Tag: Government Accountability Office (GAO)

GAO | Roll Out of IDR Process for Out-of-Network Claims Has Been Challenging

Written by AAA Staff on December 21, 2023. Posted in Regulatory.

Fast Facts

Individuals with private health insurance can receive “surprise bills” for the difference between what a provider charged and what their insurance paid.

A 2021 law prohibits surprise billing for some services, and directed the Departments of Health and Human Services, Labor, and Treasury to give providers and insurers a forum to resolve disputes about how much insurers should pay for out-of-network care.

But the rollout has been challenging. As of June 2023, over 490,000 disputes have been submitted, a much larger number than anticipated by the agencies.

And 61% of the disputes are unresolved as of June 2023.

A man holding papers while looking at a laptop.

Highlights

What GAO Found

The No Surprises Act directed the departments of Health and Human Services (HHS), Labor, and Treasury to establish a federal independent dispute resolution process. The process, which was effective April 2022, is a voluntary forum for health care providers and health insurance issuers to resolve disputes about how much should be paid for out-of-network care. The payment determinations are made by certified dispute resolution entities, which serve as arbiters. The Centers for Medicare & Medicaid Services (CMS)—an agency within HHS—administers the independent dispute resolution process.

The three departments reported that parties submitted nearly 490,000 disputes from April 2022 through June 2023. About 61 percent of these disputes remained unresolved as of June 2023. According to officials from the departments, a primary cause of the large number of unresolved disputes is the complexity of determining whether disputes are eligible for the process.

Number of Out-of-Network Disputes in the Federal Independent Dispute Resolution Process by Calendar Quarter, April 15, 2022—June 30, 2023

The groups GAO interviewed described a challenging roll out of the independent dispute resolution process, including a higher-than-expected dispute volume. For example, the departments anticipated about 22,000 disputes in 2022, but received nearly 490,000 through June 2023. Four groups told GAO the departments did not account for the experience of states with similar processes when making the estimate. Disputing parties and certified entities also described the broader effects of those challenges, such as backlogs resulting in delays in payment determinations. The departments have taken some actions to address challenges, such as conducting pre-eligibility reviews on submitted disputes.

To address concerns from insurers and providers, CMS and Labor look into complaints; however, stakeholder groups expressed concern with what they describe as a lack of response to submitted complaints. The departments reported limited ability to increase enforcement efforts due to budget constraints. HHS has requested a budget increase for the process, and the departments are revisiting the administrative fee amount, which is intended to cover the costs of the process, and plan to issue updated program rules.

Why GAO Did This Study

About two thirds of individuals in the United States receive their health coverage through private health plans. Balance billing is when insured patients receive a bill from a health care provider for the difference between the amount charged and the payment received from the health insurance issuer. An unexpected balance bill is referred to as a “surprise bill” and may create a financial strain for patients. For individuals with private health insurance, the No Surprises Act prohibits providers from balance billing in certain circumstances and directed the three departments to establish the federal independent dispute resolution process.

The Consolidated Appropriations Act, 2021, includes a provision for GAO to review the federal independent dispute resolution process. This report describes (1) the number and types of disputes submitted between April 2022 and June 2023, and the status of their resolution; (2) selected stakeholders’ experiences with the process, and agency actions to address challenges; and (3) how federal agencies oversee the process.

GAO reviewed published reports, relevant federal laws, regulations, and guidance; and interviewed officials from CMS and Labor. GAO also interviewed five selected health care providers or their representatives, which accounted for nearly half of all submitted disputes as of December 2022. In addition, GAO interviewed three issuers, three certified entities that arbitrate the disputes, and 10 stakeholder groups.

For more information, contact John E. Dicken at (202) 512-7114 or dickenj@gao.gov.

Letter to VA Reimbursement of Ambulance Services

Written by AAA Staff on December 14, 2022. Posted in Advocacy Priorities, Government Affairs, Medicare, Member Advisories, News, Reimbursement.

