CMS Likely To Tighten Audits & Reimbursement After OIG Says “Extremely High” Retail Pharmacy Billings To Medicare Part D Warrant Close Scrutiny

May 18, 2012

The Office of Inspector General (OIG) of the Department of Health & Human Services (HHS) is recommending a “strong response” to improve Medicare Part D oversight of retail pharmacy prescriptions by the Centers for Medicare & Medicaid Services (CMS) based on findings of a recent study.  See hereOIG says that  “extremely high” prescription drug billings by many retail pharmacies merit scrutiny under medical necessity or other grounds.   

Under the Medicare Part D program, CMS contracts with private insurance companies, known as sponsors, to provide prescription drug coverage to beneficiaries who choose to enroll.  According to OIG, OIG has issued several reports that OIG has found that Part D had limited safeguards in place in the 6 years since Part D began.

In response to these concerns, OIG recently conducted a study based on an analysis of prescription drug event records.  Sponsors send these records to CMS for each drug dispensed to beneficiaries enrolled in their plans.  Each record has information about the pharmacy, prescriber, beneficiary, and drug.  OIG analyzed all of the records for drugs billed by retail pharmacies in 2009 and developed eight measures to describe Part D billing and to identify pharmacies with questionable billing.

Based on this study, OIG reports that retail pharmacies each billed Part D an average of nearly $1 million for prescriptions in 2009. According to OIG, the study revealed “questionable billing” by more than 2,600 of these pharmacies.  OIG reports that these pharmacies had ‘extremely high billing” for at least one of the eight measures developed and applied by OIG   For example, many pharmacies billed what OIG characterized as “extremely high” dollar amounts or numbers of prescriptions per beneficiary or per prescriber.  The Miami, Los Angeles, and Detroit areas were the most likely to have pharmacies with questionable billing.

Although OIG concedes that some of this billing may be legitimate, OIG believes that pharmacies that bill for extremely high amounts call for further scrutiny The OIG report expresses concern that these high dollar prescription drug billings could mean that a pharmacy is billing for drugs that are not medically necessary or were never provided to the beneficiary.

Accordingly, OIG is recommending that CMS:  (1) strengthen the Medicare Drug Integrity Contractor’s monitoring of pharmacies and ability to identify pharmacies for further review, (2) provide additional guidance to sponsors on monitoring pharmacy billing, (3) require sponsors to refer potential fraud and abuse incidents that may warrant further investigation, (4) develop risk scores for pharmacies, (5) further strengthen its compliance plan audits, and (6) follow up on the pharmacies identified as having questionable billing.  CMS concurred with four of the recommendations and partially concurred with the other two.

Private health plans and other payers are likely to review the study to determine whether it provides justification for closer scrutiny of prescription drug claims made to private payers. 

Whether or not private health plans follow suit, retail pharmacies and other providers should anticipate that CMS will increase scrutiny and challenges of prescription drug charges submitted to Medicare Part D.  Accordingly, retail pharmacies and the physician and other providers prescribing medications likely to be billed should tighten documentation and other procedures to defend against possible medical necessity and other challenges. 

The continuing focus and success of federal health care fraud and related investigation and enforcement efforts continue to prove the need for health care providers and payers to strengthen their compliance practices and documentation to avoid getting caught in the ever tightening health care fraud dragnet.  The prosecutions of Giventer and Shavabskaya highlight that health care providers and their leaders need to manage prosecution risks under a broad range of laws in addition to focusing on management of the widely recognized exposures to prosecution under federal health care fraud laws, 

Health Care Providers Must Act To Manage Risks

In response to the growing emphasis and effectiveness of Federal officials in investigating and taking action against health care providers and organizations, health care providers covered by federal false claims, referral, kickback and other health care fraud laws should consider auditing the adequacy of existing practices, tightening training, oversight and controls on billing and other regulated conduct, reaffirming their commitment to compliance to workforce members and constituents and taking other proper steps to help prevent, detect and timely redress health care fraud exposures within their organization and to position their organization to respond and defend against potential investigations or charges.

For Legal Representation or More Information

If you need help reviewing or responding to these or other health care related risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer, may be able to help. Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 24 years experience advising health industry clients about these and other matters. Her experience includes advising hospitals, nursing home, home health, rehabilitation and other health care providers and health industry clients to set up and administer compliance and risk management policies; prevent, conduct and investigate, and respond to peer review and other quality concerns; and to respond to Board of Medicine, Department of Aging & Disability, Drug Enforcement Agency, OCR Privacy and Civil Rights, HHS, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns.

A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.  You can get more information about her health industry experience here. If you need assistance responding to concerns about the matters discussed in this publication or other health care concerns, wish to obtain information about arranging for training or presentations by Ms. Stamer, wish to suggest a topic for a future program or update, or wish to request other information or materials, please contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

If you or someone else you know would like to receive future updates about developments on these and other concerns from Ms. Stamer, see here.

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Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:

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©2012 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.


