There are waves of Medicaid beneficiaries that states have moved to MCOs over the last few years. This surge is attributable to the Affordable Care Act (ACA) of 2010 (“Obamacare”). The ACA was premised upon improving the quality of healthcare while increasing efficiencies. The Act includes provisions that encourage states to move their Medicaid populations into MCOs.
The managed care provisions in the ACA are actually the second major try at reducing Medicaid expenditures by hiring MCOs to manage Medicaid beneficiaries. The first large wave started in the 1990s as many states pushed Medicaid patients to MCOs. Instead of capping costs the states found that managed care increased their overall expenditures. States that had transferred the majority of their Medicaid populations to MCOs saw costs escalate and retreated to traditional fee-for-service Medicaid programs. The ACA contained incentives in the managed care approach intended to protect state expenditures as motivation for states to move to MCOs. For example, ACA extends Medicaid manufacturer rebate requirements to apply to MCOs. The states that took advantage of Medicaid expansion by utilizing MCOs to handle the large volume increases in beneficiaries.
Medicaid is a federally mandated, but state managed program created in 1965. It provides healthcare for the indigent. The majority of funding comes from federal matching funds. To qualify for federal matching funds States must operate their Medicaid programs within federal guidelines. Traditionally, Medicaid programs operated as fee-for-service plans meaning that the states process claims and makes direct payments to providers. Under risk-based Medicaid managed care MCOs contract with a state and receive capitation payments (example: dollars per patient per month) to manage and administer the care of Medicaid beneficiaries. In turn MCOs contract through PBMs to pay providers for services on a fee-for-service basis.
Program Integrity Responsibilities
In July, 2018, the Senate Committee on Homeland Security and Government Affairs reported they had found $37 billion in overpayments to providers in 2017.
Program integrity encompasses efforts to ensure Medicaid beneficiaries receive high quality and efficient care—with minimal waste. CMS is ultimately responsible for oversight of program integrity efforts across the country. CMS requires states as well as their MCOs to share the responsibilities for program integrity.
While states are directly responsible to monitor potential fraud and abuse, MCOs are obligated under state contracts to administer actions on behalf of states to detect, investigate and in some instances refer and report fraud and abuse. These responsibilities also include the recoupment of overpayments to providers.
Although MCOs are not required to establish Special Investigation Units (SIUs) many do. This is an attempt to meet program integrity responsibilities incorporated into their state contracts. Most MCOs establish SIUs to battle fraud, conduct investigations, identify and recover overpayments, refer cases and take corrective actions.
CMS drafted rules to address program integrity provisions and issued a Final Rule in 2016, with an effective date of July 1, 2017. But many of the provisions have been delayed and are yet to be enforced.
Two Government Reports
In July 2018, two government reports were published addressing the inadequacy of oversight of MCOs—one by the HHS Office of the Inspector General (OIG) and the other by the Government Accountability Office (GAO). Although both studies employed different methodologies, their findings arrive at similar conclusions. There are many gaps and deficiencies in the oversight of MCOs at the federal and state levels. These challenges have resulted in many MCOs delivering less than minimal efforts to maintain program integrity.
OIG MCO Report
HHS OIG report July 2018 (OEI-02-15-00260) “Weaknesses Exist in Medicaid Managed Care Organizations’ Efforts to Identify and Address Fraud and Abuse”
The OIG reported concerns of managed care fraud and abuse back in 2011, noting the lack of fraud and abuse referrals. Currently MCO programs serve 80% of all Medicaid enrollees with 2016, MCO payments from state and federal funds exceeding $236 billion. MCOs are responsible to identify and recoup overpayments.
The OIG methodology included a review of 2015, MCO data submitted to CMS. They focused upon the MCO with the largest expenditures in each of 38 states. In addition, the OIG conducted interviews with key Medicaid personnel in five states and five MCOs. Here is what they found.
- Seven MCOs identified fewer than 30 instances in 2015, of fraud or abuse.
