Medicare
Recent CMS Reforms Address Carrier Scrutiny of Physicians' Claims for Payment
Gao ID: GAO-02-693 May 28, 2002
In 1990, GAO designated the Medicare program to be at high-risk for waste, fraud, and abuse. More than a decade later, Medicare remains on GAO's high-risk list. This report examines Medicare's claims review process, which is designed to detect improper billing or payments. GAO found that most physicians who bill Medicare are largely unaffected by carriers' medical reviews, with 90 percent of physician claims going unreviewed in fiscal year 2001. At the three carriers GAO studied, implementation of the progressive corrective action initiative has reduced medical reviews of claims and has increased carrier education to individual physicians. The carriers in the study generally made appropriate payment determinations in examining physician claims selected for a medical review. By targeting claims that are more likely to have errors, carriers could improve the efficiency of their own operations and reduce administrative demands on the small proportion of physician practices with claims selected for review. The Centers for Medicare and Medicaid Services (CMS) is refocusing its oversight of carrier performance in processing and reviewing claims. The agency intends to hold carriers accountable for the overall level of payment errors in all the claims they process, not just the ones they review. Consistent with this approach, CMS is developing a program in which an independent contractor determines the accuracy of claims processed and paid by each carrier using quantitative performance measures.
GAO-02-693, Medicare: Recent CMS Reforms Address Carrier Scrutiny of Physicians' Claims for Payment
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United States General Accounting Office:
GAO:
Report to Congressional Committees:
May 2002:
Medicare:
Recent CMS Reforms Address Carrier Scrutiny of Physicians' Claims for
Payment:
GA0-02-693:
Contents:
Letter:
Results in Brief:
Background:
Few Physician Practices and Few Claims Per Practice Receive Medical
Reviews:
New CMS Review Policy Has Reduced Physician Repayment Amounts Due and
Increased Focus on Physician Education:
Independent Review Confirms Accuracy of Carriers' Payment Decisions:
Targeting Claims That Most Warrant Medical Review Could Be Improved:
CMS Makes Claims Accuracy New Benchmark for Measuring Carrier
Performance:
Concluding Observations:
Agency Comments:
Appendix I: Review of Medicare Carrier Medical Review Decisions:
Methodology Used to Validate Carrier Medical Review Decisions:
Results of the DynCorp Review:
Appendix II: Recovery of Overpayments:
Appendix III: Comments from the Centers for Medicare and Medicaid
Services:
Related GAO Products:
Tables:
Table 1: Physician Practices Whose Claims Received Medical Review,
Fiscal Year 2001:
Table 2: Number of Claims Per Physician Practice Subject to Prepayment
Medical Review, Fiscal Year 2001:
Table 3: Overpayments Assessed Physician Practices, Fiscal Years 2000-
2001:
Table 4: Carriers' Use of Extrapolation in Assessing Overpayments to
Physician Practices, Fiscal Years 2000-2001:
Table 5: Carrier Budgets for Provider Education and Training Related
to Medical Review Activities, Fiscal Years 2001-2002:
Table 6: Accuracy of Carrier Medical Review Decisions on Physician
Claims:
Table 7: Accuracy of Medical Review Decisions on Physician Claims by
Carrier:
Table 8: Accuracy of Prepayment and Postpayment Medical Review
Decisions on Physician Claims (percent):
Table 9: Recovery of Overpayments From Physician Practices, Fiscal
Years 2000-2001:
Table 10: Requests for Repayment Extensions, Fiscal Years 2000-2001:
Figure:
Figure 1: Outcomes of Selected Carrier Prepayment Medical Review
Edits, Fiscal Year 2001:
Abbreviations:
CMS: Centers for Medicare and Medicaid Services:
CERT: Comprehensive Error Rate Testing:
CPE: contractor performance evaluation:
D.O.: doctor of osteopathy:
E&M: evaluation and management:
HCFA: Health Care Financing Administration:
HHS: Department of Health and Human Services:
LMRP: local medical review policy:
M.D.: doctor of medicine:
NHIC: National Heritage Insurance Company:
OIG: Office of Inspector General:
PCA: Progressive Corrective Action:
PIMR: Program Integrity Management Reporting system:
PIN: provider identification number:
PSC: program safeguard contractor:
WPS: Wisconsin Physicians Service Insurance Corporation:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
May 28, 2002:
Congressional Committees:
In 1990, we designated the Medicare program to be at risk of
considerable losses to waste, fraud, and abuse because of its vast
size, complex structure, and weaknesses in both financial and program
management. More than a decade later, we still consider Medicare to be
a high-risk program.[Footnote 1] With annual fee-for-service payments
now totaling about $192 billion, Medicare finances health services
delivered to elderly and disabled individuals by hundreds of thousands
of providers. The Centers for Medicare and Medicaid Services (CMS)
[Footnote 2]-”the federal agency that manages the Medicare program”-is
responsible for ensuring that these funds are spent appropriately.
However, the process of enforcing program payment rules has raised
concerns that the impact of these safeguard activities has imposed too
great a burden on health care providers.[Footnote 3]
With an interest in striking a balance between appropriate payment
controls and reasonable billing requirements for providers, the
Congress required, in the Medicare, Medicaid and SCHIP Benefits
Improvement and Protection Act of 2000, that we study Medicare claims
review”designed to detect improper billing or payment”and related
education activities for physicians.[Footnote 4] While CMS contractors
responsible for processing physicians' Medicare claims”referred to as
carriers”conduct an automated check of all claims submitted, they
select only a sample of claims for medical review. For the purposes of
our study, these are reviews that involve a detailed examination of
claims by clinically trained staff and require that physicians submit
medical records to substantiate their claims for payment. In fiscal
year 2001, CMS revised its policy on medical reviews of physicians'
claims under the Progressive Corrective Action (PCA) initiative,
directing carriers to focus their scrutiny on claims where there is
the greatest risk of inappropriate payments.[Footnote 5]
As agreed with the cognizant congressional committees, we focused our
study on the medical review process and the related implications of
PCA's implementation. Specifically, we examined (1) the extent to
which physicians have claims that are subjected to medical review, (2)
the implications for physicians of PCA's strategic approach to
overpayment assessments and education, (3) the accuracy of carriers'
decisions to pay or deny a claim based on medical review, (4) the
effectiveness of criteria used to identify claims for medical review
that have potential billing errors, and (5) how CMS evaluates carrier
efforts to reduce physicians' billing errors.
Our study covers medical review activities, excluding fraud-related
cases, conducted largely in fiscal year 2001. Because national data
specific to medical reviews of physicians' claims were not available,
we contacted three carriers to obtain information that is only
maintained at the carrier level. These carriers are National Heritage
Insurance Company (NHIC) in California, Wisconsin Physicians Service
Insurance Corporation (WPS), and HealthNow NY; they serve six states
and process claims for about one-quarter of Medicare's participating
physicians.[Footnote 6] We interviewed carrier officials about their
selection of claims for medical review, the medical review process,
and related communication with physicians. In addition, we collected
data on physician practices that had claims subjected to medical
review, overpayment assessments, and requests for repayment
extensions. We also interviewed officials at CMS's central and
regional offices and representatives of physician associations in
several states.
In addition, we contracted with a firm with expertise in Medicare's
medical review activities to independently assess the accuracy of the
three carriers' medical review decisions. Its findings were discussed
with carrier officials and a consensus was reached on the correct
medical review decision in all but one case. The accuracy of the
carrier decision in that case was decided by the acting deputy
director of CMS's Program Integrity Group-”a physician. (For a
detailed description of the validation process, see appendix I.)
Because the study was limited to three carriers, our findings
regarding the frequency and accuracy of claims reviews cannot be
generalized to the universe of carriers. The carriers performed a
series of special analyses to provide data necessary for our study and
experienced varying degrees of difficulty in extracting data from
their information systems. Because the data are maintained in multiple
systems and in various formats, some information was not readily
available and could not be included in the tables we present. We did
not verify the accuracy or completeness of the data provided by the
carriers. Also, although part of the study's mandate, as agreed with
committee staff we did not assess the adequacy of resources that CMS
devotes to physician education regarding the claims review process.
CMS policy changes concerning the focus of physician education have
been too recent to allow for analysis of the sufficiency of related
resources. We performed our work from June 2001 through March 2002 in
accordance with generally accepted government auditing standards.
Results in Brief:
Our review at three carriers indicates that most physicians billing
Medicare are largely unaffected by carriers' medical reviews. In
fiscal year 2001, at least 90 percent of physician practices had no
claims subjected to a medical review. The share of physician practices
that had any claims subject to medical review before payment was 10
percent in states served by the Wisconsin carrier and a smaller
proportion in California and upstate New York. For the typical
practice, the carriers reviewed 2 claims during the year. One-tenth of
1 percent of physician practices had claims selected for medical
review after they were paid. These reviews typically involved about 30
to 50 claims.
At our three carriers, implementation of PCA has effectively reduced
the amounts that physicians must repay Medicare based on medical
reviews of their claims, and has increased carrier education to
individual physicians. Under PCA, carriers must limit their use of
extrapolation”a process by which carriers estimate the amount Medicare
overpaid a practice by projecting the error rate found in a sample of
its claims”to those cases that involve major billing problems. In
fiscal year 2001, the carriers in our study virtually eliminated
extrapolation. Following this and other modifications related to PCA,
the highest overpayment amounts assessed physician practices decreased
substantially. In addition, the three carriers increased direct
education and feedback to physicians concerning the results of medical
reviews and proper billing practices so that future claims would be
submitted correctly.
