Feeley & Driscoll's OIG Update: February 2011

The Department of Health and Human Services Office of the Inspector General (HHS-OIG) was established by Congress in 1976 to identify and eliminate fraud, abuse, and waste in HHS programs and to promote efficiency and economy in departmental operations. The OIG is responsible for conducting audits, evaluations, and both criminal and civil investigations for all HHS agencies. These functions are performed by the OIG's Office of Audit Services (OAS).

Feeley & Driscoll's OIG Update is a compilation of the latest and greatest additions from the OIG's website, listed in approximate order of greatness rather than lateness.

This update is a monthly publication from the Healthcare Group at Feeley & Driscoll, P.C.

Please visit us at: www.fdcpa.com/healthcare.htm. This OIG Update is also accessible from the F&D website, by visiting www.fdcpa.com/oig.updates.htm.

1. Oversight of the Prescriber Identifier Field in Prescription Drug Event Data for Schedule II Drugs
2. Results of Limited Scope Review at Adams County Community Development
3. Medicare Fraud Strike Force Charges 111 Individuals for More Than $225 Million in False Billing and Expands Operations to Two Additional Cities
4. Review of Ohio Department of Job and Family Services Claims for Costs Reported by the Hamilton County Department of Job and Family Services
5. Requirement for the Increased Federal Medical Assistance Percentage under the American Recovery and Reinvestment Act
6. Review of Indiana's Monitoring of the Community Services Block Grant Program
7. Twenty People Indicted in Florida for Health Care Fraud Scheme Involving Approximately $200 Million in Medicare Billing
8. Follow-up Review of Medicaid Cost-of-Care Overpayments Made to Nursing Facilities in the State of Maine
9. Review of Medicare Claims for Home Blood-Glucose Test Strips and Lancets-Durable Medical Equipment Medicare Administrative Contractor for Jurisdiction C
10. Review of Medicare Claims for Home Blood-Glucose Test Strips and Lancets-Durable Medical Equipment Medicare Administrative Contractor for Jurisdiction D
    

1. Oversight of the Prescriber Identifier Field in Prescription Drug Event Data for Schedule II Drugs

The OIG’s audit of Prescription Drug Event (PDE) records for Schedule II drugs found that approximately 228,000 PDE records with invalid prescriber identifiers (ID) accounted for approximately $20.6 million in gross drug costs in 2007. With limited guidance and edits in place for the prescriber ID field, CMS and the Medicare Part D sponsors have not identified these invalid prescriber IDs in the PDE records. Additionally, through the OIG’s separate analysis of three Schedule II drugs that are most often reported in investigations, the OIG were unable to identify the top prescribers for oxycodone, Ritalin, and methadone. Schedule II drugs have a high potential for abuse, have an accepted medical use with severe restrictions, and may cause severe psychological or physical dependence if abused.

To provide prescription drug benefits under Part D, CMS contracts with private entities called Part D sponsors that act as payers and insurers. Sponsors complete PDE records using information provided by the pharmacy responsible for filling the prescription. The prescriber ID field is filled by a number identifying the prescriber who is permitted to write prescriptions.

The OIG recommends that CMS:

• Issue specific guidance requiring sponsors to include a valid Drug Enforcement Administration number on both standard and nonstandard format PDE records involving Schedule II drugs;

• Implement an edit to reject PDE records for Schedule II drugs when the prescriber ID field contains an invalid prescriber ID number.

CMS did not concur with the OIG’s recommendations. In response, the OIG modified the first recommendation, and maintained the second recommendation.

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2. Results of Limited Scope Review at Adams County Community Development

The OIG reviewed the financial condition of Adams County Community Development (ACCD) as part of a nationwide series of reviews of Community Action Agencies that have received funding under the American Recovery and Reinvestment Act of 2009.

Based on our assessment, we believe that ACCD is financially viable and has the capacity to manage and account for Federal funds and to operate its Community Services Block Grant (CSBG) program in accordance with Federal regulations. However, we noted weaknesses related to the allowability of costs, data quality and reporting, policies and procedures, and the whistleblower process.

The OIG recommended that the Administration for Children and Families consider the information presented in this report in assessing ACCD's ability to operate the CSBG program in accordance with Federal regulations. In written comments on our draft report, ACCD provided information as to corrective actions it has taken since our review, as well as additional information related to some of our findings.

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3. Medicare Fraud Strike Force Charges 111 Individuals for More Than $225 Million in False Billing and Expands Operations to Two Additional Cities

The Medicare Fraud Strike Force today charged 111 defendants in nine cities, including doctors, nurses, health care company owners and executives, and others, for their alleged participation in Medicare fraud schemes involving more than $225 million in false billing, announced Attorney General Eric Holder, Health and Human Services (HHS) Secretary Kathleen Sebelius, FBI Executive Assistant Director Shawn Henry, Assistant Attorney General Lanny A. Breuer of the Criminal Division and HHS Inspector General Daniel Levinson. Today, the Department of Justice (DOJ) and HHS announced the expansion of Medicare Fraud Strike Force operations to two additional cities – Dallas and Chicago. Today’s operation is the largest-ever federal health care fraud takedown.

