Improper Payment Reporting Requirements

IPIA, as amended, requires federal executive branch agencies to   (1) review all programs and activities, (2) identify those that may be  susceptible to significant improper payments, (3) estimate the annual  amount of improper payments for those programs and activities,   (4) implement actions to reduce the root causes of improper payments  and set reduction targets, and (5) report on the results of addressing the  foregoing requirements. According to OMB officials, the latitude in the  Although OMB’s implementation guidance allows such variation, several  federal programs which pay for services based on claims submitted by  beneficiaries or providers, including Medicare, examined the underlying  documentation for each of a sample of claims to determine the validity of  payments as part of their efforts to estimate improper payments in fiscal   For example, CMS’s method for testing payments for errors  year 2013. in Medicaid fee-for-service and Children’s Health Insurance Program fee- for-service includes both a claims processing review and medical record  review.improper payments were identified through the medical record reviews in  fiscal year 2013. Both methodologies  evaluate a sample of health care claims paid or denied by the contractors  that process program claims. However, while CMS’s methodology  examined underlying patient medical records supporting each of the  sampled claims, DHA did not evaluate comparable medical record  documentation to discern whether each payment was supported. Consequently, TRICARE’s reported improper payment estimates were  not comparable to Medicare’s estimates, and likely understated the  amount of improper payments in the TRICARE program relative to the  estimates produced by Medicare’s more comprehensive measurement  methodology. TRICARE’s Improper Payment Measurement Methodology Was Less Comprehensive than Medicare’s Methodology

The improper payment measurement methodology that DHA used to  estimate the TRICARE improper payments reported in DOD’s fiscal year  2013 AFR was less comprehensive than the measurement methodology  CMS used to estimate Medicare improper payments. TRICARE’s Methodology Is Likely to Understate Its Improper Payment Rate Compared to Medicare’s Methodology

Compared to DHA’s methodology, CMS’s CERT methodology of  examining underlying medical records to independently verify Medicare  claims and payments more completely identifies potential improper  payments, such as those caused by provider noncompliance with coding,  billing, and payment rules. DHA policy also requires the TPCCs to conduct  quarterly internal reviews of a sample of medical records to determine the  medical necessity of care provided, and determine if the diagnostic and  procedural information of the patient—as reported on the claim—matches  the physician’s description of care and services documented in the  medical record. TRICARE’s Root Cause Analysis and Corrective Action Plans for Improper Payments Only Addressed Contractor Compliance and Were Less Comprehensive Than Medicare’s

The root causes and related corrective actions that DHA reported in  DOD’s fiscal year 2013 AFR are limited to addressing issues of contractor  noncompliance with claims processing requirements. Although DHA could include other  corrective actions, the current approach only addresses improper  payments caused by contractors’ claims processing errors. CMS, by comparison, reported more detailed and constructive information  about the 10.1 percent of Medicare payments it reported as improper in  HHS’s fiscal year 2013 AFR. For example, CMS reported that some improper payments were made for  services that, while clinically appropriate, could be provided in less  intensive settings and therefore did not meet Medicare’s medical  necessity requirements. In addition to reporting root causes and corrective actions in the AFR,  CMS uses its Medicare improper payment results to address the agency’s  stated goal of reducing Medicare improper payments due to  programmatic weaknesses. However, DHA does not have as robust an approach to  measuring improper payments in the TRICARE program as CMS has for  the Medicare program. Specifically, DHA does not routinely examine  medical record documentation in its approach to measuring TRICARE  improper payments. Recommendations for Executive Action

To better assess and address the full extent of improper payments in the  TRICARE program, we recommend that the Secretary of Defense direct  the Assistant Secretary of Defense (Health Affairs) to take the following  two actions:  1.  implement a more comprehensive TRICARE improper payment  measurement methodology that includes medical record reviews, as  done in other parts of its existing postpayment claims review  programs; and  2.  once a more comprehensive improper payment methodology is  implemented, develop more robust corrective action plans that  address underlying causes of improper payments, as determined by  the medical record reviews. HHS had no comments on the report.
Why GAO Did This Study

Improper payments—payments that were made in an incorrect amount or should not have been made at all—are a contributor to excess health care costs. For programs identified as susceptible to significant improper payments, federal agencies are required to annually report estimates of improper payments, their root causes, and corrective actions to address them. In fiscal year 2013, DOD spent about $21 billion for TRICARE and estimated improper payments of $68 million, or an error rate of 0.3 percent. That year, HHS estimated that $36 billion, or 10.1 percent, of the total $357 billion in Medicare payments were improper.
GAO was mandated to examine improper payments in TRICARE and Medicare. This report addresses (1) TRICARE and Medicare improper payment measurement comparability; and (2) the extent to which each program identifies root causes of, and develops corrective actions to address, improper payments. GAO examined DHA and CMS documentation related to improper payment measurement and corrective actions, reviewed relevant laws and guidance, and interviewed agency officials and contractors.

What GAO Found

The Defense Health Agency (DHA), the agency within the Department of Defense (DOD) responsible for administering the military health program known as TRICARE, uses a methodology for measuring TRICARE improper payments that is less comprehensive than the methodology used to measure improper payments in Medicare, the federal health care program for the elderly and certain disabled individuals. Both methodologies evaluate a sample of health care claims paid or denied by the contractors that process the programs' claims. However, DHA's methodology only examines the claims processing performance of the contractors that process TRICARE's purchased care claims. Unlike Medicare, DHA does not examine the underlying medical record documentation to discern whether each sampled payment was supported. Without examining the medical record, DHA does not verify the medical necessity of services provided. The agency also does not validate that the diagnostic and procedural information reported on the claim matches the care and services documented in the medical record. Comparatively, the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services' (CMS) approach to measuring Medicare improper payments examines medical records associated with a sample of claims to verify support for the payment. This methodology more completely identifies improper payments beyond those resulting from claim processing errors, such as those related to provider noncompliance with coding, billing, and payment rules. By not examining medical record documentation to discern if payments are proper, TRICARE's reported improper payment estimates are not comparable to Medicare's estimates, and likely understate the amount of improper payments relative to the estimates produced by Medicare's more comprehensive methodology.
The root causes of TRICARE improper payments and related corrective actions that DHA has identified are limited to addressing issues of contractor noncompliance with claims processing requirements, and are less comprehensive than the corrective actions identified by CMS. For example, DHA has identified the same single corrective action for each of the last three fiscal years to promote contractor compliance, but it only addresses improper payments caused by contractors' claims processing errors. CMS, by comparison, reports more comprehensive information about root causes of improper Medicare payments, develops corrective actions that more directly address root causes, and uses the information to address the agency's goal of reducing future improper payments. For example, for fiscal year 2013, CMS determined that some payments were improper because the services could have been provided in less intensive settings and CMS subsequently implemented two policies to address the problem. In contrast, DHA's less comprehensive approach limits its ability to address the causes of improper payments in the TRICARE program.

What GAO Recommends

DOD should implement more comprehensive TRICARE improper payment measurement methods that include medical record reviews, and develop more robust corrective action plans. DOD concurred with GAO's recommendations and identified steps the department will need to take for implementation. HHS had no comments on the report.