The Centers for Medicare & Medicaid Services (CMS) announced that it would launch three demonstration projects starting January 1, 2012, targeted towards reducing improper payments from Medicare and Medicaid, one of which has potential implications for O&P.
The three-year-long Recovery Audit Program Prepayment Review demonstration will allow Medicare Recovery Audit Contractors (RACs) to conduct prepayment claim reviews to assist in lowering the improper payment rate and to identify potential fraud and abuse in original Medicare.
Today, RACS work on a contingency basis to identify improper payments after the claims have been paid. According to the CMS Fact Sheet on this topic, the most effective way to limit the amount of taxpayer dollars lost to this type of improper payment is to review the medical record and other supporting documentation for the claim before it is paid to ensure that the correct services were billed and are paid. Currently, Medicare is only able to conduct a small number of prepayment claims reviews given the large volume of claims and current funding levels.
Medicare Administrative Contractors (MACs) currently perform a small amount of prepayment review; this demonstration will increase the volume of claims reviewed, and builds on the existing infrastructure to review claims to expand prepayment review by RACs.
Using multiple data sources to develop prepayment-review targets, the demonstration will initially focus on inpatient hospital claims, especially short stays, as this type of claim has been shown to have a high improper-payment rate. It will be implemented in 11 states. Seven of those states were chosen based on their high level of fraudulent claims and providers (Florida, California, Michigan, Texas, New York, Louisiana, and Illinois) and four states were selected based on having high claims volumes for short, inpatient-hospital stays (Pennsylvania, Ohio, North Carolina, and Missouri).
Under this demonstration, CMS will choose specific claim types for review. Then, RACs will review selected claims and if an improper claim is identified, it can be denied before the improper payment is made. Payment determinations will be made following the same processes with which providers are familiar.
Contingency fees for RACs and administrative costs will be paid out of funds that CMS saves by denying improperly billed claims. This approach allows for more reviews without increased funding. Normal provider appeals rights apply.
The other two demonstrations cover Part A to Part B rebilling for hospital inpatient short-stay claims and Medicare’s prepayment review and prior authorization for power mobility devices.
