The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


No Organization Likes Surprises – Especially When it Comes to PBM Contracts

By Truven Staff

CVS Health Corp., the second largest pharmacy chain in the country, is the latest company involved in a class-action lawsuit for allegedly overcharging patients for generic prescription drugs.

Though CVS has yet to make a public statement about the claim because they haven’t been officially served with the lawsuit, company spokesman Michael DeAngelis did state that co-pays are determined by a patient's prescription coverage plan, not by the pharmacy, and that a similar lawsuit in Massachusetts was dismissed.

Plan sponsors don’t always prevail in these kinds of complaints, but situations like this are exactly why you don’t want to use a pharmacy benefit manager’s (PBM’s) standard contact language.

The details around factors such as discount programs and “usual and customary” pricing can make all the difference in how much you and your plan members pay for prescription drugs.

For example, your PBM contract should include language that the PBM will charge you for the lowest of the following pharmacy network claims (less member copayments or deductibles):

  • Participating pharmacies’ usual & customary (U&C) price
  • AWP discount (ingredient cost) plus the guaranteed dispensing fee, if applicable, or
  • Maximum allowable cost (MAC) plus the guaranteed dispensing fee, if applicable

Ensure your PBM contract protects your interests.

Health Plans, download these best practices for contracting with your PBM, visit our website or contact us here

Employers, download these best practices for contracting with your PBM, visit our website or contact us here

Marie Bowker
Senior Director, Payment Integrity

Medicaid Program Integrity: Fighting Fraud in a Managed Care Environment

By Truven Staff
David Nelson imageA recently published study by the Government Accounting Office identified a need for states to ramp up their efforts to assure Medicaid program integrity under managed care. Although a majority of Medicaid beneficiaries are now enrolled with managed care organizations (MCOs), and payments for those plans are growing at a faster rate than fee-for-service (FFS) expenditures, some states are just now beginning to shift their program integrity focus from FFS to managed care. 

Traditionally, Medicaid has fought FFS fraud, waste, abuse, and overpayment by applying edits and algorithms to claims in prepayment, and using data mining, investigation, and recovery modeling and analytics in post payment. More recently, Medicaid has stepped up fraud-prevention efforts by expanding the use of prepay predictive analytics and implementing provider credentialing and stringent ongoing provider surveillance, as required under the Affordable Care Act (ACA). 

Best-practice Medicaid agencies have increased their managed care program integrity efforts through more comprehensive oversight of their contracted MCOs. They are collecting and validating encounter data, which allows them to perform advanced analytics to find fraud, waste, and abuse, and they are performing checks to ensure proper Medicaid administration. These agencies examine the full continuum of managed care fraud and abuse vulnerabilities:
  • Traditional FFS issues, such as over-utilization and billing for unnecessary or unused services
  • FFS/Managed Care crossover issues, including double billing and payment for ineligible recipients, such as prisoners and those with certain medical conditions or who are enrolled in certain waiver programs
  • Managed care operational issues, such as inaccurate encounter claims, under-utilization, and cherry-picking patients
  • Managed care financial auditing to ensure that MCOs accurately account for and categorize costs incurred and capitation rates are premised upon correct information
Medicaid agencies need to be diligent stewards of their managed care contracts. While managed care adds new complexities and challenges for monitoring program integrity, the rapid growth in managed care enrollment adds to the urgency of putting in place effective oversight mechanisms. 

Critical Success Factors
As we look across best-practice Medicaid agencies, several critical success factors have been shown to produce significant results for the integrity of the program under managed care. Some of these critical success factors are:
  • Encounter data accuracy and completeness
  • Contract provisions and rules to support managed care payment integrity
  • Capitation payment review
  • Data analytics examining MCO services and comparing MCO utilization to FFS
  • Inter-MCO comparisons and analytics
  • Managed care organization auditing (both financial and operational)
By incorporating such success factors, Medicaid agencies can avoid common fraud, waste, and abuse pitfalls under managed care and improve the integrity of the program.

Truven Health Analytics™ has been helping managed care organizations in all of these dimensions for several years. Our experts have advised 20 states over the past 15 years about managed care encounter data strategy, and our program integrity experts have been delivering recoveries to Medicaid agencies for three decades. In fact, IDC MarketScape recently named us an industry leader in fraud, waste, and abuse solutions.*

For more information, please contact me at

David Nelson
Vice President, Market Planning & Strategy

Using Algorithms and Predictive Models to Find Abuse and Fraud

By Truven Staff
David Nelson imageA critical success factor in any program integrity effort is applying the appropriate algorithms and predictive models in pre-payment and post-payment claims analysis environments. Truven Health Analytics has experience developing and cataloging hundreds of algorithms which have been used (and are currently used) in various state agency, federal agency, health plan and employer operations to detect abusive and fraudulent claims schemes. We have also seen predictive model intelligence growing in the marketplace, and we are helping payers improve their predictive models so that they more effectively fight fraud and identify high risk claims before the claims are paid. While these sophisticated approaches are implemented to find what we didn’t see before, we also see our clients achieving results every year with some of the tried and true detection algorithms. Each year our expert panel – a team that works with payers across the healthcare spectrum every day – selects a set of key algorithms. We just presented a webinar on the Key Algorithms for 2014, and the presentation included:

