CMS To Battle Claims Fraud With Analytics

Editor's Note: This article originally appeared on InformationWeek.com

The Centers for Medicare and Medicaid Services (CMS) next month will begin using new predictive modeling technology to crack down on healthcare claims fraud.

The predictive modeling is similar to tools used by credit card and telecom companies to prevent fraud, and will enable CMS to spot in real time potentially fraudulent Medicare claims nationwide before the claims are paid. Until now, CMS said it focused on "pay and chase" methods for investigating, recovering, and prosecuting fraudulent claims.

The deployment of the data analytics technology is part of a $350 million, 10-year CMS anti-fraud effort that was signed into law by President Obama with the Affordable Care Act healthcare reform legislation in March 2010.

CMS selected Northrop Grumman as prime contractor for the project in a competitive procurement to develop CMS' national predictive model technology format using best practices of public and private sectors. Northrop Grumman is partnering with National Government Services (NGS) and Federal Network Systems LLC, a unit of Verizon.

The system will use algorithms and analytical processes to evaluate claims by healthcare provider, beneficiary, service region, procedures, and other factors, to assign risk scores and alerts to claims that show patterns indicating possible fraud and other problems. Claims assigned alerts will be further reviewed by CMS and assessed for whether investigative or enforcement actions are needed.

For instance, the system could red flag claims for procedures by a healthcare provider claiming to be treating many patients in multiple cities all on the same day.

Originally, CMS had planned to deploy the technology in limited tests this year, but instead said last week it would begin using the tools nationwide on July 1.

In January CMS announced it would speed up implementation of data analytics tools as part of efforts to reduce Medicare waste and fraud under the healthcare reform legislation.

The CMS effort also fits into the Obama administration's recently launched "Campaign to Cut Waste," which aims to reduce fraud, wasteful spending and abuse across the federal government.