United States: CMS Issues Guidance on Controlling Fraud, Waste, and Abuse for Medicare Part D Sponsors

Originally published February 22, 2006

On February 8, 2006, the Centers for Medicare and Medicaid Services (CMS) updated its guidance for Sponsors of Medicare Part D prescription drug plans on detecting, correcting, and preventing fraud, waste, and abuse (FWA). The guidance, which was 63 pages long, is an update to Chapter 9 of the Prescription Drug Benefit Manual, and it expands on an eight-page summary document issued last June. CMS will accept comments on the draft guidance until March 1, 2006.

Although in draft form, the guidance nevertheless offers insight into CMS’s expectations for various parties involved in the Part D benefit. Notably, CMS identifies potential risk areas, schemes, and vulnerabilities for key stakeholders, including employer or union sponsored plans, pharmacy benefit managers, pharmacies, prescribers, wholesalers, pharmaceutical manufacturers, and Medicare beneficiaries.

Delegation of Compliance Functions

CMS emphasizes that the Sponsor ultimately is responsible for fulfilling its contractual obligations to CMS. A Sponsor must have monitoring processes in place to ensure subcontractor compliance with applicable laws, rules, and regulations. CMS expects that Sponsors will require subcontractors to submit to ongoing monitoring for compliance purposes. The guidance mentions that CMS may require a Sponsor to revoke a particular subcontract if compliance concerns arise.

FWA Compliance Program Basics

A Sponsor may use the guidance to develop a comprehensive FWA program or to integrate CMS’s requirements into its existing compliance plan. According to CMS, the latter approach would be the most efficient, but it defers to Sponsors to make this determination based on their individual needs.

Written Policies and Procedures. CMS recommends that every Sponsor implement a code of conduct/ethics for its Part D business. It also provides a laundry list of the policies and procedures that a FWA program should include, such as:

  • a comprehensive conflict of interest disclosure protocol,
  • a process to ensure lawful marketing practices,
  • a commitment to legal Pharmacy and Therapeutic Committee decisions and formulary decisions, and
  • measures for timely responding to data requests by CMS and its designees, such as the Medicare Drug Integrity Contractors (MEDICs).

A Sponsor should distribute these policies and procedures not only to its employees but also to officers, directors, and managers of its subcontractors. CMS expects employees as well as subcontractors to certify that they have received, read, and will comply with the written standards of conduct.

Compliance Officer and Compliance Committee. CMS notes that the corporate Compliance Officer may serve as the Part D Compliance Officer, but "strongly recommends" having two separate positions. A Sponsor cannot delegate the Part D FWA Compliance Officer or the Compliance Committee functions to a subcontractor. The guidance outlines, in great detail, the Part D Compliance Officer’s duties as well as the Compliance Committee’s responsibilities.

Training and Education. A Sponsor must provide training and education for its Compliance Officer, Compliance Committee, employees, subcontractors, agents, and directors involved in the Part D benefit. In addition, the Sponsor must provide specialized training to employees based on their job functions. This training may cover issues such as calculating TrOOP, submitting Part D data to CMS, negotiating pharmacy network agreements, reconciling payments, and managing employer group plans and the retiree drug subsidy. CMS also recommends offering specialized training to subcontractors. Unlike the compliance guidance issued for various sectors of the health care industry by the Office of Inspector General (OIG) for the Department of Health and Human Services, the CMS guidance makes specific recommendations regarding the length and methods of training.

Effective Lines of Communication. Effective lines of communication must exist among the Compliance Officer, employees, and subcontractors. In addition, each Sponsor must develop a system to field compliance questions and reports of misconduct, such as a hotline or a similar anonymous, easily accessible mechanism. Sponsors must have and make available to CMS or its designee its processes for screening enrollee complaints, results of the complaint tracking system, and methods for educating enrollees about FWA.

Enforcement of Standards Through Well-Publicized Disciplinary Guidelines. CMS expects a Sponsor’s senior management to be involved in the development of standards of conduct. In addition, Sponsors should ensure that disciplinary guidelines are widely disseminated using any of the four methods specified by CMS. Sponsors also should distribute to senior management, employees, and subcontractors the procedures for making FWA reports and for asking compliance questions. Subcontractors should be aware that violations may result in contract termination.