  •  A new approach to the overuse of modifiers. We focused on modifiers 22, 24, 57, 76, and 77.
  • The device malfunction algorithm which identifies claims where the reason for treatment or services rendered is due to a malfunctioning implanted device
  • Extended DME rental use
  • Over utilization of diabetic supplies
  • Critical care on date of discharge
  • Advanced life support (ALS) transportation without an inpatient stay
  • Hospital acquired conditions
  • Over utilization of lumbar MRIs
  • Lumbar MRI, post lumbar MRI, or CT
Some of these algorithms represent new schemes we are seeing, and some represent schemes that continue to produce analytic results that PI units and Special Investigation Units (SIUs) can take action on and make recoveries. Our team has produced the Key Algorithms list annually since 2003 to support the healthcare payer community that is dedicated to improving integrity and eliminating fraud, waste, and abuse in healthcare. If you would like more information on algorithms and predictive models, feel free to reach me at

David Nelson
Vice President, Market Planning & Strategy

How Much are Fraud, Waste, and Abuse Costing You?

By Truven Staff
Jody Amodeo imageTypically, we think of fraud, waste, and abuse as being confined to Medicare and Medicaid. However, recent findings show it is widespread in the commercial insurance population as well. In fact, results obtained from the Truven Health MarketScan® Commercial Database, found the estimated overall impact of six common claims scenarios alone is $122.6 million in over-payments in one year – or nearly $1 million annually for each of the organizations in the study. These issues are not limited to these six algorithms, but help shed light on the nature and extent of the problem in the commercial population.

What are those six algorithms and what can we do?
Here are the six algorithms we analyzed and the over-payments associated with them:

  • Multiple new patient office visits for a patient with the same provider in three years – $18.5 million
  • Diabetic supplies for members without a diabetes diagnosis – $8 million
  • Medical transportation trips to nowhere – $1.3 million
  • Schedule II drugs without physician care – $84.3 million
  • Refills of Schedule II drugs – $5.2 million
  • Unbundling of psychotherapy and drug management service – $5.3 million
Just think, here at Truven Health, we have hundreds of algorithms in our database. In just six of them, we’ve found $122.6 million in savings. How much more could we save the industry, if all of the algorithms were implemented in all the country’s organizations to detect overpayment patterns? With an estimated $600 to $850 billion of annual U.S. healthcare spending attributable to waste of some kind, surely our advanced predictive models and algorithms could help identify and reduce a huge amount of claims waste, fraud, and abuse.

Learn more and contact us
For more information on the six key algorithms for commercial payers, download the complete Payment Integrity Analysis. Please contact us with questions, or to learn more about our payment integrity solutions.

Jody Amodeo
VP Practice Leadership

Controlling Costs to Avoid the Cadillac Tax

By Truven Staff
Marie Bowker imageThe International Foundation of Employee Benefit Plans (IFEBP) recently released its 2013 Employer-Sponsored Health Care:  ACA’s Impact—Survey Results report, examining how the Affordable Care Act (ACA) is affecting single-employer plans.  Consistent with the results of other similar surveys, the major

Not surprisingly, with that “play” strategy in mind, employers are now considering ways to avoid the 2018 excise tax (i.e., the “Cadillac tax”) by lowering the cost/spend of their plans.  According to the IFEBP survey, 27% of employers have conducted or plan to conduct in the next 12 months healthcare claims utilization analysis.  With regard to auditing, 25% have conducted or plan to conduct a dependent eligibility audit and 17% have conducted or plan to conduct healthcare claims audits to identify and eliminate unnecessary spending.

There is a limit to the amount of cost employers can shift to employees without jeopardizing their ability to attract and retain talented employees.  Therefore, it makes sense to focus instead on cutting waste and ineffective spending from the healthcare system to reduce overall costs—for both employers and employees.  And there is plenty of low-hanging fruit with which to start.  For example, our research estimates that the U.S. healthcare system wastes $125-175 billion annually on claims associated with fraud and abuse.

While there is a perception that fraudulent claims are confined to Medicare and Medicaid, our analysis shows it is widespread in employer-sponsored healthcare plans as well.  We recently analyzed the healthcare claims in our Truven Health MarketScan® Commercial Database and identified $122.6 million in overpayments in a single year—nearly $820,000 for each of the 150 organizations in the study—from just 6 of our fraud detection algorithms.  When looking at diabetic supplies for patients without diabetes, for example, we found claims totaling $450,000 for a single patient/provider combination for the year.  Did you know there is a “black market” for diabetic test supplies?

The key to avoiding fraud, waste, and abuse in your plan is meticulous attention to payment integrity issues.  That is, making sure that the correct payment is made for the correct member for the correct service to the correct provider.  Eliminating unnecessary spending from your plan is the first step to reducing your overall costs.

For more information on improving payment accuracy and reducing cost trends, download the Payment Integrity Analysis Research Brief.