August 3, 2016

$42 Billion CMS Claim Questioned

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EDITOR’S NOTE: The Centers for Medicare & Medicaid Services (CMS) recently released a report showing that investments made in program integrity activities resulted in the agency saving $42 billion over a two-year period stretching from the 2013 to 2014 fiscal years. “This equates to an average savings of $12.40 for each dollar spent on Medicare program integrity alone,” the agency noted. “These savings represent funds that remain available to provide needed healthcare to Medicare, Medicaid, and Children’s Health Insurance Program beneficiaries nationwide and reflect the increasing success of CMS’ efforts to proactively prevent improper payments.” Senior healthcare analyst Frank Cohen responds to those comments in this article.

I read through the CMS report several times and while I applaud any effort to reduce fraud, waste, and abuse, I was a bit surprised by the $42 billion figure recorded over just two years. This is the first time I have heard of such a large amount, and I wish that CMS would have provided a better breakdown of where the money came from. 

For example, how did they prevent 70 percent of all payments, and where did the remainder come from? And while we’re at it, just what constitutes “savings?” Is it just payments that weren’t made that should have been made? 

For example, in the 2014 report to congress, CMS bragged about preventing $820 million in payments from being made as a result of the Fraud Prevention System, which accounts for the predictive analytics mentioned in the article. In fact, if you take the press release at face value and apply the 70 percent or so that is claimed to have been prevented, that means that for 2013 and 2014, CMS prevented the payout of some $29 billion – and I can’t say that I believe that is really possible.

I imagine that a lot of these dollars had to come from penalties, such as under the False Claims Act, which can translate thousands of dollars in overpayments into tens of millions of dollars in penalties. Interestingly enough, when you look at recoupment efforts published by CMS, we saw a precipitous decline in 2014 over 2013 – but I may not be seeing the big picture. Even in the 2015 Comprehensive Error Rate Testing (CERT) study, while extrapolated overpayments are in the billions of dollars, they are nowhere near the tens of billions being reported. 

What’s frustrating to me, as a statistician, is the inability to validate these claims at a more granular level. At a return on investment (ROI) of 12.4 to 1, it means that CMS spent around $3.3 billion to get to the $42 billion mark. And I get the ROI of 12.4 to 1, but what I don’t get is from where the numbers actually come. I mean, it seems that there is a huge disconnect between the $820 million claimed in 2014 under the fraud prevention system and the $29 billion claimed here, using that plus other techniques. In fact, if this is true, if there is another $28 billion that came from other programs (in essence, where the FPS program was only responsible for 1.9 percent of all prevented payments), then maybe it should be scrapped, as there isn’t any way that it could have a positive ROI, at least not based on these other numbers.

In the end, my problem is that I just don’t believe the numbers, and at least from my experience, in the past CMS has not proven to be very reliable when it came to reporting these types of metrics.

So while I still agree with preventing fraud, waste and abuse, I will reserve my judgment regarding the accuracy of CMS’s numbers until they publish something that provides some degree of detail that can be validated by outside analysts.

And that’s the world according to Frank. 

About the Author

Frank Cohen is the director of analytics and business intelligence for DoctorsManagement, a Knoxville, Tenn. consulting firm. Mr. Cohen’s specializes in data mining, applied statistics, practice analytics, decision support, and process improvement.

Contact the Author

fcohen@drsmgmt.com

Comment on this Article

editor@racmonitor.com 

Frank D. Cohen, MPA, MBB

Frank Cohen is the director of analytics and business intelligence for DoctorsManagement, a Knoxville, Tenn.-based consulting firm. Mr. Cohen specializes in data mining, applied statistics, practice analytics, decision support, and process improvement.

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