pharmacy HHSC-IG SIU Quarterly Meetings SCIO-Analytics vendor that reviews and audits providers for recovery opportunities 5 Confidential. Do not distribute without appropriate permission.
Potential Provider Fraud Schemes Upcoding on claims Billing for supplies and services not rendered Billing for medically unnecessary services Physicians billing for services performed by mid-level practitioners. Physicians billing hours exceed a typical workday 6 Confidential. Do not distribute without appropriate permission.
Potential Member Fraud Schemes Prescription pad theft Theft or misuse of insurance ID cards Falsifying information on enrollment applications Misrepresentation of income (Medicaid/CHIP) 7 Confidential. Do not distribute without appropriate permission.
Action steps Review Compliance Plans annually Maintain current written policies and procedures Conduct periodic training of staff and network providers (hospital & clinics) 8 Confidential. Do not distribute without appropriate permission.
The Bottom Line It all comes down to services billed but not rendered, medically unnecessary services, and questionable beneficiary eligibility. 9 Confidential. Do not distribute without appropriate permission.
Questions? Thank you! 10 Confidential. Do not distribute without appropriate permission.
Association of Local Government Auditors Annual Conference Medicaid: Auditing in the Managed Care Era Stuart Bowen, Jr., Inspector General May 23, 2016 INSPECTOR GENERAL Texas Health and Human Services Commission Page 11
MISSION, VISION, AND VALUES Mission The Inspector General must detect and deter fraud, waste, and abuse through investigations, audits, and inspections. Vision To develop the best state Inspector General s office in the nation. Values Professionalism Productivity Perseverance Page 12
IG ORGANIZATION Governor EXECUTIVE COMMISSIONER Health & Human Services Commission Inspector General COMMISSIONER DADS Aging & Disability Services COMMISSIONER COMMISSIONER COMMISSIONER DSHS State Health Services DFPS Family & Protective Services DARS Assistive & Rehab Services Page 13
IG LEADERSHIP TEAM Inspector General Stuart W. Bowen, Jr. Chief of Staff and Deputy IG Operations Chief Counsel Principal Deputy IG Counselor to the IG Deputy IG Investigations Deputy IG Audit Deputy IG Inspections & Senior Advisor Deputy IG Data and Technology External Relations Director Page 14
IG AUDIT DIVISION Deputy IG Audit Senior Counsel for Audit Assistant Deputy IG Audit Audit Operations Director Audit Director Audit Director Quality Assurance Manager Federal Audit Coordination Manager Audit Managers (3) Audit Managers (3) Audit Pool 58 Auditors (includes 5 IT Auditors) Page 15
TEXAS MEDICAID Medicaid provides health coverage to over 4 million Texans, including: Low-income families Children Pregnant women Elderly adults People with disabilities Page 16
TEXAS MEDICAID RECIPIENTS Texas Medicaid Recipients By Age State Fiscal Year 2013 Age 0 to 5 32% Age 6 to 14 33% Age 15 to 20 12% Age 21 to 64 17% Age 65+ 6% 0% 5% 10% 15% 20% 25% 30% 35% Source: HHSC, Financial Services, HHS System Forecasting Page 17
TEXAS MEDICAID ENROLLMENT Average Monthly Medicaid Enrollment State Fiscal Years 2003-2013 Average Monthly Enrollment (in millions) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.5 2.7 2.8 2.8 2.8 2.9 3.0 3.3 3.5 3.7 3.8 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 51% total growth from SFY 2003 to 2013 Source: HHSC, Financial Services, HHS System Forecasting Page 18
TEXAS MEDICAID DELIVERY SERVICES MODELS Texas Medicaid provides health care services through two service delivery models. Fee-for-Service: Providers are paid for each service they provide, such as an office visit, test, or procedure. Managed Care: The delivery of care is managed by a health plan Managed Care Organization (MCO) or Dental Maintenance Organization (DMO) through a network of medical or dental providers. Providers in a health plan s network are responsible for managing and delivering quality, cost-effective health care services. Page 19
DELIVERY SERVICE MODEL COMPARISONS Features Fee-for-Service Managed Care Who is at risk financially? Payment structure (plans) State (with federal match) N/A Health plans (MCOs/DMOs) State pays capitated monthly premium for enrolled members Payment structure (providers) Provider network contract State pays provider directly for claimed services Provider contracts directly with state Plan pays providers or subcontractors according to contract agreement Provider contracts with state first, then contracts with plan Credentialing N/A Plan verifies applicant provider credentials before contracting Page 20
MANAGED CARE EXPANSION IN TEXAS Enrollees (in millions) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Medicaid Recipients in Fee-for-Service and Managed Care State Fiscal Years 2006-2015 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fee-for-Service Managed Care Source: HHSC, Financial Services, HHS System Forecasting Page 21
TEXAS MEDICAID TODAY Delivery Types FY 2015 Enrollment (as of June 2015) FY 2015 Expenditures Clients Percent Amount Percent Managed Care 3,531,587 87.6% a $16.7 billion 79.9% Fee-for-Service 498,552 12.4% b $4.2 billion 20.1% Totals 4,030,139 Medicaid clients $20.9 billion a Estimate based on 90-day Financial Statistical Reports submitted by MCOs b Source: HHSC Strategic Decision Support Page 22
TEXAS MEDICAID AUDIT COVERAGE HHSC IG Audit HHSC Internal Audit HHSC contracted audits Financial statistical report audits MCO risk assessments MCO performance audits Recovery Audit Contractor Federal OIG (DHHS) State Auditor s Office CMS Medicaid Integrity Contractors CMS Payment Error Rate Measurement Texas Department of Insurance Pharmacy Benefit Manager (PBM) audits of pharmacies Page 23
