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RAC-Initiated Medicare Prepayment Reviews Will Soon Begin.

(February 7, 2012):  In recent years, physicians and other health care providers have faced a wide number of administrative actions and sanctions levied by contractors working for the Centers for Medicare and Medicaid Services (CMS).  Zone Program Integrity Contractors (ZPICs) have subjected physician practices to Medicare prepayment reviews, postpayment audits, suspension and / or revocation actions.  In contrast, Recovery Audit Contractors (RACs) have exclusively initiated postpayment audit actions in their dealings with physicians and other Medicare providers.  As set out below, this will soon change.   Prepayment reviews will now be conducted by both ZPICs and RACs.  Now, more than ever, it is essential that physicians conduct a long, hard look at their documentation and work practices.  As we will discuss, being placed on prepayment audit can result in serious financial harm a practice.  In some cases, it can even lead to bankruptcy.

I.    RAC Conducted Medicare Prepayment Reviews Will Soon Begin:

Late last week, CMS announced that prepayment reviews by RACs would begin (again) on or after June 1, 2012.  As discussed in previous articles, CMS had originally delayed the program amid significant provider concerns about its operation.

II.   Background of the RAC Program:

RACs have long served an important role in detecting and recovering both Part A and Part B overpayments since the program began in 2005. Utilizing both automatic review edits and complex medical reviews to identify a multitude of claims errors, RACs have greatly assisted the government in its efforts to protect the integrity of the Medicare Trust Fund.  As you know, RACs are paid on a contingency basis, based on the amount of improper payments (either overpayments or underpayments) each RAC identifies and actual recovers. Despite harsh criticism from the provider community, RACs have been successful in their audit and recovery tasks, prompting the federal government to expand their authority to conduct prepayment audits, not merely post-payment reviews.

III.   Demonstration Project of Proposed RAC Prepayment Reviews:

Initially announced on November 15, 2011, CMS’ “RAC Prepayment Review Demonstration Project” was slated to start in 11 states on January 1, 2012, including Florida, California, Mississippi, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri. Through the project, CMS was hoping to ensure that Medicare claims reimbursed by the government were medically necessary and met coding and billing criteria before such claims were paid. Due, at least in part, to significant concerns from providers and hospitals about the substantial administrative burden such review would cause, CMS announced last month that it was indefinitely delaying the RAC Prepayment Review Demonstration Project.

As we noted when CMS first announced this delay, while providers may have considered this postponement a victory, CMS still has numerous other contractors actively performing prepayment review audits each day around the country. At the end of the day, the issue really isn’t whether CMS is going to instruct its contractors to conduct prepayment reviews, it really comes down to whether providers are properly meeting applicable medical necessarily, coverage, documentation, coding and billing requirements.

IV.   Impact of Medicare Prepayment Reviews:

As we have previously discussed, there is no prepayment review administrative appeals process. As a result, providers placed on prepayment review have little recourse to reverse the decision, and often remain on review for four to six months (although we have seen reviews lasting up to a year) or until the provider is able to show their Medicare Administrative Contractor (MAC) that the services billed meet medical necessity, coverage and documentation requirements. Importantly, this determination is entirely based on the respective MAC’s subjective view of the propriety of a provider’s claims.

It is important to note that Medicare prepayment reviews can prove disastrous for physicians and other health care providers who mainly treat Medicare beneficiaries. Being placed on prepayment review can effectively delay payments to a physician for several months, even assuming that the MAC finds the provider’s claims are payable. Often times, providers must also take many of these claims through the administrative appeals process, adding another one to two years before payment is made (again assuming that an Administrative Law Judge ultimately finds your claims to qualify for coverage and payment).

V.   Avoiding Prepayment Review:

With RAC prepayment reviews on their way, providers may consider investing in the time and energy now to make sure their claims meet applicable payment requirements. While there is no “silver bullet” to completely eliminate the risk of prepayment audit, a number of preemptive steps exist to reduce the likelihood of such an occurrence.    Physicians and other health care providers should consider conducting a “gap analysis” of their practice.  In doing so, a provider will learn whether their billed services, and associated documentation, meet medical necessity and coverage requirements.  Physicians should also review their utilization rates of certain procedures and compare these rates to those of their local, regional and national peers. All in all,  physicians need to identify the regulatory benchmarks applicable to their practice, identify where they fail to meet these benchmarks, consider the manner and method to rectify these deficiencies, and add proper procedures and additional risk areas to their Compliance Plan. Such efforts now can leave a physician’s practice in an excellent position to respond to any billing questions by RACs or other Medicare contractors.  While RAC prepayment reviews are just another type of audit in a long list of concerns for providers, don’t underestimate the ability of these RACs to identity errors and deny payment.

VI.   Reading the Tea Leaves:

The government’s rekindled RAC Prepayment Review Program is slated to begin again on June 1, 2012.  With the re-implementation of this project, CMS moves yet another step away from its “pay-and-chase” model.  Among its many advantages, the prepayment review approach greatly reduces the likelihood that the claims being paid by the government are improper. We believe that the scope of RAC and ZPIC prepayment reviews will continue to grow in the near future and will represent a key component of the government’s fraud prevention efforts in years to come.  To be clear, we all agree with the government’s goal of identifying and stamping-out Medicare fraud.  Unfortunately, it has been our experience that many physicians and other Medicare providers have little understanding what CMS and its contractors expect to find when auditing medical records.  As a participating provider in the Medicare program, you are required to know and adhere to all of Medicare’s rules and regulations which apply to your practice and the services that you provide.  Changes in documentation requirements, coverage issues and questions of medical necessity are constantly changing.  Keeping up with these changes can be quite a challenge.

Healthcare lawyerRobert W. Liles is Managing Partner at the health law firm of Liles Parker PLLC.  With offices in Washington, DC, Houston, Texas, San Antonio, Texas and Baton Rouge, Louisiana, Liles Parker attorneys are available to help physicians around the country with Medicare audits which may arise.  Our attorneys have extensive experience conducting “GAP Analyses” and compliance reviews for health care providers of all types. In addition, our attorneys are skilled in assisting providers who have been placed on prepayment review or subjected to postpayment audit. For more information, please call Robert today for a complimentary consultation.  Robert and our other attorneys can be reached at: 1 (800) 475-1906.

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