Monitoring and Auditing. Sponsors have broad responsibilities regarding monitoring and auditing, as set forth in both the Part D rules and the guidance. Sponsors must develop a monitoring and auditing workplan that addresses risks associated with the Part D benefit and outlines the Sponsor’s system for responding to all monitoring and audit results, including reporting to MEDICs as necessary. Sponsors must document the process and development of the workplan and, upon request, make such documentation available to CMS or its designee, such as the MEDICs. CMS recommends creation of an independent, objective internal audit department if the sponsor does not already have such a department.

The guidance goes into great detail about development of a strategy for monitoring and auditing subcontractors involved in the Part D benefit. Audits should include a review of subcontractor contracts, as well as rebate, discount, and all other relevant agreements and supporting data. In addition, a Sponsor should collect routine reports from subcontractors to monitor payment, drug utilization, and prescription patterns among physicians and enrollees who obtain multiple prescriptions from providers located outside of a normal distance for care. The workplan should state the number of subcontractors the Sponsor will audit each year and how it will identify the subcontractors for such auditing. Where subcontractors perform their own audits, Sponsors should ensure that subcontractors have an adequate audit workplan in place and that corrective measures are taken when appropriate. A Sponsor should receive these audit results regularly.

Prompt Reponses to Detected Offenses. Where evidence suggests misconduct has occurred that is related to payment or delivery of prescription drug items or services under the Part D contract, a Sponsor must make timely and reasonable inquiries into such conduct. CMS describes a "timely and reasonable" inquiry as occurring no later than two weeks after conduct identification and including a preliminary investigation of the matter by the Part D Compliance Officer and/or the Special Investigative Unit (SIU) for the Sponsor. The guidance describes the role of the SIU, which is an internal investigative unit that already may exist under a different name in some plans. Sponsors that do not have the time or resources to investigate potential misconduct should refer the matter to the MEDIC within two weeks of identification of the conduct.

Corrective Action Procedures. Whenever an underlying problem results in one or more program violations, a Sponsor must take appropriate corrective action through a corrective action plan tailored to address the particular misconduct identified. The plan should provide structure and time frames to prevent continued misconduct. The Sponsor should detail any elements of this plan that affect subcontractors in a written agreement with the subcontractor.

Self-Reporting

The guidance emphasizes the importance of self-reporting. A Sponsor with an SIU is responsible for investigating potentially fraudulent activity and, when necessary, for timely (within 30 days) referring any determined or suspected fraud, waste, or abuse to the appropriate MEDIC. The MEDICs have contracted with CMS to perform prevention and detection activities and to manage CMS’s audit, oversight, and anti-fraud and abuse efforts in the Part D benefit. When making a referral to a MEDIC, the Sponsor must compile a referral package that includes certain information required by CMS. The MEDIC then may request additional information, which the Sponsor must furnish within 30 days, unless the MEDIC specifies otherwise. The Sponsor must provide updates to the MEDIC as new information regarding the matter is identified.

Sponsors also are encouraged to consider self-reporting to government authorities such as the OIG. Providers can self-report using the OIG’s Provider Self Disclosure Protocol.

Potential Fraud Schemes/Risk Areas

The guidance gives various examples of fraud, waste, and abuse in which Part D stakeholders could engage. For Sponsors, risk areas include duplicate payments, excessive premiums, incorrect eligibility calculations, and coordination of benefits in a way that leads to waste or inaccurate data submissions. The guidance also alerts Sponsors to potential actions that could constitute less obvious forms of fraud. For instance, CMS prohibits the falsification of TrOOP calculations to keep beneficiaries within the coverage gap or to advance beneficiaries through the coverage gap into catastrophic coverage. Sponsors also may be liable for subcontractors who inadequately fulfill duties to beneficiaries, by, for example, incorrectly denying a beneficiary’s right to appeal, failing to reimburse a beneficiary following a retroactive low income subsidy determination, charging a beneficiary a higher than expected amount for a drug at the point of sale, or steering a beneficiary to a particular drug or plan.

Conclusion

All parties connected to the Part D benefit are affected by CMS’s comprehensive proposed guidance on controlling fraud, waste, and abuse. Because the final guidance likely will not differ in substantive respects from the proposed guidance, all Part D stakeholders should take immediate steps to comply. Sponsors, in particular, should act quickly to ensure compliance with CMS’s guidance and expectations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.