OIG lets state Medicaid fraud units use federal funds for analytics

By Anthony Brino
01:26 PM

States will soon be able to use federal matching funds to finance data analytics for Medicaid fraud prevention, under regulations finalized by the Department of Health and Services’ Office of the Inspector General (OIG).

Starting in June, state Medicaid fraud control units (MFCUs) — financial watchdog offices typically housed under state Attorneys General — can use federal funding for Medicaid data mining, which should offer states analytic tools at the same time that Medicaid is being expanded in more than 20 states.

“For years, we understand that many MFCUs have had online access to Medicaid claims information for purposes of individual case development, but have been prohibited by regulation from receiving [federal financing] for using claims data for identifying other potential cases,” OIG officials wrote in the Federal Register.

Since Medicaid began, it’s been the responsibility of state Medicaid agencies to analyze data for possible improper billing or fraud. Although Medicaid agencies do analyze data routinely, the OIG said, the financing limitations for MFCUs have placed most of the data analysis burden on Medicaid agencies.

Opening MFCUs to federal funding for data analysis would help Medicaid agencies better coordinate with state law enforcement and could also help save federal dollars by reducing fraud (to the extent MFCUs
will have an easier time spotting aberrant billing with federal support and access to state data).

In its final rule, the OIG placed three requirements on the funding change that have to be confirmed in agreements between the MFCUs and state Medicaid agencies, which the OIG will approve in consultation with CMS.

First, MFCUs and state Medicaid agencies must “fully coordinate the MFCUs’ use of data mining and the identification of possible provider fraud” — i.e. consulting with each other on data mining priorities and working with auditing organizations like CMS review contractors.

MFCUs must also confirm their results with state Medicaid agencies and check to make sure any evidence of improper billing or fraud isn’t related to policy changes in reimbursement or documentation that weren’t taken into account.

And third, MFCU staff have to be trained in data and statistical analysis and state Medicaid policy. MFCUs, in their annual reports to the OIG, also have to list the costs of data mining and the cases data mining generates, along with their outcomes and any financial recoveries.

The OIG received about a dozen comments on the MFCU funding change when it was first proposed in March 2011, with input from healthcare provider groups, consumer groups, state Attorneys General, state MFCUs and Medicaid agencies, IT firms and managed care organizations.

Heeding one suggestion, the OIG clarified in the final rule that the data open for MFCU analysis broadly include Medicaid and other relevant data, as allowed under state policy. “MFCUs may
find it useful to mine other types of data...there may be relevant non-Medicaid data that would
be useful to data mining, such as information from other Federal or State programs or from commercial payers,” OIG officials wrote.

The OIG also responded to provider concerns about appealing MFCU findings stemming from data analysis and said that they should generally fall under existing policies. “A provider would have the same legal ability to defend himself or herself in an investigation or prosecution undertaken by a MFCU whether it was the result of data mining or another source of referrals to the MFCU,” OIG officials wrote.

In response to suggestions that MFCUs be required to work with Medicaid managed care companies, the OIG said it was letting states mostly decide the parameters of coordination with industry.

“Our general approach to data mining by MFCUs is to give each MFCU the autonomy to choose how to operate its programs based on the needs and priorities of each State...Coordination with managed care plans may be an effective practice in certain States. However, we believe this determination should be made by the MFCU, in consultation with the State Medicaid agency.”

See also:

Florida boosts fraud prevention in public assistance programs

CMS readies IT, analytics for waves of health reform data

4 strategies to combat healthcare fraud