A recent OEI report found troubling conflicts of interest and financial relationships among potential Zone Program Integrity Contractors (ZPICs) used by the Centers for Medicare & Medicaid Services (CMS) in their controversial new National Fraud Prevention Program.  Medicare fraud costs the government an estimated $60 billion dollars annually, and CMS’ new strategy to prevent fraud consists of a claims-based analytic system that employs complex algorithms designed to detect unusual billing patterns as well as heightened screening of providers.  Peter Budetti, director of CMS’ Center for Program Integrity, characterizes the program as “a new generation of activity in which [CMS] is continuing to partner with law enforcement and take administrative action that will interrupt the ability of people to steal from the program.”

Unfortunately, ZPICs have been criticized for their aggressive tactics, which include showing up to facilities unannounced to conduct impromptu in-person audits.  ZPICs use statistical sampling, auditing a sample of claims and extrapolating that analysis to assess massive disallowances.  Thus, providers that are outliers simply because they tend to treat patients in need of intensive therapy may find themselves the subject of a ZPIC investigation. 

 ZPICs have an unprecedented ability to conduct pre-payment reviews on claims, which effectively freezes a provider’s cash flow for a certain line of business, and could seriously jeopardize the financial viability of a company.  There is no time requirement for a ZPIC to issue a determination on a claim, unlike MACs who must issue a determination within 60 days of receiving the documentation.  And there is no meaningful oversight by CMS of prepayment reviews initiated by a ZPIC contractor.  Compounding this problem, ZPICs have more of an incentive to conduct aggressive investigations than past auditors like the Program Safeguard Contractors (PSCs) because they are measured not only by the amount of money recovered, but also by the number of cases they investigate and refer to law enforcement.  Despite the potential for arbitrary ZPIC decisions to threaten a provider’s viability, providers have no access to meaningful due process in the form of administrative appeals when ZPICs exercise their authority to conduct pre-payment reviews. 

Because ZPICs exercise much broader authority than that exercised by the government itself and the PSCs of the past, the OEI report finding large-scale conflicts of interest and financial relationships among potential ZPICs is especially troubling.  The Government Accountability Office describes three types of conflicts of interest; “unequal access to nonpublic information” arising from other work as part of a government contract, “biased ground rules” conflicts occurring when an offeror has set the ground rules for a government contract as part of its performance of another government contract, and “impaired objectivity” arising when an offeror’s work under a government contract would involve self-evaluation.  The OEI reviewed conflict-of-interest information for 18 offerors and 85 subcontractors, finding that the offerors and subcontractors often had business and contractual relationships with CMS and with each other, but rarely considered them to be actual conflicts.  OEI discovered substantial under-reporting of potential and actual conflicts, attributed to CMS’ lack of a written policy for reviewing conflict and financial interest information submitted by offerors, some of which was inconsistent and or incomplete.

OEI made a number of recommendations to CMS to address the lack of transparency and accountability among ZPICs.  For their part, CMS has agreed to provide clearer guidance to offerors in the Request for Proposals as well as requiring offerors and subcontractors to distinguish relationships they deem potential conflicts and actual conflicts.  The agency has pledged to develop a formal, written policy outlining how conflict-of-interest information provided by offerors should be reviewed by CMS staff.  CMS will also create a standardized format for reporting information in the Organizational Conflict of Interest Certificate and require offerors and subcontractors to use them.  These measures ought to reduce the prevalence of conflicts of interest and financial interest among CMS’ potential ZPICs.  But they are of little comfort to providers who are rightfully anxious about the broad authority wielded by ZPICs and the lack of due process that characterizes ZPICs’ invasive, aggressive investigations.