INSIDE WASHINGTON:
Anti-fraud effort disappoints

[February 24, 2012]  WASHINGTON (AP) -- Launched last summer, a $77 million computer system to stop Medicare fraud before it happens had prevented just one suspicious payment by Christmas. That saved taxpayers exactly $7,591.

Hoping for much better results, a disappointed Sen. Tom Carper, D-Del., says, "I wondered, did they leave out some zeros?"

Lawmakers had expected the system to finally allow Medicare to stanch a $60-billion-a-year fraud hemorrhage. Now they're worried about its future performance.

Medicare officials say it's unfair to grade the new technology on a single statistic.

"Suspending payments is only one way of stopping the money," says Ted Doolittle, deputy director of Medicare's anti-fraud program. "There's lots of ways of stopping the money, and we are using them all. Looking at payment suspensions only -- that's an unsophisticated view that doesn't give you a full picture of our activities."

When other benefits of the system are taken into account, such as cases referred to investigators and changes to payment software that result in automatic denial of suspect claims, the potential savings in the first six months of operation easily exceed $20 million, Medicare officials indicated in a Jan. 27 letter to Carper. However, officials now acknowledge they don't know how much of that money has actually been recovered.

Other experts point out that the mission of the new system was to stop bogus payments before they leave the Treasury's coffers, ending what's known as "pay and chase," where the agency automatically pays claims, even suspicious ones, and then reviews them weeks after the fact.

That can be a self-defeating way to do business. Law enforcement is usually several steps behind the fraudsters, who sometimes manage to flee the country with millions plundered from the government. The new computer system was meant to elevate Medicare's game, putting it in the same league as major credit card companies that can freeze accounts proactively.

"The whole idea for creating this technology was they were going to be able to end pay-and-chase," said Hank Walther, former head of the Justice Department's health care fraud division. "But we haven't yet seen evidence of its success."

Medicare has "got to explain to us clearly that they are implementing the program, that their goals are well-established, reasonable, achievable, and they're making progress," added Carper, chairman of a subcommittee that oversees federal financial management. "We're not sure if they've done those things."

Medicare has been a highly sensitive political issue for the Obama administration since Democrats lost the House in 2010 partly due to a backlash from seniors over program cuts to help finance the president's health care overhaul. Since then, top officials have emphasized the administration's stewardship of Medicare, touting better benefits, prescription savings, manageable premiums -- and an all-out campaign against fraud.

Just last week, at a news conference to announce a record $4 billion in fraud recoveries last year, Health and Human Services Secretary Kathleen Sebelius heaped praise on the new computer technology.

"Now, just as your credit card company freezes your account when it's used to buy 10 flat-screen TVs in stores around the country, we have the technology to stop suspicious claims payments before they're sent out," she said.

Formally known as the Fraud Prevention System, the new screening technology was mandated by Congress. It's housed in the Baltimore area, and staffed by as many as 150 people.

The goal was to allow Medicare to analyze large numbers of claims and spot patterns of potential problems. Does a storefront wheelchair retailer in Los Angeles, for example, have lots of customers in San Francisco, more than 350 miles away?

The system is supposed to issue an alert when something looks wrong so Medicare can investigate the claim before payment is sent out. That's critical because Congress has also directed Medicare to pay promptly, usually within 14 to 30 days.

Doolittle, a former federal prosecutor, said the system has generated some 2,500 leads and identified 600 suspicious cases, some which may mature into major investigations.

In their letter to Carper, Medicare officials said screening technology is now being used to evaluate all Medicare inpatient, outpatient and medical-equipment claims before payment. But payment suspensions did not begin until December 2011 -- nearly six months after the system was up and running.

Medicare awarded an initial $77 million contract for the new system to defense giant Northrup Grumman and a group of other companies. About $27 million has been spent out of a four-year budget that could reach $100 million. IBM is also a contractor.

Sen. Tom Coburn, R-Okla., has questioned whether Grumman has the financial services experience necessary to take the lead on the job.

"My point is there was off-the-shelf stuff they could have bought and applied," said Coburn. "You don't have to recreate the wheel."

Responded Doolittle, "The wheel is not being reinvented. We are inventing the first wheel. The use of predictive modeling doesn't exist on this scale in industry."

Coburn says he's not impressed even by the figure of $20 million or more in potential savings that Medicare officials point to.

"If it is fully deployed, we ought to be seeing savings of $5 billion a month," he said. "It will be two to three years before we get an effective predictive system."

Lawmakers say that Medicare has failed to set clear goals for the system, such as a realistic figure for how much it can be expected to save, and by when.

In addition to the new technology, Medicare was also given broad authority to act on leads generated by the system, letting it ban suspicious providers or put a moratorium on allowing new suppliers in high-fraud sectors like medical equipment. But lawmakers question whether the program is taking full advantage of that.

Sen. Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee that oversees Medicare, says the number of cases being handled by private investigators that initially screen for potential fraud has stayed roughly the same since the new system was deployed.

"The fact is, the anti-fraud contractors were reporting similar, if not better, results prior to this new technology," said Hatch. "It's not giving taxpayers the biggest bang for the buck and we need to change that."

Medicare officials say it will take time. "We are really at the start of this program," said Doolittle. "It's not mature yet. The fruits are going to be produced over a period of years, perhaps even our lifetimes. We're already getting great results."

[Associated Press; By KELLI KENNEDY and RICARDO ALONSO-ZALDIVAR]

Kennedy reported from Miami.

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