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Watchdog: Pentagon Could Learn from HHS on Curbing Medical Claims Fraud

Health and Human Services has a better system than Defense does for identifying improper payments, GAO says.

The Pentagon could learn from the Health and Human Services Department when it comes to rooting out waste and fraud in medical claims processing, according to the government’s watchdog.

A new Government Accountability Office report criticized the Defense Department’s approach to identifying improper payments within TRICARE, a process that does not typically include reviewing underlying medical records associated with the claim to ensure the payment and the type of health care provided are justified in the first place. The methodology used by HHS’ Centers for Medicare and Medicaid Services for ferreting out payment mistakes in Medicare claims’ reimbursement is more robust, GAO said, primarily because the agency reviews medical records to identify “services that are undocumented, medically unnecessary, or incorrectly coded, as well as duplicate payments for services that were not provided.”

Defense’s post-payment review of TRICARE claims looks at whether contractors processed and paid submitted claims correctly, which identifies improper payments stemming from contractors’ noncompliance with policies. But that methodology doesn’t cover all the potential terrain associated with improper payments, according to GAO, such as whether medical records support the diagnosis and procedures codes on the claim.

The methodology used by HHS and other federal agencies casts a wider net to catch mistakes. “For example, the HHS-OIG found that 61 percent of power wheelchairs provided to Medicare beneficiaries in the first half of 2007 were medically unnecessary or had claims that lacked sufficient documentation to determine medical necessity, which accounted for $95 million in improper Medicare payments,” the report stated.

GAO said that Defense’s current review of TRICARE claims and subsequent reported improper payment estimates “likely understate the amount of improper payments relative to the estimates produced by Medicare’s more comprehensive methodology.” Defense spent about $21 billion on TRICARE in fiscal 2013, estimating improper payments at $68 million, or 0.3 percent. Of the total $357 billion HHS spent on Medicare that year, the department estimated that $36 billion – or 10.1 percent – were erroneous payments. Agencies annually report improper payment estimates and error rates as part of the 2002 Improper Payments Information Act.

“The HHS-OIG and most of the organizations with knowledge of health care claims review practices that we spoke with also acknowledge that reviewing the underlying medical records is needed to verify appropriate payment,” the report said.

GAO recommended that Defense strengthen its methodology related to reviewing TRICARE claims, including adding medical record reviews to the oversight. Defense agreed with the recommendations but said that implementing a more comprehensive methodology that includes medical record reviews will take time and more staff. HHS did not comment on the report.

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