EP502: How Some Pretty Wild Medicare Fraud Sabotages ACOs and Also Independent Practices and Could Cost Plan Sponsors Such as Self-insured Employers a Lot of Zeros Downstream, With Brian Machut
Relentless Health Value
Why Fraud Persists in Fee-for-Service Medicare
Brian discusses rapid auto-adjudication, regional contractors, and why Medicare FFS is vulnerable compared to MA.
Episode 502 features Stacey's conversation with Brian Machut (Alliant Health) on how widespread Medicare fee-for-service fraud is inflating costs and undermining ACO shared savings in MSSP and ACO REACH. ACOs uncovered major urinary catheter fraud in 2023 tied to codes A4352/A4353, totaling about $3.5B, with some beneficiaries billed for items never received (including a case shared by Dr. Tara Lagu).
CMS created a "SAHS" (significant, anomalous, highly suspect) process to remove certain suspect costs, but benchmark effects can unevenly impact ACOs; catheter fraud is still projected at $3–$3.5B in 2025. The episode also highlights rapidly growing "skin substitute" spending projected at $13–$15B in 2025; CMS did not classify 2024 skin substitute costs as SAHS, leaving them in ACO performance calculations.
Machut explains this fraud and missed CMS trend projections can reduce provider earnings, discourage participation in value-based care, and potentially drive cost shifting into higher commercial rates—affecting plan sponsors such as self-insured employers.
=== LINKS === 🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP502
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00:00 One way hackers are using medical data to commit Medicare fraud.
01:49 What today's conversation with Brian Machut entails.
02:16 The downstream impact that this Medicare fraud can have.
03:30 A brief outline of how plan sponsors can be affected by this Medicare fraud.
06:38 What does a value-based actuary do?
08:04 The conversation with Brian Machut: What caused his team to look into DME costs and uncover Medicare fraud?
08:46 How much did this fraud scheme cost organizations in 2023?
09:57 How this data was tracked down and uncovered.
11:13 How fee-for-service ACOs work, and why this Medicare fraud affected the ACOs' shared savings.
12:46 The two codes that were the target of this fraud.
15:13 Across the U.S., how much money in 2023 did this fraud, waste, and abuse cost, and what was done about it?
16:14 The framework that was created to combat this fraud spend.
17:49 Why the CMS decision to pull those expenditures negatively affected some ACOs.
20:17 Where things stand now with this catheter fraud.
21:33 Why this fraud is still able to happen.
22:19 Is this a use case for prior authorizations?
23:49 How this Medicare fraud affects self-insured employers and what they should keep in mind.
25:12 What is the correlation to employee affordability?
27:08 A cost that dwarfs the catheter Medicare fraud.
28:21 A brief summary of skin substitutes.
29:32 What SAHS means, and how CMS uses it to calculate an ACO's shared savings.
31:21 Why CMS chose not to classify skin substitutes as SAHS.
33:26 Why this fraud affects ACOs' prospective trend pricing risk.
36:40 Why these fraud cases make participating in ACO programs less appealing to provider organizations.
38:28 Medicare Advantage Advance Notice for 2027.
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