The AAA has sent a letter to VA Secretary Denis McDonough asking him to delay the implementation of a final rule that would allow the Department of Veterans Affairs (VA) to reimburse at the lower of billable charges or Medicare rates for certain non-contracted ambulance services. The proposed rule was issued back in 2020 but we understand that the VA could now issue the final rule in January 2023. GMR has been advocating on Capitol Hill for a delay in air and ground ambulance services. The AAA will be issuing later today a request for AAA members to reach out to the VA to also request the delay.

December 12, 2022

The Honorable Denis McDonough
Secretary of Veterans Affairs
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Secretary McDonough,

The American Ambulance Association (AAA) respectfully requests that the Department delay release and implementation of the final rule on the “Change in Rates VA Pays for Special Modes of Transportation (RIN 2900-AP89).” Reimbursing for services to veterans at Medicare rates would have dire consequences for the ability of ground ambulance service organizations to provide lifesaving 9-1-1 emergency and also interfacility ambulance services not only to veterans but entire communities. We ask that the Department delay the rule until after Congress has had an opportunity to act on the results from the Medicare ambulance data collection system which is currently underway.

As documented by the Government Accountability Office (GAO) in 2007 and 2012, the Medicare program reimburses ground ambulance service organizations below the cost of providing their services when temporary add-ons are not considered. Since 2012, the disparity between the cost of providing ambulance services and reimbursement by Medicare has only increased through sequestration cuts, a reduction in inflation updates, and other Medicare payment policy changes. Ground ambulance service organizations are already facing difficult financial straits and cannot
sustain a reduction in reimbursement from another federal payor.

Ground ambulance service organizations serve as the foundation for emergency medical response for veterans and communities throughout the country. Our members are a vital component of our local and national health care and 9-1-1 emergency response systems and serve as lifelines of medical care for many rural and underserved communities. However, our ability to continue to serve communities is already at risk due to inadequate reimbursement and access to care for veterans would be further jeopardized if the Department were to reimburse at lower levels for ground ambulance services.

The AAA is the primary association for ground ambulance service organizations, including governmental entities, volunteer services, private for-profit, private not-for-profit, and hospital-based ambulance services. Our members provide emergency and non-emergency medical transportation services to more than 75 percent of the U.S. population. AAA members serve
patients in all 50 states and provide services in urban, rural, and super-rural areas.

Again, we request that you delay the release and implementation of the final rule on the “Change in Rates VA Pays for Special Modes of Transportation”.

If you have any questions regarding our request, please do not hesitate to have a member of your staff contact AAA Senior Vice President of Government Affairs Tristan North. Tristan can be reached by phone at (202) 802-9025 or email at tnorth@ambulance.org.

Thank you in advance for your consideration.

Sincerely,

Shawn Baird
President

Talking Medicare: GAO urges CMS to continue prior authorization

Written by Brian Werfel on May 30, 2018. Posted in Member-Only, Talking Medicare.

Talking Medicare: GAO urges CMS to continue prior authorization efforts

On May 21, 2018, the Government Accountability Office (GAO) issued a report to the U.S. Senate Finance Committee on the use of prior authorization models by the Centers for Medicare and Medicaid Services (CMS). The GAO was asked to examine: (1) the impact of prior authorization on total expenditures, and the potential savings for items or service subject to prior authorization, (2) the reported benefits and challenges of prior authorization, and (3) CMS’ monitoring of these programs, and its plans for future prior authorization. To conduct its study, the GAO looked at payment data and other information provided by CMS. The GAO also interviewed CMS, the Medicare Administrative Contractors (MACs), and selected provider, supplier, and beneficiary groups.

