As of July 1, 2011, the Centers for Medicare & Medicaid Services (“CMS”) has added a new tool to the arsenal of tactical measures aimed at stopping fraudulent claims payments before they are processed.1 This new tool, which uses Predictive Modeling Technology (“PMT”), is the latest addition to the Campaign to Cut Waste2 and is an effort to stop the “pay and chase” quandary that results from remitting funds and then being forced to track down problematic providers. 3

Overview of PMT

PMT is comparable to technology that credit card companies use to catch fraudulent charges on a real-time basis. A risk scoring technology will be used to analyze Medicare claims upon submission and will apply predictive models to identify fraudulent claims. This initiative is a groundbreaking move for CMS as it will be the first time it has monitored real-time data in an attempt to find suspicious claims. By looking at the claims before payment, CMS hopes to intercept each claim and prevent any transfers of funds to the provider submitting the claim.

The authority for the PMT program is found in Section 4241 of the Small Business Jobs Act of 2010 (the “Act”), which President Obama signed on September 27, 2010. The Act requires the Health and Human Services Secretary to identify the 10 states with the highest risk of waste, fraud and abuse in the Medicare program and use PMT for at least one year to identify and stop fraudulent claims. After the initial year, the actual savings will be examined along with the effect on providers and beneficiaries. If the initial year is deemed successful, more states will be added in subsequent years until the entire country is covered by the program.

Implementing PMT

In order to implement the PMT program, CMS issued a Request for Proposal (“RFP”) in the fall of 2010.4 Included among the specifications in the RFP were the ability to (1) handle approximately 4.5 million claims per day, (2) integrate seamlessly into the existing Medicare claims system, (3) provide rapid real-time information, (4) use a statistically guided PMT to prevent improper payments, (5) use risk scoring methods to flag unusual claims, and (6) permit modifications for future advances in technology. CMS has chosen Northrop Grumman (“NG”), which is a global provider of advanced information solutions, as the winner of the RFP and the company that will implement the PMT. NG will utilize National Government Services and Federal Network Systems, LLC, a Verizon Company, to assist it with managing the abundance of claims data and other sources of information. NG intends to use its own algorithms and proprietary analytical tools to examine CMS claims to find suspect claims and flag them with appropriate “risk scores.” The flagged claims will then be prioritized for additional review and potential investigation.

If you have any questions regarding this issue of Health Reform IMPACT, please contact any of the attorneys in our Healthcare Practice Group.

1  Please see CMS Press Release, published June 17, 2011.
Campaign to Cut Waste, June 13, 2011; video available of announcement.
3  For an earlier issue of Health Reform IMPACT regarding the campaign against “pay and chase,” see “‘Pay and Chase’ No More: CMS Begins Implementing Health Reform’s Provider Enrollment Provisions,” November 12, 2010.
4  CMS Solicitation Number: RFP-CMS-2010-0054, September 15, 2010.