- The median number of cases per MCO was 116.
- Three MCOs identified over 800 cases.
- Three MCOs averaged only about 1 case per month.
- Thirteen MCOs referred few cases to their state.
- One-third of the MCOs referred fewer than 10 cases.
- Two MCOs did not refer any cases.
- Four MCOs referred more than 100 cases.
- 38 MCOs identified $57.8 million in overpayments because of fraud and abuse.
- The median was $402,000 per MCO.
- Four MCOs did not identify any overpayments
- Overall MCOs recovered only 22% of the amounts they identified as overpayments.
- Seven of the MCOs only recovered 2% or less of the amounts they identified as provider overpayments.
- The MCOs with SIUs consisting of five or more employees referred four times as many cases to states as MCOs with fewer than five employees.
- The OIG emphasized the importance of proactive data analysis to detect overpayments but not all the MCOs used proactive data analysis to detect potential fraud and abuse.
- The OIG found disincentives for the MCOs to refer cases to the states because when the State takes a case the MCO is prevented from collecting the overpayment. Some states include “finders’ keepers” incentives in their contracts to allow MCOs to keep a portion of recoveries.
- The study found the states to be inconsistent in their expectations of MCOs to refer cases to them with a general lack of direction or continuity from state to state.
OIG Recommendations
The most pertinent recommendations included:
- Improve MCO identification and referral of cases of suspected fraud or abuse.
This recommendation will translate into more Medicaid Managed Care audits of pharmacies
- Increase the MCO reporting of corrective actions taken against providers for fraud or abuse to the State
Expect tougher audits wider in scope—more claims, greater detail
- Improve coordination between MCOs
Expect the possibility of several MCO plans working together.
Expect States to take a more active role in making sure their MCOs operate strong anti-fraud and abuse programs
GAO MCO Report
GAO report July, 2018, (GAO-18-528) “Medicaid Managed Care: Improvements Needed to Better Oversee Payment Risks”
In 2017 Federal spending for Medicaid Managed Care was $171 billion, nearly half of total federal expenditures. This figure does not include state funds matched with federal money. Between 2013 and 2016 Medicaid enrollments in MCOs increased from 35 million to 54.6 million beneficiaries. The GAO noted that, up to this point, state audits focus upon Medicaid fee-for-service providers and not MCOs. GAO found that payment risks with managed care are more difficult and complex to manage than traditional Medicaid fee-for-service.
The GAO study spanned from October, 2016, to July, 2017. To conduct their study, they reviewed federal and state audit reports, particularly Medicare managed care. They also reviewed previous reports regarding Medicaid program integrity. From these actions the GAO identified payment risks. They also conducted structured interviews with key state employees—managed care offices, program integrity units, state auditors, Medicaid Fraud Control Units (MCFU) and a MCO.
The GAO identified six risk areas. At the top of their list is MCO fee-for-service payments to providers. Of their interviews 59% of the stakeholders rated incorrect MCO fee-for-service payments as “high risk.”
Key GAO Findings
- States are not providing an adequate level of oversight over MCO risks.
- Gaps exist in CMS and state program integrity oversight.
- CMS does not receive full information on the breadth of MCO overpayments
- .CMS does not have methods in place to regularly collect overpayment information.
- CMS does not know if overpayments are accounted for by the states in setting MCO capitation payments.
GAO Recommendations
- CMS must publish the long-delayed guidance to address many oversight issues.
This translates into greater controls of MCOs which will force them to conduct more audits and investigations.
- CMS must increase collaborative audits.
This means MCOs will work more closely with each other and state Medicaid agencies comparing notes.
- CMS must up their game to reduce managed care payment risks.
As CMS pushes harder it will produce a domino effect eventually filtering down to provider pharmacies.
PAAS Final Takeaways
The heat is on. CMS will begin to penalize states where their Payment Error Rate Measurements are excessive. CMS plans to increase its activity of auditing state claims for federal matching payments.