With relatively few exceptions, the carriers in our study made
appropriate payment determinations in examining the physician claims
selected for a medical review. Our contractor's evaluation of the
carriers' medical review decisions found a 96 percent overall accuracy
rate. The accuracy of carriers' decisions to totally deny payment was
even higher, 98 percent. For reviews where the carrier paid a reduced
amount on a physician's claim, the accuracy of carrier decisions was
somewhat less-92 percent. Such reductions occurred most often on
claims reviews involving what should have been the appropriate billing
level for physician office visits. Overall, the small share of
inaccurate decisions made by the carrier resulted in both overpayments
and underpayments.
While the three carriers were highly accurate in their payment
decisions, they could improve their selection of claims for medical
review by better identifying claims likely to have been billed
incorrectly. Fiscal year 2001 data showed substantial variation in the
performance of edits”criteria used to target specific services for
review”that our three carriers employed to identify medically
unnecessary or incorrectly coded physician services. For the
prepayment edits that accounted for the largest number of claims
examined by each of our carriers, denial rates”that is, the proportion
of reviewed claims that were fully or partially denied”ranged from 5
to 82 percent. By refining their selection criteria to more
consistently target claims likely to have been submitted with errors,
carriers could improve the efficiency of their own operations and
reduce administrative demands on the small proportion of physician
practices with claims selected for review.
CMS is refocusing its oversight of carrier performance in processing
and reviewing claims. Specifically, the agency intends to hold
carriers accountable for the overall level of payment errors in all
the claims they process, not just the ones they review. Consistent
with this approach, CMS is developing a new tool”the Comprehensive
Error Rate Testing (CERT) program”that involves having an independent
contractor determine the accuracy of claims processed and paid by each
carrier using quantitative performance measures. CMS expects CERT to
help identify individual carrier performance problems and track each
contractor's rate of improvement. CERT benchmarking is expected to be
in place by November 2002.
We provided CMS a draft of this report for comment. The agency
generally agreed with our findings.
Background:
CMS, within the Department of Health and Human Services (HHS),
provides operational direction and policy guidance for the nationwide
administration of the Medicare program. It contracts with private
organizations”called carriers and fiscal intermediaries”to process and
pay claims from Medicare providers and perform related administrative
functions. Twenty-three carriers nationwide make claims payments for
physician services, which are covered under part B of Medicare.
[Footnote 7] In addition, carriers are responsible for implementing
controls to safeguard program dollars and providing information
services to beneficiaries and providers. To ensure appropriate
payment, they conduct claims reviews that determine, for example,
whether the services physicians have claimed are covered by Medicare,
are reasonable and necessary, and have been billed with the proper
codes.
Carriers employ a variety of review mechanisms. Automated checks,
applied to all claims, are designed to detect missing information,
services that do not correspond to a beneficiary's diagnosis, or other
obvious errors. They may also be used to determine if a claim meets
other specific requirements, including national or local coverage
policies (such as allowing only one office visit for an eye
examination per beneficiary per year unless medical necessity is
documented).[Footnote 8] Manual reviews by carrier staff are used when
the review of a claim cannot be automated to determine if sufficient
information has been included to support the claim. In the most
thorough type of manual claims review, a carrier's clinically trained
personnel perform a medical review, which involves an examination of
the claim along with the patient's medical record, submitted by the
physician, to determine compliance with all billing requirements.
Typically, carriers conduct medical reviews on claims before they are
paid, by suspending payment pending further examination of the claim.
Prepayment medical reviews help to ensure that a carrier is making
appropriate payment decisions while the claims are processed, rather
than later trying to collect payments made in error. To target such
reviews, carriers develop "edits"”-specific criteria used to identify
services that the carrier determines to have a high probability of
being billed in error. Carriers develop these edits based on data
analyses that include comparisons of local and national billing
patterns to identify services billed locally at substantially higher
rates than the national norm.[Footnote 9] Carriers may also develop
edits for prepayment medical review based on other factors, such as
CMS directives or individual physicians or group practices the carrier
has flagged for review based on their billing histories. Before
putting edits into effect, CMS expects the carriers to conduct
targeted medical reviews on a small sample of claims in order to
validate that the billing problem identified by the carrier's data
analysis or other sources does actually exist.
In addition to prepayment medical reviews, carriers conduct some
medical reviews after claims are paid. Postpayment reviews determine
if claims were paid in error and the amounts that may need to be
returned to the Medicare program. They focus on the claims of
individual physicians or group practices that have atypical billing
patterns as determined by data analysis. Such analyses may include
comparisons of paid claims for particular services to identify
physicians who routinely billed at rates higher than their peers.
Carriers may also select claims for postpayment review based on other
factors, such as information derived from prepayment reviews,
referrals from other carrier units, and complaints from beneficiaries.
In rare cases, postpayment reviews may result in referrals to carrier
fraud units.
Each year, as part of their budget negotiations with CMS, carriers
develop medical review strategies that include workload goals for
conducting medical reviews. CMS provides each carrier with an overall
budget for claims review. The carriers then submit for CMS approval
their workload goals for specific activities, such as the number of
prepayment and postpayment medical reviews they plan to conduct, along
with proposed budgets and staff allocations across these activities.
In addition, the carriers submit budget proposals for provider
education and training related to issues identified in medical review.
CMS requires the carriers to reassess the allocation of these
resources among review and educational activities during the course of
the year and, with CMS approval, to shift resources as appropriate to
deal with changing circumstances.
Few Physician Practices and Few Claims Per Practice Receive Medical
Reviews:
In estimating the prevalence of medical reviews, data from the three
carriers in our study show that more than 90 percent of physician
practices”including individual physicians, groups, and clinics”did not
have any of their claims selected for medical review in fiscal year
2001, and for those that did, relatively few claims were subject to
review.
A small proportion of physician practices served by the three carriers
had any claims medically reviewed during fiscal year 2001. Table 1
shows that about 10 percent of the solo and group practices that filed
claims with WPS had any prepayment medical reviews. This proportion
was even lower at HealthNow NY and NBIC California, with rates of
about 4 and 7 percent, respectively. The share of physician practices
with postpayment reviews by any of these carriers was much smaller;
approximately one tenth of 1 percent of practices had claims selected
for medical review after payment had been made.
Table 1: Physician Practices Whose Claims Received Medical Review,
Fiscal Year 2001:
Medical review: Prepayment;
NHIC California[A], Number: 5,590;
NHIC California[A], Percent of total[D]: 7.4%;
WPS[B], Number: 13,372;
WPS[B], Percent of total[D]: 10.1%;
HealthNow NY, Number: 1,270;
HealthNow NY, Percent of total[D]: 4.3%.
Medical review: Postpayment;
NHIC California[A], Number: 113;
NHIC California[A], Percent of total[D]: 0.1%;
WPS[B], Number: 80;
WPS[B], Percent of total[D]: 0.1%;
HealthNow NY, Number: 33;
HealthNow NY, Percent of total[D]: 0.1%.
Note: Physician practices were identified by the Medicare Provider
Identification Number (PIN).
[A] The number of practices shown include data from northern
California for November 2000 to September 2001 and from southern
California for December 2000 to September 2001.
[B] WPS prepayment data include reviews in Illinois, Michigan, and
Minnesota only; data were not available for Wisconsin. Postpayment
data include Illinois, Michigan, Minnesota, and Wisconsin.
[C] Because a list of active PINs was not available from NHIC
California, we estimated the total number of solo and group practices
in California based on data from the most recent American Medical
Association census of group medical practices, adjusted for increases
in the total number of nonfederal M.D.s as of December 31, 2000, and
the number of D.O.s in the state.
[D] Percentages are based on lists of active PINs obtained from the
carrier.
Source: GAO analysis of carrier data, and physician practice data from
the American Medical Association and American Osteopathic Association.
[End of table]
Further, for most of the physician practices having any claims subject
to medical review in fiscal year 2001, the carriers examined
relatively few claims. As shown in table 2, over 80 percent of the
practices at each carrier whose claims received a prepayment review
had 10 or fewer claims examined and about half had only 1 or 2 claims
reviewed.
Table 2: Number of Claims Per Physician Practice Subject to Prepayment
Medical Review, Fiscal Year 2001:
Claims per practice: 1 or 2;
Percent of practices whose claims were reviewed: NHIC California[A]:
56.4%;
Percent of practices whose claims were reviewed: WPS[B]: 54.0%;
Percent of practices whose claims were reviewed: HealthNow NY: 50.9%.
Claims per practice: 10 or fewer;
Percent of practices whose claims were reviewed: NHIC California[A]:
86.4%;
Percent of practices whose claims were reviewed: WPS[B]: 88.7%;
Percent of practices whose claims were reviewed: HealthNow NY: 81.7%.
Claims per practice: 100 or more;
Percent of practices whose claims were reviewed: NHIC California[A]:
1.2%;
Percent of practices whose claims were reviewed: WPS[B]: 0.5%;
Percent of practices whose claims were reviewed: HealthNow NY: 2.9%.
[A] The figures shown include data from northern California for
November 2000 to September 2001 and from southern California for
December 2000 to September 2001.
[B] WPS prepayment data include Illinois, Michigan, and Minnesota;
prepayment data were not available for Wisconsin.
Source: GAO analysis of carrier data.
[End of table]
For the small number of physician practices whose claims were subject
to postpayment review in fiscal year 2001, the three carriers
typically examined more claims per practice. At NI-11C California, the
median physician practice had 33 claims reviewed postpayment; at WPS,
49; and at HealthNow NY, 31.
New CMS Review Policy Has Reduced Physician Repayment Amounts Due and
Increased Focus on Physician Education:
With the issuance of the PCA initiative, CMS modified the approach
that carriers use to select physicians' claims for medical review,
determine repayments due, and prevent future billing errors. PCA
directs carriers to (1) use their analyses of physician billing
patterns to better focus their medical review efforts towards claims
with the greatest risk of inappropriate payments, and (2) provide
targeted education regarding how to correct billing errors.
