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Medicare Fraud Prevention System Finds $210 Million in Improper Payments in Second Year

CMS took action against 938 providers and suppliers, says report sent to Congress today; anti-fraud strategy recovered $19.2 billion in last five years

June 25, 2014 – The Centers for Medicare & Medicaid Services announced today that its “state state-of-the-art Fraud Prevention System” discovered or prevented more than $210 million in improper Medicare fee-for-service payments, nearly double the identified savings of $115.4 million achieved during the first year of the program. It also resulted in CMS taking action against 938 providers and suppliers, according to a report sent to Congress today.

The actions included revocation of billing privileges, implementation of prepayment review edits, referrals to law enforcement, and suspension of payments.

“CMS is using the best of private sector technology to move beyond the ‘pay-and-chase’ approach to protect the Medicare Trust Funds,” said CMS Administrator Marilyn Tavenner.

Return on Investment

The FPS identified or prevented more than

$210.7 million through administrative

actions taken due to the FPS or through

investigations corroborated, augmented, or

expedited by information in the FPS.

The results are a $5 to $1 return on

investment, almost double the value of the

FPS in the first implementation year.

“While CMS is continuing to enhance the Fraud Prevention System we have demonstrated that investing in cutting-edge technology pays off for taxpayers and Medicare beneficiaries.”

The Fraud Prevention System is a key element of the anti-fraud strategy that has led to a record $19.2 billion in fraud recoveries over the previous five years. The Fraud Prevention System uses predictive algorithms and other sophisticated analytics to analyze billing patterns against every Medicare fee-for-service claim.

Building on its expert knowledge for investigators and analysts, CMS is leading the government and healthcare industry in systematically applying advanced analytics on a nationwide scale. The system also uses other data sources including compromised Medicare identification numbers and complaints made through 1-800-MEDICARE.

The tool is part of CMS's comprehensive program integrity strategy. For example:

>>  The Fraud Prevention System is used as part of an agency focus on home health services in South Florida. CMS identified this type of service in South Florida as an area of high risk to our programs. The Fraud Prevention System led to investigations and administrative actions, which ultimately led to the revocation of the billing privileges of home health agencies, with potential savings worth more than $26 million.

“The Fraud Prevention System (FPS) is the state-of-the-art predictive analytics technology required under the Small Business Jobs Act of 2010 (SBJA). Since June 30, 2011, the FPS has run predictive algorithms and other sophisticated analytics nationwide against all Medicare fee-for-service (FFS) claims prior to payment. For the first time in the history of the program, CMS is systematically applying advanced analytics against Medicare FFS claims on a streaming, nationwide basis as part of its comprehensive program integrity strategy.” – CMS, Executive Summary, Report to Congress, Fraud Prevention System, Second Implementation Year, June 2014

>>  The Fraud Prevention System identified a group practice for having a high risk of inappropriate billing. A contractor made an unannounced site visit, interviewed beneficiaries, and reviewed medical records. The evidence showed that the aides working in the group were not appropriately trained and the provider was billing Medicare for services that were in fact performed by unqualified individuals. A provider was removed from the Medicare program, preventing over $700,000 of inappropriate payments and ensuring that Medicare beneficiaries receive quality care from trained providers.


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CMS also expects to expand the use of the Fraud Prevention System beyond the initial focus on identifying potential fraud into the areas of waste and abuse, which will increase future savings. The Fraud Prevention System now has the capability to stop payment of certain improper claims, without human intervention, by communicating a denial message to the claims payment system.

CMS also has pilot projects underway evaluating the expansion of program that provides waste, fraud and abuse leads to Medicare Administrative Contractors for early intervention.

To view the report, please visit:


Future of the Successful FPS Tool: CMS

Expand and improve models to identify bad actors more quickly and more effectively

Expand FPS beyond fraud into waste and abuse

Deny claims that are not supported by Medicare policy

Identify leads for early intervention by the Medicare Administrative Contractors

Evaluate the feasibility of expanding predictive analytics to Medicaid

• Reduce costs of FPS while applying predictive analytics more effectively and efficiently

• Share lessons learned and best practices with federal, state, and private partners


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