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On April 24, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule for fiscal year 2019 for the Inpatient Prospective Payment System (IPPS). In the rule, CMS included prepayment claim reviews for Medicare Advantage Part C and Part D, which covers drugs for Medicare beneficiaries, but did not include prepayment reviews for Parts A and B. In the rule, CMS incentivizes managed care organizations to review claims for billing accuracy prior to payment, rather than relying on post-payment audits.

Around the same time, The Council for Medicare Integrity (CMI)—a non-profit advocacy organization that educates policymakers and other stakeholders about the importance of healthcare integrity programs that help Medicare identify and correct improper payments—called on CMS to institute prepayment reviews of Part A and Part B claims. CMI supported this call by pointing to the three-year Prepayment Review Demonstration project CMS initiated in 2012.

In this demonstration, CMS authorized the Recovery Auditors (RAs) to review certain Medicare fee-for-service claims prior to the Medicare Administrative Contractor (MAC) paying the claim. The demo was conducted in seven states that were deemed by CMS to have high incidences of improper payments and fraud: California, Florida, Illinois, Louisiana, Michigan, New York and Texas. Additionally, CMS selected four states—Missouri, North Carolina, Ohio and Pennsylvania—with high numbers of short hospital stays.

If we look at the results of this demonstration from the provider prospective, it can only be characterized as an administrative burden. Under the prepayment review process, providers still submitted claims to the MAC, and in turn the MAC suspended claims selected for prepayment review and forwarded them to the RAs for audit. The RA then requested medical records from the provider and had 30 days from the time they received the medical record to review the claim and advise the MAC to either pay or deny it. Providers were able to appeal the RA's decision, just as they can in the case of any pre- or post-payment audit denial.

The most obvious provider impact from this demo was cash flow delays. MACs are required to pay electronic claims within 14 days of submission. Those claims selected for prepayment audit were, if approved by the RA, not paid for approximately 60 days. If denied, and a provider chose to appeal, a receivable could remain open on the provider's books for years.

Providers using an audit management system like TRACKER PRO™ were able to track these prepayment audits and determine their success rate in the demonstration. In its 2015 report to Congress on the RA program CMS stated that the demo prevented over $192 million in improper payments, and the demonstration resulted in a total of close to $75 million in savings from claims reviewed in fiscal years 2013 and 2014. We note that these results, however, do not reflect provider appeals outstanding after the demo was concluded. It is also important to note that CMS did not include a prepayment component in the new RA contracts. The MACs have always had the ability to suspend claims for prepayment reviews.

CMS may decide to accept the CMI recommendation and include Part A and Part B prepayment RA reviews in the IPPS final rule which will be published on or about August 1. We will keep monitoring the situation and provide updates as needed.



The Affordable Care Act's individual mandate—which required consumers to enroll in health insurance or pay a penalty fee—has been at the forefront of health care reform debate for years. And while a federal tax bill passed in late 2017 reduced the mandate's financial penalties to zero, beginning in 2019, it doesn't look like the individual mandate is out of sight just yet.

While the fines for the mandate have been reduced to zero at the federal level, the mandate itself and its requirement to carry health insurance will remain part of the Affordable Care Act. However, without the fines, there are no federal regulations in place to hold consumers accountable for complying with the mandate.

The Congressional Budget Office (CBO) estimates that, as a result, 4 million people will choose not to enroll in coverage in 2019 and that the number will only grow from there—with 13 million ultimately becoming uninsured. It's speculated that a large number of those would likely be healthier consumers, threatening the stability of the marketplaces. This is expected to drive increases in premiums at a rate of 10% a year, beginning in 2019.

States are responding in a variety of ways. Some are pursuing state-level proposals to enact provisions similar to the individual mandate, while others are looking to eliminate the mandate all together.

  • Nine states have passed or are pursuing their own requirements, including California, Connecticut, Hawaii, Minnesota, New Jersey, Rhode Island, Vermont and Washington, as well as the District of Columbia.
  • New Jersey recently passed its bill to reinstate the individual mandate, becoming the second state to do so.
  • Maryland began pursuing its own innovative approach to similar legislation earlier this year. The bill would require those who choose not to buy a plan to pay an annual fine starting at $700. They would then have the option to use that fine as a down payment to purchase insurance the following year.
  • Ohio became the first state to request a waiver to eliminate the individual mandate all together, submitting paperwork in late March to the Department of Health and Human Services. If approved, Ohio would become the first state to receive a 1332 waiver of the individual mandate.

At the consumer level, it's likely many don't know that the individual mandate was waived. In other cases, consumer stories have surfaced that consumers have already dropped coverage, thinking the changes at the federal level would immediately eliminate the penalty fees.

Whatever the outcome at the state level, there's no doubt this will continue to be a pain point for both consumers and providers as they try to navigate the ever-changing health care landscape.



Recently, a federal judge in the District of Columbia asked the American Hospital Association (AHA) for ideas on how the U.S. Department of Health and Human Services (HHS) can deal with the substantially large volume of Medicare appeals backlog at the Administrative Law Judge (ALJ) appeals level. As of June 2017, the Office of Medicare, Hearing and Appeals (OMHA) had 607,402 appeals pending with a current estimated wait time of three years for an administrative law judge to process a provider's appeal. At this rate, the backlog is predicted to reach 950,520 appeals by the end of Fiscal Year 2021.

The AHA and a group of hospitals filed a law suit in 2014 against the Secretary of HHS. The substance of the law suit was that the length of time it takes to challenge a Medicare Recovery Audit Contractor (RA) decision at the ALJ level of appeal violates the statutory deadlines set forth in 42USC section 1395ff of the Social Security Act. The statute requires that the ALJs "conduct and conclude a hearing" and render a decision within 90 days of the date a request for hearing is filed—a much shorter timeframe than the current three-year waiting period. Under Medicare rules a provider has five levels of appeals to use when a Medicare claim is denied.

U.S. District Judge James Boasberg reportedly expressed frustration toward HHS during a recent hearing over the agency's inability to find a solution for the staggering backlog. Judge Boasberg told AHA to provide the court with a list of recommendations to cull the backlog by June 22, 2018. In turn, HHS will have until July 6, 2018 to respond to the proposed suggestions.

We are extremely pleased with the Judge's request to the AHA. Clearing the appeals back-log will not only help providers but will also improve the effectiveness of the overall appeal process moving forward. Over the years we have seen the significant growth in appeals as our clients enter these cases into the TRACKER™ PRO solution to monitor their appeal status and track potential financial impact. The judge is correct in turning this situation over to the industry representatives to come up with a solution. We are confident that the AHA and its members will make good suggestions to the court. One obvious solution would be to require HHS to offer settlements to all providers with pending appeals as they did a few years ago. Many hospital providers accepted the settlement offer in order to clear the appeals off their books. We have yet to learn about other options being discussed but are sure that AHA will publish its comments for the hospital industry to review when ready. We will continue to monitor this issue moving forward and provide updates where appropriate.