The Centers for Medicare & Medicaid Services (CMS) identified over $210 million in savings during the second year of implementation of its predictive analytics-based Fraud Prevention System (“FPS”), according to a June 2014 report released last week. CMS claimed that these “identified savings” reflected a return of $5 for every dollar spent on the program, a $2 increase over the program’s first year.

But the Department of Health and Human Services Office of the Inspector General (OIG), based on a new metric called “adjusted savings,” calculated a much lower return on investment—only $1.34 for every dollar spent, or $54.2 million. This “adjusted savings” metric uses historical experience in the Medicare program to determine how much of the “identified savings” CMS will actually recover.

The FPS, established in 2010, was designed to prospectively analyze Medicare fee-for-service claims to identify suspicious transactions. Certain triggering criteria are used to identify a claim or a provider as suspicious. For instance, a claim submitted under an ID number reported as stolen would trigger review, as would a physician who billed 100 patient encounters on a single day (as opposed to an average of 30). Claims and providers identified as suspicious are referred to Zone Program Integrity Contractors (ZPICs) for investigation, which can include prepayment claim review, site visits, and other measures.…

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