Background Medicare and Medicaid FFS are federal health care programs, though there are certain distinctions between the programs’ coverage and financing. Medicare coverage policies are generally established at the national level, and the program directly pays providers for services rendered. Medicaid is a federal-state program, and states are provided flexibility to design their coverage policies. State Medicaid agencies pay providers for services rendered, and the federal government and states share in the financing of the program, with the federal government matching most state expenditures. Estimating Improper Payments in Medicare and Medicaid The Improper Payments Information Act of 2002 (IPIA), as amended, requires federal executive branch agencies to report a statistically valid estimate of the annual amount of improper payments for programs identified as susceptible to significant improper payments. To accomplish this, agencies follow guidance for estimating improper payments issued by OMB. According to the HHS-OIG, which conducts annual compliance reviews and regularly reviews the estimation methodology for both the Medicare FFS and Medicaid improper payment measurement programs, the methodology for both programs’ estimates comply with federal improper payment requirements. To estimate improper payments in Medicare and Medicaid FFS, respectively, CMS’s CERT and PERM contractors randomly sample and manually review medical record documentation associated with FFS claims for payment from providers, also known as medical reviews. The CERT and PERM programs project the improper payments identified in the sample to all FFS claims to estimate improper payment amounts and rates for the programs nationally for a given fiscal year. For Medicare, the CERT contractor conducted medical reviews on about 50,000 Medicare claims in fiscal year 2017. For Medicaid, the PERM contractor conducted medical reviews on nearly 31,000 Medicaid claims across fiscal years 2015, 2016, and 2017 to estimate fiscal year 2017 improper payments. Although IPIA, as amended, only requires agencies to develop one improper payment estimate for each identified program, both the CERT and PERM programs also estimate national service-specific improper payment amounts and rates to identify services at high risk for improper payment. Additionally, the PERM program estimates state-level improper payment rates based on the amounts of improper payments identified through medical reviews in each state. The CERT and PERM contractors conduct medical reviews to determine whether claims were paid or denied properly in accordance with program coverage policies—including coverage policies based on statutes, regulations, other CMS coverage rules, and each state’s coverage policies in the case of Medicaid. To perform medical reviews, trained clinicians review documentation—such as progress notes, plans of care, certificates of medical necessity, and physician orders for services—to ensure that claims meet program coverage policies. In general, Medicare and Medicaid documentation requirements define the documentation needed to ensure that services are medically necessary and demonstrate compliance with program coverage policies. For example, Medicare home health services must be supported by documentation demonstrating compliance with the coverage policy that beneficiaries be homebound, among other requirements. Certain coverage policies and documentation requirements were implemented to help reduce the potential for fraud, waste, and abuse. For example, Medicare implemented a requirement that DME providers maintain documentation demonstrating proof of item delivery, to better ensure program integrity. (Figure 1 presents an example of a progress note to support the medical necessity of Medicare home health services. See App. III for additional examples of provider documentation). The CERT and PERM contractors classify improper payments identified through medical review by the type of payment error. Two types of errors are related to documentation—no documentation and insufficient documentation. No documentation: Improper payments in which providers fail to submit requested documentation or respond that they do not have the requested documentation. Insufficient documentation: Improper payments in which providers submit documentation that is insufficient to determine whether a claim was proper, such as when there is insufficient documentation to determine if services were medically necessary, or when a specific, required documentation element, such as a signature, is missing. In fiscal year 2017, insufficient documentation comprised the majority of estimated FFS improper payments in both Medicare and Medicaid, with 64 percent of Medicare and 57 percent of Medicaid medical review improper payments. Improper payments stemming from insufficient documentation in Medicare FFS increased substantially starting in 2009, while insufficient documentation in Medicaid has remained relatively stable since 2011 (see Fig. 2). CMS has attributed the increase in Medicare insufficient documentation since 2009 in part to changes made in CERT review criteria. Prior to 2009, CERT medical reviewers used “clinical inference” to determine that claims were proper even when specific documentation was missing if, based on other documentation and beneficiary claim histories, the reviewers could reasonably infer that the services were provided and medically necessary. Beginning with CMS’s fiscal year 2009 CERT report, in response to 2008 HHS-OIG recommendations, CMS revised the criteria for CERT medical reviews to no longer allow clinical inference and the use of claim histories as a source of review information. More recent policy changes that added to Medicare documentation requirements may have also contributed to the increase in insufficient documentation in Medicare FFS. CMS’s Medicare and Medicaid Contractors Make Multiple Attempts to Contact Providers to Obtain Documentation to Estimate Improper Payments Medicare’s CERT and Medicaid’s PERM contractors make multiple attempts to contact providers to request medical record documentation for medical reviews, and review all documentation until they must finalize the FFS improper payment estimate. The CERT and PERM contractors allow providers 75 days to submit documentation, though providers can generally submit late documentation up to the date each program must finalize its improper payment estimate, known as the cut-off date (See Fig. 3.). Both programs also contact providers to subsequently request additional documentation if the initial documentation submitted by the providers does not meet program requirements. Initial documentation request: The CERT and PERM contractors make initial requests for documentation by sending a letter and calling the provider. After the initial provider request, if there is no response, the contractors contact the provider at least three additional times to remind them to submit the required documentation. If there is no response, the claim is determined to be improper due to no documentation. Claims are also classified as improper due to no documentation when the provider responds but cannot produce the documentation, such as providers that do not have the beneficiary’s documentation or records for the date of service, among other reasons (see Table 1). For referred services, such as home health, DME, and laboratory services, the CERT contractor also conducts outreach to referring physicians to request documentation. For example, for a laboratory claim, the CERT contractor may contact the physician who ordered the laboratory test to request associated documentation, such as progress notes. Conversely, the PERM contractor told us they generally do not contact referring physicians to request documentation. Subsequent documentation request: If a provider initially submits documentation that is insufficient to support a claim, then the CERT and PERM contractors subsequently request additional documentation. In fiscal year 2017, of the 50,000 claims in the CERT sample, the contractor requested additional documentation from 22,815 providers. Providers did not submit additional documentation to sufficiently support 56 percent of the associated claims. For the 3 years that comprise the 2017 Medicaid improper payment rate, of the nearly 31,000 claims in the PERM sample, the contractor requested additional documentation for 5,448, and providers did not submit additional documentation to sufficiently support about 8 percent of the 5,448 claims. In addition to having similar outreach to providers for obtaining documentation, the CERT and PERM contractors also have processes to refer suspected fraud to the appropriate program integrity entity, to ensure the accuracy of medical reviews, and to allow providers to dispute improper payment determinations. Suspected fraud: When CERT and PERM contractors identify claims with evidence of suspected fraud, they are required to refer the claims to other program integrity entities that are responsible for investigating suspected fraud. CERT and PERM contractor officials said that in 2017, the CERT contractor referred 35 claims, and the PERM contractor did not make any referrals. Interrater reliability (IRR) reviews: As a part of their medical review processes, both the CERT and PERM contractors conduct IRR reviews, where two reviewers conduct medical reviews on the same claim and compare their medical review determinations. These IRR reviews ensure the consistency of medical review determinations and processes for resolving differences identified through the IRR reviews. CMS staff said that they also review a sample of the CERT and PERM contractors’ payment determinations to ensure their accuracy. CERT: The contractor performs IRR reviews for at least 300 claims each month, including claims with and without improper payment determinations. PERM: The contractor conducts IRR reviews of all improper payment determinations, except improper payments due to no documentation, and 10 percent of all correctly paid claims in the sample, which combined was about 3,600 claims for the fiscal year 2017 national improper payment rate. Disputing improper payment determinations: Both CERT and PERM contractors have processes in place for disputing the CERT or PERM contractor’s improper payment determinations. These processes involve reviewing the claim, including any newly submitted documentation, and may result in upholding or overturning the initial improper payment determination. Improper payment determinations that are overturned prior to the CERT and PERM contractors’ cut-off dates are no longer considered improper, and estimated improper payment amounts and rates are adjusted appropriately. CERT: Medicare Administrative Contractors, which process and pay claims, may dispute the CERT contractor’s improper payment determinations first with the CERT contractors and then, if desired, with CMS. Additionally, Medicare providers can appeal the CERT contractor’s improper payment determinations through the Medicare appeals process. PERM: State Medicaid officials may dispute the PERM contractor’s improper payment determinations first with the PERM contractor and then, if desired, with CMS. Providers are not directly involved in this process; instead, providers can contact the state to appeal the improper payment determination. Differing Medicare and Medicaid Documentation Requirements May Result in Inconsistent Assessments of Program Risks Differences in Documentation Requirements for Medicare and Medicaid May Result in Differing Improper Payment Rates and Assessments of Program Risks We found that Medicare, relative to Medicaid, had a higher estimated FFS improper payment rate primarily due to insufficient documentation in fiscal year 2017. According to CMS data, across all services in fiscal year 2017, the rate of insufficient documentation was 6.1 percent for Medicare and 1.3 percent in Medicaid, substantially greater than the difference in rates for all other types of errors, which were 3.4 and 1.0 percent, respectively. For home health, DME, and laboratory services, the insufficient documentation rate was at least 27 percentage