Allowing recovery audit contractors (RACs) to conduct prepayment reviews and prevent overpayments would better allow CMS to protect the integrity of federal health care programs. The Government Accountability Office (GAO) reviewed various activities conducted by claim review contractors in order to analyze their differing focuses. The report noted that prepayment reviews are generally better for protecting program funds and recommended that the agency pursue legislation to allow RACs to shift their focus to reviewing claims before they are paid instead of attempting to recover improperly paid payments (GAO Report, GAO-16-394, May 13, 2016).
Contractors. The GAO reviewed three different types of contractors: RACs, Medicare administrative contractors (MACs) and the Supplemental Medical Review Contractor (SMRC). All contractors select claims for review, request additional documentation to support claim coverage, apply various Medicare requirements to determine if claims were properly reimbursed, and send their results to the providers. The 16 MACs in operation process and pay claims in an established region for either Part A and Part B claims or claims for durable medical equipment (DME). MACs must identify high-risk providers and services for review. The RAC program is made up of four regional contractors that conduct postpayment reviews based on CMS audit issues. The SMRC reviews claims on a postpayment basis nationally in an effort to lower the rate of improper payments.
Prepayment reviews. Prepayment reviews can identify which claims should not be made before payment is issued, which better protects program funds compared to attempts to recover improperly paid claims. Postpayment reviews require more resources, and not all paid claims are collectible. Various officials stated that both types of reviews involve similar activities and that providers also respond similarly to the results. Two key differences were observed: providers are able to discuss postpayment review findings with RACs and the SMRC, and the appeals process is different for the review types. During postpayment review appeals, providers are permitted to retain the disputed reimbursement for the first two appeal levels. However, providers are not entitled to payment for services already rendered during prepayment review appeals and are not provided interest for the time CMS held the payments if the denial is later overturned. This can result in cash flow burdens for providers.
Recommendations and response. The GAO recommended that CMS pursue legislation that would allow RACs to conduct claim reviews on a prepayment basis, rather than requiring them to do so under a demonstration. In addition, the agency should provide MACs with guidance regarding calculating and reporting prepayment review savings. This would allow CMS to determine MAC effectiveness and compare contractor performance. HHS disagreed with the first recommendation in the draft report but concurred with the second. HHS noted that many other contractors, even those not reviewed by the GAO, conduct prepayment reviews in an effort to move away from the postpayment review “pay and chase” system and that the 2017 budget does not include a proposal to change the RACs’ mission. The GAO noted in response that allowing RACs to conduct prepayment reviews would further HHS’ mission of shifting away from pay and chase.
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