Running head: PREVENTING FRAUD AND ABUSE IN MANAGED CARE Preventing Fraud and Abuse in Managed Care HSM420 Professor 1 PREVENTING FRAUD AND ABUSE IN MANAGED CARE Table of contents I. Introduction II. Background III. Define the Challenges and Problems Associated With Your Topic IV. Review of the Literature V. VI. VII. VIII. IX. X. Challenges/Problems Analysis Recommend Solutions Implementation of Solutions Justification Summary and Conclusion Reference 2 PREVENTING FRAUD AND ABUSE IN MANAGED CARE 3 Preventing Fraud And Abuse In Managed Care Introduction As the cost of healthcare continue rising to unprecedented heights, most states are looking for new approaches to provide health care services to the citizens. Many states are moving their Medicaid program away from the program of the traditional fee-for-service to a capitated environment or a managed care system (United States, 2011). The shift in health care brings about new challenges associated with containing costs as well as new opportunities for fraud. The original belief of most people within the industry is that fraud has never existed in the managed care environment. Federal mandate requires states to possess an effective fraud detection and prevention program although few managed care fraud programs have been formulated by states. The purpose of such guidelines would be to enable the Health Care Financing Administration, Medicaid Fraud Control Units, managed care organization, and State Medicaid Agencies in identifying, investigating, preventing, and prosecuting fraud in a Medicaid managed care environment, and then better equip states with new initiatives and measures to protect against fraud (Simmers et al., 2009). The key responsibility for program integrity in Medicaid program is controlled by Federal and State governments, regardless of the kind of service delivery system that is used. However, in a managed care environment, other entities play critical roles in supporting the efforts of state and federal governments to prevent, investigate, report, detect, and prosecute fraud and abuse in the managed care environment. Background In 1997, there was a meeting between Health Care Financing Administration and State Medicaid Program Integrity Staff with the objective of discussing ways of improving the state PREVENTING FRAUD AND ABUSE IN MANAGED CARE 4 and federal partnerships concerning the detection and prevention of fraud within the Medicaid program (Simmers et al., 2009).. They came up with one recommendation to develop procedures, new approaches, guidelines, and data systems to help states in controlling fraud and abuse in managed care. A fraud and abuse in managed care workgroup that consisted of representatives from health care financing administration, state attorneys' general Medicaid fraud control unit, and managed care and program integrity sections was therefore established to accomplish this objective. Until just recently, the risk for fraud in managed care was believed to be a small issue, as the responsibility for fraud detection and prevention was transferred to the entity of managed care. It was thought by purchasers that managed care organizations (MCOs) would absorb fraudulent or abusive payments by capitation payments and that a strong contract language would limit the provision of too little services (Simmers et al., 2009).. Fraud and abuse in managed care has the ability to harm the profitability of managed care organizations and the money taken by the recipient or provider can also threaten the viability of Managed Care Organizations (MCOs). Challenges and Problems This paper focuses on fraud in risk-based and capitated managed care programs. Capitated program in this aspect refers to programs in which services are offered to members based on a per month/per member payment fee (Simmers et al., 2009).. It is then required of the managed care program to give contracted and medically necessary services to the members that are included in the program. In the event that the cost of giving services to enrollees is more than the per/month and per/member payment fee, the managed care programs could most likely suffer capital loss (United States, 2011). On the other hand, if the cost of giving services to the enrollees is less than the per/month and per/member payment fee, the managed care programs PREVENTING FRAUD AND ABUSE IN MANAGED CARE 5 would most likely experience a capital gain. Since managed care organizations are paid o capitated basis, they have designed a built-in incentive aimed at controlling health care expenditures. Regulators of managed care have a critical role in making sure that managed care organizations (MCOs) meet their contractual obligations and then provide enrollees with the necessary standard of medical services (Simmers et al., 2009).. Provision of health care services need to be carefully monitored to make sure that the individual enrollees are getting the appropriate medical care as well as detecting any systematic problems associated with access to appropriate health care services. Based on the level of intent, fraud often takes place when the organization is demonstrating a habit of consistently failing to give enrollees with the necessary medical care. In addition, depending on the level of intent, fraudulent or abusive practices by the organization entails consistent failure to provide adequate health care for enrollees or denying enrollees appropriate medical care (United States, 2011). When managed care organizations (MCOs) deliberately fail to put in place adequate networks, they can jeopardize access to care of enrollees. The MCOs' enrollment of substandard providers can also degrade the quality of care offered to the enrollees. In addition, fraud in managed care can also raise costs for states despite a situation of capitation. For example, if MCO manipulates data to give appearance of giving services to enrollees who are not truly enrolled in the organization, the managed care organization may be trying to get enhanced future capitation payments (Zack, 2003). This would therefore increase state costs based on inflated data. Managed care presents familiar and new opportunities for providers, MCOs, and beneficiaries to commit fraud and abuse. It is therefore important for MCOs and sates to develop partnerships that are dedicated to eliminate fraud and abuse in managed care. PREVENTING