points greater for Medicare than for Medicaid, and for hospice services, the rate was 9 percentage points greater (see Fig. 4). Differences between Medicare and Medicaid coverage policies and documentation requirements likely contributed to the substantial variation in the programs’ insufficient documentation rates for the services we examined. Among the services we examined, there are four notable differences in coverage policy and documentation requirements that likely affected how the programs conducted medical reviews: face-to-face examinations; prior authorization; signature requirements; and documentation from referring physicians for referred services, as discussed below. Face-to-face examinations. In part to better ensure program integrity, the Patient Protection and Affordable Care Act established a requirement for referring physicians to conduct a face-to-face examination of beneficiaries as a condition of payment for certain Medicare and Medicaid services. States were still in the process of implementing the policies for Medicaid in fiscal year 2017. include narrative information that sufficiently supported that the beneficiary had a life expectancy of less than 6 months. include the certification date span. documentation supporting that the referring physician conducted an examination when certifying the medical necessity of the service. Hospice providers must submit documentation of a face-to-face examination when recertifying the medical necessity of hospice services for beneficiaries who receive care beyond 6 months after their date of admission. (See sidebar for examples of insufficient documentation in Medicare hospice services.) CMS officials told us that documentation requirements for the face-to-face examination policy for home health services in particular led to an increase in insufficient documentation. When initially implemented in April 2011, home health providers had to submit separate documentation from the referring physician detailing the examination and the need for home health services. Beginning January 2015, CMS changed the requirement to allow home health providers to instead use documentation from the referring physician, such as progress notes, to support the examinations. CMS and several stakeholders attributed recent decreases in the home health improper payment rate to the amended documentation requirement (see Fig. 5). agency did not apply to the sampled day of care associated with the claim. health and DME services in Medicaid in 2016; however, the requirement likely did not apply to many claims subject to fiscal year 2017 PERM medical reviews. Medicaid does not have a face-to-face policy for hospice services, and most states we interviewed did not have such policies. (See sidebar for examples of insufficient documentation in Medicaid.) Prior authorization. Medicare does not have the same broad authority as state Medicaid agencies to implement prior authorization, which can be used to review documentation and verify the need for coverage prior to services being rendered. State Medicaid agencies we spoke with credit prior authorization with preventing improper payments from being paid in the first place. CMS has used prior authorization in Medicare for certain services through temporary demonstration projects and models, as well as one permanent program. In April 2018, we found that savings from a series of Medicare temporary demonstrations and models that began in 2012 could be as high as about $1.1 to $1.9 billion as of March 2017. We recommended that CMS take steps, based on its evaluations of the demonstrations, to continue prior authorization. All six of our selected states use prior authorization in Medicaid for at least one of the four services we examined. In particular, all six selected states require prior authorization for DME, and five require prior authorization for home health. Officials from several states noted that they often apply prior authorization to services at high risk for improper payments, and most told us that prior authorization screens potential improper payments before services are rendered. We did not evaluate the effectiveness of states’ use of prior authorization, or review the documentation required by states for prior authorization. (See Fig 6 for an example state Medicaid prior authorization form.) Physician signatures: While both Medicare and state Medicaid agencies require signatures on provider documents to ensure their validity, Medicare has detailed standards for what constitutes a valid signature. physician did not support the medical necessity for the specific type of catheter ordered. variety of situations. For example, illegible signatures and initials on their own are generally invalid, though they are valid when over a printed name. Examples of insufficient documentation in Medicare laboratory Documentation from the referring physician did not support the order or an intent to order the billed laboratory tests. In Medicaid, PERM contractor staff told us that state agencies generally have not set detailed standards for valid signatures, and that reviewers generally rely on their judgment to assess signature validity. Documentation from the referring physician did not support that the beneficiary’s currently has diabetes for a billed laboratory test for the management and control of diabetes. Documentation for referred services. Medicare requires documentation from referring physicians to support the medical necessity of the referred services that we examined—home health, DME, and laboratory services—but Medicaid generally does not require such documentation. Medicare generally requires documentation from the referring physician, such as progress notes, to support the medical necessity of referred services. CMS officials told us that Medicare requires such documentation from referring physicians to ensure that medical necessity determinations are independent of the financial incentive to provide the referred service, particularly as certain referred services are high risk for fraud, waste, and abuse. (See sidebar for examples of insufficient documentation in Medicare home health, DME, and laboratory services.) In Medicaid, documentation requirements to support the medical necessity of referred services are primarily established by states, and states generally do not require documentation, such as progress notes from referring physicians, to support medical necessity. Further, PERM contractor staff told us that they generally do not review such documentation when conducting medical reviews of claims for referred services. Officials from CMS, the CERT contractor, and provider associations told us that Medicare’s documentation requirements for referred services present challenges for providers of referred services to submit sufficient documentation since they are dependent on referring physician documentation to support medical necessity. Some officials further stated that referring physicians may lack incentive to ensure the sufficiency of such documentation, as they do not experience financial repercussions when payments for referred services are determined to be improper. Officials told us that: It is generally not standard administrative practice for laboratories or DME providers to obtain referring physician documentation, and referring physicians may not submit them when the referred services are subject to medical review. For example, laboratories generally render services based solely on physician orders for specific tests, and generally do not obtain associated physician medical records. Referring physicians may not document their medical records in a way that meets Medicare documentation requirements to support the medical necessity of referred services. Officials from a physician organization told us that physicians refer beneficiaries for a broad array of services, and face challenges documenting their medical records to comply with Medicare documentation requirements for various referred services. We previously reported on CMS provider education efforts and recommended that CMS take steps to focus education on services at high risk for improper payments and to better educate referring physicians on documentation requirements for DME and home health services. CMS agreed with and has fully addressed our recommendation. Medicare and Medicaid pay for many of the same services, to some of the same providers, and likely face many of the same underlying program risks. However, because of differences in documentation requirements between the two programs, the same documentation for the same service can be sufficient in one program but not the other. The substantial variation in the programs’ improper payment rates raise questions about how well their documentation requirements help in determining whether services comply with program coverage policies, and accordingly help identify causes of program risks. This is inconsistent with federal internal control standards, which require agencies to identify, analyze, and respond to program risks. CMS officials attributed any differences in the two programs’ documentation requirements to the role played by the states in establishing such requirements under Medicaid, and told us that they have not assessed the implications of how differing requirements between the programs may lead to differing assessments of the programs’ risks. CMS relies on improper payment estimates to help develop strategies to reduce improper payments, such as informing Medicare’s use of routine medical reviews, educational outreach to providers, and efforts to address fraud. Without a better understanding of how documentation requirements affect estimates of improper payments, CMS may not have the information it needs to effectively identify and analyze program risks, and develop strategies to protect the integrity of the Medicare and Medicaid programs. CMS Has Ongoing Efforts to Examine Insufficient Documentation in Medicare and Revise Documentation Requirements CMS’s Patients over Paperwork initiative is an ongoing effort to simplify provider processes for complying with Medicare FFS requirements, including documentation requirements. Although CMS officials said this initiative is intended to help providers meet documentation requirements in both Medicare and Medicaid, current efforts only address Medicare documentation requirements. As part of the initiative, CMS solicited comments from stakeholders through proposed rulemaking on documentation requirements that often lead to insufficient documentation, and CMS officials stated that they have met with provider associations to obtain feedback. The initiative is generally focused on reviewing documentation requirements the agency has the authority to easily update, namely requirements that are based on CMS coverage rules, as opposed to requirements based on statute. Through this initiative, CMS has clarified and amended several Medicare documentation requirements. For example, CMS clarified Medicare documentation requirements for DME providers to support proof of item delivery. As part of another initiative to examine insufficient documentation in Medicare, CMS found that 3 percent of improper payments due to insufficient documentation were clerical in nature in fiscal year 2018. For the CERT’s fiscal year 2018 medical reviews, the CERT contractor classified whether improper payments due to insufficient documentation were clerical in nature—meaning the documentation supported that the service was covered and necessary, had been rendered, and was paid correctly, but did not comply with all Medicare documentation requirements. Such errors would not result in an improper payment determination if the documentation had been corrected. For example, such clerical errors may involve missing documentation elements that may be found elsewhere within the medical records. According to CMS officials, the information gathered on clerical errors may inform efforts to simplify documentation requirements. Specifically, CMS plans to use this information to help identify requirements that may not be needed to demonstrate medical necessity or compliance with coverage policies. CMS said that it does not plan to engage