Prior authorization was first implemented by CMS in 2012 for certain power mobility devices (e.g., power wheelchairs) in seven states. Subsequent prior authorization models were implemented for non-emergency hyperbaric oxygen and home health services. Most relevant to our industry, CMS implemented a prior authorization model for repetitive, scheduled, non-emergency ambulance transportation in December of 2014. Originally, this model was implemented in only three states: New Jersey, Pennsylvania, and South Carolina. In January of 2016, the prior authorization model was expanded to include the states of Delaware, Maryland, North Carolina, Virginia, and West Virginia, as well as the District of Columbia.

The GAO’s key finding is that these prior authorization models have been effective in reducing Medicare’s expenditures for various items. The GAO’s analysis of actual expenditures found that the estimated savings from all demonstrations through March of 2017 could be as high as $1.1 to $1.9 billion. Given this fact, it should not be surprising that the GAO is calling on CMS to continue the use of prior authorization.

The majority of the data included in this report relates to non-ambulance services. However, I do want to highlight a few data points noted by the GAO.

From the model’s implementation in December 2014 through March 2017, MACs collectively handled more than 337,000 prior authorization requests, including a total of 3,231 requests for authorization of a repetitive, non-emergency, ambulance patient. This includes 2,620 initial requests, and 611 resubmissions (i.e., subsequent requests for prior authorization following the rejection of the initial request).

The GAO provisional affirmation rate for both initial and resubmitted authorization requests rose in each demonstration between the initial implementation date and March 2017. For example, the GAO noted that the affirmation rate (i.e., the rate at which patients are approved for repetitive ambulance transportation) during the first six months of the non-emergency ambulance model was 28 percent. This rose to 66 percent during the most recent six-month period (October 2016 through March 2017). The GAO noted that MAC officials attributed this increase, in part, to provider and supplier education, which they felt improved the documentation being submitted by providers and suppliers. While this is undoubtedly true, it is also likely the case that the MACs refined their approval process over time.

The GAO estimated the total potential savings from the prior authorization model for ambulance to be nearly $387.5 million from December 2014 through March 2017. Importantly, 90 percent of that savings was attributable to reductions in utilization in the original three states. Moreover, more than half the reduced expenditures took place within the first six months of the demonstration project.

In terms of fitting this report into the larger picture, I think it is best viewed as further confirmation of what we already suspected: namely, that the federal government perceives prior authorization to be an effective tool for combating the perceived overutilization of ambulance to transport patients to and from dialysis. CMS indicated as much when it adopted the program in 2014. Medicare payment data has borne out those expectations. Recently, CMS issued its first interim report on prior authorization’s effectiveness. The GAO’s report adds an independent imprimatur to that belief.

Big picture, all of the stars appear to be lining up for an expansion of prior authorization next year. Stay tuned!!

Have an issue you would like to see discussed in a future Talking Medicare blog? Please write to me at bwerfel@aol.com.

House Holds Hearing on Veterans Choice Program

Written by Todd Tuten on March 8, 2017. Posted in Government Affairs, Legislative, News, Veterans Affairs.

The House VA Committee hearing started at 7:30 p.m., but it was well-attended and lasted until 10 p.m. The witnesses included Senator John McCain (R-AZ), VA Secretary David Shulkin, and representatives of the VA Office of Inspector General and the Government Accountability Office. Senator McCain and Secretary Shulkin were both warmly welcomed by Members of the Committee on a bipartisan basis.

Chairman Roe (R-TN) emphasized the need to act quickly to extend the authorization for the Veterans Choice Program, which expires on August 7. To that end, the House VA Committee is voting today on a bill to eliminate the sunset of the program’s authorization. In addition, the Committee will consider broader legislation later this year to make comprehensive reforms to the Choice Program. He noted that the VA has additional funds available but will not be able to spend them once the authorization expires. A copy of Chairman Roe’s opening statement is available here.

Secretary Shulkin testified in support of extending the Choice Program, and he clarified that the VA was not seeking additional funding – just the authority to spend funds already obligated. He noted that the VA already is being forced to deny Choice Program coverage to veterans whose episodes of care would extend beyond the August 7 expiration date (e.g., pregnancy).