With the information from the HHS OIG and GSA reports it is easy to understand how PAAS came up with their prognosis—Expect Medicaid Managed Care Plans to drastically increase audits.
- Expect larger numbers of Medicaid Managed Care organization audits of provider pharmacies.
- Expect the scope of these audits to increase in terms of breadth and depth.
- Expect to see new and cleverer audit strategies.
- PAAS sees a strong likelihood of multiple MCOs and state Medicaid programs collaborating efforts.
Audit proof your pharmacy today!
Humana Begins Enforcing Mail Order Prohibition
In July of 2017, Humana updated its Retail Pharmacy Provider Agreement to prohibit the delivery of prescription drugs, Durable Medical Equipment, and prescribed diabetic supplies through mail delivery services. These services include the U.S. Postal Service, UPS, DHL, FedEx, or any similar national, regional, or local common carriers.
PAAS National® is seeing termination notices sent to pharmacies that Humana believes are using mail delivery. Humana is basing these terminations on review of claims submitted by pharmacies to Humana. Likely, Humana is comparing
Humana is providing an opportunity to resolve termination. Pharmacies must sign an attestation confirming and agreeing to cease all mail delivery. Attestations must be signed and submitted within 30 days of the termination notice. Any subsequent violations will result in immediate termination.
PAAS Tip: PAAS is aware of four PBMs that restrict mail delivery:
Pharmacies may be able to obtain separate mail order agreements or amendments. Prescriptions can still be picked up in-store or delivered to patients’ preferred address using pharmacy employees or contractors.
Expect Medicaid Managed Care Plans to Drastically Increase Audits
The Heat is on
Expect increased audit activity in the near future
PAAS expects to see increased audit activity from Medicaid Managed Care Organizations (MCO) across the country. Our predictions include larger numbers of MCO audits, increased scope of audits and new audit strategies. We also believe we will see collaborative audits with coordination between CMS, state Medicaid programs and multiple MCOs working together. Now is the time for you to take proactive measures to audit proof your pharmacy.
PAAS bases these predictions upon the signs coming from the federal government that point toward efforts to push state Medicaid programs to step up program integrity efforts by placing much higher levels of scrutiny on state MCOs. Government reports from the HHS Office of the Inspector and Government Accountability Office published in July, 2018, highlight deficiencies in the states’ oversight of program integrity of their MCOs. These reports conclude that many MCOs are not performing their responsibilities related to the detection, reporting and reduction of fraud, waste and abuse. They are also sure to stimulate CMS to enforce much higher levels of accountability upon states and in turn states to enforce stronger oversight of their MCO plans. CMS will expect state Medicaid agencies to strengthen program integrity with stronger audits, stricter enforcement, corrective action plans and greater overpayment recoveries.
Background
There are waves of Medicaid beneficiaries that states have moved to MCOs over the last few years. This surge is attributable to the Affordable Care Act (ACA) of 2010 (“Obamacare”). The ACA was premised upon improving the quality of healthcare while increasing efficiencies. The Act includes provisions that encourage states to move their Medicaid populations into MCOs.
The managed care provisions in the ACA are actually the second major try at reducing Medicaid expenditures by hiring MCOs to manage Medicaid beneficiaries. The first large wave started in the 1990s as many states pushed Medicaid patients to MCOs. Instead of capping costs the states found that managed care increased their overall expenditures. States that had transferred the majority of their Medicaid populations to MCOs saw costs escalate and retreated to traditional fee-for-service Medicaid programs. The ACA contained incentives in the managed care approach intended to protect state expenditures as motivation for states to move to MCOs. For example, ACA extends Medicaid manufacturer rebate requirements to apply to MCOs. The states that took advantage of Medicaid expansion by utilizing MCOs to handle the large volume increases in beneficiaries.