Information from our three carriers indicates that, as a result of
PCA, they virtually eliminated in fiscal year 2001 their use of
extrapolation, a corrective action that involves projecting a
potential overpayment from a statistical sample. A recent CMS survey
also showed reduced use of extrapolation by other carriers. After PCA
was implemented, the highest repayment amounts each of our three
carriers assessed physicians were substantially lower than in the
previous year. The carriers have also developed medical review
strategies that include increased education for individual physicians
in an effort to change billing behavior and, thus, prevent incorrect
payments.
CMS Policy Matches Corrective Actions to Level of the Physician's
Billing Problems:
PCA seeks to more effectively select physician claims for medical
review. The initiative aims to further the agency's program integrity
goals of making sure that claims are paid correctly and billing errors
are reduced while carriers maintain a level of medical review
consistent with their workload agreements with CMS. In targeting
physician claims, PCA requires that carriers subject physicians only
to the amount of medical review necessary to address the level and
type of billing error identified. If claims data analysis shows a
potential billing problem for a particular service, carriers must
first conduct a "probe review"”requesting and examining medical
records from a physician for a limited sample of claims”to validate
suspicions of improper billing or payment. For example, a carrier may
initiate a postpayment probe review after discovering that a physician
billed, per patient, substantially more services than his or her
peers.[Footnote 10] If the carrier determines that the documentation
in the medical records does not support the type or level of services
that was billed, the carrier calculates an error rate”the dollar
amounts paid in error relative to the dollar amount of services
reviewed. The error rate, the dollar value of the errors, and the
physician's past billing history are among the factors the carrier may
consider in assessing the level of the billing errors and determining
the appropriate response.[Footnote 11]
Under PCA, CMS instructs carriers to categorize the severity of
billing errors found in probe samples into three levels of concern”
minor, moderate, or major. Minor concerns may include cases with a low
error rate, small amounts improperly paid, and no physician history of
billing problems. Moderate concerns include cases that have a low
error rate but substantial amounts improperly paid. Major concerns are
cases with a very high error rate, or even a moderate error rate if
the carrier had previously provided education to the physician
concerning the same type of billing errors. Although no numerical
thresholds were established in the instructions to carriers, CMS
provided vignettes illustrating the various levels of concern. In an
example of a major concern, 50 percent of the claims in a probe sample
were denied, representing 50 percent of the dollar amount of the
claims reviewed.
PCA allows carriers flexibility in determining the most appropriate
corrective action corresponding to the level of concern identified. At
a minimum, the carrier will communicate directly with the provider to
correct improper billing practices. For probe reviews that are
conducted postpayment”the stage at which probe reviews are most
commonly done at the three carriers we visited”they must also take
steps to recover payment on claims identified as having errors.
Further options for corrective action include:
* for minor concerns, conducting further claims analysis at a later
date to ensure the problem was corrected;
* for moderate concerns, initiating prepayment medical review for a
percentage of the physician's claims until the physician demonstrates
compliance with billing procedures; and;
* for major concerns, initiating prepayment medical review for a large
share of claims or further postpayment review to estimate and recover
potential overpayments by projecting an error rate for the universe of
comparable claims”a method of estimation called "extrapolation."
Under PCA, because the corrective action is scaled to the level of
errors identified, the potential financial impact of medical review on
some physicians has decreased. Although our three carriers did not
frequently use extrapolation in 2000, before PCA, a physician could
experience a postpayment medical review that involved extrapolation
regardless of the level of errors detected. As shown in table 3, after
PCA's implementation, the highest amount any physician practice was
required to repay substantially declined at the three carriers. The
largest overpayment assessed across the carriers ranged from about
$6,000 to $79,000 in fiscal year 2001, compared with about $95,000 to
$372,000 in the previous year. At the same time, changes in the median
overpayment amounts varied across our three carriers, with a dramatic
decline at NHIC California. (Recovery of overpayments from physicians
is discussed in appendix II.)
Table 3: Overpayments Assessed Physician Practices, Fiscal Years 2000-
2001:
Number of practices assessed an overpayment:
NHIC California[A], 2000: 58;
NHIC California[A], 2001: 81;
WPS, 2000: 106[B];
WPS, 2001: 76[B];
HealthNow NY, 2000: 158;
HealthNow NY, 2001: 151.
Overpayment per practice[C], Median amount:
NHIC California[A], 2000: $11,644;
NHIC California[A], 2001: $2,023;
WPS, 2000: $2,185;
WPS, 2001: $2,913;
HealthNow NY, 2000: $134;
HealthNow NY, 2001: $133.
Overpayment per practice[C], Highest amount:
NHIC California[A], 2000: $174,838;
NHIC California[A], 2001: $79,313;
WPS, 2000: $94,545;
WPS, 2001: $79,488;
HealthNow NY, 2000: $372,446;
HealthNow NY, 2001: $6,449.
Notes: Overpayment assessments can result from billing errors found in
one or more claims or be extrapolated from errors found in a sample of
claims. Some overpayment assessments may reflect the outcomes of
medical reviews conducted the previous fiscal year.
[A] The figures shown include data from NHIC's northern California
office only; data were not available for its southern office for
fiscal year 2000. However, during fiscal year 2001, the southern
California office's median overpayment assessment was $101 and the
highest amount was $18,396.
[B] WPS data represent the number of overpayment assessments. Because
a few physicians were assessed more than one overpayment during the
fiscal year, these data very slightly overstate the number of
physician practices.
[C] Some assessments may have been subsequently reduced after an
appeal.
Source: NHIC California, WPS, and HealthNow NY.
[End of table]
Several factors may account for the lower overpayment amounts assessed
physician practices in fiscal year 2001. Under PCA, probe samples are
designed to include a small number of claims per physician, so any
overpayments discovered through the probe review process will likely
be limited. Whereas the typical postpayment medical review conducted
before PCA might involve several hundred claims, a probe review
generally samples 20 to 40 claims selected from an individual
physician for the time period and the type of service in question. If
the carrier classifies the physician's billing problem as a minor or
moderate level of concern, the physician is responsible for returning
only the amount paid in error found in the probe sample. In these
cases, there would not be an extrapolation as may have occurred in the
past.
The circumstances in which carriers determine an overpayment by
extrapolating from a statistical sample have narrowed. Before PCA was
implemented, carriers were encouraged to extrapolate an overpayment
amount whenever a postpayment sample of claims was drawn. However,
even then, our three carriers used extrapolation in only 38 instances
in fiscal year 2000. Now CMS has directed carriers to reserve the use
of extrapolation for those cases where a major level of concern has
been identified. In addition, before it can proceed with an
extrapolation, the carrier has to draw a new, statistically valid
random sample from which to project the assessed overpayment.[Footnote
12] Furthermore, the amount to be recovered based on an extrapolation
is smaller than it typically would have been in years past because
instead of using the average overpayment found in the sample, the
average is reduced because statistical estimates do not have 100
percent accuracy.[Footnote 13]
In the event that extrapolation is used, the requirement to start with
probe samples may also reduce the physician's financial risk. Because
a probe sample is fairly small, carrier officials stated that they may
only examine one or two types of services, compared to four to six
types of services reviewed previously. This means that if the probe
review results lead to an extrapolation based on a larger
statistically valid random sample, only claims for the small number of
service types will be included in that sample and the results will be
projected to a smaller universe of claims.
Consequently, the total amount assessed would tend to be smaller than
previously extrapolated amounts.
In the first year of PCA implementation, our three carriers virtually
eliminated their use of extrapolation to determine overpayments. For
example, NHIC California officials stated that before PCA it was not
uncommon to use extrapolation in determining overpayments based on
samples involving a relatively large number of claims. But now, such
extrapolation is to be used infrequently. If a physician failed to
correct inappropriate billing practices following a probe sample and
targeted education, the carrier would probably subject some or all of
the physician's subsequent Medicare billing for prepayment review
before it would consider selecting a larger postpayment sample
suitable for extrapolation. As shown in table 4, in fiscal year 2000,
NHIC California conducted 31 postpayment reviews that involved
extrapolation, with a median overpayment assessment of about $32,000,
but had no cases involving extrapolation in fiscal year 2001.
Similarly, HealthNow NY had none in fiscal year 2001 and WPS reported
no cases of extrapolation other than a small number of consent
settlement cases.[Footnote 14]
Table 4: Carriers' Use of Extrapolation in Assessing Overpayments to
Physician Practices, Fiscal Years 2000-2001:
Number of overpayment cases involving extrapolation:
NHIC California, 2000: 31;
NHIC California, 2001: 0;
WPS, 2000: 6;
WPS, 2001: 0;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 0.
Size of claims samples used: Smallest;
NHIC California, 2000: 43;
NHIC California, 2001: [A];
WPS, 2000: 60;
WPS, 2001: [A];
HealthNow NY, 2000: [A];
HealthNow NY, 2001: [A];
Size of claims samples used: Median;
NHIC California, 2000: 207;
NHIC California, 2001: [A];
WPS, 2000: 171;
WPS, 2001: [A];
HealthNow NY, 2000: 43;
HealthNow NY, 2001: [A];
Size of claims samples used: Largest;
NHIC California, 2000: 1,232;
NHIC California, 2001: [A];
WPS, 2000: 432;
WPS, 2001: [A];
HealthNow NY, 2000: [A];
HealthNow NY, 2001: [A].
Projected overpayment: Lowest amount;
NHIC California, 2000: $3,758;
NHIC California, 2001: [A];
WPS, 2000: $2,640;
WPS, 2001: [A];
HealthNow NY, 2000: [A];
HealthNow NY, 2001: [A];
Projected overpayment: Median amount;
NHIC California, 2000: $32,140
NHIC California, 2001: [A];
WPS, 2000: $29,093
WPS, 2001: [A];
HealthNow NY, 2000: $112,896
HealthNow NY, 2001: [A].