Secretary Shulkin also urged Congress to support the VA’s efforts to bring appointment scheduling in-house for care coordination purposes. However, the VA OIG witness noted challenges in records going out to community-based providers and coming back to the VA. The GAO witness also underscored the need for the VA to have better systems in place in order to effectively coordinate care, which will take time to procure and implement. Rep. Brownley (D-CA) echoed that point, calling the VA’s information technology systems a “Model T in a Tesla world.” Rep. Esty (D-CT) also urged improvements in the VA’s information systems and expressed concern that veterans are being improperly billed.

Other Members, including Rep. Wenstrup (R-OH) and Rep. Poliquin (R-ME), raised concerns about continuing delays in the processing of claims and payments to providers. Secretary Shulkin agreed that providers deserve to be paid for their services, noting his own experience as a physician in the private sector. He acknowledged that the VA is not processing enough claims electronically today, and he advised that he plans to pursue options outside the VA for systems procurement going forward.

Many Members also raised serious concerns about treatment of PTSD and mental health conditions for veterans, including Rep. Wenstrup (R-OH), Rep. O’Rourke (D-TX), Rep. Sablan (D-MP), Rep. Banks (R-IN), Rep. Rutherford (R-FL) and Rep. Takano (D-CA). Rep. O’Rourke emphasized that suicide among veterans is the most serious crisis, and Secretary Shulkin agreed that it is his number one priority. The Secretary announced that the VA will begin providing urgent mental health care that also will include individuals other than those service members who were honorably discharged. He added that the VA needs 1,000 more mental health providers, as well as telemental health services, and is looking to expand community partnerships to address suicide.

Rep. Banks noted interest among Indiana veterans in greater access to alternative treatments for PTSD and traumatic brain injury. Secretary Shulkin underscored that he is “most concerned about areas like PTSD, where we do not have effective treatments.” He also advised that the VA has established an “Office of Compassionate Innovation” (separate from the VA’s Center for Innovation), which will focus on finding new approaches to health and physical wellness and explore alternative treatment options for veterans when traditional methods fall short.

Rep. Wenstrup inquired about the VA’s GME and residency programs, as well as its associations with academic institutions. Secretary Shulkin responded that the VA is “doubling down” on partnerships with academic medical institutions.

Chairman Roe concluded his remarks by emphasizing the need to extend the Choice Program authorization soon and to consolidate the VA’s community-based care programs. He also expressed support for the VA’s decision to stop developing its own information technology internally.

GAO Report on Revised Provider Enrollment Screening Process

Written by Brian Werfel on December 21, 2016. Posted in Medicaid, Medicare, Member Advisories, Member-Only.

In March 2011, the Centers for Medicare and Medicaid Services (CMS) implemented a revised process for processing the enrollment of new Medicare providers and suppliers. This revised process also applied to existing Medicare providers and suppliers that were revalidating their enrollment information. This new process included assigning all providers and suppliers to one of three risk categories—limited, moderate, and high—based on the perceived risk of fraud and abuse. The risk category then determines the applicable screening process used for providers within that risk category.

Please note that ambulance providers and suppliers were placed in the moderate risk category. This risk category includes a verification of the information provided by the provider on its enrollment application, a check of the provider’s state licensure, a check of any adverse legal actions against the provider, and a site visit of the provider.

On December 15, 2016, the Government Accountability Office (GAO) released a report on the initial results of this revised provider enrollment screening process.

