Use of prepayment edits saved Medicare at least $1.76 billion in fiscal year 2010, but a new study by the Government Accountability Office found that savings could have been greater had the edits been more widely used.
According to GAO, the Centers for Medicare & Medicaid Services (CMS) reported an improper payment rate of 8.6 percent ($28.8 billion) in the Medicare fee-for-service program for fiscal year 2011. To help ensure that payments are made properly, CMS uses controls called edits that are programmed into claims processing systems to compare claims data to Medicare requirements in order to approve or deny claims or flag them for further review.
GAO officials said the study was conducted because GAO was asked to assess the use of prepayment edits in the Medicare program and CMS’s oversight of Medicare administrative contractors (MACs), which process claims and implement some edits.
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According to the GAO, CMS has three processes for implementing the edits, “but each of these processes has at least one weakness.”
GAO said the weaknesses include:
- incomplete analysis of vulnerabilities to improper payment that could be addressed by edits;
- lack of specific time frames for implementing edits and other corrective actions;
- flaws in the structure of some edits;
- lack of centralization in the implementation of some edits, which leads to inconsistencies; incomplete assessment of whether edits are working as intended;
- and lack of full documentation of the processes.
GAO officials found that Medicare paid $8.6 million in fiscal year 2010 for claims that exceeded CMS’s limits on the quantity of certain services that can be provided to a beneficiary by the same provider on a single date of service. “Although edits had been implemented to limit service quantities, a weakness in their structure caused them to miss instances in which quantity limits were exceeded,” according to the report.
The report also claimed that CMS informs MACs about vulnerabilities that could be addressed through prepayment edits, but the agency does not systematically compile and disseminate information about effective local edits to address such vulnerabilities. CMS oversees MACs’ use of edits partly through its review of certain MAC reports, but these reports are not intended to provide a comprehensive overview of their edits.
In January 2011, CMS expanded its oversight activities and began requiring MACs to report on how they had addressed certain vulnerabilities to improper payment, some of which could be addressed through edits. While CMS increased the funding in fiscal year 2011 for contractors’ medical review activities, including edit development, the agency provided relatively small incentives – 3 percent or less of all contract award fees – to promote use of effective prepayment edits by MACs, GAO found.
GAO concluded that CMS should take seven actions to strengthen its use of prepayment edits, including restructuring some edits; centralizing implementation of others; fully documenting processes; encouraging more information sharing about effective edits; and assessing the feasibility of increasing incentives for edit use.
In the report, the Department of Health and Human Services “generally agreed” with GAO’s recommendations and noted CMS’s plans to address them.