Projected overpayment: Highest amount;
NHIC California, 2000: $234,890
NHIC California, 2001: [A];
WPS, 2000: $72,679
WPS, 2001: [A];
HealthNow NY, 2000: [A];
HealthNow NY, 2001: [A].
Note: Because a physician practice may have more than one sample of
claims selected in a year, overpayments were reported for each case
where extrapolation was used. Some projected overpayments were later
reduced as the result of physician rebuttals or appeals.
[A] Not applicable.
Sources: NHIC California, WPS, and HealthNow NY.
[End of table]
A recent CMS survey indicates that most carriers limit their use of
extrapolation. In October 2001, CMS surveyed carriers to determine, in
part, the number of cases that involved extrapolation during the last
3 fiscal years.[Footnote 15] Of the 18 carriers that responded to the
survey, only 3”serving Ohio, West Virginia, Massachusetts, and Florida”
had more than 9 cases involving extrapolation in fiscal year 2001.
[Footnote 16]
Carriers Are Expected To Integrate Medical Review And Education
Outreach Functions:
A key focus of PCA is its emphasis on carrier feedback to physicians
in the medical review process. Educating physicians and their staffs
about billing rules is intended to increase correct billing, which
reduces both inaccurate payments and the number of questionable claims
for which physicians may be required to forward copies of patient
medical records. When a carrier identifies a physician's billing
problem, PCA requires the carrier to provide data to the physician
about how his or her billing pattern varies from other physicians in
the same specialty or locality. For issues that affect a large number
of providers, CMS recommends that carriers work with specialty and
state medical societies to provide education and training on proper
billing procedures.
In response to PCA, two of the three carriers planned substantial
increases in their spending for education and feedback to physicians
on medical review issues as part of their overall medical review
strategies for fiscal year 2002. As shown in table 5, the three
carriers had budget increases of various sizes for provider education
and training related to medical review.[Footnote 17]
Table 5: Carrier Budgets for Provider Education and Training Related
to Medical Review Activities, Fiscal Years 2001-2002:
Fiscal year 2001:
NHIC California[A]: $491,817;
WPS: $645,561;
HealthNow NY: $277,939.
Fiscal year 2002:
NHIC California[A]: $767,032;
WPS: $736,000;
HealthNow NY: v284,000.
Percent change:
NHIC California[A]: +56.0%;
WPS: +14.0%;
HealthNow NY: +2.2%.
Note: Data for fiscal year 2001 represent actual expenditures; data
for fiscal year 2002 are estimates.
[A] Because NHIC California's southern office did not assume carrier
operations until December 2001, fiscal year 2001 includes only 10
months for that office and all 12 months for the northern office. As a
result, the percentage change in the budget for fiscal year 2002 is
overstated as the budget for that year covers 12 months for both
offices.
Source: CMS and NHIC New England.
[End of table]
As part of their strategies to increase physician education, the three
carriers reported that they were making greater use of phone calls and
individualized letters to physicians' offices to notify them about
billing errors. Carriers record their contacts using physician
tracking systems to check on the education that has been provided to
the physician, which can include letters, materials, phone calls, or
face-to-face visits. Whereas in the past it was common for carriers to
simply point physicians toward the applicable Medicare rules, under
PCA they have assisted physicians in interpreting the rules and
applying them to specific billing situations. The carrier's medical
review staff has addressed problems of questionable billing patterns
by contacting physicians by phone to provide specific information
pertaining to billing rules. For physicians whose claims are
undergoing postpayment review, the carrier sends a letter at the
completion of the medical review that provides a description of the
billing problems found, including, as needed, information on the
relevant national and local medical policies. The letter also
identifies a contact person at the carrier, should the physician want
additional information about billing or documentation issues.
For example, WPS officials acknowledged that they previously had
little or no follow-up with physician practices whose claims were
denied or reduced after medical review to make sure they understood
how to bill correctly. In fiscal year 2001, WPS began providing
additional education”some efforts addressing all Medicare physicians
and some targeted to providers in specific specialties or service
locations. To identify the groups that would most benefit from
targeted education, the carrier developed benchmark data on billing
errors using aggregate claims data on utilization, denial rates, and
other billing patterns. For example, the carrier developed education
campaigns targeted to mental health practitioners, such as
psychologists, clinical social workers, and psychiatrists. In fiscal
year 2001, WPS also began to conduct on-site education and group
meetings and contact specialty associations to disseminate further
information.
Independent Review Confirms Accuracy of Carriers' Payment Decisions:
In addition to concerns about having their claims selected for medical
review, some physicians have expressed dissatisfaction with the
accuracy of the carrier medical review decisions concerning the
medical necessity, coding, and documentation of physician services
billed to Medicare. To assess the appropriateness of clinical
judgments made by carriers' medical review staff, we sponsored an
independent evaluation by the private firm that monitors claims
payment error rates as a Medicare program safeguard contractor.
[Footnote 18] The firm found that our three carriers made highly
accurate medical review decisions. In addition, the level of accuracy
was highly consistent across the three carriers. Slight variation in
the degree of accuracy was evident when the claims reviewed were
classified by the type of payment decision: to pay the claim in full,
to pay a reduced amount, or to fully deny payment.
The independent review was conducted on samples of 100 physician
claims from each carrier selected randomly from all claims undergoing
either prepayment or postpayment medical review in March 2001. Nurse
reviewers examined the carrier's initial review decision to see if it
was supported by the available medical record documentation and
carrier policies in effect when the carrier made its payment decision.
These reviewers then discussed with the carrier's staff each claim
where they had come to a different conclusion, and in all but one
instance, the carrier and contractor achieved a consensus as to
whether the original carrier decision was in error. The acting deputy
director of CMS's Program Integrity Group, a physician, decided the
accuracy of the one case that remained in dispute.
For the vast majority of claims, the independent reviews validated the
carriers' decisions. As shown in table 6, the independent reviewers
agreed with carriers' original assessments in 280 of the 293 cases
examined, or about 96 percent of the time.[Footnote 19] The small
share of inaccurate decisions made by the carrier resulted in both
overpayments and underpayments to physicians.
Table 6: Accuracy of Carrier Medical Review Decisions on Physician
Claims:
Carrier decision: All decisions on sampled claims[A] (n=293);
Accurate decision rate: 95.6%;
Inaccurate decision rate, Overpayment: 2.7%;
Inaccurate decision rate, Underpayment: 1.7%.
Carrier decision: Deny in full (n=64);
Accurate decision rate: 98.4%;
Inaccurate decision rate, Overpayment: 0.0%;
Inaccurate decision rate, Underpayment: 1.6%.
Carrier decision: Deny in part (n=59);
Accurate decision rate: 91.5%;
Inaccurate decision rate, Overpayment: 1.7%;
Inaccurate decision rate, Underpayment: 6.8%.
Carrier decision: Pay in full (n=170);
Accurate decision rate: 95.9%;
Inaccurate decision rate, Overpayment: 4.1%;
Inaccurate decision rate, Underpayment: 0.0%.
[A] Claims randomly selected from all carrier prepayment and
postpayment reviews during March 2001. Although 100 claims were
selected from each of the three carriers, 5 claims from WPS and 2 from
HealthNow NY were excluded either because the billing entity did not
meet our definition of physician (M.D. or D.0.) or because
documentation from the carrier associated with the claim was
unavailable or not interpretable.
Source: GAO analysis of independent review results.
[End of table]
There was slight variation in the accuracy of carrier medical review
decisions for different types of payment determinations that resulted
from the carriers' initial review. The independent reviewer found that
carrier decisions to completely deny payment were the most accurate.
In our sample, only 1 of the 64 carrier decisions (1.6 percent) to
fully deny a claim was determined to be a medical review error.
Carrier decisions to reduce payment amounts were slightly less
accurate. The independent reviewers (with subsequent concurrence by
the carriers) found errors in 5 of 59 claims (8.5 percent) that the
carriers had initially decided to pay at a reduced amount. In one
instance, the independent reviewer determined that the carrier should
have denied the claim altogether; for the other 4 claims, it judged
that the carrier should have made a smaller reduction or paid the
claim in full.[Footnote 20]
Three of the five instances in which the independent reviewer
questioned the carrier's decision to reduce the amount paid involved
claims for physicians' evaluation and management (E&M) services”
commonly known as physician visits or consultations.[Footnote 21] The
coding system used for billing much of physician care has five
separate levels of evaluation and management service intensity, each
linked to a distinct payment amount. In order to assess the
appropriateness of a claim's billing level, reviewers have to find
specific information in the submitted clinical documentation on, among
other factors, the breadth of the medical history taken, the scope of
the physical examination conducted, and the complexity of the
decisions made by the physician. According to CMS officials, one
reason medical review decisions for these claims are likely to raise
questions is that the different levels along these key dimensions are
not clearly defined, such as distinguishing between "straightforward"
and "low" complexity in medical decision making. Such reviews are also
complicated by CMS's instruction to the carriers that they may use
either the guidelines for billing evaluation and management services
issued in 1995 or the ones issued in 1997, depending on which set is
most advantageous to the physician.[Footnote 22]
Another factor contributing to the difficulty in medically reviewing
E&M claims is the broad variability in style and content found in the
medical records. Carrier officials noted that some physicians
meticulously document exactly what they have observed and done while
others tend to be less complete and careful. Reviewers are likely to
vary in what they infer from the less complete records, which, in
turn, can lead to different conclusions as to whether a case is of
low, medium, or high complexity.