In its report, the GAO indicated that CMS applied its revised enrollment screening process to over 2.4 million newly enrolling and revalidating Medicare providers and suppliers from March 25, 2011 through December 31, 2015. Other relevant findings include:

The total number of enrolled Medicare providers and suppliers increased from 1.4 million in March 2011 to 1.9 million in December 2015, an increase of more than 30%.
CMS denied more than 6,000 applications for ineligible providers and suppliers. The most commonly cited reason for a denial was the failure of applicant to meet the provider/supplier type requirements. This included situations where the provider/supplier did not hold the required certification for that provider/supplier type.
CMS rejected 17,000 applications as incomplete. The GAO found that approximately 25% of the rejected applications were the result of the application being filed in error, either by the provider/supplier or the MAC. 21% of applications were rejected as being duplicates. Another 16% of rejections were the result of the provider/supplier failing to timely respond to the MAC’s request for additional information.
CMS screening of existing providers/suppliers resulted in more than 660,000 provider numbers being deactivated. This was typically (47%) the result of the provider failing to respond to the MAC’s request that they revalidate. Another 29% were the result of the provider/supplier voluntarily withdrawing from the Medicare program. Another 5% of deactivations were the result of the provider/supplier not submitting a claim to Medicare within the previous 12 months. The majority of these were likely individual practitioners (e.g., physicians) that either died, or who retired from professional practice, and who failed to inform the MAC at the time of retirement to request that their provider number be deactivated. This could also include organizational providers that were sold or otherwise no longer operational.
These were frequently the result of an individual practitioner (e.g., a physician) failing to deactivate his or her Medicare number upon their retirement, and their either not responding to a request to revalidate, or notifying the MAC of their retirement and agreeing to voluntarily withdraw
CMS revoked the billing privileges of 43,000 provider/suppliers. The most common reason cited (61%) was the failure of the provider/supplier to be professionally licensed. However, within the moderate risk category, which includes ambulance, 26% of all revocations were the result of a “CMS-approved revocation,” e.g., the result of some adverse legal action against the provider/supplier which was not properly disclosed to the MAC within 30 days.

CMS estimated that its revised screening procedures avoided $2.4 billion in Medicare payments to ineligible providers and suppliers over this period.

CMS also reported that it made several changes to its screening process over this period. This includes the implementation of a continuous license monitoring report in November 2013, and a continuous criminal monitoring report in July 2015. This also includes fingerprint-based criminal background checks for the owners and certain key employees of categorically high-risk providers and suppliers. In December 2015, CMS also began conducting site-visits for certain limited-risk providers and suppliers.

Despite the progress made by CMS, the GAO did find that certain program vulnerabilities still exist. For example, the GAO found that CMS had not established performance measures to monitor its ability to place providers and suppliers in the proper risk categories. The GAO recommended that CMS establish objectives and performance measures for assessing its progress in establishing better screening procedures for new enrollments and revalidations. CMS ultimately agreed with this recommendation.

Have a Medicare question? AAA members, send your inquiry to Brian Werfel, Esq. using our simple form!

AAA Issues Response to GAO Claims Report

Written by Tristan North on June 21, 2016. Posted in Medicare, Member Advisories, Regulatory.

On May 13, the Government Accountability Office (GAO) issued a report entitled “Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data“. In the report, the GAO recommended that CMS be provided legislative authority to allow Recovery Auditors to use prepayment claims reviews to address improper Medicare payments. CMS fortunately disagreed with the GAO on the recommendation and cited better options such as prior authorization to address potentially improper payments.

The AAA has now issued a Formal Statement in response to the GAO report noting the problems with prepayment claims review for ambulance services and promoting the better alternative of prior authorization for nonemergency BLS transports of dialysis patients. The statement is in follow up to our Member Advisory providing an in-depth review of the report. Please feel free to share the statement if you receive questions about the report.

On June 26, 2015, the AAA had participated in a conference call with the GAO officials conducting the report in which AAA representatives had pushed for recommendations in line with our statement. The AAA will continue to advocate for policies to address improper payments that address the issue but are also the least burdensome to AAA members and help ensure our ability to continue to provide high-quality emergency and nonemergency ambulance services to patients.

Understanding the GAO’s Recent Report on Medicare Prepayment and Postpayment Reviews

Written by Brian Werfel on June 1, 2016. Posted in Reimbursement, Talking Medicare.