in similar efforts to examine insufficient documentation errors in Medicaid because of challenges associated with variations in state Medicaid documentation requirements and the additional burden it would place on states. Medicaid Medical Reviews May Not Provide Actionable Information for States, and Other Practices May Compromise Fraud Investigations Medicaid Medical Reviews Do Not Provide Robust State-Specific Information; Resulting Corrective Actions May Not Address the Most Prevalent Causes of Improper Payments On a national basis, CMS’s PERM program generates statistically valid improper payment estimates for the Medicaid FFS program. At the state level, however, CMS officials told us that the PERM contractor’s medical reviews do not generate statistically generalizable information about improper payments by service type and, as a result, they do not provide robust state-specific information on the corrective actions needed to address the underlying causes of improper payments. According to CMS, the number of improper payments identified through medical reviews is too small to generate robust state-specific results. In fiscal year 2017, the PERM contractor identified 918 improper payments nationwide out of nearly 31,000 claims subjected to medical reviews. More than half of all states had 10 or fewer improper payments identified through medical reviews in fiscal year 2017, and these made up about 7 percent of total sample improper payments identified through medical reviews (see Table 2). According to CMS officials, estimating improper payments for specific service types within each state with the same precision as the national estimate would involve substantially expanding the number of medical reviews conducted and commensurately increasing PERM program costs. CMS officials also estimated federal spending on PERM Medicaid FFS medical reviews at about $8 million each year, which does not include state costs, the federal share of the state costs, or providers’ costs. Of our six selected states, officials from one state said that data on service-specific improper payment rates at the state level would be useful, though officials had reservations about increasing sample sizes because of the resources involved in doing so. CMS requires state Medicaid agencies to develop corrective actions to rectify each improper payment identified. However, since the Medicaid review sample in a state typically is not large enough to be statistically generalizable by service type, the identified improper payments may not be representative of the prevalence of improper payments associated with different services within the state. Accordingly, corrective actions designed to rectify specific individual improper payments may not address the most prevalent underlying causes of improper payments. For example, state Medicaid officials in four of our six states said that most improper payments identified through PERM medical reviews are unique one-time events. Federal internal control standards require agencies to identify and analyze program risks so they can effectively respond to such risks, and OMB expects agencies to implement corrective actions that address underlying causes of improper payments. Without estimates that provide information on the most prevalent underlying causes of improper payments within a state, particularly by service type, a state Medicaid agency may not be able to develop appropriate corrective actions or prioritize activities to effectively address program risks. Corrective actions that do not address the underlying causes of improper payments are unlikely to be an effective use of state resources. Increasing sample sizes of the PERM is one approach that could improve the usefulness of the medical reviews for states—but other options also exist. For example, PERM findings could be augmented with data from other sources—such as findings from other CMS program integrity efforts, state auditors, and HHS-OIG reports. States conduct their own program integrity efforts, including medical reviews, to identify improper payments and state Medicaid officials we spoke with in four of our six selected states said that they largely rely on such efforts to identify program risks. One state’s Medicaid officials said that state-led audits allow them to more effectively identify—and subsequently monitor—services that are at risk for improper payments in the state. CMS also could use data from other sources on state-specific program risks to help design states’ PERM samples. These options could help CMS and the states better identify the most prevalent causes of improper payments and more effectively focus corrective actions and program integrity strategies to address program risks. CMS Policy May Limit State Identification of Medicaid Providers Under Fraud Investigation State Medicaid agencies may, but are not required to, determine whether providers included in the PERM sample are under fraud investigation and notify the PERM contractor. Under CMS policy, when a state notifies the PERM contractor of a provider under investigation, the contractor will end all contact with the provider to avoid compromising the fraud investigation, and the claim will be determined to be improper, due to no documentation. In fiscal year 2017, of the 328 Medicaid improper payments due to no documentation, 27 (8 percent) from five states, according to CMS, were because the provider was under fraud investigation. If a state Medicaid agency does not notify the PERM contractor about providers under fraud investigation, the PERM contractor will conduct its medical review, which involves contacting the provider to obtain documentation as a part of its normal process, and communicate about improper payment determinations. Contacting providers that are under fraud investigation as part of PERM reviews could interfere with an ongoing investigation, such as in the following ways we identified based on information from the Association of Certified Fraud Examiners and others. The contact by the PERM contractor to request documentation, although unrelated to the fraud investigation, may give the impression that the provider is under heightened scrutiny. This could prompt the provider to change its behavior, or to destroy, falsify, or create evidence. These actions could in turn disrupt or complicate law enforcement efforts to build a criminal or civil case. The PERM contractor’s communication about improper payment determinations may prompt states to conduct educational outreach to the provider about proper billing procedures. This may inadvertently change the billing practices of a fraudulent provider for whom law enforcement is trying to establish a pattern of behavior. We found that states may not have processes to determine whether providers included in the PERM sample are under fraud investigation. Of the six states we spoke with, officials from two states said they did not have a mechanism in place to identify providers under fraud investigation. However, it is a best practice for investigative and review entities to communicate and coordinate with one another to determine if multiple entities are reviewing the same provider and for investigators to work discreetly without disrupting the normal course of business, based on our analysis of information from the Association of Certified Fraud Examiners and others. Accordingly, investigators should be aware of other government entities that are in contact with providers under investigation, such as the PERM contractor, who may contact providers multiple times to request documentation, and refer identified improper payments for recovery. If multiple entities are reviewing the same provider, one entity may be directed to pause or cease its activities, such as a PERM medical review, to reduce the risk of compromising an active fraud investigation. CMS has stated that it is not the agency’s intention to negatively impact states’ provider fraud investigations and, therefore, it has provided states the option to notify the PERM contractor of any providers under investigation to avoid compromising investigations. However, CMS does not require states to determine whether providers under PERM medical reviews are also under fraud investigation, which creates the potential that PERM reviews could interfere with ongoing investigations. State Medicaid agencies may not have incentives to notify the PERM contractor of providers under fraud investigation, as doing so will automatically result in a no documentation error, which increases states’ improper payment rates. Medicaid officials from one state we spoke with said that while they check whether providers subject to PERM reviews are under investigation for fraud, they do not report these instances to the PERM contractor because the PERM contractor would find a no documentation error and the claim would be cited as improper, increasing the state’s improper payment rate. Officials from another state said this policy penalizes states, in the form of higher state-level improper payment rates that may reflect poorly on states. Additionally, officials from this state were reluctant to develop corrective actions for improper payments stemming from such no documentation errors. Conclusions CMS and states need information about the underlying causes of improper payments to develop corrective actions that will effectively prevent or reduce future improper payments in Medicare and Medicaid FFS. The substantial variation in Medicare and Medicaid estimated improper payment rates for the services we examined raise questions about how well the programs’ documentation requirements ensure that services were rendered in accordance with program coverage policies. While our study focused on certain services with high rates of insufficient documentation, differences in documentation requirements between the programs may apply to other services as well. Without examining how the programs’ differing documentation requirements affect their improper payment rates, CMS’s ability to better identify and address FFS program risks and design strategies to assist providers with meeting requirements may be hindered. At the state level, PERM medical reviews do not provide robust information to individual states. CMS’s requirements to address individual improper payments may lead states to take corrective actions that may not fully address underlying causes of improper payments identified through medical review, and may misdirect state efforts to reduce improper payments. Absent a more comprehensive review of existing sources of information on the underlying causes of Medicaid improper payments, CMS and states are missing an opportunity to improve their ability to address program risks. In addition, the lack of a requirement for state Medicaid agencies to determine whether providers whose claims are selected for PERM medical reviews are also under fraud investigation risks compromising ongoing investigations. Further, citing such claims as improper payments in states’ estimated improper payment rates may discourage state Medicaid agencies from notifying the PERM contractor that a provider is under investigation. Recommendations We are making the following four recommendations to CMS: The Administrator of CMS should institute a process to routinely assess, and take steps to ensure, as appropriate, that Medicare and Medicaid documentation requirements are necessary and effective at demonstrating compliance with coverage policies while appropriately addressing program risks. (Recommendation 1) The Administrator of CMS should take steps to ensure that Medicaid medical reviews provide robust information about and result in corrective actions that effectively address the underlying causes of improper payments. Such steps could include adjusting the sampling approach to reflect state-specific program risks, and working with state Medicaid agencies to leverage other sources of information, such as state auditor and HHS-OIG findings. (Recommendation 2) The Administrator of CMS should take steps to minimize the potential for PERM medical reviews to compromise fraud investigations, such as by directing states to determine whether providers