March 2015
The Government Accountability Office (“GAO”) recently published a summary of the testimony of US Comptroller General Gene L. Dodaro regarding government efficiency and effectiveness. The GAO reports annually to Congress on federal programs, agencies, offices, and initiatives (both within departments and government-wide) that are fragmented, overlapping, or duplicative. It also identifies opportunities for cost savings or increased revenues. One area that GAO highlighted as offering the potential for significant cost savings is improper payments, i.e. payments that should not have been made or were made in the incorrect amount.
For the first time in recent years, the government-wide improper payment estimate has significantly increased. It is estimated at $125 billion in fiscal year 2014, $19 billion higher than the $106 billion reported for fiscal year 2013. The increase primarily relates to Medicare, Medicaid, and the Earned Income Tax Credit, which combined account for over 76 percent of the government-wide estimate.
The GAO applauds the Centers for Medicare and Medicaid Services for their strong commitment to improving efficiency and effectiveness, but there are numerous recommendations previously communicated that have yet to be enacted. Of the approximately 440 recommended actions across 180 various government entities that GAO identified in its past annual reports, 44 percent were only partially addressed and 22 percent were not addressed at all. The benefits accruing from items already addressed are believed to exceed $20 billion currently, with $80 billion to come in future years. However, the unaddressed items continue to represent tens of billions of dollars of missed opportunities for additional savings related to improved efficiencies, cost savings, or increased revenue in defense, information technology, education and training, health care, energy, and tax enforcement.
Since 2008, the U.S. Department of Health and Human Services’ Centers for Medicare & Medicaid Services have been relying on Zone Program Integrity Contractors (ZPIC) to perform audits on behalf of the federal government. ZPIC are independent contractors responsible for identifying potential fraud, investigating it thoroughly and in a timely manner, and taking swift action―such as working to revoke suspect providers’ Medicare billing privileges or referring such providers to law enforcement.
The ZPIC contractors audit all claim types. To initially identify entities to audit, ZPICs look at billing trends and patterns, concentrating on providers whose billings are higher than other providers in the community. Once a provider has been identified as an outlier, a medical review of a sample of claims occurs. The results of this sample-based audit are extrapolated to estimate the entire population of claims. In so doing, a relatively small population of errors is expanded to cover the much larger population of claims that were not examined. While the process of statistical extrapolation is generally accepted as valid, each extrapolation is unique and must be performed carefully. Large extrapolation errors can and do occur if proper statistical processes are not followed.
The recent increase reported by the GAO will no doubt increase pressure on ZPIC contractors to recover improper payments. As a result, healthcare providers should expect increased scrutiny of their billings. However, when faced with a statistically-based analysis from a government audit, providers should not assume that the government’s statistics are performed and interpreted without error.
Fulcrum Inquiry has substantial health care experience. We assist providers to analyze properly the statistical extrapolation results proposed by federal auditors.