PBM and payor audits can be routine business challenges that healthcare businesses and providers prepare for and overcome successfully. Other times, however, the sailing is not so smooth. Accordingly, providers should understand the full range of outcomes that may arise from PBM audits and use that insight to guide strategy.

PBM Audits Likely will Increase

Despite the hot glare of ongoing Congressional and FTC inquiries, nothing is expected to change the pace or intensity of PBM audit activities.

First, as Medicare delegates, PBMs and payors are required by law to conduct fraud, waste and abuse (FWA) monitoring. PBM audits are a form of FWA monitoring.

Second, capitated plans have structural incentives to recoup paid claims because the vast majority of every dollar recouped, particularly on commercial claims, goes to the PBM’s bottom line.

Third, as inflation and economic headwinds continue to mount, businesses are compelled to take additional risks to maintain profitability. PBM audits will therefore become even more frequent.

PBM Audits Can Result in Broader Liability

Providers should fully understand the intersection between government enforcement actions and PBM audits.

A discrepant PBM audit can result in a referral to a government agency, such as the FBI, OIG or DEA, for further investigation. The investigation can result in potential civil, administrative, and even criminal charges against a provider for healthcare fraud or false claims.

Although there is no way to predict with certainty whether a referral will occur, or whether a government agency will pursue the lead, there are a number of PBM audit strategies that clients should consider to protect against a subsequent government inquiry.

Federal and State Laws Require Fraud, Waste & Abuse Reporting

The first reason that PBM audits can lead to law enforcement scrutiny is that Medicare and Medicaid laws require managed care organizations (MCOs) and their contractors, often referred to as "delegates," to conduct rigorous fraud, waste and abuse monitoring activities. The law further requires that such claims monitoring functions be performed by a dedicated group of employees with mandated staffing levels.

Artificial intelligence (AI) has dramatically increased the speed at which companies can analyze massive volumes of claims data. In addition, AI facilitates the automated development of investigative data around certain patterns and metrics. For example, to use a real-world example that is easily understandable, state police can use license plate readers to understand when and how often certain cars are traveling to a given location. As a result of AI, state police can then decide when to conduct a car stop for potentially suspicious activity.

As you might envision, the use cases for AI are even more powerful when applied to claims data sets, instead of vehicle travel. Therefore, providers faced with audits need to understand the role AI may have played in the claims analysis to effectively defend the audit and any follow-on referral for government investigation.

Payors Employ Former Law Enforcement Investigators

Civil servants, including FBI, OIG and DEA Special Agents, may be required to work for 20-25 years to be eligible for a retirement pension, but those benefits often include "full" salary in retirement. Accordingly, most federal and state investigators will position themselves for employment in the private sector after qualifying for a full pension and retiring as early as 45 years old. This way, they can receive their full pension plus their pay from the private-sector job.

Healthcare is one of the more lucrative sectors for former law enforcement investigators. There are many jobs available to former investigators, and they do not necessarily have to have healthcare background or experience to get hired. Payors will hire law enforcement due to their relationships within their respective agencies.

In other words, payors "stack the deck" in their favor by hiring former government investigators, like OIG Special Agents, because they are often themselves under investigation by OIG! Thus, by reporting other businesses for fraud, waste or abuse, the MCOs, payors and PBMs can accomplish two desirable goals. First, they deflect attention from scrutiny of themselves. Second, they build relationships within the agencies that they can use for their purposes.

Government Officials Promote Healthcare Enforcement

Does it surprise you that the top law enforcement officials in each state are typically political appointees? For example, the President appoints the U.S. Attorney in each state, typically after selection by the state's U.S. Senators. Likewise, the top law enforcement officer for each state is the Attorney General, who is typically appointed by the Governor.

Although agendas and priorities change, budget is always a top consideration. Unlike violent crime or quality of life crimes, healthcare and financial crimes are often revenue centers because the costs of enforcement are typically much lower than financial recoveries through forfeitures and fines. In other words, healthcare prosecution is a self-funded activity, so there is almost no downside to increasing investigative capabilities and the number of cases filed.

Finally, within the government itself, between federal and state investigators, and between federal investigators in different jurisdictions, there is competition for healthcare cases. All of these investigators want the biggest and most significant cases to be filed by their office and, as a result, they cultivate relationships with industry participants to encourage referrals of PBM audits and other cases that fill their investigative pipeline.

HLA’s PBM Audit Experience is Unmatched

The considerations discussed above are only a few of the many factors that shape whether a PBM audit will result in a government investigation. Obviously, such a referral dramatically increases the risks involved, and should be guarded against from the inception of the audit. To do that effectively, you need someone who understands the process from an insider's perspective.

No firm can match our experience in PBM audit defense. For example, our firm's founder, Anthony Mahajan, previously oversaw Optum Rx, including investigators and data analysts in the PBM’s Pharmacy Network Contracting Department, United Healthcare’s Special Investigative Unit (SIU), and coordination with CMS’s National Benefit Integrity Medicare Drug Integrity Contractor (NBI MEDIC) on Part D monitoring and auditing in regions across the country.

In addition, as former federal and state prosecutors, including nearly a decade of experience as an Assistant United States Attorney for the U.S. Department of Justice, we understand the “behind the scenes” considerations and factors that may lead to a government referral of the PBM audit. Accordingly, we have had indictments dismissed, criminal prosecutions declined, deeply discounted civil settlements, and administrative resolutions with no board or other licensing ramifications. Significantly, these cases all involved a PBM audit that noted inventory or other discrepancies, withheld reimbursement due the provider, and resulted in a government investigation that, ultimately, was resolved successfully once we got involved.

Our firm’s mission is simple: use unmatched experience and insight to defend our clients against insurance conglomerates, the federal government, and state agencies. We used to work for them. Now let us fight for you. Contact us today for a consultation. We can help.