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CMS Cuts Wasteful Medical Spending, FFS Improper Payments

Using the Comprehensive Error Rate Testing (CERT) program, CMS has successfully reduced wasteful medical spending in the form of Medicare fee-for-service improper payments.

By Vera Gruessner

The Centers for Medicare & Medicaid Services (CMS) has reduced the Medicare fee-for-service improper payment rate from last year’s 12.1 percent to 11 percent in 2016, The CMS Blog reports. CMS has dedicated itself in recent years to reducing wasteful medical spending.  

Medicare Fee-for-Service Improper Payment Rate

Through the Comprehensive Error Rate Testing (CERT) program, CMS has been able to determine the Medicare fee-for-service improper payment rate and reduce inaccurate payments. When it comes to inpatient hospital claims, the Medicare program has reduced improper payments by a significant 58.3 percent. In 2014, the Medicare improper payment rate was 9.2 percent and, by 2016, the rate dropped to 3.8 percent.

Medicare fee-for-service improper payments in the realm of inpatient hospital claims dropped from $10.45 billion in 2014 to $4.42 billion during the 2016 reporting period. There are certain reasons for this outcome. Through greater provider education and stronger oversight, CMS was able to reduce this type of wasteful medical spending. CMS also put in certain policy changes to achieve these results.

“First, CMS changed its policy to allow hospitals to bill for Part B (Medical Insurance) services given during a hospital inpatient stay when an inpatient admission is found not to be reasonable and necessary,” The CMS Blog states.

“Second, CMS clarified policy for when an inpatient admission is generally appropriate for payment under Medicare Part A (Hospital Insurance) by establishing and modifying the 'Two-Midnight rule.' The Two-Midnight rule applied to admissions beginning on or after October 1, 2013, and established benchmark criteria that should be used when determining whether a short stay hospital admission is payable under Medicare Part A. The Two-Midnight rule stated that inpatient admissions will generally be payable under Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supports that reasonable expectation.”

READ MORE: Why Patients Need More than Reduced Healthcare Spending

When providers were selected for an audit and found to have improperly billed the Medicare program, CMS offered one-on-one education to prevent future medical billing errors. The federal agency will be focused on further reducing wasteful healthcare spending especially in terms of Medicare fee-for-service improper payments.

Wasteful medical spending rose significantly in 2015 when compared to the two years prior. The Health Care Cost Institute (HCCI) released a study showing that medical spending within the private health insurance market increased by 4.6 percent in 2015 while the rate was only at 2.6 percent in 2014 and 3 percent in 2013.

“Our findings add evidence to the notion that reducing overuse of medical procedures could improve quality while reducing spending,” Lead Author and RAND’s Physician Scientist Rachel Reid said in a public statement.

“The services in this study reflect many clinical areas and types of care, but still are a small portion of all the low-value care patients receive. The potential savings from reducing these low-value services and others are substantial,” Reid concluded.

There are a number of steps that health payers as well as other stakeholders within the medical industry can take to cut down on wasteful medical spending. For instance, adopting bundled payment models could lead providers to find ways to cut costs while improving the quality of care.

READ MORE: 5 Best Practices to Advance Value-Based Care Reimbursement

Also, participating in an accountable care organization could bring stakeholders to focus more on population health management and preventive services. These methods could keep medical conditions from worsening and becoming more costly in the long run.

One study from the RAND Corporation and the University of Southern California found that providers could reduce wasteful medical spending by cutting down on low-value services. The results from the study show that providers, payers, and other stakeholders spent $32.8 million on 28 low-value services in 2013.

The findings show that the highest factor for wasteful medical spending comes from overtreatment. Some areas where providers could cut down on services include imaging for back pain and imaging for headaches, the researchers reported in their study.

Some other steps that payers can take to reduce wasteful medical spending include a focus on expanding the use of health IT, data analytics for measuring patient flow, and improving patient engagement.

Payers could implement automated software to streamline medical billing so that less time is spent on data entry. Data analytics can be used in the emergency room to improve patient management during busy days.

READ MORE: Key Steps for Payer Success in Accountable Care Organizations

Patient engagement strategies could go a long way toward cutting costs by reducing the need for doctor visits. For instance, patients could use a patient portal or telehealth consultation instead of the more pricey in-person visit. By following these steps, payers could join CMS in reducing wasteful medical spending nationwide.


Dig Deeper:

How Medicare, Medicaid, and CHIP Guide the Health Payer Industry

What Are the Benefits of Accountable Care Organizations?


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