Audit and Compliance



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.