Medicaid is a federally mandated, but state managed program created in 1965. It provides healthcare for the indigent. The majority of funding comes from federal matching funds. To qualify for federal matching funds States must operate their Medicaid programs within federal guidelines. Traditionally, Medicaid programs operated as fee-for-service plans meaning that the states process claims and makes direct payments to providers. Under risk-based Medicaid managed care MCOs contract with a state and receive capitation payments (example: dollars per patient per month) to manage and administer the care of Medicaid beneficiaries. In turn MCOs contract through PBMs to pay providers for services on a fee-for-service basis.
Program Integrity Responsibilities
In July, 2018, the Senate Committee on Homeland Security and Government Affairs reported they had found $37 billion in overpayments to providers in 2017.
Program integrity encompasses efforts to ensure Medicaid beneficiaries receive high quality and efficient care—with minimal waste. CMS is ultimately responsible for oversight of program integrity efforts across the country. CMS requires states as well as their MCOs to share the responsibilities for program integrity.
While states are directly responsible to monitor potential fraud and abuse, MCOs are obligated under state contracts to administer actions on behalf of states to detect, investigate and in some instances refer and report fraud and abuse. These responsibilities also include the recoupment of overpayments to providers.
Although MCOs are not required to establish Special Investigation Units (SIUs) many do. This is an attempt to meet program integrity responsibilities incorporated into their state contracts. Most MCOs establish SIUs to battle fraud, conduct investigations, identify and recover overpayments, refer cases and take corrective actions.
CMS drafted rules to address program integrity provisions and issued a Final Rule in 2016, with an effective date of July 1, 2017. But many of the provisions have been delayed and are yet to be enforced.
Two Government Reports
In July 2018, two government reports were published addressing the inadequacy of oversight of MCOs—one by the HHS Office of the Inspector General (OIG) and the other by the Government Accountability Office (GAO). Although both studies employed different methodologies, their findings arrive at similar conclusions. There are many gaps and deficiencies in the oversight of MCOs at the federal and state levels. These challenges have resulted in many MCOs delivering less than minimal efforts to maintain program integrity.
OIG MCO Report
HHS OIG report July 2018 (OEI-02-15-00260) “Weaknesses Exist in Medicaid Managed Care Organizations’ Efforts to Identify and Address Fraud and Abuse”
The OIG reported concerns of managed care fraud and abuse back in 2011, noting the lack of fraud and abuse referrals. Currently MCO programs serve 80% of all Medicaid enrollees with 2016, MCO payments from state and federal funds exceeding $236 billion. MCOs are responsible to identify and recoup overpayments.
The OIG methodology included a review of 2015, MCO data submitted to CMS. They focused upon the MCO with the largest expenditures in each of 38 states. In addition, the OIG conducted interviews with key Medicaid personnel in five states and five MCOs. Here is what they found.
OIG Recommendations
The most pertinent recommendations included:
This recommendation will translate into more Medicaid Managed Care audits of pharmacies
Expect tougher audits wider in scope—more claims, greater detail
Expect the possibility of several MCO plans working together.
Expect States to take a more active role in making sure their MCOs operate strong anti-fraud and abuse programs
GAO MCO Report
GAO report July, 2018, (GAO-18-528) “Medicaid Managed Care: Improvements Needed to Better Oversee Payment Risks”
In 2017 Federal spending for Medicaid Managed Care was $171 billion, nearly half of total federal expenditures. This figure does not include state funds matched with federal money. Between 2013 and 2016 Medicaid enrollments in MCOs increased from 35 million to 54.6 million beneficiaries. The GAO noted that, up to this point, state audits focus upon Medicaid fee-for-service providers and not MCOs. GAO found that payment risks with managed care are more difficult and complex to manage than traditional Medicaid fee-for-service.
The GAO study spanned from October, 2016, to July, 2017. To conduct their study, they reviewed federal and state audit reports, particularly Medicare managed care. They also reviewed previous reports regarding Medicaid program integrity. From these actions the GAO identified payment risks. They also conducted structured interviews with key state employees—managed care offices, program integrity units, state auditors, Medicaid Fraud Control Units (MCFU) and a MCO.
