The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) annual release of a new Work Plan both summarizes the results achieved last year and highlights new areas for examination in the next. This year’s Work Plan reported rising audit results but declining investigative results, in contrast to previous years.

In examining the new topics added to the Work Plan, two themes emerge. First, many of the new payment audits reflect OIG’s use of data mining to identify providers or suppliers who could potentially be considered “outliers” from the average use of a particular code or procedure. Data mining will also play a significant role in connection with the second theme—a notable increase in OIG’s review of significant, and some controversial, policy issues concerning changes in the country’s health care delivery system, operation of HHS programs and the effectiveness of HHS agency oversight of those changes and programs.

Based on how OIG identified new study topics, the main takeaway from the Work Plan is “know your data.” Whether the issue is Medicare claims or data reporting obligations, the OIG increasingly turns to data analytics to both generate audit or investigative leads or to study HHS program effectiveness.

2015 Results

The fiscal year 2016 Work Plan, released November 3, 2015, stated that OIG expected recoveries of nearly $1.3 billion in audit receivables for its 2015 work, an increase from the $834.7 million reported in 2014. OIG reported a significant drop in the investigative receivables amount, however, from $4.1 billion in 2014 to $2.22 billion in 2015. The number of civil actions, defined as false claims and unjust enrichment lawsuits filed in federal courts, civil monetary penalty settlements and self-disclosure recoveries, increased from 533 in 2014 to 682 in 2015. These statistics may foreshadow a corresponding decrease in the total recoveries under the False Claims Act, but potentially an increase in the number of filed cases, in the upcoming Health Care Fraud and Abuse Control Program Report issued by the U.S. Department of Justice and HHS. However, the almost 30 percent increase in the number of civil actions demonstrates the government’s, and whistleblowers, sustained attention to the health care industry.

2016 Planned Work

Federal Health Care Program Payment Audits

OIG added a number of new reviews that expand OIG’s work in areas previously identified as priorities, such as hospital-based services, post-acute care, lab testing and Part D. Many of these topics lend themselves to selecting audit targets through data mining to find providers or suppliers who are “outliers” from their peers or who otherwise appear to exhibit aberrant billing patterns. 

• Hospitals: OIG stated it would examine whether hospitals properly reported inpatient and outpatient claims for services related to replacing a defective medical device. This situation could be indicated by having two claims for the same surgery for the same beneficiary, but the second claim does not include the modifier indicating that the device provided was a replacement device covered under a warranty (and therefore the hospital did not need to pay for the second device). OIG will also examine hospital payments for outpatient services provided during an inpatient stay when those services were included in the Part A payment.

• Physicians: Physician data mining efforts include whether physicians properly enrolled to order or refer certain services, supplies or durable medical equipment (DME) in compliance with the Centers for Medicare and Medicaid Services’ (CMS) new regulation, whether professional claims for anesthesia services are linked to a corresponding service, whether physicians are properly billing for home visits and “prolonged” evaluation and management services.

• Skilled nursing facilities: Building on several audits over the years of rehabilitation therapy services and the relative utilization group (RUG) payment model, OIG added a more comprehensive audit of skilled nursing facilities (SNFs) that could encompass any aspect of SNF billing, including whether “the documentation requirement in support of the claims paid by Medicare” was met. Such SNF documentation includes (1) a physician order at the time of admission for the resident’s immediate care; (2) a comprehensive assessment; and (3) a comprehensive plan of care prepared by an interdisciplinary team that includes the attending physician, a registered nurse and other appropriate staff. This audit follows a broad study issued in September concluding that CMS re-evaluate (again) the SNF Medicare payment system.

• Durable medical equipment: OIG will review Medicare Part B payments for orthotic braces to determine whether durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers’ claims were medically necessary and were supported in accordance with Medicare requirements. OIG notes this review will encompass applying the utilization guidelines and documentation requirements for orthotic braces of the contractor’s local coverage determinations.

• Prescription drugs: OIG will review whether Medicare Part D beneficiaries are being prescribed drugs that should not be prescribed in combination with other drugs. These would include drugs that have a severe interaction when used in combination with other drugs and drugs that should not be co-prescribed.

Health Care System Reviews

OIG announced a number of potentially high-profile and high-impact review topics spanning many aspects of CMS’ oversight of the Medicare and Medicaid programs and health reform as well as other HHS agencies.

Proper Payment Levels

• Prescription drugs: OIG initiated several new studies related to payments for prescription drugs. OIG intends to examine billing trends within the Medicare Part D program, wading into two areas that have been the subject of prominent news coverage—opioid prescriptions and brand name drug pricing. OIG specifically noted that its preliminary data analysis showed that the most commonly used brand name drug pricing increased 13 percent in 2013 under Part D, which is eight times faster than inflation. In Medicaid, OIG will review specialty drug pricing and payment systems, such as how much states paid for specialty drugs, how states determine payment methodologies for specialty drugs, and the differences in reimbursement amounts for these drugs among the states. This review could potentially go in the other direction as the brand name study and conclude that the disparate and inconsistent Medicaid payment rates among states for specialty drugs may lead to reduced beneficiary access.