FRAUD AND ABUSE IN MANAGED CARE 6 Review of the Literature In the past decade, expenditures on Medicaid have almost doubled, from more $200 billion in the year 2000 to about $374 billion in 2010. In response to these increasing expenditures, most states have increasingly embraced managed care. States can contract with various types of MCEs in providing health care services on a community or statewide basis. Centers for Medicare and Medicaid services require MCEs to meet some specific requirements of program integrity as condition for getting payment. The requirements encompass written compliance plan, internal monitoring and auditing, and effective education and training for MCE employees. CMS also expects MCEs to disclose to the states some information concerning ownership and control. Medicaid integrity group often conducts integrity review of MCEs and the states by issuing guidelines aimed at addressing fraud and abuse in the Medicaid managed care system (McMillan, 2005). It is the responsibility of states to monitor the operations of MCE. There have been program integrity reviews from a sample of states and MCEs and it has been evident that fraud and abuse is a common activity in the managed care organizations. Challenges/Problems Analysis Fraud in managed care involves an intentional misrepresentation or deception made by a person or an entity in a capitated PCCM program, MCO, or any other managed care setting with a full knowledge that such deception could bring about some unauthorized benefit to himself, entity, or some other person (Zack, 2003). Fraud and abuse can be committed by a contractor, MCO, subcontractor, provider, or state employee. Some health plan transgressions are considered failures in performing contractual obligations or involving in undesirable practices, in which PREVENTING FRAUD AND ABUSE IN MANAGED CARE 7 plans need to be held accountable. The incentive of fraudulently procuring an MCO involves the receipt of money for which a company may not be otherwise entitled. Enrollment fraud is generally considered a \"startup\" kind of fraud (McMillan, 2005). After the enrollment of the targeted population, there will be a decreasing demand for marketing and hence, a reduced opportunity for fraud. Marketing activities can, however, be ongoing and the likelihood of fraud will be uncovered in managed care organizations having years of operational history. Based on the enrollment process of the state, it is likely that the beneficiary who is nonexistent or ineligible will be enrolled. When this takes place, the managed care organization (MCO) will inappropriately get a monthly capitated payment from State Medicaid agency for covering services for that nonexistent or ineligible person (McMillan, 2005). Even if the individual is eligible, there will be a damage of other plans if they are not able to have a fair chance in enrolling the beneficiary. The beneficiary could finally end up being enrolled in a plan that is not able to meet his or her needs. The incentive of committing fraud that relates to enrolling of new members or marketing can be found where MCOs have established the idea of paying its representatives, or employees, a bonus or fee for the persons that they enroll. The nature of a managed care system forms the potential of enrollment fraud or marketing in the sense that the MCO gets paid a monthly fee that is not dependent on the number of members that are enrolled. The larger the number of enrolled members, the higher the capitation income received by the MCO from the State Medicaid agency. It is therefore critical for states to approve all marketing materials and plans. In addition, the States should also monitor the manner in which marketing plans are conducted. Recommend Solutions PREVENTING FRAUD AND ABUSE IN MANAGED CARE 8 Managed care offers challenges in addressing fraud, which differ from those in the feefor-service Medicaid. For example, capitated payments for managed care can provide incentive for providers in rendering fewer services to the beneficiaries. The states must also be ready to bear financial risks that will threaten the viability of Medicaid managed care programs (Wells, 2011). The CMS guidelines that address Medicaid managed care fraud should also be updated in order for MCOs to be able detect any form of fraud. As states increase the use of managed care in delivering Medicaid services, the aspect of implementing safeguards aimed at protecting against fraud still remains essential. States have a stake in ensuring that the integrity of their systems is protected. Implementation of Solutions There is need for CMS to update and reissue guidelines aimed at addressing fraud in Medicaid Managed Care. Given that most of the concerns reported fall under the section of \"claims and billing procedures\In conclusion, Medicaid program has been discovered to be one of the most fraudulent systems in the United States. This has prompted the federal and state governments to come up with techniques which can help in curbing this menace. The partnerships between stakeholders in the health care systems both in the federal and state governments have propose various techniques and policy changes to detect and prevent fraud and abuse of patients seeking medical services within the United States. One of the suggested solution to the challenge has been introduction of the capitation payment program with is a replacement of the old pay-for-service program. The other solution has been empowering other agencies such as the MHOs to play an important role in detecting and preventing this menace. In conclusion, Medicaid program has been discovered to be one of the most fraudulent systems in the United States. This has prompted the federal and state governments to come up with techniques which can help in curbing this menace. The partnerships between stakeholders in the health care systems both in the federal and state governments have propose various techniques and policy changes to detect and prevent fraud and abuse of patients seeking medical services within the United States. One of the suggested solution to the challenge has been introduction of the capitation payment program with is a replacement of the old pay-for-service program. The other solution has been empowering other agencies such as the MHOs to play an important role in detecting and preventing this menace