The GAO identified six risk areas. At the top of their list is MCO fee-for-service payments to providers. Of their interviews 59% of the stakeholders rated incorrect MCO fee-for-service payments as “high risk.”
Key GAO Findings
GAO Recommendations
This translates into greater controls of MCOs which will force them to conduct more audits and investigations.
This means MCOs will work more closely with each other and state Medicaid agencies comparing notes.
As CMS pushes harder it will produce a domino effect eventually filtering down to provider pharmacies.
PAAS Final Takeaways
The heat is on. CMS will begin to penalize states where their Payment Error Rate Measurements are excessive. CMS plans to increase its activity of auditing state claims for federal matching payments.
With the information from the HHS OIG and GSA reports it is easy to understand how PAAS came up with their prognosis—Expect Medicaid Managed Care Plans to drastically increase audits.
Audit proof your pharmacy today!
Walmart, Sam’s Club Fined $825,000 for Auto Refills
On May 29, 2018 Walmart Stores, Inc. and Sam’s West, Inc. (Sam’s Club) reached an agreement to settle allegations that their pharmacies in Minnesota submitted claims to Medicaid that violated requirements surrounding auto-refills.
In the settlement Walmart and Sam’s agreed to pay $825,000 to resolve federal and Minnesota False Claims Acts violations.
ESI Enforcing Mail Order and Formulary Limits
PAAS recently became aware of Express Scripts (ESI) enforcing their mail order and formulary compliance limitations. Several pharmacies have received Cease & Desist notices from ESI and even one contract termination notice.
ESI is using patient address information to make assumptions as to which claims are being mailed outside of the pharmacy’s service area because ESI does not allow mail order under a standard retail contract. The notices are not indicating what ESI is using for service area. Notices have been issued for assumed mail order claims of as little as 10% of total ESI claims. Pharmacies may need to provide proof that claims were delivered or picked up to avoid future contract termination.
ESI also is requiring that pharmacies use “best efforts to achieve formulary compliance.” Having a high percentage of non-formulary or brand drugs may be considered a violation of their Provider Manual. One of the notices specifically identified a high percentage of claims for products manufactured by Horizon Pharma. ESI stated that this was evidence that the pharmacy was not operating as a traditional retail pharmacy that dispenses a variety of drugs.
Humana Slamming Pharmacies for Invalid Faxed and Oral Prescriptions
Humana is going after pharmacies every way they can these days. Many states have specific elements that need to be present in the fax header of a faxed prescription. PAAS has seen numerous audits where the Humana auditor is marking a fax as an invalid hard copy if it is missing these required fax header elements.
Some examples are:
Please be aware of your state requirements for faxed prescriptions. Contact your board of pharmacy for more information.
Humana is also going after pharmacies for invalid oral prescriptions. Some state laws require an oral order be promptly reduced to writing. PAAS sees some pharmacies use a fill sticker as a hard copy. Other pharmacies will reduce an oral order to type-writing. PAAS thinks that these procedures are fine, however, Humana has interpreted reduced to writing to mean hand-writing and has found a new way to line their pockets.
While these discrepancies are appealable, they are a hassle as you must obtain a physician statement on clinic letterhead to get paid for that prescription. Avoid chargebacks from Humana for oral orders by hand writing them if your state requires you to reduce an oral order to writing.
Opioids – Don’t Get Sucked In!
“Two pharmacists sentenced to 19 and 20 years in prison and ordered to pay $5 million in restitution to the state of Georgia to combat the opioid epidemic,” reads the news heading from the Department of Justice story based upon the criminal activity of two pharmacists.
“Rosemary Ofume and Donatus Iriele have each been ordered to pay $2.5 million in community restitution… The defendants… formerly owned the Medicine Center Pharmacy in Atlanta, Georgia. They were sentenced… to 19 and 20 years in prison, respectively, for illegally dispensing controlled narcotics to customers of the AMARC ‘pill mill’ pain clinic.”
