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Recovery Audit Contractors to Begin Prepayment Review

Recovery Audit Contractors to Begin Prepayment Review


Health Care Law Note
(August, 2012)

The Centers for Medicare & Medicaid Services ("CMS") has announced that on August 27, 2012, it will begin the Recovery Audit Prepayment Review demonstration project. CMS expects that the demonstration project, in which claims will be reviewed before they are paid to confirm medical necessity and to assure that providers are complying with all Medicare payment rules, will save money by preventing improper payments. If the demonstration project is successful in lowering the billing error rate and the risk of fraud, the use of prepayment review will increase and may largely replace the "pay and chase" method of conducting reviews for improper payments after payments have been made. CMS estimates that the recovery audit contractors ("RACs") will review up to 150,000 claims annually at the height of the demonstration project.

In the demonstration project, RACs will perform complex medical reviews of certain types of claims that historically have resulted in high rates of improper payments. The RACs initially will review short hospital stays. The demonstration project will be implemented in the "seven high fraud states" of Florida, California, Michigan, Texas, New York, Louisiana, and Illinois, as well as in the four states having the highest number of short inpatient hospital stays—Pennsylvania, Ohio, North Carolina, and Missouri.

On August 9, from 2:00 to 4:00 p.m. EST, CMS will hold a Special Open Door Forum on the demonstration project. The call-in number is 1-866-501-5502, and the Conference ID is 16834984. Participation instructions and slides of the presentation will be made available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/Demonstrations.html.

Providers in these states should consider attending the Forum to hear about the details of the project directly from CMS and to pose questions. In addition, hospitals that have not already done so should assemble a team to begin reviewing and evaluating the requirements for documentation of short hospital stays, determining their compliance with those requirements, and making improvements where needed. Hospitals also should be sure that any request for records from the RAC is provided to their Compliance Officer to assist with the response.

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