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RAC Prepayment Review Delays Will Effectively Place the Project on Hold

(January 11, 2012): Health care providers are increasingly finding that their Medicare claims are being placed on prepayment review by one or more Medicare contractor.  As these providers can attest, prepayment review can seriously disrupt a provider’s cash flow, possibly leading to bankruptcy if it is not resolved quickly.  As discussed below, the use of prepayment reviews as an audit toll is likely to increase greatly as Recovery Audit Contractors (RACs) will soon begin also conducting prepayment reviews.

I.  RAC Prepayment Review Delays Have Been Announced by CMS:

Last month, we discussed a new demonstration project by the Centers for Medicare and Medicaid Services (CMS) to test the ability of RACs’ to conduct prepayment reviews of Medicare Part A and B claims. RACs have successfully identified a wide variety of Medicare overpayments in the past and have become one of CMS’ most important post-payment audit tools. In light of their continued success, last November, CMS announced that RACs would also now conduct  prepayment reviews and audits. An initial RAC Prepayment Review Demonstration Project was intended to cover many of the same types of prepayment review as those currently conducted by ZPICs around the country.  The RAC Prepayment Review Demonstration Project was initially slated to be conducted in:

  • Florida
  • California
  • Mississippi
  • Texas
  • New York
  • Louisiana
  • Illinois
  • Pennsylvania
  • Ohio
  • North Carolina
  • Missouri

After CMS announced the RAC Prepayment Review Demonstration Project, it reportedly received an outpouring of concerns regarding the scope of these prepayment reviews and audits.  In consideration of these concerns, yesterday CMS announced that it was indefinitely delaying implementation of the demonstration project, and would give 30 days notice before the RAC Prepayment Review Demonstration Project was reactivated.

II.     Commentary Regarding RAC Prepayment Review Delays:

Importantly, CMS’s decision to delay the RAC Prepayment Review Demonstration Project does not mean that RAC prepayment reviews won’t occur. Moreover, it is essential that health care providers keep in mind that other CMS contractors are already placing a wide variety of Part A and Part B providers on prepayment review.  As before, providers should regularly review their activities to ensure that all regulatory and statutory requirements are being met.

It is important to keep in mind that there is no administrative appeals process or other effective legal remedy to get off prepayment review.  In fact, there is no “silver bullet,” despite what you have heard or been told.  The only way to be taken off of prepayment review is to show the responsible Medicare contractor that your claims fully meet each of Medicare’s myriad statutory and regulatory requirements for coverage and payment.  To that end, there are a number of preemptive steps a provider can take to reduce the chances of being selected for prepayment review in the first place.

To start, we recommend that you (or your qualified legal counsel) conduct a “GAP Analysis” of your claims.  In doing so, you will readily identify any possible deficiencies in your medical necessity assessments, coverage, documentation, coding and / or billing activities.  Moreover, you should consider assessing your utilization rate against the local and national average. For instance, for basic Evaluation and Management (E/M) services, are you or your providers billing higher level codes more often than your peers?  Medicare contractors use this data to identify possible outliers who may be engaging in improper coding and / or billing.  Data mining can also be used by contractors to identify potential problem providers who may need to be audited and / or placed on prepayment review.  Keep in mind, should you identify any overpayments when you conduct a GAP Analysis, you must report the overpayment and return it to the government within 60 days.  Any deficiencies noted in your review can be promptly addressed and added to the risk areas covered in your Compliance Plan.  After taking these steps, you will likely be well situated to respond to any prepayment audits initiated by a Medicare contractor, regardless of whether the contractor is a RAC or another Medicare contractor.

Healthcare AttorneyRobert W. Liles and other Liles Parker attorneys have extensive experience advising health care providers on how to best respond to prepayment reviews and post-payment audits.  Mr. Liles also counsels providers on “GAP Analyses” and provides compliance guidance to home health agencies, physicians, DME suppliers and other health care providers and suppliers.  For more information, please call Robert today for a free consultation.  He can be reached at: 1 (800) 475-1906.
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