Targeting Claims That Most Warrant Medical Review Could Be Improved:
Although the carriers in our study were highly accurate in making
payment determinations, they can improve their process for selecting
claims for medical review that are most likely to contain billing
errors. Our data show that, in fiscal year 2001, there was variation
in the performance of edits”criteria used to target specific services
for review”that our three carriers employed to identify medically
unnecessary, or incorrectly coded, physician services. Carriers have
difficulty establishing edits that routinely select claims with the
greatest probability of errors because they have to rely, to some
degree, on incomplete data. Also, CMS's oversight of the carriers does
not include incentives to develop and use more refined edits. CMS has
limited its involvement in this area to collecting data from the
carriers on the results of reviews selected by the edits and setting
general expectations for the carriers to assess the effectiveness of
the edits that they use. Carriers receive no feedback on the edit
effectiveness data that they have reported to the agency and little
guidance as to how they could maximize the effectiveness of their
procedures to select physician claims for medical review.
To help reduce local billing problems, carriers usually decide on
their own which claims to select for medical review. They generally
develop edits by (1) analyzing claims data to identify services or
providers where local billing rates are substantially higher than
national averages, and (2) selecting a small probe sample of such
claims for medical review to substantiate the existence of a billing
problem. Other edits are designed to ensure that physicians adhere to
local medical review policies”rules that describe when and under what
circumstances certain services may be covered. Claims identified by
the edits are suspended, that is, temporarily held back from final
processing, and the physicians involved are contacted to request the
relevant medical records. Once those records arrive, claims examiners
determine whether the claim should be paid in full, reduced, or
denied. Of the total number of prepayment edits related to physician
services used at each carrier (36 edits at WPS in each of its two
largest states; 18 at NHIC's Northern California office, and 7 at
HealthNow NY), 27 identified the large majority of claims undergoing
medical review in fiscal year 2001. Specifically, 10 or fewer edits at
each of the carriers suspended more than three-fourths of the claims
medically reviewed prior to payment.
In order to assess the relative effectiveness of those edits, we drew
on data that the carriers recorded on the results of reviews initiated
by each edit in effect during that period. These data included
information on the proportion of suspended claims that were reduced or
denied as a consequence of medical review, and the average dollar
reduction for those claims that were not paid in full. Edits would be
considered better targeted if they have (1) a higher rate of claims
denied or reduced, or (2) a larger average amount of dollars withheld
from payment for an inappropriately billed service. The strongest case
could be made for edits that did well on both dimensions, and the
weakest case would apply for those edits that ranked low on both
denial rate and average amount withheld.
Figure 1 shows the results of this analysis for the 27 prepayment
edits that accounted for the largest number of claims suspended by
each of our three carriers.[Footnote 23] The four bars indicate the
number of edits achieving different levels of denial (or reduction)
rates. The grouping with the largest number of edits, 11, represents
the lowest level of effective targeting, between 5 and 19 percent.
[Footnote 24] Two thirds of the edits, 18, have denial rates under 40
percent. By contrast, 6 edits have denial rates of between 60 and 82
percent.
Figure 1: Outcomes of Selected Carrier Prepayment Medical Review
Edits, Fiscal Year 2001:
[Refer to PDF for image: stacked vertical bar graph]
The graph represents the number of edits in four categories:
5 to 19 Percent of claims denied or reduced;
20 to 39 Percent of claims denied or reduced;
40 to 59 Percent of claims denied or reduced;
60 to 82 Percent of claims denied or reduced.
Within each category, three values are represented:
Average dollar value of denied claims, $200 or more;
Average dollar value of denied claims, $100-$199;
Average dollar value of denied claims, Under $100.
Note: Includes data for NHIC northern California only; comparable data
were not available from the carrier's southern California office.
Source: NHIC California, WPS, and HealthNow NY.
[End of figure]
The segments within the bars indicate the average dollar amount
reduced or denied when either occurs. Only 3 of the 11 major edits in
the lowest denial rate group generated relatively large program
savings”an average of $200 or more”for those claims that were reduced
or denied. An equal number, and larger proportion, of edits in the
highest denial rate group also produced savings exceeding $200 per
claim.
The wide variation among these 27 major edits across both the
dimensions of denial rate and average dollar amount denied or reduced
suggests that there is room for improvement. CMS requires the carriers
to periodically evaluate the effectiveness of the edits they use to
ensure that each has a reasonable denial rate and dollar return.
However, CMS has not provided guidelines to the carriers as to how
such evaluation should be conducted, or what minimum level of
performance they should strive for with respect to denial rates,
average dollar reductions, or other measures of efficiency. Moreover,
officials at the three carriers indicated that they did not receive
feedback from CMS regarding the performance of their edits, even
though the carriers submit quarterly reports to the agency on the
performance of their most active edits. CMS's involvement in this area
was generally limited to ensuring that carriers had their own process
in place for evaluating prepayment edits.
The three carriers tend to consider similar variables in evaluating
edit effectiveness, but vary quite a bit in the procedures that they
follow to make that assessment. In general, all three carriers
consider factors such as the number of claims suspended, the denial
rate, dollar savings, and the overall magnitude of the potential
billing problem. With respect to process, HealthNow NY did not have
any explicit procedure to evaluate edits until the end of fiscal year
2001. At that point it adopted a detailed scoring system with numeric
thresholds that determine when to discontinue using a edit.[Footnote
25] The other carriers continue to rely less on quantitative measures
and more on the professional judgment of medical review staff in
evaluating prepayment edits.
Several factors contribute to the continued use of poorly targeted
edits. Some of the carriers contend that their data on the relative
effectiveness of their edits are incomplete and therefore unreliable
For example, NHIC California officials noted that they often lack good
information on the ultimate outcome of reviews, taking account of
reversals that occur when initial carrier decisions are appealed. Not
only does the appeal process take a long time, if followed to its full
extent, it can also be difficult to determine why certain claim
denials were overturned.[Footnote 26]
Another reason why carriers maintain low-performing prepayment edits
is that there are few incentives”and some disincentives”for them to
change. In particular, carriers have agreed with CMS to conduct a
certain number of reviews that are evenly distributed throughout the
course of the year. Before a carrier discontinues use of an edit, it
must have another one in place that will garner at least as many
claims for medical review to meet workload targets, or else negotiate
a change in its medical review strategy with CMS officials to
reallocate those review resources to other activities. Putting new
edits in place often requires carriers to adjust the selection
criteria over time in order to obtain the manageable number of claims
selected for review.
Carrier officials also noted that there is no systematic dissemination
of carriers' best practices”those worthy of consideration by all
carriers”regarding the success of individual edits or methods to
evaluate edit efficiency. An official at HealthNow NY told us that
they informally share information about their experiences with
particular prepayment edits with other carriers operating in the same
region. Carrier officials reported that this is not common practice at
WPS or NHIC California. In a 1996 report on selected prepayment edits,
we recommended that HCFA, now CMS, disseminate information to carriers
on highly productive edits.[Footnote 27] However, the agency currently
does not identify and publicize in any systematic manner those edits
that generate high denial rates or the selection criteria used to
develop them.
CMS Makes Claims Accuracy New Benchmark for Measuring Carrier
Performance:
Since 1996, the overall level of payment errors for the Medicare
program has been tracked nationwide in annual audit reports issued by
the HHS Office of Inspector General (OIG). In the most recent audit,
covering fiscal year 2001, the OIG found that $12.1 billion, or about
6.3 percent of the $191.8 billion in processed fee-for-service
payments, was improperly paid to Medicare providers.[Footnote 28]
These OIG reports of aggregate Medicare payment errors have spurred
CMS to improve its efforts to safeguard Medicare payments by assessing
not only an error rate nationwide but also for the individual carriers.
In February 2000, HCFA announced the development of a new tool to
assess individual carrier performance called the Comprehensive Error
Rate Testing (CERT) Program. CERT is designed to measure, for all
claims, the accuracy of payment decisions made by each carrier.
[Footnote 29] The CERT benchmark will allow CMS to hold the carriers
accountable for the accuracy of payment decisions for all claims
processed, not just those selected for review. Thus, the results will
reflect not only the carrier's performance, but also the billing
practices of the providers in their region. According to CMS
officials, CERT information on all the carriers processing physician
claims is expected to become available in November 2002. At that
point, both CMS and the carriers can begin to use that information for
program oversight and management, and will then see if the
expectations for CERT are met in practice.
Under the CERT program, CMS will use an independent contractor to
select a random sample of approximately 200 claims for each carrier
from among all those submitted each month for processing. For this
sample, the carrier will provide the CERT contractor with information
on the payment decisions made and all applicable medical documentation
used in any medical reviews of the sample claims. The CERT contractor
will request comparable documentation from physicians whose claims in
the sample were not medically reviewed by the carrier. The CERT teams
of clinician reviewers will examine the documentation and apply the
applicable national and local medical policies to arrive at their own
payment decisions for all of the sampled claims.
With the development of carrier-level error rates, CMS expects to
monitor payment accuracy trends for the individual carriers and focus
its oversight on those carriers with relatively high, or worsening,
rates of error. Moreover, on a national basis, CERT will calculate
error rates for different provider types. For example, it will
indicate how often physicians bill incorrectly and receive either too
much or too little payment compared to such nonphysician providers as
ambulance companies and clinical labs. The structure of subgroup
analyses designed to help carriers better target their medical reviews
remains open to discussion among CMS officials.
CERT will complement but not replace CMS tracking systems designed to
monitor carrier performance using data periodically reported to CMS by
the carriers concerning medical review costs, the reduction in
provider payments resulting from medical reviews, and workload. CMS
has relied on these data to ensure that carriers sustain the level of
effort specified in agreements with CMS”particularly the number of
medical reviews conducted. CMS is currently working to consolidate and
streamline these various reports into a Program Integrity Management
Reporting (PIMR) system. CMS's intention is for PIMR to collect, from
each carrier, data such as the number of claims medically reviewed,
the number denied, the number of denials reversed on appeal, and the
associated dollar amounts saved or recouped. Currently, this
information is not maintained in a common format and is difficult to
compile. The first management reports based on PIMR are expected by
the end of fiscal year 2002.