selected for PERM medical reviews are also under fraud investigation and to assess whether such reviews could compromise investigations. (Recommendation 3) The Administrator of CMS should address disincentives for state Medicaid agencies to notify the PERM contractor of providers under fraud investigation. This could include educating state officials about the benefits of reporting providers under fraud investigation, and taking actions such as revising how claims from providers under fraud investigation are accounted for in state-specific FFS improper payment rates, or the need for corrective actions in such cases. (Recommendation 4) Agency Comments and Our Evaluation We provided a draft of this report to HHS for comment, and its comments are reprinted in appendix I. HHS also provided us with technical comments, which we incorporated in the report as appropriate. HHS concurred with our first recommendation that CMS institute a process to routinely assess and ensure that Medicare and Medicaid documentation requirements are necessary and effective. HHS stated that CMS’s Patients over Paperwork initiative is focused on simplifying Medicare documentation requirements and noted that for the Medicaid program, CMS will identify and share documentation best practices with state Medicaid agencies. CMS’s Patients over Paperwork initiative may help CMS streamline Medicare documentation requirements. However, we believe CMS should take steps to assess documentation requirements in both programs to better understand the variation in the programs’ requirements and their effect on estimated improper payment rates. Without an assessment of how the programs’ documentation requirements affect estimates of improper payments, CMS may not have the information it needs to ensure that Medicare and Medicaid documentation requirements are effective at demonstrating compliance and appropriately address program risks. HHS did not concur with our second recommendation that CMS ensure that Medicaid medical reviews provide robust information about and result in corrective actions that effectively address the underlying causes of improper payments. HHS noted that increasing the PERM sample size would involve increasing costs and state Medicaid agencies’ burden, and that incorporating other sources of information into the PERM sample design could jeopardize the sample’s statistical validity. HHS also commented that it already uses a variety of sources to identify and take corrective actions to address underlying causes of improper Medicaid payments. We acknowledge that increasing the sample size would increase the costs of the PERM medical review program, though the level of improper payments warrants continued action. Further, under the current approach, we found that CMS and state Medicaid agencies are expending time and resources developing and implementing corrective actions that may not be representative of the underlying causes of improper payments in their states. It is important that corrective actions effectively and efficiently address the most prevalent causes of improper payments, and our report presents options that could improve the usefulness of the PERM’s medical reviews—such as augmenting medical reviews with other sources of information during the development of corrective actions. We continue to believe that corrective actions based on more robust information would help CMS and state Medicaid agencies more effectively address Medicaid program risks. HHS concurred with our third and fourth recommendations that CMS minimize the potential for PERM medical reviews to compromise fraud investigations and address disincentives for state Medicaid agencies to notify the PERM contractor of providers under fraud investigation. In its comments HHS described the actions it has taken and is considering taking to implement these recommendations. We are sending copies of this report to appropriate congressional committees, to the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114, or cosgrovej@gao.gov or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Comments from the Department of Health and Human Services Appendix II: Fiscal year 2018 Medicare Improper Payment Data During the period of our review, fiscal year 2017 data represented the most recent, complete data for both Medicare and Medicaid fee-for- service (FFS) estimated improper payment amounts and rates. As of March 2019, the Centers for Medicare & Medicaid Services published the fiscal year 2018 Medicare FFS Supplemental Improper Payment Data report, but had not published the 2018 Medicaid FFS Supplemental Improper Payment Data report. The Centers for Medicare & Medicaid Services estimated Medicare FFS spending of $389 billion, and $32 billion in improper payments. Table 3 below presents updated fiscal year 2018 data for the Medicare improper payment data by the services examined in our report. Appendix III: Selected Examples of Medical Record Templates for Medicare and Medicaid Providers Medicare and state Medicaid agencies have released template medical record documentation, such as certificates of medical necessity and plans of care that providers may use to document information necessary to ensure compliance with coverage policies. This appendix presents examples of such templates. Figure 7 presents a Medicare template that referring physicians can use to certify beneficiary need for home health services. Figure 8 presents a Medicare template that referring physicians can use to certify beneficiary need for home oxygen supplies. Figure 9 presents a template from the Indiana Medicaid program that hospices may use to document beneficiary plans of care. Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contacts: Staff Acknowledgments In addition to the contact named above, Leslie V. Gordon (Assistant Director), Michael Erhardt (Analyst-in-Charge), Arushi Kumar, and Dawn Nelson made key contributions to this report. Also contributing were Sam Amrhein, Vikki Porter, and Jennifer Rudisill.


Background Medicare beneficiaries with behavioral health conditions have a diverse range of conditions, of different severity, requiring different types of care. Beneficiaries with mild behavioral health conditions—such as mild depression—may require less complex care than beneficiaries with serious behavioral health conditions—such as schizophrenia—or with multiple interacting behavioral or physical health conditions. Subpopulations of Medicare beneficiaries also may face different behavioral health challenges. For example, dual-eligible beneficiaries— individuals eligible for both Medicare and Medicaid—are three times more likely to have been diagnosed with a major psychiatric disorder than non- dual beneficiaries. Medicare Services and Providers Medicare covers services for the diagnosis and treatment of behavioral health conditions, which includes the inpatient care covered by Part A and the physician services and outpatient care covered by Part B. Key behavioral health services in Medicare Part B include visits with a physician or other covered provider, partial hospitalization program services, annual depression screening, alcohol misuse screening and counseling, psychotherapy, screening, brief intervention, and referral to treatment services, and behavioral health integration services. Dual-eligible beneficiaries may be able to access additional behavioral health services through Medicaid that are not available through Medicare. Medicare covers behavioral health services delivered by a range of providers, including psychiatrists and physicians, clinical psychologists, licensed clinical social workers (LCSW), nurse practitioners, physician assistants, and clinical nurse specialists. In order to bill for services provided to Medicare beneficiaries, providers must enroll with CMS. Providers who do not want to enroll in the Medicare program may “opt out” of Medicare. Behavioral health providers have among the highest opt-out rates, with over 7,000 psychiatrists, psychologists, and LCSWs opting out of Medicare, representing nearly one-third of all providers who opted out of Medicare in 2017. Beneficiaries may still see these providers but must enter into a private contract with them. Medicare will not pay for any services furnished by providers who have opted out, so in these cases, beneficiaries must pay the provider’s entire charge out of pocket. According to researchers, psychiatrists have low participation rates across all forms of insurance, including Medicare, which may be explained, in part, by the reimbursement rates for time intensive treatments, low supply and high demand for psychiatry services, and high administrative burdens for solo practitioners to participate in insurance programs. Provision of Information to Medicare Beneficiaries CMS is required by law to provide information annually to Medicare beneficiaries about their coverage, including benefits and limitations on payment. Various factors affect how beneficiaries receive and process information about behavioral health conditions and their coverage options for behavioral health services. According to HHS, low health literacy is a key barrier that impacts individuals’ ability to comprehend health-related information. Moreover, researchers have found that low health literacy is associated with poor physical and mental health. More specific challenges facing individuals with behavioral health conditions include the stigma surrounding behavioral health conditions that may discourage individuals from seeking help or treatment. According to advocates for Medicare beneficiaries and individuals with behavioral health conditions, some individuals may have caregivers or other support for finding information and engaging in decision-making about their behavioral health care. Medicare Advantage Plans According to CMS, one-third (36 percent) of Medicare beneficiaries in 2019 were enrolled in MA plans, which CMS pays on a monthly capitated basis to deliver all covered services needed by an enrollee. MA plans contract with provider networks to deliver care to Medicare beneficiaries and must meet CMS’s network adequacy standards. MA plans may employ care management and utilization management strategies. Care management may include case managers or care coordinators who work with enrollees and providers to manage the care of complex or high-risk enrollees, including those with behavioral health conditions. According to the MA plan officials we interviewed, prior authorization—a utilization management strategy—may be employed for high-cost treatments. Officials from all five MA plans told us that they may have difficultly recruiting behavioral health providers to participate in their network. One study found access to psychiatrists to be more limited than any other physician specialty in MA plan networks, with 23 percent of psychiatrists in a county included in network on average, compared to 46 percent of physicians in a county across all physician specialties in 2015. Nearly One in Seven Medicare Beneficiaries Used Behavioral Health Services in 2018; Most Services Were Provided by Psychiatrists, Social Workers, and Psychologists Fourteen Percent of Medicare Beneficiaries Used Behavioral Health Services in 2018, Totaling More than $3 Billion in Spending Our analysis of Medicare claims data shows that in 2018 approximately 5 million beneficiaries used behavioral health services through Medicare Part B. This represented about 14 percent of the more than 36 million fee- for-service (traditional) Medicare beneficiaries, and CMS paid providers about $3.3 billion for approximately 39.3 million behavioral health services in 2018. (See fig. 1.) Our analysis of claims data also shows that among Medicare beneficiaries who used behavioral health services in 2018, utilization of the services varied significantly. (See fig. 2.) The average number of services used by Medicare beneficiaries who used behavioral health services in 2018 was eight, while the median was three. Nearly half of all such beneficiaries used between two and seven behavioral health services during the year. Nearly one-third (30 percent) of beneficiaries using behavioral health services used one behavioral