The Fraud Prevention System Identified Millions in Medicare Savings, but the Department Could Strengthen Savings Data by Improving Its Procedures

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 second implementation year.

In the second implementation year of the FPS, the Department has 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 certify that the Department's use of its FPS resulted in $54.2 million of actual and projected savings to the Medicare fee-for-service program and a return on investment of $1.34 for every dollar spent on the FPS. We also certify the $210.7 million in unadjusted savings that the FPS identified.

This year, the Department developed adjustment factors to estimate FPS savings more precisely. The $54.2 million in certified actual and projected savings was calculated by applying the adjustment factors to the $210.7 million in certified unadjusted savings that the FPS identified. The Department identified additional savings that we were unable to certify because the documentation did not support that FPS information contributed to the administrative action.

The Department's ongoing use of the FPS will strengthen 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 refine its fraud detection models using its governance process and applicable OIG recommendations to increase savings. The Department has expanded the use of the FPS nationwide to identify fraud, waste, and abuse in the Medicare fee-for-service program and is evaluating whether to expand the use of the FPS in Medicaid. However, although the Department has made significant progress in addressing the challenges of measuring actual and projected savings, its procedures were not always sufficient to ensure that its contractors provided and maintained reliable data to always support FPS savings.

To help increase savings and improve its reporting on savings measures, we recommended that the Department (1) provide contractors with written instructions on how to determine when savings from an administrative action should be attributed to the FPS and (2) require contractors to maintain documentation to support how FPS information contributes to an administrative action.