In addition to CERT and the carrier-reported data, CMS oversight of
physician medical review will continue to rely on contractor
performance evaluations (CPEs)”assessments based on site visits
conducted by a small team of CMS regional and headquarters staff. For
carrier medical review activities, these CMS evaluations occur at
irregular intervals, depending on the carrier's volume of claims and
the level of risk of finding substantial problems at the carrier.
CMS's evaluation emphasizes an assessment of the carrier's compliance
with Medicare rules and procedures in areas related to medical review”
such as data analysis to support the selection of edits, the
development of local coverage rules, and tracking contacts with
physicians. The evaluation also involves examining a small number of
claims to determine the accuracy of the carrier's review decisions.
[Footnote 30] Critics have previously alleged that CPE assessments
lacked consistency and objectivity. In response, CMS has attempted to
ensure greater uniformity across carriers in the way these evaluations
are conducted by recruiting CPE team members from the agency as a
whole, not the local regional office, and by using nationally based
CPE protocols.
Concluding Observations:
While CMS has modified its medical review procedures, it is too soon
to determine whether the PCA approach will enhance the agency's
efforts to perform its program integrity responsibilities. Carrier
staff conduct medical reviews to maintain program surveillance and
make physicians aware of any billing practices that are not in keeping
with payment rules. In this regard, CMS's PCA policy emphasizes
feedback and educational contacts with individual physicians.
Evaluating the efficacy of this policy will require a systematic
examination of carriers' performance data When CERT data become
available, CMS may be in a better position to assess PCA's impact on
reducing billing errors and preventing inappropriate payments.
Agency Comments:
CMS officials reviewed a draft of this report and generally agreed
with its findings. In particular, the agency noted that our discussion
of the effectiveness of carrier edits confirmed the need for CMS to
"become more active in assisting contractors in this area." The agency
also provided a number of technical corrections and clarifications
that we incorporated into the text as appropriate. These comments are
reprinted in Appendix III.
We are sending copies of this report to the Administrator of CMS and
we will make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have questions about this report, please contact
me at (312) 220-7600 or Rosamond Katz at (202) 512-7148. Other
contributors to this report were Hannah Fein, Jenny Grover, Joel
Hamilton, and Eric Peterson.
Signed by:
Leslie G. Aronovitz:
Director, Health Care”-Program Administration and Integrity Issues:
List of Committees:
The Honorable Max Baucus:
Chairman:
The Honorable Charles E. Grassley:
Ranking Minority Member:
Committee on Finance:
United States Senate:
The Honorable W.J. "Billy" Tauzin:
Chairman:
The Honorable John D. Dingell:
Ranking Minority Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable William M. Thomas:
Chairman:
The Honorable Charles B. Rangel:
Ranking Minority Member:
Committee on Ways and Means:
House of Representatives:
[End of section]
Appendix I: Review of Medicare Carrier Medical Review Decisions:
We assessed the claims review accuracy of the three carriers in our
study”National Heritage Insurance Company in California, Wisconsin
Physicians Service Insurance Corp, and HealthNow NY”by validating
initial medical review decisions involving physician claims. We
contracted with DynCorp”the Medicare contractor already selected by
CMS to administer its Comprehensive Error Rate Testing (CERT) program”
to use the same review procedures developed for CERT in assessing a
sample of medical review decisions made by the three carriers.
Methodology Used to Validate Carrier Medical Review Decisions:
We requested that each carrier identify the universe of physician
claims subjected to prepayment and postpayment review during March
2001, limiting the universe to those claims submitted by M.D.s and
D.O.s. From that universe, Dyncorp randomly selected 100 claims for
review. Then, DynCorp obtained the medical record information for
those claims from the carrier, and reviewed each payment decision for
accuracy. The number of carrier decisions examined by DynCorp staff
exceeded the number of claims because, in several instances, carriers
had reviewed multiple lines on a claim. The results of this assessment
of carrier medical review decisions can only be generalized to the
universe of claims from which the samples were drawn: claims from
M.D.s or D.O.s that underwent medical review in March 2001 by one of
our three carriers.
In reviewing payment accuracy, DynCorp staff was tasked with
determining if the carrier's initial review decision was supported by
the medical record and carrier policies in place at the time the
payment decision was made. Specifically, DynCorp assessed whether
documentation in the medical records supported the procedure codes and
level of service that was billed. Where their determination differed
from that of the carrier, DynCorp staff discussed those claims with
the carrier's medical review staff. In all but one case, the parties
came to agreement on whether payment decisions were accurate. In the
one case where agreement could not be reached, the acting deputy
director of CMS's Program Integrity Group”a physician”provided a
second opinion that confirmed the carrier's decision.
Results of the DynCorp Review:
The results obtained from DynCorp's review of physician claims
undergoing medical review were consistent across the three carriers.
The accuracy of decisions across all the sampled medical reviews for
each carrier exceeded 94 percent. (See table 7.) In those cases where
medical review errors were identified, NI-RC California and WPS
decisions resulted in a mix of underpayments and overpayments.
However, HealthNow NY's review errors were concentrated in decisions
to pay claims in full that should have been denied or reduced.
Table 7: Accuracy of Medical Review Decisions on Physician Claims by
Carrier:
Carrier decision: All decisions on sampled claims: NHIC California[A]
(n=100);
Accurate decision rate: 94.0%;
Inaccurate decision rate, Overpayment: 3.0%;
Inaccurate decision rate, Underpayment: 3.0%.
Carrier decision: All decisions on sampled claims: WPS[B] (n=95);
Accurate decision rate: 96.8%;
Inaccurate decision rate, Overpayment: 1.1%;
Inaccurate decision rate, Underpayment: 2.1%.
Carrier decision: All decisions on sampled claims: HealthNow NY[B]
(n=98);
Accurate decision rate: 95.9%;
Inaccurate decision rate, Overpayment: 4.1%;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Deny payment: NHIC California (n=24);
Accurate decision rate: 95.8%;
Inaccurate decision rate, Overpayment: 0.0;
Inaccurate decision rate, Underpayment: 4.2%.
Carrier decision: Deny payment: WPS (n=26);
Accurate decision rate: 100.0%;
Inaccurate decision rate, Overpayment: 0.0;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Deny payment: HealthNow NY (n=14);
Accurate decision rate: 100.0%;
Inaccurate decision rate, Overpayment: 0.0;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Pay in part: NHIC California (n=26);
Accurate decision rate: 88.5%;
Inaccurate decision rate, Overpayment: 3.8%;
Inaccurate decision rate, Underpayment: 7.7%.
Carrier decision: Pay in part: WPS (n=20);
Accurate decision rate: 90.0%;
Inaccurate decision rate, Overpayment: 0.0%;
Inaccurate decision rate, Underpayment: 10.0%.
Carrier decision: Pay in part: HealthNow NY (n=13);
Accurate decision rate: 100.0%;
Inaccurate decision rate, Overpayment: 0.0;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Pay in full: NHIC California[A] (n=50);
Accurate decision rate: 96.0%;
Inaccurate decision rate, Overpayment: 4.0%;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Pay in full: WPS (n=49);
Accurate decision rate: 98.0%;
Inaccurate decision rate, Overpayment: 2.0%;
Inaccurate decision rate, Underpayment: 0.0.
Carrier decision: Pay in full: HealthNow NY[C] (n=71);
Accurate decision rate: 94.4%;
Inaccurate decision rate, Overpayment: 5.6%;
Inaccurate decision rate, Underpayment: 0.0.
[A] Includes six claims in the NHIC California sample that DynCorp
(with concurrence of the acting deputy director of CMS's Program
Integrity Group) judged inaccurate on technical grounds, but we
considered them to have been decided appropriately. Although DynCorp
noted that the physicians had provided documentation sufficient to
justify payment, it judged them to have been paid in error because
NHIC California had a local medical review policy (LMRP) that
explicitly required the physician to document the number of minutes
spent with the patient for these services. The physicians submitting
these claims had not done so, but the carrier and DynCorp agreed that
if the LMRP had not been in place, the documentation provided would
have been sufficient to justify payment. Therefore, the problem
identified by the DynCorp review was the failure of NHIC California to
update its LMRP to reflect the review practices it was actually
following-not inadequacies in the reviews themselves.
[B] Although 100 claims were selected from each of the three carriers,
5 claims from WPS and 2 from HealthNow NY were excluded either because
the billing entity did not meet our definition of physician (M.D. or
D.0.) or because documentation from the carrier associated with the
claim was unavailable or not interpretable.
[C] Includes one claim where the carrier determined that the physician
was entitled to more than the amount submitted.
Source: GAO analysis of claims review data from NHIC California,
HealthNow NY, WPS, and Dyncorp.
[End of table]
Because a relatively small proportion of medical reviews are conducted
after claims payment, our samples from the three carriers included
just 19 claims where a postpayment review was performed. The accuracy
of carrier determinations for both prepayment and postpayment medical
reviews was consistent, at about 95 percent. (See table 8.)
Table 8: Accuracy of Prepayment and Postpayment Medical Review
Decisions on Physician Claims:
Medical review: Prepayment (n=274);
Accurate decision rate: 95.6%;
Inaccurate decision rate, Overpayment: 2.9%;
Inaccurate decision rate, Underpayment: 1.5%.
Medical review: Postpayment (n=19);
Accurate decision rate: 94.7%;
Inaccurate decision rate, Overpayment: 0.0;
Inaccurate decision rate, Underpayment: 5.3%.
Source: GAO analysis of claims review data from NHIC California,
HealthNow NY, WPS, and Dyncorp.
[End of table]
[End of section]
Appendix II: Recovery of Overpayments:
Carriers attempt to collect any overpayments due the Medicare program
as soon as possible after the completion of postpayment reviews. The
carrier notifies physician practices that they have three options for
returning an overpayment: (1) pay the entire overpayment amount within
30 days, (2) apply for an extended repayment plan, or (3) allow the
carrier to offset the overpayment amount against future claims.