Medicare Ends Fox Insurance Company Drug Plan Contract As CMS Turns Up Heat on Medicare Advantage & Part D Plan Enforcement & Oversight

March 16, 2010

By Cynthia Marcotte Stamer

The Centers for Medicare & Medicaid Services (CMS) terminated its Medicare Part D prescription drug coverage contract with Fox Insurance Company (Fox) on March 9, 2010.    The action highlights CMS’s growing scrutiny and enforcement of Medicare requirements against Medicare Part D, Medicare Advantage Plans and other federal health care program contractors.

CMS terminated the Fox contract after CMS found the failure by Fox’s plan and services to meet Medicare’s requirements to provide enrollees with prescription drugs according to recognized standards of care jeopardized the health and safety of Fox enrollees.   When announcing the contract termination, CMS reported that an on-sight review by CMS showed that Fox committed a series of violations, including improperly denying its enrollees coverage of critical HIV, cancer, and seizure medications. CMS issued an enrollment and marketing sanction to Fox on Feb. 26, 2010, because the organization was not following Medicare’s rules for providing prescription drug coverage to its enrollees.   According to CMS, an onsite audit conducted between March 2 and March 4 showed that Fox’s problems persisted and that Fox continued to subject its enrollees to obstacles in getting sustaining medicines or other needed medications.  Among other things, CMS found Fox:

  • Failed to provide access to Medicare prescription drugs benefits by imposing unapproved prior authorization and step therapy criteria that made it more difficult for beneficiaries to get drugs that are protected by law;
  • Failed to meet the plan’s appeals deadlines; and
  • Did not comply with Medicare regulations requiring enrollees to be transitioned to new drugs at the beginning of the new plan year.
  • Failed to notify enrollees about prior authorization and step therapy determinations as required by Medicare.

CMS also found that many of the obstacles were in place to limit access to high-cost drugs, which could have led to enrollees’ clinical needs not being met.

In many cases, CMS reported that Fox required enrollees to have unnecessary and invasive medical procedures before they were able to obtain drugs. Finding that Fox was unable to satisfactorily address these compliance concerns and furnish medicines to its Medicare enrollees, CMS immediately terminated the Fox contract.

At the time of the termination, more than 123,000 Medicare beneficiaries were enrolled in Fox plans. Beginning March 10, 2010, CMS indicated that LI-NET, a Medicare run program administered by Humana, would replace the Medicare Part D coverage of  enrollees affected by the Fox contract termination on an interim basis. Fox enrollees will be able to choose a new Medicare prescription drug plan through May 1, 2010. Current enrollees who do not choose a plan will be enrolled into a new plan by Medicare. CMS is sending letters explaining the actions taken by CMS to enrollees and has established a 1-800 number to receive questions.

The action against Fox is part of an ongoing series of oversight, disciplinary and enforcement actions by CMS against Medicare Advantage and other federal health care program participants.  These programs and CMS’ oversight and enforcement of federal programs are drawing increasing Congressional scrutiny in connection with Congressional health care reform efforts. Amid this heightened scrutiny, Medicare Part D and Medicare Advantage Plans; health care providers, administrative services providers and others contracting with these plans and others involved with this programs should take appropriate action to maintain compliance, tighten their contracts with and oversight of actions of partners and vendors performing critical functions; review complaint reporting, investigation and response processes and procedures; and strengthen other practices to minimize exposures to audit or other enforcement actions.

For Assistance With Medicare Managed Care or Other Matters

If your organization needs advice or assistance about Medicare Part D or other Medicare Advantage contracting or other requirements or about other health plan or health care matters, consider contacting the author of this article, Curran Tomko Tarski LLP Partner Cynthia Marcotte Stamer at (214) 270-2402 or via e-mail here

Past Chair of the ABA Health Law Section Managed Care & Insurance Section, Chair of the American Bar Association RPTE Employee Benefits & Compensation Committee and an ABA Joint Committee on Employee Benefits Council member,  Ms. Stamer has more than 22 years experience advising health plans, health care providers, and other health industry and insurance clients.  Her experience includes specific experience assisting Medicare, Medicaid and other health plan sponsors, administrators,  or administrative services providers about contracting, compliance, coverage and other matters.    A popular lecturer and widely published author on health industry matters, Ms. Stamer also conducts compliance and other training on Medicare Advantage and other contract and compliance matters, as well as a broad range of other health industry related concerns.  Ms. Stamer also publishes and speaks extensively on health and managed care industry quality, regulatory, reimbursement, and other operations, risk management and public policy concerns.  Her insights on health industry matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.  For additional information about Ms. Stamer, her experience, involvements, programs or publications, see here.  

Other Recent Developments & Resources

If you found this information of interest, you also may be interested in reviewing some of the following recent updates available online by clicking on the article title:

You can review other recent health plan, health care and internal controls resources and additional information about the health industry and other experience of Ms. Stamer here.  If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here; e-mailing this information to cstamer@cttlegal.com; or registering to participate in the distribution of these and other Solutions Law Press updates here. For important information concerning this communication click here.   

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©2010 Cynthia Marcotte Stamer.  All rights reserved.


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