Prescription for Program Integrity: Identifying Fraud, Waste, and Abuse in PBMs and MCO Delegated Vendors

Mike Johnson, CPA, CFE, member and Joe Schauer, MS, RPh, senior manager at Myers and Stauffer speak about program integrity, fraud, waste, and abuse prevention at the National Association for Medicaid Program Integrity (NAMPI) virtual conference this month.

As states grow their fraud, waste, and abuse prevention initiatives, it is more important than ever to ensure managed care organizations (MCOs) adhere to contractual agreements and deliver high quality services to those in need. To ensure accuracy, areas such as performance, cost control, and audit strategy must be monitored and addressed. Myers and Stauffer has extensive experience with effective managed care implementation strategies to safeguard the populations that rely on critical health services.

Myers and Stauffer’s health care professionals Mike Johnson, CPA, CFE, member and Joe Schauer, MS, RPh, senior manager spoke about program integrity, fraud, waste, and abuse prevention at the National Association for Medicaid Program Integrity (NAMPI) virtual conference this month. See the video above. They discussed several important factors to formulate successful MCO monitoring programs and how to reduce fraudulent activity in these programs:

MCOs are reimbursed on an actuarially sound per-member-per-month (PMPM) payment. These payment rates are determined each year based on prior years’ data (typically 2-3 years) for medical spend and revenue reporting, and risk assessment. MCO’s often use delegated vendors to provide certain services included in their contractual obligations. Common services that are delegated include: pharmacy benefit managers (PBM), dental, vision, NET, behavioral health, and therapy. With all of these areas to monitor, it is important to ensure MCOs are on track with enhanced accountability actions.

An example of inaccurate disclosure of pharmacy service cost is one of Ohio and Mississippi’s settlement with Centene Managed Care Solutions. On June 14, 2021, Ohio and Mississippi Attorney Generals announce Centene had agreed to pay both states $88.3 million and $55.5 million respectively. Lawsuits accused Centene and its PBM subsidiaries, of artificially inflating the price of prescription drugs. By using multiple companies, Centene provided an opaque and multi-layered billing process to hide pricing for its members. Centene agreed to pay $143 million to both states and reserved over $1 billion to resolve other state cases. States must adhere to transparency of pharmacy network transactions. This can be done with monitoring prescriptions claims data, calculating pharmacy discounts, and surveying network pharmacy reimbursements.

Myers and Stauffer has gained considerable experience and expertise with MCO programs. We can help state and government leaders ensure that MCOs deliver all agreed-upon services. In order to implement MCO financial reporting structures, below are steps to provide direction on how these policies will set in place:

Step 1: Know Your Contracts

  • Review MCO contracts specifically as they relate to financial reporting.
  • Provide specific financial reporting templates that require adjustments to spread pricing, prescription rebates credited to the MCO, and related party transaction reports to the entity.
  • Contracts must have a right of recovery due to the CMS Medicaid mega rule.

Step 2: Audit Data Annually

  • Actuaries use two to three years of financial and encounter data to set rates.
  • CMS rule requires states to provide for an audit no less than every three years.
  • Actuaries can use a combination of both state reported data and national trends.
  • Ensure actuary has access to completed audits including validated encounter data.

Step 3: Implement Reporting of MCO Audits and Review Encounter Data

  • MCOs typically focus on education.
  • Network adequacy issues can keep a provider in network despite questionable billing patterns.
  • MCOs should report all FWA reviews regularly to state PI unit and report on outcome.
  • Recoveries should be reported on financial templates.
  • FWA that is not recovered get used in rate setting process by actuary.
  • Understand contract language on right of recovery.
  • Conduct FWA reviews using audited encounter data to determine if proper data mining occurs.
  • Ensure MCOs are sharing information on problematic providers.

Through our successful work conducting Medicaid MCO oversight, including Medical Loss Ratio examinations, and our work performing Medicare prescription drug plan program audits, Myers and Stauffer has valuable insight into monitoring pharmacy benefit administration and contract compliance with an MCO. We can help you feel confident in your program by monitoring your MCOs’ performance while ensuring their compliance with the delivery of prescription drug services.

Please visit our managed care page, or contact our health care professionals below for more information on the services we provide.

Contact the Contributors:

Mike Johnson, CPA, CFE
Joe Schauer, MS, RPh
Senior Manager