• Devices: In connection with the orthopedic brace billing audit, OIG said it will compare Medicare payments made for orthotic braces to amounts paid by non-Medicare payers, such as private insurance companies “to identify potentially wasteful spending.” In addition, OIG will look at whether Medicare could save money renting, rather than giving the beneficiary the option of renting or buying bone-growth stimulators. Finally, OIG will also explore why there was an increase of 127 percent in billing for ventilators from 2013 to 2014.

CMS Oversight

• Data validation: In addition to the review of the Open Payments Database announced in the 2015 mid-year update, this year’s Work Plan calls for reviewing CMS’ systems for overseeing and validating a number of programs in which certain types of data are reported to CMS, including:

  • Hospital reported quality data, which is used for the hospital value-based purchasing program and acquired condition reduction program

  • Part D beneficiary eligibility determinations through transactions that are part of the coordination of benefits process and calculating a beneficiary’s true-out-of-pocket balance 

  • CMS' oversight of Medicare Advantage (MA) encounter data validation, including the extent to which CMS’ Integrated Data Repository contains timely, valid and complete MA encounter data

• Part D pharmacies: This review examines CMS’ ability to oversee Part D pharmacies—especially those identified as high risk—and how they are enrolled in Medicare, building on numerous OIG reports have raised concerns about the oversight of Part D and pharmacy-related fraud. Emphasizing the enforcement spotlight shining on Part D pharmacies, the Work Plan references the June 2015 Medicare Strike Force takedown, characterized as the largest national health care fraud takedown in history, which resulted in more than 240 subjects being charged with defrauding Medicare and Medicaid.

• ICD-10: OIG intends to review how well CMS implemented the ICD-10 system—including providing guidance to hospitals and physicians in transitioning to the new system.

• ACO performance:  Expected in 2017, this potentially significant report studies the performance of accountable care organizations (ACOs) on quality measures and cost savings over the first three years of program. OIG will endeavor to describe characteristics of those ACOs that performed well and achieved savings and identify ACOs’ strategies for and challenges to achieving quality and cost savings. This review on top of the ACO topic added in the 2015 mid-year update concerning identifying best practices and possible challenges in ACO use of electronic health records, such as interoperability issues.

• Co-op plans:  OIG also said it will follow up on prior work involving the Affordable Care Act’s nonprofit co-op insurance plans, at least eight of which have failed since the inception of the program. This review will examine the loan award selection process, whether co-ops were in compliance with federal regulations and program requirements in managing the federal funds, and determine the effectiveness of changes CMS made to the program in 2015.

Other HHS Agency Oversight

• Office for Civil Rights (OCR): Despite releasing two reports in September calling on OCR to strengthen its efforts in both general enforcement of the Health Insurance Portability and Accountability Act (HIPAA) privacy standards and enforcement of security breach reporting requirements, OIG plans to conduct another broad inquiry into OCR’s auditing activities.

• U.S. Food and Drug Administration (FDA): Protecting electronic protected health information (ePHI) is not only OCR’s worry. OIG intends to review whether FDA’s oversight of network-connected medical devices at hospitals “is sufficient to effectively protect associated electronic protected health information and ensure beneficiary safety.”

• Office of Human Research Protections (OHRP): OIG will examine OHRP’s compliance oversight process to review violations of human research subject regulations over a lengthy time period—from 2000 to 2014. Included in the review is a description of the ways in which OHRP works with relevant government entities and institutional review boards during its compliance evaluations, and the ways OHRP’s workwith these entities enhances or constrains its capacity to conduct compliance evaluations.

Revised Investigative Priorities

The Work Plan not only summarizes audit and study topics but also provides an overview of investigative activities and priority risk areas. OIG made some changes to this section that specifically lists areas OIG views as having higher risk of abuse, including:

• Controlled and non-controlled prescription drugs

• Home health agencies, personal care, and home and community-based services

• Ambulance transportation 

• Durable medical equipment

• Diagnostic radiology and laboratory testing

Also, while OIG discusses more traditional investigative areas, such as billing for services not rendered, medically unnecessary and misrepresented services, the Work Plan removed specific references to “failure of care” or “worthless services.” This step away from the “worthless services” theory may be related to the lack of a victory pursuing this theory in False Claims Act litigation, stemming from the U.S. Court of Appeals for the Seventh Circuit’s 2014 decision in United States ex rel. Absher v. Momence Meadows Nursing Ctd., Inc  stating, “Services that are ‘worth less’ are not ‘worthless.’” The Work Plan mentions the solicitation and receipt of kickbacks, which focuses attention on either the physician or a patient for their involvement in the fraud scheme, instead of the more traditional enforcement target—the party offering or paying the kickback. This reminder of OIG’s interest in physicians is consistent with the uptick in Special Fraud Alerts and other guidance published and civil money penalty actions taken in recent years that focus on physician compliance with the anti-kickback statute.