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The Fraud Prevention System Increased Recovery and Prevention of Improper Medicare Payments, but Updated Procedures Would Improve Reported Savings

The Small Business Jobs Act of 2010 (the Act) requires OIG to certify the actual and projected savings with respect to improper payments recovered and avoided and the return on investment related to the Department's use of the Fraud Prevention System (FPS) for each of its first 3 implementation years. In addition, the Act requires OIG to determine whether the Department should continue, expand, or modify its predictive analytics technologies. This report fulfills our responsibilities for the third implementation year.

In the third implementation year of the FPS, the Department complied with the requirements of the Act for reporting actual and projected savings in the Medicare Fee-for-Service program and the return on investment from the use of predictive analytics technologies. Specifically, we certified $133.2 million of actual and projected savings and a return on investment of $2.84 for every dollar spent on the FPS. We also certified the $454 million in unadjusted savings that the FPS identified.

The Department's use of the FPS should continue to enhance its efforts to prevent fraud, waste, and abuse in the Medicare Fee-for-Service program. The Department's use of the FPS generated a positive return on investment, and the Department continues to develop and refine its fraud detection models through its governance process. The Department conducted an evaluation of the cost-effectiveness and feasibility of applying predictive analytics technology to Medicaid and the Children's Health Insurance Program (CHIP) and determined that it is not cost-effective and feasible, at this time, to systematically expand the FPS to Medicaid and CHIP in all States. Although the Department has made significant progress to address the challenges of measuring actual and projected savings, the Department's written directives to its contractors were not sufficient to ensure that the contractors could identify and report the most accurate estimate of FPS savings.

To help identify and better report FPS savings, we recommended that the Department provide its contractors with improved written instructions on how to attribute the FPS savings accurately and better document the contribution of the FPS leads toward achieving administrative actions. In written comments on our draft report, CMS concurred with our recommendation and outlined steps for implementing it.