Pre-Payment Review: CMS Contractors Fail to Follow the Rules

Payment Matters Newsletter

March 21, 2012

By: Paul W. Kim* and Mark A. Stanley *

It has been over three years since the publication of the final rule by CMS regarding pre-payment reviews. At the time we noted that the rule offered apparent relief to providers and suppliers laboring under the rigorous documentation requirements of pre-payment reviews. Most importantly, the rule established a one year limit on pre-payment review, with earlier termination based on error benchmarks, unless a contractor has a reason to believe that the subject of the review is artificially lowering its error rate through sneaky billing practices. In addition, the rule established notification standards in order to give providers and suppliers clear guidance as to the reason for pre-payment review, as well as assistance in lowering their error rates. The rule on pre-payment reviews, in short, was supposed to put contractors on a relatively short leash when they subject providers and suppliers to burdensome and costly process.

The MACs and the ZPICs are clearly enamored with the prepayment review process, and have stepped up their pre-pay review activities since the publication of the final rule. However, instead of following the regulations, with their offer of guidance, relief, and predictability, many contractors have essentially ignored them altogether. Probably the most egregious example is the complete disregard for the one year termination. Some reviews have lasted more than twelve months and, when one ceases, another review begins within six months, sometimes the very next day after the first review has terminated.

The contractors also have virtually stopped issuing letters to providers and suppliers informing them that pre-payment reviews would commence and explaining both the reasons for the denials and the purposes of such reviews. Furthermore, providers and suppliers rarely receive required quarterly letters, which are supposed to notify them of the results and contractor findings, and educate them on how to improve documentation.

Ober|Kaler's Comments

Contractor activity is putting the squeeze on providers and suppliers. Simply put, if the post-payment audits by the RACs and the extrapolated overpayment amounts assessed by the ZPICs do not kill the typical provider or supplier, a pre-payment review just might. Fortunately, certain staff members at CMS appear to have the authority to reign in these contractors. In the absence of appeal rights, providers and suppliers should therefore voice their concerns directly to CMS.


*Paul W. Kim and Mark A. Stanley are former members of Ober|Kaler's Health Law Group.