The joint DOJ-HHS Medicare Fraud Strike Force is a multi-agency team of federal, state, and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing. More than 700 law enforcement agents from the FBI, HHS-Office of Inspector General (HHS-OIG), multiple Medicaid Fraud Control Units, and other state and local law enforcement agencies participated in today’s operation. In addition to making arrests, agents also executed 16 search warrants across the country in connection with ongoing strike force investigations.

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4. Review of Ohio Department of Job and Family Services Claims for Costs Reported by the Hamilton County Department of Job and Family Services

The OIG’s review found $59 million (Federal share) in unallowable Administration for Children and Families (ACF) costs identified in the Ohio Department of Job and Family Services' (State agency) report for services provided by child welfare organizations from July 1, 2001, through June 30, 2004. The OIG conducted this audit at the request of ACF after the State agency identified a total of $216 million in unallowable costs reported by the Hamilton County Department of Job and Family Services (County agency). The County agency inappropriately allocated the child welfare organizations' costs through indirect cost pools. The State agency inappropriately claimed the costs because it relied on the County agencies reported program costs and did not ensure that the County agency allocated the costs in accordance with the cost allocation plan and other Federal requirements.

The OIG recommends that the State agency:

• Refund $59 million to the Federal Government for County agency costs inappropriately claimed through the cost pools;

• Ensure that the County agency appropriately allocates and reports allowable costs in accordance with the cost allocation plan and other Federal requirements.

The State agency generally concurred with the OIG’s findings and recommendations.

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5. Requirement for the Increased Federal Medical Assistance Percentage under the American Recovery and Reinvestment Act

For the recession adjustment period (October 1, 2008, through December 31, 2010), the American Recovery and Reinvestment Act of 2009 (Recovery Act) provided an estimated 87 billion in additional Medicaid funding based on temporary increases in States' Federal medical assistance percentage (FMAP). However, a State was not eligible for the increased FMAP if any amounts attributable (directly or indirectly) to such an increase were deposited or credited into any reserve, or rainy day, fund.

The OIG’s review found that Alabama complied with the Recovery Act reserve or rainy day fund requirement for receiving increased FMAP. Specifically, the State did not use additional Medicaid funding to supplement any reserve or rainy day account. Therefore, the OIG has no recommendations.

However, the State drew Federal Recovery Act funds that exceeded the amount of the Recovery Act expenditures reported on its Quarterly Statements of Expenditures for the Medical Assistance Program (CMS-64 reports) for the audit period. The State agency did not provide an explanation for the excessive drawdown of Recovery Act funds.

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6. Review of Indiana's Monitoring of the Community Services Block Grant Program

The State agency established adequate internal controls for assessing and monitoring Community Services Block Grant (CSBG) funds provided to Community Action Agencies (CAA) under the Recovery Act. However, the OIG did not perform procedures to determine the operating effectiveness of these controls. Accordingly, the OIG does not express any opinion on the operating effectiveness of any aspects of the State agency's assessing and monitoring CSBG funds provided to CAAs under the Recovery Act, individually or in the aggregate.

This report contains no recommendations.

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7. Twenty People Indicted in Florida for Health Care Fraud Scheme Involving Approximately $200 Million in Medicare Billing

The OIG identified a total of 25 Healthcare Common Procedure Coding System (HCPCS) codes with average sales prices (ASP) that exceeded average manufacturer prices (AMP) by at least 5 percent in the second quarter of 2010. Of these 25 HCPCS codes, 10 had complete AMP data (i.e., AMP data for every drug product that CMS used to establish reimbursement amounts). If reimbursement amounts for all 10 codes with complete AMP data had been based on 103 percent of the AMPs during the fourth quarter of 2010, the OIG estimates that Medicare expenditures would have been reduced by $713,000 in that quarter alone.

By law, the OIG must notify the Secretary of Health & Human Services (the Secretary) if the ASP for a particular drug exceeds the drug's AMP by a threshold of 5 percent. If that threshold is met, the Secretary may disregard the ASP for the drug when setting reimbursement and shall substitute the payment amount with the lesser of either the widely available market price or 103 percent of the AMP. This is OIG's 19th report comparing ASPs to AMPs. Although the OIG has consistently recommended that CMS develop a price substitution policy and subsequently lower reimbursement for drugs that meet the 5-percent threshold, no price substitutions have been made to date. In July 2010, CMS published a proposed rule that, among other things, specified the circumstances under which AMP-based price substitutions would occur. However, the agency has opted not to finalize the price substitution policy from the proposed rule.

The remaining 15 of 25 HCPCS codes also met the 5-percent threshold in the second quarter of 2010 but did not have AMP data for every drug product that CMS used when calculating reimbursement. For 5 of the 15 codes, price reductions may be legitimately warranted because missing AMPs likely had little influence on the pricing comparison results for these codes. The OIG could not compare ASPs and AMPs for an additional 54 HCPCS codes because AMP data were not submitted for any of the NDCs that CMS used to calculate reimbursement. Manufacturers for 16 percent of those drug products had Medicaid drug rebate agreements and were therefore generally required to submit AMPs. The OIG will continue to work with CMS to evaluate and pursue appropriate actions against manufacturers that fail to submit required pricing data.