health service during the year. The 11 percent of beneficiaries who were the highest behavioral health service users used 19 or more behavioral health services (the 90th percentile) during 2018, and accounted for about half of all Medicare expenditures on behavioral health services. Our analysis also found that the services beneficiaries received largely fell into two broad categories in 2018: general patient consultations (53 percent of services) and psychiatry services, including psychotherapy (43 percent of services). Other services, such as central nervous system assessments and drugs administered by providers, accounted for about 5 percent of services. Beneficiaries receiving behavioral health care were largely diagnosed with a condition in at least one of five diagnostic behavioral health conditions categories, each of which contain multiple specific diagnoses. In 2018, 96 percent of all behavioral health services were for a primary diagnosis within one of these five categories. For example, the mood disorder category, which includes diagnoses such as depression and bipolar disorder, accounted for 42 percent of services provided. (See fig. 3.) Medicare claims data for 2018 show that some Medicare beneficiaries used behavioral health services to obtain treatment for SUDs. Seven percent of the behavioral health services in 2018 were for SUDs. Moreover, Medicare beneficiaries with SUDs represented 11 percent of beneficiaries using behavioral health services. On average, Medicare beneficiaries with SUDs used five behavioral health services in 2018, which is less than the number of behavioral health services used on average by all beneficiaries with a behavioral health diagnosis. Overall, beneficiaries under age 65 and dual-eligible beneficiaries were disproportionately represented among users of behavioral health services compared to the Medicare population. (See fig. 4.) In 2018, while beneficiaries under age 65 constituted 16 percent of all Medicare beneficiaries, they represented 34 percent of the Medicare beneficiaries who used behavioral health services and accounted for 42 percent of all behavioral health services paid for by Medicare that year. Similarly, while dual-eligible beneficiaries, many of whom are under age 65, constituted 20 percent of all Medicare beneficiaries, they represented 39 percent of the Medicare beneficiaries who used behavioral health services in 2018 and accounted for 45 percent of all behavioral health services paid for by Medicare. Finally, women constituted about 55 percent of all Medicare beneficiaries in 2018 and represented 62 percent of the beneficiaries who used behavioral health services that year. Two-Thirds of Behavioral Health Services Were Provided by Psychiatrists, Licensed Clinical Social Workers, and Psychologists in 2018 Our analysis of Medicare Part B claims shows that in 2018 two-thirds of behavioral health services (67 percent) were delivered to Medicare beneficiaries by behavioral health specialists: psychiatrists, psychologists, and licensed clinical social workers (LCSW). (See fig. 5.) Psychiatrists provided the most behavioral health services (31 percent), followed by LCSWs (19 percent), and psychologists (17 percent). A range of other providers delivered the remaining one-third of behavioral health services, including advanced practice providers (16 percent), primary care physicians (11 percent), other physicians (5 percent), and other providers (1 percent). As figure 5 shows, beneficiaries who were relatively high users of behavioral health services received a greater share of services from behavioral health specialists compared to all Medicare beneficiaries who used behavioral health services. Approximately three-quarters of services (78 percent) provided to the highest service users (those in the 90th percentile with 19 or more services per year) were delivered by behavioral health specialists: psychiatrists (31 percent), LCSWs (25 percent), and psychologists (22 percent). However, this pattern did not hold for Medicare beneficiaries with SUDs. Our analysis showed that beneficiaries with SUDs received 20 percent of their behavioral health services from a behavioral health specialist, and the other 80 percent of services were delivered by providers who did not specialize in behavioral health. See appendix I for additional information on Medicare behavioral health utilization. CMS Uses Various Approaches to Provide Coverage Information to Beneficiaries, but Annual Mailing Does Not Include Explicit Information on SUD Treatment Coverage CMS Uses Various Communication Approaches to Provide Information to Medicare Beneficiaries on Coverage for Behavioral Health Services According to CMS officials, the agency’s overall strategy for providing information to beneficiaries about coverage of behavioral health services involves a variety of communication and outreach approaches. For example, CMS disseminates information to beneficiaries through written and online publications, Medicare.gov, scripted answers to questions through 1-800-MEDICARE, and social media. CMS is required by law to provide information to beneficiaries about coverage under Medicare. CMS annually mails out the Medicare & You handbook to all beneficiaries, and according to CMS officials, it mailed the handbook to 42.6 million households in 2018. The information provided in the publication includes descriptions of benefits and services, a summary of cost sharing, and the types of providers Medicare covers. According to CMS officials, Medicare.gov also includes information about covered benefits and a provider directory, although some may not be accepting new Medicare patients. According to CMS officials, the most comprehensive source of information on coverage for behavioral health services is contained in the publication Medicare & Your Mental Health Benefits, which is also available at Medicare.gov. We obtained statistics from CMS officials on the frequency with which Medicare beneficiaries requested copies of Medicare & You or the agency’s other publications or accessed the agency’s web-based tools to obtain information on Medicare coverage, including coverage for behavioral health services. The most frequently accessed in 2018 were Medicare & You, Medicare.gov, and the “What’s Covered?” smartphone application. (See table 1.) These sources of information cover Medicare more broadly and provide information about Medicare benefits in general, rather than those dealing specifically with behavioral health. Like CMS, MA plans use different approaches to provide information to the beneficiaries enrolled in MA plans, including publications, phone calls, and websites. According to officials from the five MA plans in our review, MA plans use multiple modes of communication to meet the preferences of their enrolled populations. MA plans are required to provide information to each enrollee at the time of enrollment and annually thereafter; for example, MA plans must share information about providers reasonably available to enrollees. MA plans are also required to provide marketing materials to CMS for review to ensure the adequacy and accuracy of the information in the materials. Two of the MA plans in our review offer digital health tools to their enrollees. One plan offers a tool that allows enrollees to communicate with case managers, and another plan provides enrollees access to test results, the ability to refill prescriptions and schedule appointments, as well as resources for patient education. According to CMS officials, the agency also uses other strategies for providing information to beneficiaries about coverage of behavioral health benefits. CMS officials stated that it partners with stakeholders to assist beneficiaries and caregivers seeking help with behavioral health conditions. For example, CMS officials described webinars and workshops it conducts to educate partners and stakeholders who educate and counsel Medicare beneficiaries. According to agency officials, the webinars cover a range of topics related to Medicare benefits and coverage, including behavioral health. The officials also told us that CMS partners with state health insurance programs to provide information about Medicare, including information to help Medicare beneficiaries understand their coverage. CMS officials also stated that the agency conducts public awareness and outreach campaigns to provide information to beneficiaries. CMS’s Annual Mailing to Beneficiaries Does Not Include Explicit Information on Medicare Coverage for SUD Treatment Medicare & You—the most widely disseminated source of information on Medicare benefits and coverage—does not provide explicit information about coverage of services for beneficiaries with SUDs, although HHS and CMS have identified addressing SUDs as a top priority. We reviewed the fall 2019 edition of the Medicare & You publication and found that, while it does provide information on Medicare coverage for behavioral health services, it does not contain an explicit description of the services that may be covered for treatment of SUDs. CMS officials noted that printing the almost 43 million hard copies of the fall 2019 edition of Medicare & You started in July 2019, several months before the rule implementing expanded OUD coverage under Medicare was finalized. In December 2019, CMS officials updated the 2020 edition of Medicare & You to include information on the expanded OUD treatment authorized by the SUPPORT Act, which were finalized in November 2019, and became effective in January 2020. According to CMS officials, as of December 2019, this updated version was available on Medicare.gov, and CMS officials told us it will be sent to all individuals who become eligible for Medicare throughout calendar year 2020. We reviewed the updated 2020 web version of Medicare & You and found that a reference to opioid treatment was included; however, explicit information about Medicare’s coverage for other SUDs was not added. Although information on Medicare’s coverage for treating OUD is important, OUD represents only a subset of the SUDs for which Medicare beneficiaries may need treatment. Further, several of the advocates we interviewed noted that Medicare beneficiaries would benefit from clearer and more specific information about SUD coverage. According to data from SAMSHA, about one in 10 SUD cases is related to an OUD, while the rest are related to non-opioid substances. We asked CMS officials why the additions to Medicare & You relate only to OUDs, and they explained that it is the only distinct Medicare benefit category for substance abuse treatment. Officials also stated that while there is no category in Medicare & You for other SUDs specifically, the publication does note some related benefits, such as for counseling and services for behavioral issues, alcohol misuse screening, and behavioral health integrative services. However, the alcohol misuse screening benefit is specifically for beneficiaries who do not meet the criteria for alcohol dependency and covers brief counseling in a primary care setting. The description of behavioral health does not specify that SUDs are a behavioral health condition. The absence of information on Medicare’s coverage for SUDs in Medicare & You is inconsistent with HHS and CMS strategic priorities related to treatment for SUDs. The Department of Health and Human Services’ Fiscal Year 2018-2022 Strategic Plan includes among its strategic objectives reducing the impact of SUDs through treatment. Additionally, CMS has made addressing SUDs a top priority and has a stated commitment to treat SUDs, including OUDs. Beneficiaries lacking information on coverage of SUDs may be less likely to seek treatment. Conclusions HHS and CMS have made addressing SUDs a priority. However, in its most widely disseminated publication on Medicare coverage and benefits, CMS does not provide explicit information about the program’s coverage for SUD treatment services. As a result, beneficiaries with SUDs may not be aware of this coverage and may not seek needed treatment. Recommendation for Executive Action We are making the following recommendation to CMS: The Administrator of CMS should ensure that the Medicare & You publication includes explicit information on the services covered by the Medicare program for beneficiaries with a SUD. (Recommendation 1) Agency Comments and our Evaluation We provided a draft of this report to HHS for review. HHS concurred with our recommendation, and provided written comments that are reproduced in app. II, and technical comments, which we have incorporated as appropriate. In its written comments, HHS stated it would explore opportunities to modify the Medicare & You handbook to ensure beneficiaries with substance use disorders are aware of the services covered by Medicare. HHS also reiterated some of the situations under which substance use disorder may be covered under Medicare, as well as its communication strategies and tools to ensure that beneficiaries and providers are aware of all of the services available under Medicare. