CMS announces measures to target Medicare fraud and abuse

Tags: recovery audit contractor, centers for medicare and medicaid services, demonstration, power mobility device, medicare, prior authorization

CMS announces measures to target Medicare fraud and abuse

New demonstrations to test pre-payment RAC review and prior authorization of power mobility devices

By Kate Alfano

The Centers for Medicare and Medicaid Services announced two new demonstration programs to target some of the most common factors that lead to fraud, waste, and abuse in Medicare. According to a CMS press release, “reductions in improper payments will help ensure the sound future of the Medicare trust fund and protect Medicare beneficiaries who depend on it.” Both will start on or after June 1, 2012.

The Recovery Audit Prepayment Review demonstration allows recovery audit contractors, or RACs, to review fee-for-service claims that historically result in high rates of improper payment before they are paid to ensure compliance with Medicare payment rules. This is a clear departure from the current RAC program in which the audit contractors identify errors post-payment and follow steps to recover payment. The prepayment review will roll out in seven states “with high populations of fraud- and error-prone providers,” including Texas, and four additional states with high claims volumes of short hospital stays.

RACs will conduct prepayment complex medical reviews based on data analysis of improperly submitted claims, national or local claims data, beneficiary complaints, or other data. They may also collect additional documentation, including clinical evaluations; consultations; progress notes; medical records from the physician, hospital, nursing home, or home health agency; and test reports. CMS and its agents could request supporting documentation “on a routine basis” in cases where medical necessity is unclear or there is suspicion of fraud.

Kim Ross, a public affairs consultant for TAFP who specializes in health care policy and political strategy, wrote in a memo that the demonstration project expands the authority of the RACs far beyond their initial purpose: They were established by Congress to identify overpayments and underpayments and recoup overpayments, not determine medical necessity.

He said it eliminates the protections granted to physicians and suppliers and allows the RACs to prevent initial payment. “This would have the effect of drastically curtailing cash flow for providers and suppliers already coping with decreased payments and allowables. Being selected by a RAC on a prepayment basis with no defined standards governing the collection and review of the paperwork for each claim would be disastrous to any company subject to a RAC prepayment review under this demonstration project.”

The second demonstration, Prior Authorization for Certain Medical Equipment, establishes a prior authorization program for power mobility devices. It involves seven states, again including Texas, which submit 43 percent of power mobility device claims. CMS says the auditors will ensure that the beneficiary’s medical condition warrants the medical equipment and ensure that the beneficiary has access to quality products from accredited suppliers.

The demonstration will roll out in two phases. During the first, lasting a maximum of nine months, the Medicare administrative contractors will conduct prepayment reviews on the claims—that’s Trailblazer Health Enterprises in Texas. The second phase implements a  prior authorization process used by private-sector payers to prevent improper payments and deter fraud.

As described in a supporting statement, CMS proposes that the physician or the supplier submit a prior authorization request with “appropriate documentation” to the MAC, then the contractor confirms or denies coverage of the item and notifies the physician and beneficiary of the decision. Though CMS has not strictly defined what could be considered sufficient documentation to show medical need, it could include progress notes, diagnostic findings, or medications—all to help the MAC “create a longitudinal clinical picture of the patient.” If the paperwork is deemed incomplete, the physician or supplier has the option to resubmit the request.

Detractors have criticized the paperwork burden placed on physicians, saying that it is an attempt to minimize payment under complex medical necessity determinations, not target fraud. With potential submissions and resubmissions, the process could also result in unnecessary delays of care.

Without an official template for the required face-to-face examinations, TAFP developed a clinical guide and accompanying video for evaluating a patient for a power mobility device to help family physicians conform with Medicare’s extensive documentation requirements. Go to the Prescribing Practices page of the Practice Resources section of to access these tools.