On May 13, 2016, the Government Accountability Office (GAO) publicly released a report on the comparative effectiveness of the various audit programs used by the Centers for Medicare and Medicaid Services (CMS) and its various contractors. This report was requested by Senator Orrin Hatch, the Chairman of the Senate Finance Committee, who had asked the GAO to examine: (1) the differences between prepayment and postpayment reviews and the extent to which CMS contractors utilize each, (2) the extent to which contractors focus their reviews on particular types of claims, and (3) CMS’ cost per review, and the amount of improper payments identified by contractors for each dollar they are paid.

To briefly summarize the GAO’s findings:

The Recovery Audit Contractors (RACs) generally limited themselves to conducting postpayment reviews. The GAO attributed this to the fact that the RACs were paid contingency fees based on recovered overpayments, i.e., because prepayment reviews result in a claim never being paid in the first place, there is no “overpayment” to be recovered, and, therefore, no contingency fees to be paid. The GAO did note that from 2012 to 2014, CMS conducted a demonstration project in which the RACs conducted prepayment reviews (and were paid contingency fees based on the dollar amount of denied claims), which CMS considered to be a success.
The Medicare Administrative Contractors (MACs) generally limited themselves to conducting prepayment reviews.
Each contractor also tended to specialize in certain types of claims. For example, the GAO noted that during 2013 and 2014, the RACs tended to focus primarily on inpatient hospital claims. The GAO found that the MACs tended to focus on physician and durable medical equipment claims. Note: the GAO included claims for ambulance services within the larger category of “physician” claims.
The RACs identified a total of $4.5 billion in improper payments during 2013 and 2014. For their work, the RACs were paid contingency fees totaling $312 million, a return of approximately $14 in improper payments for every dollar paid to the RACs.
CMS lacked reliable data on the costs and effectiveness of its MACs program integrity reviews.

The GAO made two specific recommendations. First, it recommended that CMS seek legislation that would permit its RACs to conduct prepayment claims reviews. Second, it recommended that CMS develop written guidance on how its MACs should calculate the savings attributable to prepayment claims reviews. CMS disagreed with the first recommendation, believing it unnecessary in light of other programs intended to move CMS away from “pay and chase”, including prior authorization and enhanced provider enrollment screening. CMS agreed with the second recommendation.

Focus on the RACs

For the years 2013 – 2014, the GAO found that the RACs focused primarily on hospital inpatient claims. For example, the GAO found that 78% of the FY 2013 claims reviewed by the RACs were hospital inpatient claims. While this number declined to 47% in FY 2014, that decline was largely attributable to CMS, under its own authority and subsequent legislation, prohibiting the RACs from reviewing certain inpatient stays during the first part of FY 2014. If you look only at postpayment reviews, the numbers were even higher, 87% in FY 2013 and 64% in FY 2014.

So why were the RACs focused on hospital inpatient claims, largely to the exclusion of other types of claims? The GAO believes the answer lies in how the RACs are compensated for their work. Recall that the RACs are paid contingency fees (of between 9% – 17.5%) based on the amount of the recovered overpayments. Given this fee structure, the GAO believed it was logical for the RACs to focus on claims with higher average dollar amounts per claim. The following chart shows the average amount of the improper payment identified by the RACs on a per-claim basis:

As you can see, the average overpayment for an inpatient hospital claim was more than $3,000 in FY 2013, compared with slightly more than $300 for a physician (or ambulance) claim. Assuming a 10% contingency fee, this means the RAC could expect to receive $300 for each inpatient hospital claim it reviewed, compared with $30 for a physician claim. Given these financial incentives, the RACs decision to focus on inpatient hospital claims makes sense.

Focus on the MACs

In contrast to the RACs, the Medicare Administrative Contractors focused their program integrity activities almost exclusively on prepayment reviews. The following chart shows the breakdown of MAC reviews by provider type:

As you can see, the MAC largely focused on physician and DME claims, with physician claims (including ambulance claims) accounting for 49% of MAC reviews in FY 2013 and 55% of MAC reviews in FY 2014.

