New rule also impacts prepay review process

Friday, December 28, 2012

Most of the guidelines for prepayment medical review are found in manual guidance issued by CMS. However, the agency did issue a regulation in 2008 requiring contractors to terminate the prepayment medical review of a provider no later than one year following the initiation of the review or when calculation of the error rate indicates the provider reduced its initial error rate by 70% or more. The regulation further required contractors to conduct, at a minimum, quarterly evaluations.   

On Nov. 16, 2012, CMS issued a final rule that eliminated the prepayment medical review regulation as of Jan. 1, 2013. The final rule entitled “Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for Termination of Non- Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013,” is well known to providers due to changes to the Medicare face-to-face and written order requirements for several types of DME. Companies should be aware that the final rule also had an impact on the prepayment medical review process.   

Prepayment medical review can be particularly onerous. Often times, the process begins when a Medicare contractor undertakes a provider specific review, requesting additional documentation for a sample of claims. Additional documentation includes medical documentation and may include clinical evaluations, physician evaluations, consultations, progress notes, physician’s office records, hospital records, nursing home records, HHA records, records from other healthcare professionals and test reports. After review, a contractor may assess an error rate.  

The contractor can determine whether the provider should be placed on prepayment medical review and what percentage of claims going forward should be subject to such review. Once placed on prepayment review, a provider will routinely be asked to collect and submit additional documentation. As these claims are no longer “clean claims,” the time period can be extensive prior to any Medicare determination. Denied claims must be appealed if payment is to be obtained and this can take months, even years. In the meantime, the item or service has been provided to the beneficiary, leaving the provider in a serious cash crunch.     

The current standards governing prepayment medical review are inadequate. Stringent contractor limitations, including the manner in which claims are reviewed, are necessary. Increased provider safeguards must also be formally developed. For example, providers should not be placed on (or kept on) prepayment medical review based on an initial contractor determination(s) that is overturned by another Medicare contractor or an Administrative Law Judge.  

Instead of strengthening these standards, however, CMS has turned more of the process over to its own Program Integrity Manual.  

A federal regulation must undergo rulemaking procedures, including formal notice and comment. Agency manuals can be written and changed without public review or input. Further, manual provisions are often ill-defined and unclear. The Program Integrity Manual, for example, authorizes a Medicare contractor to target a specific entity for prepayment review “only when there is the likelihood of sustained or high level of payment error.” This language does not provide sufficient definition or limitation as to when a Medicare contractor could utilize its prepayment review authority.  

Now is the time to work with other interested stakeholders and CMS to ensure provider safeguards are clearly defined in regulation and to ensure that a rational, uniform and predictable prepayment medical review system is developed.  Finally, if you are involved in a prepayment review audit, provide the requested information, make your case to the contractor, and be sure to pursue your appeal rights.

Stephen Azia is a partner with Eastwood & Azia in Washington, D.C. Reach him at or 202-296-8880.