CMS’s annual report demonstrates that the government is becoming increasingly effective at ferreting out fraud and abuse from the healthcare system. With a 12-to-1 return on investment, the government will likely continue to make fighting healthcare fraud a priority.

Last week, CMS reported that the agency’s fraud prevention program saved the government nearly $42 billion dollars in the fiscal years (FY) 2013 and 2014. On July 20th, CMS released its Annual Report to Congress on Medicare and Medicaid Integrity Programs, which detailed the agency’s success in fighting fraud and abuse in the healthcare system. According to the report, CMS recovered $12.40 for the Medicare program for every dollar invested in fraud prevention efforts.

CMS attributes its success to moving beyond the reactive “pay and chase” method of recovering fraudulent payments after the fact and instead implementing preventative strategies that focus on identifying potentially fraudulent payments before they are made. In FY 2013, savings from CMS’ prevention efforts represented 68 percent of total savings. In FY 2014, that percentage increased to 73 percent.

CMS’s increasing success is partially the result of prevention strategies that harness the power of data mining and predictive modeling. Since 2011, CMS has used predictive analytics technology under the Fraud Prevention System (FPS) to run algorithms and others analytics against Medicare claims prior to payment in order to identify and prevent potentially fraudulent claims. According to the report, CMS prevented or identified an estimated $820 million in improper payments since the FPS was implemented in 2011. Despite this success, CMS has not recommended extending the use of predictive analytics technology to the Medicaid and CHIP programs. As explained in the report, CMS has determined that “it is not feasible at this time to systematically expand predictive analytics technology to all Medicaid and CHIP claims, and it may not be cost effective for all states to adopt predictive analytics individually.” However, it will continue to reevaluate this option for the future.

Additionally, for the first time, this year’s report analyzes the impact of revoking providers’ billing privileges on the government’s bottom line. According to the report, “[b]y taking swift administrative action to remove providers and suppliers from the program who were no longer qualified to bill Medicare, CMS estimates that in both FY 2013 and FY 2014, it will avoid paying over $700 million dollars to these revoked providers over the three-year period following their revocation.” As explained in the report, revocation of billing privileges is an important government tool for fighting fraud, as it “deters and reduces fraudulent behavior across the provider population.”

As we previously posted, last month, the DOJ brought criminal and civil charges against 301 healthcare professionals for claims amounting to $900 million in the form of alleged kickbacks, money laundering, and other false billings, making it the largest national healthcare fraud “takedown” to date.

It is critical that healthcare entities implement robust compliance programs to detect and correct improper payments. One way for healthcare entities to monitor compliance is to evaluate is use data analytics to flag potentially problematic claims and minimize their risk. We would be happy to discuss ways that companies can efficiently analyze their data.