MEDICAID FEE-FOR-SERVICE AUDIT Fee-For-Service Model Medicaid Eligibility Claim Payments HHSC Providers Claims Audit Emphasis Providers Audit Focus Identification and recovery of provider overpayments Overpayments Provider overpayments are recovered by HHSC HHSC has a direct relationship with providers Page 24
MEDICAID MANAGED CARE AUDIT Managed Care Model HHSC Capitation Payments Medicaid Eligibility MCO Member Eligibility Claim Payments Providers Claims HHSC has an indirect relationship with providers Audit Emphasis MCOs Medicaid eligibility Capitation payments Audit Focus SIUs Utilization mgmt. Quality of care Contract compliance Experience rebates Overpayments Provider overpayments are recovered by the MCO Page 25
TRANSITION FROM AUDITING FEE-FOR-SERVICE TO MANAGED CARE Coordinate and collaborate with: Legislature Governor s office HHSC executive management HHSC program areas, including the Medicaid/CHIP Division Stakeholders Audit entities Redefine audit client MCO or HHSC program contract management Page 26
TRANSITION FROM AUDITING FEE-FOR- SERVICE TO MANAGED CARE, CONT. Develop audit approaches Risk-based Coverage-based Geographic Large/small For profit/not-for-profit Audit each MCO at least once per year MCO-specific Focus on specific function across multiple MCOs SIUs Utilization management Page 27
MANAGED CARE AUDIT CHALLENGES Measurement of success Dollars recovered from providers was an important performance measure for audits under Fee-for-Service. Under Managed Care, dollars recovered from providers are returned to the MCO, so dollar impact to state is indirect (experience rebates and future capitation rates). Large number of MCOs and sub-contractors 19 MCOs, 2 DMOs MCOs transmit large amounts of protected health information across multiple IT applications and systems. MCOs may outsource claims processing, call centers, PBMs, behavioral health, etc. MCOs may have different contractual arrangements for payment of medical services with each provider. Page 28
MANAGED CARE AUDIT CHALLENGES, CONT. Inadequate quality and delivery of services In Fee-for-Service, audit focus was on the identification and recovery of overpayments made to providers for unnecessary or excessive services. Managed Care audits must address the risk that providers are not delivering necessary or adequate services due to an MCO s attempt to cut costs, such as by denying needed services during prior authorization. Page 29
PROVIDER FRAUD, WASTE, AND ABUSE Examples of managed care provider fraud, waste, and abuse: Billing for services not rendered Up-coding Unbundling Solicitation Providing unnecessary or excessive services Providing services outside scope of licensure Providing a service and billing for another or at a higher or inappropriate quantity Duplicate billing Billing for services rendered by excluded or non-contracted provider Page 30
MCO FRAUD, WASTE, AND ABUSE Examples of managed care plan fraud, waste, and abuse: Contract procurement fraud Provider credentials Financial solvency Inadequate network Bid-rigging Unreasonable prior authorization delays or denials Encounter data fraud Page 31
IG MANAGED CARE AUDITS IG has two managed care audits in progress: MCO special investigative units (SIU) performance MCO utilization management Page 32
SPECIAL INVESTIGATIVE UNIT AUDIT Audit objective is to determine the effectiveness of SIUs performance in: Determining and investigating fraud, waste, and abuse. Reporting SIU activities, results, and recoveries to HHSC. Audit background information MCOs received more than $17 billion in capitated services of federal and state funds in fiscal year 2015. HHSC Medicaid/CHIP Division administers MCO contracts and maintains oversight responsibility over MCOs. IG approves annual SIU fraud, waste, and abuse plans submitted by MCOs, and has oversight over MCO SIU performance. Page 33
SPECIAL INVESTIGATIVE UNIT AUDIT, CONT. The IG Audit Division s analysis of non-audited information submitted by MCOs indicates that: MCOs produce limited results in SIU detection, investigation, recovery, and referral efforts. In 2015, SIUs reported a total of $2.5 million in recoveries, representing two hundredths of one percent (0.02%) of $12.5 billion in medical claims submitted for services provided during the same year. The highest performing SIU in 2015 recovered or referred to IG Investigations less than one half of one percent of MCOs Medicaid and CHIP medical claims dollars. Page 34
UTILIZATION MANAGEMENT AUDIT Audit objective is to evaluate: The effectiveness of MCO acute care utilization practices in ensuring that care services, procedures, and facilities are medically necessary, appropriate, and efficient. Whether MCO acute care utilization practices achieve intended client outcomes, including those related to timeliness, availability, and quality of care. Audit background information MCOs use utilization management to review requests for approval of future medical or services needs, or to monitor and evaluate the appropriateness of past treatments and services. HHSC Medicaid/CHIP Division is responsible for managed care policy and oversight of MCOs. Page 35
IG MANAGED CARE AUDITS Additional audits on the IG audit plan include: Quality and completeness of MCO encounter data MCO comprehensive review DMO comprehensive review MCO support for quality payments MCO pharmacy benefit managed care compliance Physician administered drug rebate processes in MCOs MCO behavioral health initiatives funded with Medicaid dollars Page 36
CONCLUSION Understand difference between Fee-for-Service and Managed Care Direct vs. indirect relationship with provider and dollars recovered from provider Adapt to major changes in audit focus MCO-oriented Address audit challenges Develop new ways to conduct audits and measure success Page 37
QUESTIONS Questions? Page 38
CONTACT INFORMATION Stuart W. Bowen, Jr. Inspector General Stuart.bowen@hhsc.state.tx.us David Griffith, CPA, CIA, CGFM Deputy Inspector General for Audit David.griffith@hhsc.state.tx.us Page 39