Initially, the carrier sends a letter informing the physician practice
of the medical review results and the specific dollar amount that the
practice must return to Medicare. The letter provides an explanation
of the procedures for repaying an overpayment, which includes a
statement of Medicare's right to recover overpayments and charge
interest on debts not repaid within 30 days, as well as the practice's
right to request an extended repayment plan if the overpayment cannot
be paid in that time.[Footnote 31] The letter also advises the
physician practice of the right to submit a rebuttal statement prior
to any recoupment by the carrier and to appeal the review decision to,
in the first instance, the carrier's separate appeals unit. In
addition, the letter notifies the practice of any additional reviews
that the carrier has planned. Regardless of whether the physician
practice appeals the review decision, repayment is due within 30 days
of the date of the letter, unless an extension is approved.
Carriers will consider extended repayment plans for those physician
practices that cannot make a lump sum payment by the due date. To
qualify for an extension, the overpayment amount must be $1,000 or
more and a practice must prove that returning an overpayment within
the required time period would cause a financial hardship.
Accordingly, a physician practice must offer specific documentation to
support the request, including a financial statement with information
on monthly income and expenses, investments, property owned, loans
payable, and other assets and liabilities. In addition, if the
requested repayment extension is for 12 months or longer, the
physician practice must submit at least two letters from separate
institutions indicating that they denied a loan request for the amount
of the repayment. Requests for payment extensions that exceed 12
months must be referred to CMS regional staff for approval.
If a physician practice does not return payment within 30 days or
establish a repayment extension plan, the carrier must offset the
amount owed against pending or future claims. The carrier has some
discretion as to the exact date that offsetting begins, taking into
consideration any statements or evidence from the physician practice
as to the reasons why offsetting should not occur.[Footnote 32] In
fiscal year 2001, HealthNow NY offset amounts owed by 72 of 95
physician practices that did not pay their overpayment amounts within
30 days. Most of the practices that did not have amounts offset
returned their overpayments within 40 days. Any offset payments are
applied against the accrued interest first, and then the principal.
As shown in table 9, the three carriers in our study reported that
most physician practices assessed an overpayment in fiscal year 2000
or 2001 repaid Medicare within 6 months of the carrier's notice.
Table 9: Recovery of Overpayments From Physician Practices, Fiscal
Years 2000-2001:
Number of practices assessed an overpayment[B]:
NHIC California[A], 2000: 58;
NHIC California[A], 2001: 81;
WPS, 2000: 106[B];
WPS, 2001: 76[B];
HealthNow NY, 2000: 158;
HealthNow NY, 2001: 151.
Number of practices that repaid within: 30 days;
NHIC California[A], 2000: 33;
NHIC California[A], 2001: 48;
WPS, 2000: 37;
WPS, 2001: 24;
HealthNow NY, 2000: 46;
HealthNow NY, 2001: 56;
Number of practices that repaid within: 31-180 days;
NHIC California[A], 2000: 23;
NHIC California[A], 2001: 33;
WPS, 2000: 57;
WPS, 2001: 34;
HealthNow NY, 2000: 107;
HealthNow NY, 2001: 94.
Number of practices that repaid within: 181-365 days;
NHIC California[A], 2000: 0;
NHIC California[A], 2001: 0;
WPS, 2000: 1;
WPS, 2001: 1;
HealthNow NY, 2000: 3;
HealthNow NY, 2001: 1.
Number of practices that repaid within: Over 1 year;
NHIC California[A], 2000: 2;
NHIC California[A], 2001: 0;
WPS, 2000: 6;
WPS, 2001: 4;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 0.
Number of practices that repaid within: Outstanding;
NHIC California[A], 2000: 0;
NHIC California[A], 2001: 0;
WPS, 2000: 5;
WPS, 2001: 13;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 0.
Number of practices with overpayments of $5,000 or more that repaid
within: 30 days;
NHIC California[A], 2000: 21;
NHIC California[A], 2001: 10;
WPS, 2000: 7;
WPS, 2001: 2;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 3.
Number of practices with overpayments of $5,000 or more that repaid
within: 31-180 days;
NHIC California[A], 2000: 12;
NHIC California[A], 2001: 17;
WPS, 2000: 24;
WPS, 2001: 13;
HealthNow NY, 2000: 6;
HealthNow NY, 2001: 1.
Number of practices with overpayments of $5,000 or more that repaid
within: 181-365 days;
NHIC California[A], 2000: 0;
NHIC California[A], 2001: 0;
WPS, 2000: 1;
WPS, 2001: 0;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 0.
Number of practices with overpayments of $5,000 or more that repaid
within: Over 1 year;
NHIC California[A], 2000: 2;
NHIC California[A], 2001: 0;
WPS, 2000: 6;
WPS, 2001: 1;
HealthNow NY, 2000: 1;
HealthNow NY, 2001: 0.
Number of practices with overpayments of $5,000 or more that repaid
within: Outstanding;
NHIC California[A], 2000: 0;
NHIC California[A], 2001: 0;
WPS, 2000: 5;
WPS, 2001: 2;
HealthNow NY, 2000: 0;
HealthNow NY, 2001: 0;
[A] Data include NHIC's northern California office only; data were not
available for its southern office for fiscal year 2000. However,
during fiscal year 2001, the southern office assessed 137 physician
practices an overpayment, and all but 5 repaid within 6 months.
[B] Some overpayment assessments may reflect the outcomes of medical
reviews conducted in the previous fiscal year.
[C] WPS data represent the number of overpayment assessments. Because
a few physicians practices were assessed more than one overpayment
during the fiscal year, these data very slightly overstate the number
of practices involved.
Source: NHIC California, WPS, and HealthNow NY.
[End of table]
The three carriers also reported few requests from physician practices
for extended repayment plans. As shown in table 10, none of the
carriers had more than four requests during fiscal year 2001, and no
extension exceeded 1 year.
Table 10: Requests for Repayment Extensions, Fiscal Years 2000-2001[A]:
Extensions requested:
NHIC California, 2000: 12;
NHIC California, 2001: 4;
WPS, 2000: 3;
WPS, 2001: 1;
HealthNow NY, 2000: 0;
HealthNow NY, 2001: 1. ;
Extensions approved:
NHIC California, 2000: 11;
NHIC California, 2001: 2;
WPS, 2000: 3;
WPS, 2001: 0;
HealthNow NY, 2000: [B];
HealthNow NY, 2001: 1.
Extension period granted:
NHIC California, 2000: 6 to 24 months;
NHIC California, 2001: 6 to 12 months;
WPS, 2000: 7 to 12 months;
WPS, 2001: [B];
HealthNow NY, 2000: [B];
HealthNow NY, 2001: 6 months.
Range of overpayments[C]: Lowest amount;
NHIC California, 2000: $18,337;
NHIC California, 2001: $20,588;
WPS, 2000: $2,708;
WPS, 2001: [B];
HealthNow NY, 2000: [B];
HealthNow NY, 2001: [B].
Range of overpayments[C]: Median amount;
NHIC California, 2000: $159,894;
NHIC California, 2001: [B];
WPS, 2000: $28,749;
WPS, 2001: [B];
HealthNow NY, 2000: [B];
HealthNow NY, 2001: $13,343.
Range of overpayments[C]: Highest amount;
NHIC California, 2000: $324,106;
NHIC California, 2001: $49,981;
WPS, 2000: $105,924;
WPS, 2001: [B];
HealthNow NY, 2000: [B];
HealthNow NY, 2001: [B].
[A] Some requests for repayment extensions relate to overpayments
assessed in a previous fiscal year.
[B] Not applicable.
[C] Repayment amounts include the principal only, adjusted for any
reductions that may have resulted from physician rebuttals or appeals.
Source: NHIC California, WPS, and HealthNow NY.
[End of table]
[End of section]
Appendix III: Comments from the Centers for Medicare and Medicaid
Services:
Department of Health & Human Services:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
To: Leslie G. Aronovitz:
Director, Health Care”Program Administration and Integrity Issues:
General Accounting Office:
From: [Signed by] Thomas A. Scully:
Administrator:
Centers for Medicare & Medicaid Services:
Subject: General Accounting Office (GAO) Draft Report, Medicare:
Recent CMS RefOrms Address Carrier Scrutiny of Physicians' Claims for
Payment (GAO-02-693):
Thank you for the opportunity to review the above-referenced GAO draft
report.
We are appreciative that GAO finds our program integrity efforts to
improve medical review procedures have had a positive effect on
physician oversight. The findings you report were certainly some of
the goals we worked towards when implementing these program changes.
We plan to continue and increase provider education with the goal of
reducing the payment error rate.
The Comprehensive Error Rate Testing (CERT) program will calculate
three rates: 1) a paid claims error rate; 2) a claims processing error
rate; and 3) a provider compliance rate. The program will calculate an
error rate for four levels”national, contractor specific, benefit
specific, and provider type. This program will facilitate the Centers
for Medicare & Medicaid Services' ability to take appropriate
corrective actions and can be used to better manage contractor
performance. The Progressive Corrective Action (PCA) initiative is
designed to focus resources and corrective actions on those areas
where there is the greatest risk of inappropriate payments.
We appreciate your discussion of edit effectiveness. It is a subject
that we have discussed often internally over the past year, and your
comments confirm our belief that we need to become more active in
assisting contractors in this area.
We have attached a number of technical comments that we believe will
better characterize our progressive corrective action and the
Comprehensive Error Rate Testing activities. We look forward to
working with GAO on this and other issues.
Attachment
[End of section]
Related GAO Products:
Medicare: Communications With Physicians Can Be Improved [hyperlink,
http://www.gao.gov/products/GAO-02-249], February 27, 2002.
