New Demonstration Projects Crack Down on Improper Payments

Beginning Jan. 1, 2012, the Centers for Medicare & Medicaid Services (CMS) will begin three demonstration projects aimed at eliminating Medicare fraud, waste, and abuse, according to a Nov. 15 press release.

The first of these, the Recovery Audit Prepayment Review, will allow Medicare recovery audit contractors (RACs) to review claims that historically result in high rates of improper payments before they are paid. The reviews will focus on seven states with high populations of fraud- and error-prone providers (Fla., Calif., Mich., Texas, N.Y., La., Ill.) and four states with high claims volumes of short inpatient hospital stays (Pa., Ohio, N.C., Mo.).

The second demonstration, Prior Authorization for Certain Medical Equipment, will require prior authorization for certain medical equipment for Medicare beneficiaries who reside in the same seven states to help ensure that a beneficiary’s medical condition warrants the medical equipment under coverage guidelines. This demonstration will be implemented in two phases:

  1. During the first three to nine months, Medicare administrative contractors (MACs) will conduct prepayment reviews on certain medical equipment claims.
  2. The remainder of the three-year demonstration will implement prior authorization, as used by private-sector health care payers, to prevent improper payments and deter the fraudulent provision of items or services.

The final initiative, Part A to Part B Rebilling, will allow hospitals to resubmit claims for 90 percent of the allowable Part B payment when a MAC, RAC, or the Comprehensive Error Rate Testing (CERT) contractor finds that a Medicare patient met the requirements for Part B services, but did not meet the requirements for a Part A inpatient stay. Currently, when outpatient services are billed as inpatient services, the entire claim is denied in full. This demonstration will be limited to a representative sample of 380 hospitals nationwide that volunteer to be part of the program.

In 2010, President Obama announced three goals for cutting improper payments by 2012: reducing overall payment errors by $50 billion, cutting the Medicare fee-for-service error rate in half, and recovering $2 billion in improper payments. You can learn more about the savings so far by viewing the CMS Fact Sheet.


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