OIG Work Plan Monthly Review: February 2018

The three new items OIG added to its Work Plan this month focus on various oversight of Medicare and Medicaid program initiatives, including State Medicaid fraud enforcement, processing of provider overpayment appeals and setting of Part B drug prices.

1. State Medicaid Fraud Control Units (MFCUs) Annual Report for FY 2017

Issue: MCFUs investigate Medicaid fraud and abuse, patient neglect and other compliance issues within their states under the OIG’s guidance. The OIG also uses statistical information reported by the MFCUs to assess their compliance with federal regulations, policy and performance standards based on the statistical information the latter provides.

OIG Action: The OIG plans to issue an annual report analyzing the statistical information that MFCUs reported in FY 2017 that describes the aggregate outcomes of MFCU criminal and civil cases and identify trends in MFCU case results.

2. Review of Statistical Methods Used in Medicare Fee-For-Service Administrative Appeal Process

Issue: Medicare program integrity contractors use statistical sampling to identify and recover improper payments. But providers can use the administrative appeals process to challenge these statistical estimates. If the appeal is successful, the provider’s liability is limited to the overpayment amount, if any, upheld in the sample rather than the full extrapolated total—which is often a lot of money. Medicare Administrative Contractors (MACs) and Qualified Independent Contractors (QICs) play a critical role in the appeals process and deciding which extrapolations to uphold.

OIG Action: The OIG will see if the MACs and QICs are reviewing statistical estimates appropriately and consistently as part of the fee-for-service appeals process.

3. Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2016 Average Sales Prices

Issue: Medicare Part B drug reimbursement is based on the product’s average sales price (ASP). The legally mandated mechanism for monitoring market prices and limiting potentially excessive Medicare payment amounts: the OIG compares ASPs with average manufacturer prices (AMPs) each quarter. If OIG finds that the ASP for a drug exceeds the AMP by 5% in the two previous quarters or three of the previous four quarters, HHS may substitute the reimbursement amount with a lower calculated rate.

OIG Action: Using annual reports aggregating the results of quarterly ASP to AMP comparisons, the OIG will quantify exactly how much Medicare and its beneficiaries saved as a direct result of CMS’s price substitution policy based on 2016 ASPs and recommend ways for Medicare to achieve additional savings.


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