Medicare Management: CMS Faces Challenges to Sustain Progress and
Address Weaknesses [hyperlink, http://www.gao.gov/products/GAO-01-
817], July 31, 2001.
Medicare Management: CMS Faces Challenges in Safeguarding Payments
While Addressing Provider Needs [hyperlink,
http://www.gao.gov/products/GAO-01-1014T], July 26, 2001.
Regulatory Issues for Medicare Providers (GAO-01-802R, June 11, 2001).
[End of section]
Footnotes:
[1] U.S. General Accounting Office, High Risk Series: An Update,
[hyperlink, http://www.gao.gov/products/GAO-01-263 (Washington, D.C.:
January 2001).
[2] Until June 14, 2001, CMS was known as the Health Care Financing
Administration (HCFA).
[3 In June 2001, we responded to questions raised by the Senate
Finance Committee that were related to these concerns. See U.S.
General Accounting Office, Regulatory Issues for Medicare Providers,
GAO-01-802R (Washington, D.C.: June 11, 2001).
[4] Pub. L. No. 106-554, App. F, Sec. 437(a), 114 Stat. 2763A-463,
2763A-527. Although Medicare considers services from dentists,
optometrists, podiatrists, and chiropractors to be covered physicians'
services (see 42 C.F.R. § 410.20(b)(2002)), as agreed with the
committees of jurisdiction we focused on claims filed by doctors of
medicine (M.D.s) and doctors of osteopathy (D.O.s) only.
[5] Department of Health and Human Services, HCFA, Medical Review
Progressive Corrective Action, Program Memorandum Transmittal AB-00-72
(Baltimore, MD: Aug. 7, 2000).
[6] These carriers vary by size and geographic region. NHIC's
California component is a large insurer with separate facilities
serving the southern and northern areas of the state. In some
instances, data for fiscal year 2001 did not include the entire year
for NHIC because its southern office did not assume carrier operations
until 2 months after the fiscal year had begun. Prior to December
2000, another carrier conducted claims review for southern California.
WPS, also a large insurer, has separate facilities that operate in
four states (Wisconsin, Illinois, Michigan, and Minnesota). The
Minnesota office was the most recent addition, joining WPS in
September 2000. HealthNow NY is a small insurer that serves providers
in upstate New York.
[7] Part B also covers charges from licensed practitioners, as well as
clinical laboratory and diagnostic services, surgical supplies and
durable medical equipment, and ambulance services. Part A covers
hospital and certain other services.
[8] Local coverage rules, known as local medical review policies
(LMRPs), reflect regional differences in medical practice by
specifying the circumstances under which a carrier will or will not
provide Medicare payment for a particular service and how the service
will be coded. According to CMS officials, LMRPs are carriers'
interpretations of Medicare coverage for a particular service that
enhance or clarify national Medicare policy or provide guidance in the
absence of national policy. Because these interpretations may differ,
one carrier might pay for a particular service that would not be paid
for by another carrier.
[9] CMS maintains reports containing national averages for the billing
of specific services. Billing data are also available by physician
specialty, locality, and other categories.
[10] Provider-specific probe reviews can be both prepayment and
postpayment. If the carrier can select a sufficient number of claims
for a probe in a reasonable period, it may choose to conduct a
prepayment medical review. For lower volume services, however, the
carrier will typically take a postpayment approach so that the
physician does not have an excessive wait before having claims
processed.
[11] PCA identifies secondary considerations that carriers should use
in determining appropriate corrective actions. Aggravating factors
might include past history of abusive billing practices or a high
percentage of particular types of errors. Mitigating factors include
establishing a compliance training program for office staff.
[12] An exception where extrapolation based on the original probe
sample is allowed, is when the physician chooses to accept a proposed
consent settlement rather than having to submit medical record
documentation for a new, and typically larger, sample of claims.
[13] In a typical extrapolation, the amount of the overpayment is
calculated by (1) determining the average overpayment per claim in the
sample as a whole or broken down into strata or clusters, (2)
multiplying that amount by the number of corresponding claims in the
universe, and (3) reducing that amount to that represented by the
lower bound of a one-sided 90 percent confidence interval. This third
step was introduced in January 2001, when CMS issued new standards for
statistical sampling and extrapolation methodologies used by carriers.
This change takes into account that statistical estimates may be in
error and that the actual amount may fall within a range around an
estimate. This policy involves using the bottom of the range as the
amount of overpayment to recover.
[14] Under a Medicare consent settlement, a potential overpayment is
determined by extrapolating from a small sample of claims that is not
statistically valid. The carrier would then offer the provider the
option of repaying the projected overpayment and agreeing to a consent
settlement or proceeding to a further review of a larger,
statistically valid random sample of claims and overpayment
projection. Of the carriers in our study, only WPS' Minnesota office
used consent settlements for a few cases in either fiscal year 2000 or
2001, and it settled all but one of its cases.
[15] These cases involved statistically valid random samples of claims
that were used to project overpayments. The survey also identified
other cases involving consent settlements based on extrapolations from
more limited samples of claims.
[16] One of the three carriers did not separate the number of
extrapolation cases for medical review from those associated with
fraud-unit activity. An official at that carrier told us that
approximately 33 of the 131 cases where extrapolation was used were
related to medical review.
[17] All education and training activities related to medical review
are funded through the Medicare Integrity Program, which also supports
claims reviews and antifraud activities. General provider education
related to enrollment and billing procedures is funded from a larger
and separate budget for program management. The related fiscal year
2002 budgets for the three carriers were: $1.6 million for NHIC
California, $2.8 million for WPS, and $1.3 million for HealthNow NY.
These represented increases from the previous fiscal year of 42, 6,
and 102 percent, respectively.
[18] HCFA chose 12 claims administration contractors in 1999 to act as
program safeguard contractors (PSCs) for Medicare and since then has
issued task orders that include different ways of using PSC services.
Some task orders involve discrete activities by a single PSC that
focus on specific areas vulnerable to fraud and abuse, others require
PSCs to replace some or all of the program safeguard activities
traditionally performed by claims administration contractors, and
still others may have a national impact on fraud and abuse prevention
and detection.
[19] This result was consistent across the three carriers and for both
prepayment and postpayment reviews. (See appendix I.)
[20] There was 1 claim among the 293 examined where the carrier
decided (and the contractor concurred) that, based on the medical
documentation provided, the physician was entitled to more than the
amount submitted. In all other cases, once carrier and contractor
reviews were completed, any adjustment to the claim as it was
originally submitted to the carrier resulted in a decrease in the
amount paid to the physician.
[21] They can include physician encounters in hospitals and nursing
facilities as well as in the doctor's office.
[22] Primary care physicians find the 1995 documentation guidelines
less cumbersome, while the more detailed 1997 guidelines better
reflect the needs of specialists. See Nancy-Ann DeParle, "Evaluation &
Management Services Guidelines," Journal of the American Medical
Association, vol. 283, no. 23 (June 21, 2000).
[23] We have excluded some prepayment edits that are expected to have
low denial rates. For instance, carriers use "pricing edits" to gather
information to help determine an appropriate payment amount for newly
covered services (for which Medicare has not established a set fee) or
for highly complex procedures, such as certain surgeries. In these
cases, although a nurse reviewer must examine each claim to determine
an appropriate payment amount, claims suspended by these edits are
likely to be paid in full.
[24] A once effective edit may experience declining denial rates over
time, to the extent that it has its intended effect of changing
physician billing behavior. This is why carriers need to monitor edit
performance at periodic intervals and make appropriate adjustments.
[25] Each prepayment edit is scored based on its performance on six
dimensions: number of claims suspended (should be greater than 150);
percent of claims denied (should be greater than 25 percent); dollar
value denied (should be greater than $10,000); percent of dollars
denied (should be greater than 25 percent); percent of claims reversed
(should be less than 40 percent); and percent of dollars reversed
(should be less than 40 percent).
[26] When medical review staff denies a claim before payment, the
billing physician can appeal the denial. See 42 CFR 405.801(b)(1). If
the appeal is successful, the carrier may ultimately pay a claim that
it initially denied. Carriers' data systems generally do not track the
claims denied by medical review to determine if they are appealed and
then paid.
[27] U.S. General Accounting Office, Medicare: Millions Can Be Saved
by Screening Claims for Overused Services, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-96-49] (Washington, D.C.: January
30, 1996).
[28] For the fiscal year 2001 audit, OIG selected 600 beneficiaries
nationwide with 6,594 fee-for-service claims processed for payment.
Based on this sample, it estimated the range of improper payments at
the 95 percent confidence level to be $7.2 billion to $16.9 billion.
The OIG indicated that this result was not significantly different
from the estimates for the past 3 years. See Department of Health and
Human Services/Office of Inspector General, Improper Fiscal Year 2001
Medicare Fee-For-Service Payments, A-17-00-02000 (Washington, D.C.:
Feb. 15, 2002).
[29] Previously, carriers selected a portion of their prepayment
medical reviews through a random sampling procedure. CERT is taking
the place of that random sample, and henceforth carriers should only
select claims for prepayment review that have been identified as
potentially problematic.
[30] In a typical CPE about 30 claims are reassessed. By contrast,
CERT will examine approximately 200 claims payment decisions per month
for each carrier.
[31] Medicare regulations provide for the assessment of interest at
the higher of the private consumer rate or the current value of funds
rate (5 percent for calendar year 2002). See 42 C.F.R. Sec. 405.378
(d) (2001). As of February 1, 2002, the private consumer rate was
12.625 percent.
[32] CMS instructs carriers to allow physician practices 15 days from
the initial notification letter to submit information related to
offsetting. The carrier is to promptly consider and respond to the
information. If the carrier does not receive such a response from the
practice, CMS instructs carriers to initiate offset within 40 days
after the date of the letter notifying the physician practice of the
overpayment amount.
[End of section]
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