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, the Administrator of CMS, and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or at CosgroveJ@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III. Appendix I: Additional Tables on Behavioral Health Utilization among Medicare Beneficiaries, 2018 To produce the tables below describing the utilization of behavioral health services by Medicare beneficiaries and the providers furnishing these services, we analyzed the 2018 Medicare Part B claims file, the most recent data available at the time of analysis. Our analysis only includes Medicare beneficiaries in fee-for-service Medicare because similar reliable information was not available for beneficiaries enrolled in Medicare Advantage. Appendix II: Comments from the Department of Health and Human Services Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Acknowledgments In addition to the contact named above, Lori Achman (Assistant Director), N. Rotimi Adebonojo (Analyst in Charge), Todd Anderson, Sauravi Chakrabarty, Kelly Krinn, Rich Lipinski, Drew Long, Diona Martyn, Vikki Porter, and Caitlin Scoville made key contributions to this report.


Background Medicare’s Physician Fee Schedule CMS uses the Medicare Physician Fee Schedule to pay physicians and other providers for services delivered to beneficiaries. Physicians and other providers bill Medicare for their services using various five-digit billing codes based in part on codes developed by an AMA panel. Each year, the panel receives proposals from provider groups and others to revise existing billing codes or create new codes. The panel requires those who submit proposals to develop a clinical vignette that describes the typical patient who would receive the service, the diagnosis and relevant conditions, and estimates of time that physicians might spend in providing the service for the typical patient. The panel applies several criteria in reviewing these proposals. For example, a new code should represent a unique, well-defined procedure or service clearly identified and distinguished from existing procedures and services; should not fragment an existing procedure or service represented by one or more existing codes; should reflect the typical (not extraordinary) circumstances related to the delivery of the service; should be performed by many physicians or other qualified health care professionals across the United States; and should be consistent with current medical practice. CMS pays providers a fixed amount known as the Medicare fee for each code. The fees are based on relative values—estimates of resources for the physician’s work (time, skill, and level of training), and practice expenses (the costs of running a practice such as salaries of non- physician employees, rent, and overhead) required to provide a service relative to all other services. In setting fees, CMS also does not allow certain codes to be billed together if it deems that payment for one code is already included in another. CMS establishes and updates relative values annually. By law, the effect of any changes to its payment rates generally must be budget neutral. That is, if total spending increases by more than $20 million each year, including due to the creation of new billing codes, fees for all services would have to be reduced accordingly. Services billed under the physician fee schedule may be provided in a variety of settings, including physicians’ offices and institutional settings such as hospitals, skilled nursing facilities and hospices. Non-physicians may also bill or be reimbursed by Medicare for services under certain circumstances. For example, some types of non-physicians practicing independently—such as physician assistants and nurse practitioners— may bill Medicare for certain services that they are legally authorized to perform under their respective state laws. In other instances, physicians may bill as if they had furnished services that were provided by non- physician staff that they employ or with whom they have a contractual relationship as long as the physician has an established relationship with the beneficiary, and is on the premises to provide supervision if necessary. Care Planning Services in Medicare Providers and other stakeholders have noted that they care for an elderly population with increasingly complex medical conditions who receive care from multiple providers across different sites of care including physicians’ offices, hospitals, nursing homes, and hospices. As such, the focus of primary care has shifted from treating specific medical conditions to increased care coordination and planning. CMS also noted that a new trend in care planning is the use of shared care plans between the beneficiary and the provider rather than those created solely by the provider. These jointly developed care plans can be particularly important to improving overall beneficiary outcomes for beneficiaries with serious illnesses and also allow other providers involved in the beneficiary’s care access to timely information that supports planned care. However, stakeholders have suggested that Medicare’s payment system does not fully reimburse providers for such care planning services. For example, some note that the E/M billing codes that primary care physicians generally use to bill for their services were developed at a time when care coordination and planning was not part of the standard practice of medicine; as such, these codes do not reflect time spent on activities that do not require a face-to-face encounter with the beneficiary, including medical conferences with other physicians, or telephone calls to coordinate care with other providers. Some primary care physicians have requested that CMS conduct a comprehensive review of existing E/M codes to ensure they account for time spent on these services, or develop new codes that primary care physicians may exclusively use to bill for these services. However, others have noted that E/M codes have been reviewed and valued by the AMA, and the codes account for the time spent on these services. Moreover, they have stated that care coordination and planning services are delivered by multiple specialties, not just primary care physicians. Medicare’s Physician Fee Schedule Contains at Least 58 Billing Codes That Providers May Use to Bill for LCCP-Type Services Our analysis identified at least 58 Medicare Physician Fee Schedule billing codes that providers may use to bill for LCCP-type services. These 58 billing codes generally contain components we determined to be equivalent to the five key components of the LCCP service as defined in the 2018 BBA. For example, all 58 codes included a provision for the development of a care plan that addresses the beneficiary’s goals, values, and preferences, and a provision for coordination with other providers, which is equivalent to the LCCP component related to interdisciplinary care. Providers may choose a single code or a combination of these codes to account for the time, skill, and resources needed to deliver the service based on the unique health needs of each patient. (See app. IV for more information on the 58 codes and the LCCP components they contain as defined in the 2018 BBA.) The 58 billing codes for LCCP-type services include 45 longstanding, broadly-defined codes and 13 narrowly-defined codes that were more recently introduced starting in 2013. Broadly-defined codes. Of the 45 broadly-defined codes, 39 are E/M codes that have existed for decades. E/M codes are broadly defined to include services provided to treat a variety of illnesses (for example, treatment of a particular medical complaint), but they may also be used to bill for LCCP-type services. In general, the E/M codes range in complexity from low to high depending on the amount of time the provider spends with a patient as well as the complexity of the medical condition(s) being treated. E/M codes may also be billed if more than 50 percent of the time allotted for the service is spent on counseling and care coordination—for example, explaining treatment options and ways to mitigate the patient’s health risks—which are key components of the LCCP service as defined in the 2018 BBA. The E/M codes we identified as representing LCCP-type services were the more complex codes that had estimates of time that may be spent providing the service to a typical patient ranging from 30 to 120 minutes of physician time and 3 to 71 minutes of non-physician time. While the majority of E/M codes have existed for decades, CMS added six new E/M codes starting in 2008—referred to as “prolonged” E/M codes—allowing payment for additional time for care planning and care management services for complex conditions. Narrowly-defined codes. Starting in 2013, CMS added 13 narrowly- defined LCCP-type codes to better account for the time spent coordinating care for patients with complex treatment needs. CMS implemented these more narrowly-defined care planning codes largely in response to provider complaints that E/M codes did not sufficiently account for extensive care management/coordination of care that was required across multiple providers and settings. Unlike broadly-defined codes, these narrowly-defined codes can only be used for LCCP-type services. The 13 narrowly-defined LCCP-type codes fall into four types: transitional care management (TCM), chronic care management (CCM), advance care planning (ACP), and behavioral health integration (BHI). (See table 1.) While some pertain to patients with specific types of health conditions or in certain settings, others are more general and may be used for a range of health conditions. The estimates of physician and non-physician time that may be spent on the broadly-defined and narrowly-defined codes vary, as does Medicare’s 2019 fees for these billing codes—see examples of commonly used LCCP-type billing codes in table 2 and see appendix IV for related information on all 58 LCCP-type billing codes. For example, some stakeholders told us they might bill a complex E/M code (99214) along with a CCM code (99487). As our analysis shows, this combination could result in the provider spending 66 minutes of physician time and 113 minutes of non-physician time for a typical beneficiary, and receiving total Medicare fees of about $203 in 2019. Medicare Spending Increased for All LCCP-Type Services and Increased More Rapidly for New Narrowly-Defined Services That Were Furnished to More Beneficiaries by More Providers Medicare Spending on All LCCP-Type Services Increased by 11 Percent from 2013 through 2017, While Spending on Narrowly-Defined Services Grew More Rapidly Overall Medicare spending on LCCP-type services represented by the 58 billing codes we identified increased from $26 billion in 2013 to $29 billion in 2017, an 11 percent increase. The vast majority of this spending— about $28.3 billion in 2017—was on services represented by the 45 broadly-defined codes we identified earlier (henceforth we refer to these services as “broadly-defined services.”) By comparison, Medicare spending on LCCP-type services represented by the 13 narrowly-defined codes (henceforth referred to as “narrowly-defined services”) was about $467 million in 2017. Though smaller in terms of total dollars, spending on narrowly-defined services grew at a higher rate than spending on broadly-defined