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MICHELLE SNYDER, CHIEF FINANCIAL OFFICER
HEALTH CARE FINANCING ADMINISTRATION
"GOVERNMENT WASTE CORRECTIONS ACT"
HOUSE GOVERNMENT REFORM
MANAGEMENT, INFORMATION, & TECHNOLOGY SUBCOMMITTEE
June 29, 1999
Chairman Horn, Congressman Turner, distinguished Subcommittee
members, thank you for inviting us to testify about the
Government Waste Corrections Act and our extensive efforts
to prevent and recoup improper payments. As you know, we
reduced Medicare's payment error rate from 14 percent to
7 percent in just two years, and we continue to work diligently
to build upon this success. We are very grateful for this
Subcommittee's support in these efforts.
We have had good success with efforts similar to the recovery
audits described in the proposed legislation. Of course,
we prefer to prevent improper payments from occurring in
the first place. We are making solid progress on that front,
in large part due to increased efforts by providers to document
and file claims correctly. We also use nearly 100,000 computerized
"edits" that detect and automatically deny payment
for improper claims, as well as manual medical record reviews
and cost report audits. Our success with such efforts strongly
suggests that they may have value for other government agencies.
We are making solid progress in identifying and collecting
overpayments as well. As you know, the HHS Inspector General's
CFO audits have found that the vast majority of Medicare
claims paid by our contractors are correct on their surface.
Finding most payment errors requires going beyond what's
on the claim to look at the documentation behind the claim
and its medical necessity. These activities are now primarily
performed by our claims processing contractors. We recently
held an open competition to establish a pool of new Program
Safeguard Contractors to augment these efforts, and the
President is proposing legislation to further increase competition
among Medicare contractors.
The Act's authorization to compensate recovery auditors
on a contingency basis may have appropriate uses in some
circumstances, as the Department of Defense experience may
suggest. It may have value for Medicare in the limited situations
where we are unable to collect from providers. However,
most overpayments are now recouped by making deductions
from future payments to providers who have been overpaid.
We also do not believe contingency payment is necessary,
or necessarily prudent, for identification of Medicare payment
errors. As mentioned above, we have made solid progress
identifying payment errors under existing contractor arrangements.
More importantly, paying on a contingency basis for error
identification could be perceived pejoratively as a "bounty
system" by health care providers. Providers have raised
such concern about even the very modest reward available
to beneficiaries who uncover fraud under the Health Insurance
Portability and Accountability Act. The vast majority of
Medicare providers make only honest errors, and their good
will and cooperation are key to much of our success in preventing
improper payments in the first place.
Furthermore, a financial incentive to identify errors could
well lead to inappropriate denials and thus create errors,
instead. Our obligation is to pay correctly, and we do not
want to deny proper payment any more than we want to make
improper payment. Inappropriate denials resulting from contingency
contracts also could backfire on the bottom line due to
increased costs for appeals filed by beneficiaries and providers
denied proper payment.
We also believe that all recouped overpayments made from
the Medicare Trust Funds should be returned to the Trust
Funds or general revenue funds, as is the case now. This
will ensure that Medicare can continue to pay for necessary
health care for our beneficiaries, and is consistent with
the fraud and abuse control program created under the Health
Insurance Portability and Accountability Act.
Since the Clinton Administration took office, the Department
of Health and Human Services has taken numerous steps to
stop fraud, waste, and abuse. Achieving this goal is one
of our top priorities at HCFA. With help from Congress,
providers, beneficiaries, and our many other partners, we
have achieved record success in assuring proper payments
and recouping improper payments.
Obviously, the most cost effective way to collect overpayments
is to not make them in the first place. We have had great
success by cooperating with providers to help them document
and file claims properly to prevent improper payments. Documentation
errors had been the single largest factor in our error rate,
but have declined by almost 80 percent from fiscal 1996
to fiscal 1998. They now account for only about 17 percent
of improper payments.
That is why our Comprehensive Plan for Program Integrity
features increased efforts to educate providers about how
to properly document and file claims. Most providers who
make billing errors have no intent to do anything wrong,
but simply make honest mistakes, and we want to ensure that
providers understand our coding and documentation rules.
We are therefore taking nationwide a highly successful provider
education pilot project conducted last year in 13 States.
We also are meeting with physicians around the country
to explore ways we might be able to make it easier to understand
and comply with Medicare rules and regulations. In all these
activities, it is essential that we maintain a constructive
partnership with providers.
Our Comprehensive Plan also features efforts to increase
and improve ongoing activities that parallel the "recovery
audits" described in the Act. For example, we are tightening
the performance standards and evaluation for contractor
medical review efforts, in which physicians review medical
records to ensure that claims are correct. We also are engaging
independent contractors to evaluate key medical review processes.
Some of these medical reviews are conducted on a random,
post-payment basis, and others are focused on providers
with aberrant billing patterns.
Other ongoing activities we use to identify overpayments
We also pursue legal remedies, including civil and criminal
prosecutions, to recover funds that providers have obtained
through fraudulent acts. The Federal Government won or negotiated
more than $480 million in judgments, settlements, and fines
We support any legislation that will give government agencies
tools to help collect overpayments. However, given the extremely
high priority this Administration and our Agency place on
fighting fraud, waste, and abuse, it is unlikely that paying
for recovery audits as envisioned in H.R. 1827 would significantly
increase our success. We are concerned that contingency
fees could have a negative impact on the constructive partnership
with providers that is critical to preventing improper payments
in the first place.
I thank you again for holding this hearing, and I am happy
to answer any questions you might have.