What Anesthesiologists Should Know about Medicare Prepayment Reviews


February 13, 2012


The Anesthesia Insider

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In any financial transaction, the person holding the money is at an advantage.  Getting money back from someone who should not have been paid is harder than not making the payment in the first place.   CMS knows this, and that is why it is placing a new emphasis on prepayment review of claims.  Originally slated to begin on January 1, 2012 the prepayment review initiative will now formally launch in June.  The number of prepayment reviews is going to increase from 1.2 million to 2.7 million claims per year.

There is a large amount of taxpayer dollars at stake.  In 2011, the Medicare fee-for-service improper payment rate was 8.6 percent, or $28.8 billion in estimated erroneous claims payments.  Medicaid adds another $21.9 billion. 

During 2011, CMS recovered $5.6 billion in fraudulent payments, an increase of 167 percent over 2008. The increase in recoveries is attributable in major part to the $350 million allocated through the Affordable Care Act over 10 years to ramp up anti-fraud efforts.  The ramp-up has involved, thus far, more “feet on the street” law enforcement agents, and also investments in sophisticated data analytics allowing more prepayment scrutiny.  Since June 30th, CMS has been using predictive modeling to help identify potentially fraudulent claims and the providers and suppliers who routinely submit such claims.

Anesthesiologists are already familiar with prepayment reviews in the form of claim denials.  When a Medicare Administrative Contractor (MAC) rejects a claim because of a National Correct Coding Initiative (NCCI) edit or a “Medically Unlikely Edit” (MUE), it does so on the basis of an automated analysis of the claim before any payment is remitted to the provider.  Similarly, the MAC may deny a claim for lack of medical necessity if, for example, there is a mismatch between the procedure and the acceptable diagnosis codes.

The MAC covering Florida, First Coast Services Options, introduced a new form of screening when it targeted 11 cardiology and four orthopedic procedures for prepayment review based on high error rates on claims, according to an article in the January 14, 2012 issue of American Medical News.  As an example of one type of error, a sample of paid claims for cardiac pacemaker implantation procedures did not meet Medicare national coverage decision criteria. 

First Coast proposed withholding payment from the hospital until after it had verified physician documentation.  If the hospital were ultimately denied payment, First Coast would then send the physician a “take-back” letter seeking a refund of the amount paid for the professional service.  Both the hospitals and the physicians affected expressed their concern over potential losses for expensive services already provided to Medicare patients, as well as over the work likely to be involved in a program that will target 30 to 50 percent of all claims submitted for the procedures in question.

The concept of prepayment review received even more provider interest following November 15, 2011, when CMS announced three new demonstration projects, one of which will permit the Recovery Audit Contractors (RACs) for the first time to review claims before they are paid.  

The RACs review paid Medicare claims for potential overpayments or underpayments.  They analyze claims data using proprietary software to identify claims that clearly contain improper payments or that likely contain improper payments. Until now, the RACs have been limited to postpayment review to ensure that the physician, hospital or other provider has complied with the Medicare payment rules.  Beginning in June of this year, according to CMS,

The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments. These reviews will focus on seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO) for a total of 11 states. This demonstration will also help lower the error rate by preventing improper payments rather than the traditional ‘pay and chase’ methods of looking for improper payments after they occur.

The RAC prepayment review demonstration program will begin by focusing on inpatient hospital claims, especially for short stays.   There is no provision for prepayment reviews of claims for physicians’ professional services in the demonstration project, but given that the success of the original RAC demonstrations in 2005 and the expansion of the program into a permanent, nationwide effort, we should prepare to see the RACs’ prepayment focus envelop physicians at some point. 

It is worth noting some of the other strategies for reducing the amount of Medicare and Medicaid fraud provided for in the Affordable Care Act:

  • Increasing the federal sentencing guidelines for health care fraud offenses by 20-50 percent for crimes that involve more than $1 million in losses, establishing penalties for obstructing a fraud investigation and making it easier for the government to recapture any funds acquired through fraudulent practices.  
  • Giving the Office of the Inspector General (OIG) the authority to impose stronger civil and monetary penalties on those found to have committed fraud.  OIG also has new authority to prevent problem providers from participating in Medicare, Medicaid or the Children’s Health Insurance Program (CHIP).
  • Enhancing coordination between the states, CMS, the Office of the Inspector General within the Department of Health and Human Services and the Department of Justice.
  • Sharing data across Government by requiring certain claims data from Medicare, Medicaid and CHIP, the Veterans Administration, the Department of Defense, the Social Security Disability Insurance program, and the Indian Health Service to be centralized, making it easier for agency and law enforcement officials to identify criminals and prevent fraud on a system-wide basis.
  • Enhancing screening and other enrollment requirements for providers.  Among the powerful new tools is the authority to suspend Medicare payments to providers or suppliers while investigating a credible allegation of fraud.  The Affordable Care Act also allows HHS to impose a temporary moratorium on newly enrolling providers or suppliers in certain geographic areas to prevent or combat waste, fraud and abuse. 
  • Requiring compliance programs for providers and suppliers.

As citizens and taxpayers, we all stand to benefit from a reduction in the vast amounts of money lost to both fraud and to billing errors.  As anesthesiologists and anesthesia business professionals, we have received clear warning that we must continue our efforts to comply fully with Medicare and Medicaid requirements.

With best wishes,

Tony Mira
President and CEO