services, from about $2 per beneficiary in 2013 to $14 per beneficiary in 2017. This higher rate in growth can mostly be attributed to these four new types of services being introduced during this 4 year period. For example, as Table 1 shows, two TCM codes were introduced in 2013 and four CCM codes were introduced from 2015 to 2017. In contrast, spending growth for broadly-defined services was much smaller, increasing from about $785 per beneficiary in 2013 to $844 per beneficiary in 2017. For all other Medicare Physician Fee Schedule services combined, per-beneficiary spending decreased from about $1,488 in 2013 to $1,426 in 2017. Spending on CCM and TCM services accounted for most of the total spending on narrowly-defined LCCP-type services from 2013 to 2017. (See fig. 1.) For example, in 2017, TCM services accounted for almost half ($213 million of the total spending of $467 million), while spending on CCM services accounted for over a third ($162 million of the $467 million). The growth in spending on narrowly-defined services was driven by increased utilization—that can be attributed in part to the development of new codes for these services—rather than increases in Medicare fees for these services. Specifically, utilization of narrowly-defined services increased from about 9 services per 1,000 beneficiaries in 2013 to about 177 services per 1,000 beneficiaries in 2017. Average Medicare fees for these services remained flat during this period. More Beneficiaries Received and More Providers Billed for Narrowly-Defined LCCP- Type Services, with a Small Share of Beneficiaries and Providers Accounting for Most of the Services The number of beneficiaries receiving narrowly-defined LCCP-type services increased substantially from 2013 to 2017, as more of these Medicare billing codes were added and began to be utilized during this time. Specifically, in 2017, about 2.5 million beneficiaries received narrowly-defined LCCP-type services, representing an 839 percent increase from about 267,000 beneficiaries in 2013. (See fig. 2.) While the overall number of beneficiaries receiving narrowly-defined services increased, these services were concentrated among a relatively small share of Medicare beneficiaries. Specifically, one-quarter of beneficiaries who received any of the narrowly-defined services in 2017 received 62 percent of the approximately 6 million services that were provided that year. (See fig. 3.) In 2017, of the total 2.5 million beneficiaries that received narrowly- defined services, 90 percent received only one type of narrowly-defined LCCP-type service. (See fig. 4.) In contrast, only 10 percent of beneficiaries received multiple types of narrowly-defined LCCP-type services, the most common combination being CCM and ACP. Mirroring beneficiary trends, the number of Medicare providers billing for narrowly-defined LCCP-type services also increased significantly from 2013 through 2017, as these Medicare billing codes were established and began to be utilized during this time. In 2017, a total of about 100,000 providers billed for narrowly-defined services, representing a 227 percent increase from about 31,000 providers in 2013. (See fig. 5.) As with beneficiary trends, while the overall number of providers billing narrowly-defined services grew from 2013 to 2017, billing for these services was also increasingly concentrated among a small share of providers. Specifically, in 2017, 10 percent of providers who billed for any narrowly-defined services billed about 76 percent of the approximately 6 million services that were provided in that year. (See fig. 6.) Each year from 2013 through 2017, physicians specializing in internal medicine accounted for the largest share of spending on narrowly-defined LCCP-type services. In 2017, internal medicine accounted for 45 percent of the $467 million in total Medicare spending on narrowly-defined services. (See fig. 7.) Family practice and nurse practitioners were the other specialties accounting for the greatest shares of spending. In terms of the setting in which narrowly-defined LCCP-type services were provided, the majority were provided in nonfacility settings such as physicians’ offices. Specifically, in 2017, 94 percent of narrowly-defined services were provided in nonfacility settings. This trend was consistent over each of the 5 years from 2013 to 2017. Stakeholders Had Mixed Views on Whether a New Billing Code for an LCCP Service Is Needed Six Stakeholders Did Not Support Creating a New Billing Code for an LCCP Service Six of the 19 stakeholders we interviewed did not support the creation of a new billing code for an LCCP service as defined in the 2018 BBA. Two of these—representing physician specialties that together accounted for almost one-fifth of total spending on LCCP-type services in 2017—stated that the existing billing codes were sufficient for them to provide and bill for the full range of the LCCP service. They stated that billing either a single code or a combination of an E/M code and one or more of the 13 narrowly-defined LCCP-type codes we identified allowed them to account for the full range of the LCCP service as defined in the BBA. As such, the two stakeholders said, there was no need for a new billing code. The remaining four stakeholders expressed concerns about creating a new billing code for an LCCP service. These concerns included the following: Overlap with existing codes that require the development of care plans: While not explicitly stating that existing codes were sufficient, some stakeholders said that if a new billing code were created for the LCCP service as defined in the 2018 BBA, it would overlap with or duplicate existing billing codes. For example, three stakeholders noted potential overlap with existing billing codes, such as the ACP and CCM. Three stakeholders said that the care plan that would be required under the new LCCP code would duplicate existing care plans that are required by law for beneficiaries in hospices or skilled nursing facilities. In addition, two stakeholders noted that providers in their specialty already prepare detailed care plans as a standard practice of care when evaluating their patients and billing for these services using existing E/M billing codes. They stated that these care plans exceed the components of the care plan specified in the 2018 BBA. Stakeholders noted that the existence of multiple overlapping codes that include the development of a care plan could create confusion for providers in choosing the most appropriate billing code. Concerns about code proliferation or code fragmentation: Several stakeholders were concerned that adding another code to Medicare’s billing system could result in increased Medicare spending and less, rather than more, care coordination. Specifically, two stakeholders stated that having multiple billing codes for care planning and care management, respectively, would have the potential to increase spending because multiple providers could start billing the new codes even though one provider may have primary responsibility for the beneficiary. (In contrast, under the existing billing codes a single code that encompassed both types of services could be billed.) For example, one of these stakeholders said that primary care physicians generally referred beneficiaries with complex treatment needs to a surgeon or specialist who then both planned and managed the beneficiary’s care, yet the primary care physician might also bill the care planning billing code. In addition to the potential for increased Medicare spending, three stakeholders said that code fragmentation—splitting existing billing codes into multiple codes for services that were previously bundled together—was contrary to the comprehensive patient-centered model of care that Medicare was moving towards. Specifically, one provider stated that under such a model, rather than billing multiple different codes for care planning and coordination, a primary care practice is paid a monthly management fee to (among other things) improve care coordination for patients who receive most of their primary care services from that practice. Thirteen Stakeholders Stated That a New LCCP Code Could Address Concerns Regarding Interdisciplinary Care Reimbursement and Other Limitations They Identified in Existing Billing Codes While six of the stakeholders we interviewed did not support creating a new LCCP code, the remaining 13 stakeholders told us that such a billing code is needed. According to the stakeholders, a new LCCP code as defined in the 2018 BBA could address several concerns they identified in Medicare’s existing billing codes related to the provision of the LCCP service. However, some of these concerns could be addressed under the current Medicare billing framework, as shown by our analysis of available data. For example, stakeholders identified the following limitations that could be addressed by a new LCCP code: Inadequate reimbursement for time spent on interdisciplinary care: The 13 stakeholders stated that Medicare’s existing billing codes either did not require or did not sufficiently reimburse them for the time spent on interdisciplinary care. They stated there should be a separate code to reimburse this type of care. However, stakeholders representing two specialties told us they had proposed such a code to the AMA but the AMA had rejected their proposals because interdisciplinary care is already accounted for in the existing billing codes. Moreover, as our analysis of the 58 billing codes shows, the majority of these codes include a provision for consultation and coordination among providers that is equivalent to input from an interdisciplinary team. With regard to inadequate reimbursement, as another stakeholder noted, providers may bill a complex E/M service along with a narrowly-defined LCCP-type service such as CCM. The total reimbursement for such a combination of codes would be about $203 as of 2019. (See table 2.) Insufficient physician time for care planning: Six stakeholders representing a mix of primary care and medical specialties stated the existing billing codes (including the more complex E/M codes) had insufficient physician time to provide both care planning and care management, which they maintained are separate and distinct activities. They stated a new code could include the appropriate time needed. One stakeholder said that care planning requires at least 30 minutes of time, and the complex E/M codes do not allow providers to bill for the time it takes to provide both the care management of a complex patient as well as care planning for the patient. According to the stakeholder, for example, if a provider bills a complex E/M code that allows for 40 minutes of physician time, that is insufficient to provide both types of services. While CMS has recently established new prolonged E/M codes (which allow for an additional 60 minutes of time), the stakeholder noted that they do not address the problem of insufficient time because a prolonged E/M code may only be billed with a companion E/M code, and the threshold of time needed to bill the two codes together is now too high—specifically 40 minutes for the complex E/M code plus 60 minutes for the prolonged E/M code. However, our review of CMS guidance on billing of prolonged E/M codes shows that providers do not have to meet the full 60 minutes of time in order to bill a prolonged E/M code; they may bill it as long as the total time spent on the visit exceeds the typical time for the E/M visit plus 30 minutes. Documentation requirements: Three stakeholders, largely representing primary care and medical specialties, stated that burdensome documentation requirements for the more complex E/M codes hampered their ability to bill these codes. They suggested that a new billing code could be structured similar to the new ACP or CCM codes which do not have the same documentation requirements. While these stakeholders expressed concern regarding documentation as a discouraging factor, our analysis of 2017 Medicare claims data showed that certain specialties, including some that had expressed this concern, billed the more complex codes at a significantly higher rate than the