“The defendants used their pharmacy to supply pills to patients of a known ‘pill mill’ and then laundered millions of dollars to conceal their crimes,” said U.S. Attorney Byung J. “BJay” Pak.
“All health care professionals are put on notice to remember: you are to do no harm. And if you intentionally ignore this charge, you are going to be treated the same as a street-corner drug dealer in this war on opioid abuse,” said Dennis M. Troughton Sr., Director, Georgia Drugs & Narcotics Agency.
Last month, we reported that a Kentucky pharmacist was sentenced to eight years in federal prison for conspiring to distribute oxycodone and money laundering by filling forged prescriptions from outside of the state. Michael Ingram, who owned and operated Hometown Pharmacy of Georgetown, KY, was ordered to forfeit an amount in excess of $450,000.
The bottom line is – Don’t get sucked into distributing opioids for the allure of making a profit. If you know of any health care professionals who are circumventing their duties to do no harm, report them to the Department of Justice or the DEA.
The CVS Caremark and Aetna Deal
While it hasn’t gone through yet, some say the deal to merge CVS Caremark and Aetna will be bad for health care. “It’s going to face many hurdles,” said Adam Fein, president of Pembroke Consulting. Some House Democrats are calling for a hearing to examine the merger, which still faces the Federal Trade Commission. Some antitrust experts have stated that the deal could result in higher drug prices and less consumer choice. Aetna could simply drive their prescription business to CVS pharmacies, and charge more to patients who fill their drugs elsewhere.
The $69 billion merger could have major implications for patients. The deal would combine medical benefits and pharmacy benefits, and hopefully allow better treatment of those patients – a result yet to be seen after the 2015 merger of United Health Care and OptumRx, which resulted in a deal with the Walgreens 8,000 plus pharmacies to fill 90-day supply prescriptions at home delivery copay amounts, while independent and other community pharmacies saw copay clawbacks!
Larry Merlo, the CEO of CVS Health said, “While the traditional health care system could be overseeing people’s care, it isn’t,” and described the potential merger as, “an opportunity to meet a huge unmet need.” But some are asking if they wanted to change the health care landscape, why haven’t they done so already? Others say that the rumored interest of Amazon to enter the pharmaceutical supply industry is behind the potential merger.
According to the New York Times, “Some worry that the nation’s health care system will come to resemble a series of kingdoms, where consumers are locked into separate ecosystems of pharmacies, doctors and health care clinics depending on their insurance provider.” B. Douglas Hoey, CEO of the National Community Pharmacists Association said, “You may be bounced from kingdom to kingdom.” PAAS wonders if you could even be locked out of a (contract) kingdom? Aetna has over 22 million members that they can direct to CVS!
CVS Health and Aetna say that fewer people will fall through the cracks, getting high-quality and low-cost medical care at their corner drug store. Is CVS planning on ramping up their over 1,000 Minute Clinics for walkin medical care?
If the deal goes through, Aetna’s CEO is said to receive about $500 million in exit pay and stock options, so it’s a good deal for at least one person. Time will tell whether or not the deal is good for patients, and how it will affect independent pharmacies.
OptumRx Prohibits Mailing Prescriptions
Optum has recently faxed out notices reminding pharmacies that they should not solicit members for mail delivery or mail any covered prescription services to members. This includes US mail or shipping via any common carrier (FedEx, UPS, DHL).
Unless you have a specialized mail-order contract with OptumRx, this will be considered a violation of contract.
These notices can be somewhat deceiving as they may only list a certain benefit plan and a few BINs. If you read the notice closely, it does state that mailing is subject to termination from all ORx networks.
Optum is not the only PBM that prohibits mailing prescriptions. Humana and Express Scripts also have this stipulation in their provider manuals. Caremark states that if you ship more than 25% of the prescriptions you bill to them in any month, you are no longer eligible to be contracted under the retail pharmacy network.
Please check your contract, provider manual, or PSAO for further information.