Medicare Program Integrity:
Greater Prepayment Control Efforts Could Increase Savings and Better Ensure Proper Payment
GAO-13-102, Nov 13, 2012
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What GAO Found
Use of prepayment edits saved Medicare at least $1.76 billion in fiscal year 2010, but GAO found that savings could have been greater had prepayment edits been more widely used. GAO illustrated this point using analysis of a limited number of national policies and local coverage determinations (LCD), which are established by each Medicare administrative contractor (MAC) to specify coverage rules in its jurisdiction. GAO identified $14.7 million in payments in fiscal year 2010 that appeared to be inconsistent with four national policies and therefore improper. These payments could have been prevented through automated prepayment edits. GAO also found more than $100 million in payments that were inconsistent with three selected LCDs and that could have been identified using automated edits.
The Centers for Medicare & Medicaid Services (CMS) has three processes with some appropriately designed steps to identify the need for, and to implement, edits based on national policies, but each of these processes has at least one weakness. The weaknesses include incomplete analysis of vulnerabilities to improper payment that could be addressed by edits; lack of specific time frames for implementing edits and other corrective actions; flaws in the structure of some edits; lack of centralization in the implementation of some edits, which leads to inconsistencies; incomplete assessment of whether edits are working as intended; and lack of full documentation of the processes. For example, GAO found that Medicare paid $8.6 million in fiscal year 2010 for claims that exceeded CMS's limits on the quantity of certain services that can be provided to a beneficiary by the same provider on a single date of service. Although edits had been implemented to limit service quantities, a weakness in their structure caused them to miss instances in which quantity limits were exceeded.
CMS informs MACs about vulnerabilities that could be addressed through prepayment edits, but the agency does not systematically compile and disseminate information about effective local edits to address such vulnerabilities. CMS oversees MACs' use of edits partly through its review of certain MAC reports, but these reports are not intended to provide a comprehensive overview of their edits. In January 2011, CMS expanded its oversight activities and began requiring MACs to report on how they had addressed certain vulnerabilities to improper payment, some of which could be addressed through edits. While CMS increased the funding in fiscal year 2011 for contractors' medical review activities, including edit development, the agency provided relatively small incentives--3 percent or less of all contract award fees--to promote use of effective prepayment edits by MACs.
Why GAO Did Ths Study
CMS reported an improper payment rate of 8.6 percent ($28.8 billion) in the Medicare fee-for-service program for fiscal year 2011. To help ensure that payments are made properly, CMS uses controls called edits that are programmed into claims processing systems to compare claims data to Medicare requirements in order to approve or deny claims or flag them for further review.
GAO was asked to assess the use of prepayment edits in the Medicare program and CMS's oversight of MACs, which process claims and implement some edits. This report examines the extent to which (1) CMS and its contractors employed prepayment edits, (2) CMS has designed adequate processes to determine the need for and to implement edits based on national policies, and (3) CMS provides information, oversight, and incentives to MACs to promote use of effective edits. GAO analyzed Medicare claims for consistency with selected coverage policies, reviewed CMS and contractor documents, and interviewed officials from CMS and selected contractors.
What GAO Recommends
GAO recommends that CMS take seven actions to strengthen its use of prepayment edits, such as restructuring some edits, centralizing implementation of others, fully documenting processes, encouraging more information sharing about effective edits, and assessing the feasibility of increasing incentives for edit use. The Department of Health and Human Services generally agreed with GAO's recommendations and noted CMS's plans to address them.
For more information, contact Kathleen King at (202) 512-7114 or kingk@gao.gov.
Status Legend:
- Review Pending
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, and to promote implementation of effective edits based on national policies, the CMS Administrator should centralize within CMS the development and implementation of automated edits based on NCDs to ensure greater consistency.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, and to promote implementation of effective edits based on national policies, the CMS Administrator should implement MUEs that assess all quantities provided to the same beneficiary by the same provider on the same day, so providers cannot avoid claim denials by billing for services on multiple claim lines or multiple claims without including modifiers that reflect a declaration that quantities above the normal limit are reasonable and necessary.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, and to promote implementation of effective edits based on national policies, the CMS Administrator should revise the method for compiling information about RAC-identified vulnerabilities to identify their full extent and prioritize them accordingly.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, and to promote implementation of effective edits based on national policies, the CMS Administrator should develop written procedures to provide guidance to agency staff on all steps in the processes for developing and implementing edits based on national policies, including (1) time frames for taking corrective actions, (2) methods for assessing the effects of corrective actions, and (3) procedures for ensuring consideration of automated edits whenever possible, including for all existing NCDs and other national policies.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, to promote implementation of effective edits based on national policies, and to encourage more widespread use of effective local edits by MACs the CMS Administrator should improve the data collected about local prepayment edits to enable CMS to identify the most effective edits and the local coverage policies on which they are based and disseminate this information to MACs for their consideration.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, to promote implementation of effective edits based on national policies, and to encourage more widespread use of effective local edits by MACs the CMS Administrator should, until CMS has a new database in place to collect information about edits, require MACs to share information about the underlying policies and savings related to their most effective edits.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order to promote greater use of effective prepayment edits and better ensure proper payment, to promote implementation of effective edits based on national policies, and to encourage more widespread use of effective local edits by MACs the CMS Administrator should assess the feasibility of providing increased incentives to MACs to implement effective prepayment edits.
Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.