average across all specialties. This may indicate that these documentation requirements do not necessarily preclude providers from billing these codes. For example, 83 percent of all the E/M new patient visits billed by geriatricians in 2017 were billed using the more complex E/M codes, compared to 48 percent on average. Similarly, 80 percent of all the E/M established patient visits billed by clinical psychologists in 2017 were billed using the more complex E/M codes compared to 50 percent on average. See appendix V for details on billing patterns for all medical specialties. Inability of non-physician staff to independently bill for care planning: Seven stakeholders expressed concerns that non-physician staff such as nurses and social workers cannot independently bill the existing Medicare billing codes that we identified as being LCCP-type services. As one stakeholder explained, non-physician staff may spend time providing coordination and care planning services separately rather than concurrently with the physician, but they cannot bill for this time independently because the physician was not present. These stakeholders stated that a new LCCP code that could be billed by physicians and non-physicians that participated in the care planning process could address this issue. However, other stakeholders expressed concerns about the effect on Medicare spending if multiple providers billed for an LCCP service. Moreover, reimbursement for non-physicians is built into Medicare fees. Specifically, Medicare’s fee for each billing code includes reimbursement for physician’s time as well as their practice expenses (which cover the costs of non-physician staff), and when the AMA panel develops resources estimates for each billing code (upon which Medicare fees are based), it considers the amount of non-physician time spent on that code. Certain non-physician practitioners, such as nurse practitioners and physician assistants, may also independently bill services under the Medicare Physician Fee Schedule subject to certain requirements, and as specified in their scope of practice under state law. Stakeholders generally concurred that if a new LCCP code were implemented, the definition of interdisciplinary care should be flexible and not require a social worker. Currently, the LCCP billing code as defined in the 2018 BBA requires that the interdisciplinary team providing care planning services include a social worker. However, 13 stakeholders stated that a typical practice did not include a social worker, but rather included a nurse who might perform the functions of a social worker. They stated that smaller office-based medical practices could not afford to hire a social worker. The stakeholders concurred that social workers were generally available in larger integrated practices (such as a single or multiple groups aligning with each other or with a larger hospital system) and in facility settings such as hospitals or skilled nursing facilities. (Stakeholders also provided other comments on the structure of a potential new billing code for the LCCP service should such a code be established by CMS, which we summarize in app. VI.) Agency Comments We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or farbj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. Appendix I: Example of an American Medical Association Vignette Appendix II: Longitudinal Comprehensive Care Planning Service Components in the Balanced Budget Act of 2018 Appendix II: Longitudinal Comprehensive Care Planning Service Components in the Balanced Budget Act of 2018 Pub. L. No. 115-123, § 50342(c)(4), 132 Stat. 211. Appendix III: Stakeholder Groups Interviewed by GAO Appendix IV: Medicare Physician Fee Schedule Billing Codes for Longitudinal Comprehensive Care Planning (LCCP)-Type Services We identified 58 billing codes in Medicare’s physician fee schedule that may be used to bill for LCCP-type services as defined in the Balanced Budget Act of 2018 (2018 BBA). Figure 9 shows relevant information on these billing codes including the short descriptor, beneficiary eligibility criteria, our analysis of whether the billing code’s components are equivalent to the components of an LCCP service as defined in the 2018 BBA, and Medicare’s 2019 fee. Appendix V: Specialty Billing of Complex Evaluation and Management Codes in 2017 Medicare’s physician fee schedule contains evaluation and management (E/M) codes that providers may use to bill for face-to-face visits in their offices or other settings such as hospitals. These codes range in complexity from low to high depending on the amount of time the provider spends with a patient as well as the complexity of the medical decision- making and the medical condition(s) being treated. Table 4 shows the percentage of each specialty’s E/M visits that were billed as complex visits (moderate or high complexity). In general, primary care and medical sub-specialties tended to bill complex visits at a higher rate than the all- specialty average, while surgical specialties tended to bill complex visits at a lower rate than the all-specialty average. Appendix VI: Longitudinal Comprehensive Care Planning (LCCP) Services: Stakeholder Perspectives on Potential New Billing Code We interviewed 19 stakeholders including national umbrella groups of physicians and other providers to obtain their perspectives on the structure of a new billing code for LCCP-type services as defined in the Balanced Budget Act of 2018 (2018 BBA), regardless of whether they supported the creation of a new code. Stakeholders were generally in agreement that a new billing code for LCCP-type services as defined in the 2018 BBA, if implemented, should be broadly defined. Specifically, stakeholders stated that it should not be tied to a specific condition, should allow for both in-person and non-face-to-face services performed when the beneficiary was not present, should be billable more than once, should be available for billing by both primary care physicians and specialists, and should have restrictions to avoid duplicative billing with existing billing that provided overlapping services. However, stakeholders had more mixed views about what these specific restrictions should be. Stakeholder views about the various structural components or restrictions included the following: Applicable medical conditions: The majority of stakeholders (13 of the 17 who responded to this question) stated that the new code should be broadly defined although they differed in their opinions of what broadly-defined meant; one stakeholder cautioned against an overly broad definition, and one suggested pilot testing with a discrete list of conditions. Of the 13 stakeholders in favor of a broad definition, 12 stated that the new billing code should not be tied to any particular specific illness or medical condition but should be flexible in structure. Three stakeholders stated that the extent of beneficiaries’ daily functioning or quality of life should also be considered when defining applicable medical conditions. For example, a beneficiary who is not necessarily suffering from a life-threatening illness but is unable to perform the functions of daily living (such as bathing and eating) needs extensive care planning and should therefore be covered under the new LCCP-type service. Three stakeholders stated that the new code should be billable if a beneficiary’s existing diagnosis of a serious illness changed. Three stakeholders stated that a potential new code could be modeled along the lines of existing billing codes—specifically the advance care planning (ACP) or chronic care management (CCM) codes— which do not specify any particular medical condition. Two stakeholders said that a new code should not be so broad that it could apply to a vast majority of beneficiaries. For example, one stakeholder stated that the American Medical Association would likely not approve a code for a generic serious condition because it would be difficult to differentiate that code from an existing billing code, such as an evaluation and management (E/M) code, which may be used for any medical condition including serious, life-threatening conditions. One stakeholder suggested pilot testing the code with a discrete list of conditions, with the intention of expanding the list afterwards. In-person or non-face-to-face: The majority of stakeholders (12 of the 15 that responded to this question) stated that a potential new code should allow for both in-person and non-face-to-face activities (such as virtual or telehealth—providing clinical care remotely by two-way video, phone calls with the beneficiary or to arrange referrals or coordinate care with other providers when the beneficiary was not present); three said it should only include face-to-face activities. Twelve stakeholders stated that the visit should include both types of activities. For example, one stakeholder said the initial visit for LCCP-type services should be in-person, and follow up activities such as updating a care plan or remote patient monitoring (monitoring of patients outside of conventional settings) could be non-face-to-face. Three stakeholders said it should only include face-to-face activities either because of concerns about the potential for overbilling if the new code included non-face-to-face activities which might be difficult to verify or because other existing codes, such as CCM, already cover non-face-to-face activities. Frequency of billing: All of the 16 stakeholders responding to this question concurred that the new code should be billable more frequently than on a one-time basis, although opinions varied on the exact frequency. Nine stakeholders said the code should be billable on an ongoing basis as the beneficiary’s condition changes. For example, one said that the new code should be on-going because the care planning and treatment would continue to evolve over time as the beneficiary’s condition changes. Seven other stakeholders said that while it should not be an ongoing service, it should be billable more frequently than once. For example, one stakeholder specified that it could be billed once per month or over every three months, but that a target end date must be specified; otherwise, it would be too similar to existing billing codes such as the CCM code that may be billed monthly. Two other stakeholders said it could be billed up to 4-5 times a year. Other billing restrictions: All 12 stakeholders responding to this question indicated that restrictions would be necessary to avoid overlap with existing billing codes. For example, three stakeholders suggested that the new code could be billed along with an E/M code for additional services not covered by the E/M code as long as it does not overlap with other existing codes that account for additional time beyond an E/M visit (such as the prolonged E/M visit billing codes). One suggested that it should not be billed along with any of the existing narrowly-defined LCCP-type codes, including CCM, transitional care management, or the ACP codes. One did not specify any particular code with which the new code should not be billed, but cautioned that care should be taken to ensure that time spent with the beneficiary was reported only once. Providers eligible to bill the code: The majority of stakeholders (13 of the 15 that responded to this question) stated that both primary care physicians and specialists should be eligible to bill the new code. Two of these stakeholders said that there should also be a requirement that the billing physician has an established relationship with the beneficiary. Two stakeholders said that only specialists should bill since they are generally the ones attending to the beneficiary’s serious illness. Two stakeholders stated that non-physicians (including social workers) should also be able to bill the code as long as they are currently allowed to bill separately under the Medicare Physician Fee Schedule. Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Karen Doran, Assistant Director; Iola D’Souza, Analyst-in-Charge; Sarah Belford; Krister Friday; John Lalomio; and Daniel Ries made key contributions to this report. Also contributing were George Bogart and Muriel Brown.