Alerts and Updates

National Fraud Prevention System Means More Audits, Screening and Collection of Provider Data

April 12, 2012

Providers should assume that every claim they submit will be subjected to prepayment screening, which will provide CMS with a vast amount of information about every provider.

As an integral part of its efforts to combat fraud, the U.S. Centers for Medicare and Medicaid Services (CMS) has implemented a major data-gathering, data-mining and data-matching program. While the implementation of this program appears to have been virtually unnoticed, providers should be aware of the nature and volume of information that CMS has been gathering about them and how this information is being, and can be, used.

The Fraud Prevention System

For Medicare Parts A and B, and durable medical equipment (DME) reimbursement, CMS has abandoned its practice of paying claims and then, if warranted, initiating recovery of overpayments ("pay and chase") in favor of a proactive system that utilizes prepayment review to deny individual claims and initiate fraud investigations. Since June 30, 2011, the Fraud Prevention System (FPS) has been screening all Medicare fee-for-service claims. According to CMS, 4.5 million claims per day are being monitored and analyzed using "sophisticated algorithms and models to identify suspicious behavior." The FPS also uses historic data and external databases to build “robust” profiles of providers and suppliers. CMS states that these profiles are being used to identify "unusual billing patterns" in order to determine "the likelihood of fraudulent activity." The results are provided to Zone Program Integrity Contractors (ZPIC) and, if warranted, to law enforcement personnel.

ZPICs are contractors tasked with, among other things, identifying potential fraud by comparing a provider's billings with those of similarly situated providers. For example, a ZPIC may initiate an investigation of a provider with a high frequency of certain services, or with lengths of stay that are outside of the industry norm. ZPICs are authorized to use statistical sampling and extrapolation, deny or suspend payments pending the completion of an investigation and refer cases to the Office of Inspector General (OIG).

Automated Provider Screening (APS)

The APS system, which was implemented on December 31, 2011, is an automated provider enrollment screening tool that automatically cross-checks the information on Medicare enrollment applications against thousands of public and private databanks to verify and supplement the information submitted by providers. The APS is also intended to identify providers that may be high risk on the basis of this information.

The APS will also routinely rescreen information submitted by providers for continued accuracy and to ensure a provider's continued eligibility. All of this information will be housed in a central data bank and will be used for the ongoing monitoring of all existing providers.

Additional Sources and Uses of Data

CMS will share its information on providers with states, law enforcement agencies and private insurance plans.

The Proposed Rule implementing the Patient Protection and Affordable Care Act requirement that providers report and return overpayments within 60 days after their identification specifies that the report must include, among other things, information that identifies the affected claims along with a summary of how the error was discovered, the corrective action taken and the methodology used to quantify the overpayment. This type of information is intended to allow CMS to "match claims information with the information that is reported by the provider" so that CMS can "understand the nature of the overpayment." It can be anticipated that the information will be made part of the fraud prevention database.


Providers should assume that every claim they submit will be subjected to prepayment screening, which will provide CMS with a vast amount of information about every provider that can be cross-checked, massaged, shared and stored for future use.

For Further Information

If you have any questions about this Alert, please contact Harry R. Silver, Philip H. Lebowitz, David E. Loder, any member of the Health Law Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.