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8. Follow-up Review of Medicaid Cost-of-Care Overpayments Made to Nursing Facilities in the State of Maine

The Maine Department of Health and Human Services (State agency) did not report Medicaid overpayments totaling $1.68 million from 2008 to 2009 in accordance with Federal requirements (the Federal share of these overpayments is $1.09 million). Federal law requires States to refund the Federal share of a Medicaid overpayment, and Federal regulations require States to refund the Federal share of an overpayment to a provider at the end of the 60-day period following the date of discovery, whether or not the State has recovered the overpayment. These deficiencies occurred because the State agency did not credit the Federal claim until the nursing facilities returned overpayments.

The OIG recommends that the State:

• Refund CMS $1.09 million in Medicaid cost-of-care overpayments that it made to nursing facilities on its next quarterly CMS-64;

• Implement policies and procedures to ensure that overpayments identified are returned in the required amount of time.

The State concurred with the OIG’s recommendations.

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9. Review of Medicare Claims for Home Blood-Glucose Test Strips and Lancets-Durable Medical Equipment Medicare Administrative Contractor for Jurisdiction C

The OIG estimated that CIGNA Government Services, LLC (CGS), and Palmetto Government Benefits Administrators, LLC (Palmetto GBA), the durable medical equipment (DME) Medicare contractors for Jurisdiction C, inappropriately allowed for payment approximately $125 million in claims for calendar year (CY) 2007 for home blood glucose test strip and/or lancet supplies (test strips and/or lancets) that the OIG identified as high-utilization claims. The OIG estimated that CGS and Palmetto GBA inappropriately paid approximately $96.6 million to DME suppliers. CGS and Palmetto GBA could have saved Medicare an estimated $96.6 million for CY 2007 if they had had controls to ensure that claims for test strips and/or lancets complied with certain Medicare documentation requirements.

Medicare Part B covers test strips and lancets that physicians prescribe for diabetics. Medicare utilization guidelines allow up to 100 test strips and 100 lancets every month for insulin-treated diabetics and every 3 months for non-insulin-treated diabetics. Additional requirements apply for reimbursement of a claim for a quantity of test strips and/or lancets that exceeds the utilization guidelines (high-utilization claim).

To help achieve potential savings for the Medicare program in future years, the OIG recommends that CGS, as the current DME Medicare administrative contractor for Jurisdiction C:

• Implement system edits to identify high-utilization claims for test strips and/or lancets and work with CMS to develop cost-effective ways of determining which claims should be further reviewed for compliance with Medicare documentation requirements;

• Implement system edits to identify claims for test strips and/or lancets that have overlapping service dates for the same beneficiary;

• Enforce Medicare documentation requirements for claims for test strips and/or lancets by identifying DME suppliers with a high volume of high utilization claims, performing prepayment reviews of those suppliers, and referring them to the Office of Inspector General or CMS for further review or investigation when necessary.

In response, CGS concurred with the OIG’s recommendations and provided information on actions that it had taken or planned to take to address the recommendations.

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10. Review of Medicare Claims for Home Blood-Glucose Test Strips and Lancets-Durable Medical Equipment Medicare Administrative Contractor for Jurisdiction D

The OIG estimated that Noridian Administrative Services, LLC (Noridian), the durable medical equipment (DME) Medicare administrative contractor for Jurisdiction D, inappropriately allowed for payment approximately $40.5 million in claims for calendar year (CY) 2007 for home blood-glucose and/or lancet supplies (test strips and/or lancets) that the OIG identified as high utilization claims. The OIG estimated that Noridian inappropriately paid approximately $30.9 million of this amount to DME suppliers. Noridian could have saved Medicare an estimated $30.9 million for CY 2007 if it had had controls to ensure that claims for test strips and/or lancets complied with certain Medicare documentation requirements.

Medicare Part B covers test strips and lancets that physicians prescribe for diabetics. Medicare utilization guidelines allow up to 100 test strips and 100 lancets every month for insulin-treated diabetics and every 3 months for non-insulin-treated diabetics. Additional requirements apply for reimbursement of a claim for a quantity of test strips and lancets that exceeds the utilization guidelines (high utilization claim).

To help achieve potential savings for the Medicare program in future years, the OIG recommends that Noridian:

• Implement system edits to identify high utilization claims for test strips and/or lancets and work with CMS to develop cost-effective ways of determining which claims should be further reviewed for compliance with Medicare documentation requirements;

• Implement system edits to identify claims for test strips and/or lancets that have overlapping service dates for the same beneficiary;

• Enforce Medicare documentation requirements for claims for test strips and/or lancets by identifying DME suppliers with a high volume of high utilization claims, performing prepayment reviews of those suppliers, and referring them to the Office of Inspector General or CMS for further review or investigation when necessary.

Noridian provided information on actions that it had taken to address the OIG’s recommendations.

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