Managed care organizations need to increase their fraud prevention efforts, OIG says

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HHS Inspector General Daniel Levinson
HHS Inspector General Daniel Levinson

Managed care organizations, which oversee 80% of all Medicaid enrollees, are weak in fighting fraud and abuse, the Health and Human Services Inspector General said Wednesday.

MCOs often missed identifying fraudulent overpayments and referred few cases of suspected fraud in 2015, the July report from Inspector General Daniel R.  Levinson states. Not all organizations used analysis for fraud identification and when they took action against potentially fraudulent providers, they did not generally tell the state, he wrote.

The fates of Medicaid and the long-term care industry are thickly intertwined, with the former providing about two-thirds of the funding for the latter.

The MCOs analyzed were more likely to identify and recover overpayments, such as erroneous billing, the investigators found. In 2015, there were 38 MCOs that found $831.4 million in overpayments unrelated to fraud. In contrast, 38 MCOS identified $57.8 million in overpayments related to fraud and abuse. In general, there's a lack of incentives for the organizations to invest in preventing overpayments related to fraud and abuse, the report found.

“For example, one MCO official explained that MCOs do not have incentives to conduct proactive data analysis or take actions to put providers on prepayment review to prevent ‘bad dollars from going out the door,'” the report states.

Among the OIG's recommendations were for the Centers for Medicare & Medicaid Services to work with states on improving referral of cases of suspected fraud or abuse and increase reporting to the state about corrective actions taken against providers suspected of fraud or abuse. It also wants the organizations to provide complete and timely encounter data. CMS agreed with all but one recommendation, which was working with states to standardize the reporting of referrals in the state.

“CMS noted that state flexibility is an important feature of the Medicaid program and that states have the flexibility to decide whether standardization would be beneficial to their managed care environment,” the report states.

While the OIG was critical of the organizations, it also noted that a previous report found a quarter of the MCOs surveyed did not report a single case of fraud and abuse to their state Medicaid agencies in 2009.