The efficacy of these reviews is unclear. This is largely due to the failure by CMS to collect consistent data on the savings from prepayment claims denials. At least 3 MACs failed to provide data on the specific funds they spent on prepayment and postpayment reviews. Instead, these MACs reported their costs as part of their broader claims processing activities. MAC also used different methods for calculating the savings from prepayment reviews. For example, 2 MACs used the billed amounts by providers to calculate total savings from denied claims, despite the Medicare allowables being significantly lower than the amounts normally billed by providers. 9 MACs used the total Medicare allowable, without differentiating between Medicare’s payment and the payments made by secondary insurers and/or patients. The remaining 5 MACs compared denied claims to similar claims that were paid to estimate what Medicare saved on claims denied as part of prepayment reviews.

Impact on Ambulance Providers and Suppliers

The key finding in this report is the GAO’s belief that prepayment reviews are generally more cost-effective in preventing improper Medicare payments. The GAO believes this is because prepayment reviews “limit the need to recover overpayments through the “pay and chase” process, which requires administrative resources and is not always successful.”

While the GAO and CMS are in agreement that Medicare should move away from postpayment reviews, they appear to disagree on how, exactly, to implement that transition. The GAO’s report makes clear its belief that CMS should devote greater resources to prepayment reviews, with the GAO specifically recommending that CMS seek legislative authority to empower its RACs to take a greater role in conducting prepayment reviews. By contrast, CMS appears to favor prior authorization programs.

Only time will tell which of these views gains prominence. In the meantime, ambulance providers and suppliers should expect to see the RACs take an increasing interest in our industry.

Have an issue you would like to see discussed in a future Talking Medicare blog? Submit your question!

The GAO Releases New Report on Claims Review Programs, Recommending Additional Prepayment Review Authority and Written Guidance on Calculating Savings from Prepayment Review

Written by Kathy Lester on May 17, 2016. Posted in Government Affairs, Medicare, Member Advisories, Reimbursement, Talking Medicare.

On Friday, May 13, the Government Accountability Office (GAO) publicly released a new Medicare report entitled, “Claim Review Programs Could Be Improved with Additional Prepayment Reviews and Better Data,” which it shared with the Congress and the Centers for Medicare & Medicaid Services (CMS) in April. The report is addressed to the Senate Finance Committee Chairman Orrin Hatch (R-UT) in response to his request.

The Report examines:

1. The differences, if any, between prepayment and post-payment reviews, and the extent to which the contractors utilize these types of reviews;

2. The extent to which the Medicare claim review contractors focus their reviews on different types of claims; and

3. CMS’s cost per review and the amount of improper payments identified by the claim review contractors per dollar paid by CMS.

In compiling the Report, the GAO reviewed Administration documents, interviewed CMS officials, Recovery Auditors (RAs), and Medicare Administrative Contractors (MACs). The GAO also interviewed representatives from 10 Medicare provider/supplier organizations that have experienced claim reviews on both a pre- and post-payment review basis. The AAA worked the GAO by participating in a telephone interview and providing written comments.

The GAO examined three types of contractors – the RAs, the MACs, and the Supplemental Medicare Review Contractor (SMRC). These contractors are responsible for reviewing claims that are at high risk of improper payment and claims that pose the greatest financial risk to Medicare. Only MACs conduct both pre- and post-payment reviews. RAs and the SMRC conduct only post-payment reviews, but RAs did participate in a pre-payment review demonstration project. RAs are paid on a contingent basis from recovered overpayments. During the demonstration, RAs were paid contingency fees based on claim denial amounts.

In its review, the GAO found that few differences exist between pre- and post-payment reviews, but noted that pre-payment reviews “better protect Medicare funds.” The GAO found that CMS is not always able to collect overpayments from post-payment reviews and that post-payment reviews require more administrative resources than pre-payment reviews.

The provider/supplier organizations highlighted two issues that need to be resolved with regard to pre-payment review audits. First, they identified that the option to hold discussions with RAs before payment determinations are made in the context of post-payment reviews can be helpful. These discussions are not part of the pre-payment review process; nor are they part of the MAC process. CMS indicated that it is not practical to have such an option in these contexts because of the timing requirements.

Second, the providers/suppliers noted that pre-payment reviews create cash flow burdens, in light of the appeals process. When appealing a post-payment review, providers/suppliers retain their Medicare payments through the first two rounds of review. If the denial is overturned at a higher level, CMS must pay back the recovered amount with interest accrued. However, for pre-payment reviews, providers/suppliers do not receive payment and CMS does not provide interest on the dollars withheld if the provider/supplier wins on appeal.

MACs have traditionally relied upon post-payment review. MACs will also use post-payment reviews to analyze billing patterns to inform other review activities, such as future pre-payment reviews and educational outreach. CMS has encouraged MACs to perform extrapolation, especially for providers/suppliers that submit large volumes of low-dollar claims with high improper payment rates.

The SMRC reviews often include studies to develop sampling methodologies or other policies that could be rolled out more broadly in the future.

The GAO also found that different contractors focused on different claims during 2013 and 2014. RAs focused on inpatient claim reviews primarily. RAs have the discretion to select the claims they review and the GAO stated that “their focus on reviewing inpatient claims is consistent with the financial incentives associated with the contingency fees they receive, as inpatient claims generally have higher payment amounts compared to other claim types.” The GAO also found that RA claim reviews had higher average identified improper payment amounts per post-payment claim review relative to other claim types in 2013 and 2014. For the upcoming contracts, CMS has indicated that it will more closely monitor RAs to ensure that they are reviewing all types of claims. For DME claims in particular, CMS has increased the contingency fee percentage paid to the RAs for DME, home health agencies, and hospice claims.

In contracts, MAC claim reviews focused primarily on physician and DME claims. DME claims accounted for 29 percent of their reviews in 2013 and 26 percent in 2014, while representing 22 percent of total improper payments in fiscal year 2013 and 16 percent of improper payments in fiscal year 2014. DME claims also had the highest rates of improper payments in both years.

Physician claims is a broadly used term that includes labs, ambulances, and individual physician.

The SMRC focused its claim reviews on studies that CMS directs the contractor to conduct. In 2013, the SMRC reviews focused on outpatient and physician claims, but in 2014 the focus shifted to home health agency claims and certain DME suppliers.

The GAO concluded that both RAs and SMRC generated savings for CMS, but unreliable data prevented comparing these results to those of MACs. CMS paid the RAs an average of $158 per review; the RAs averaged $14 in identified improper payments per dollar paid by CMS in both 2013 and 2014. CMS paid the SMRC an average of $256 per review, and the SMRC averaged $7 in identified improper payments per dollar paid in 2013 and 2014. The higher SMRC costs related to the study costs and extrapolation.

CMS lacks reliable MAC cost and savings data. CMS does not collect reliable data on claim review funding and does not have consistent data on identified improper payments. While CMS has established ways to collect this information, some MACs are not reporting it. MACs also use different methods to calculate and report savings.

The GAO recommended that CMS take two actions:

• In order to better ensure proper Medicare payments and protect Medicare funds, CMS should seek legislative authority to allow the RAs to conduct prepayment claim reviews.

• In order to ensure that CMS has the information it needs to evaluate MAC effectiveness in preventing improper payments and to evaluate and compare contractor performance across its Medicare claim review program, CMS should provide the MACs with written guidance on how to accurately calculate and report savings from prepayment claim reviews.

CMS did not agree with the first recommendation, stating that it has a strategy to move away from “pay and chase” using different policies, such as prior authorization initiatives and enhanced provider enrollment screening. CMS concurred with the second recommendation.