Q&A with Jeff Baird: How to Prepare for and Survive Prepayment Reviews

According to health care attorney Jeff Baird of Brown &
Fortunato, post-payment audits are not fun, but they are normally
not fatal.

“At least with a post-payment audit, the HME supplier receives
payment up front, thereby allowing it to pay its light bill and
meet payroll. It is only after the fact that the supplier and the
carrier argue about whether the supplier should have been paid in
the first place,” says Baird. However, he continues, “A prepayment
review is a different animal. Before receiving payment,
the supplier must submit documentation to the carrier and the
supplier will receive payment months later only if the carrier is
satisfied with the supplier’s documentation.

“The carrier’s determination can be subjective. While the
supplier is waiting for the carrier’s decision, the supplier must
still pay its day-to-day expenses. This can be difficult to do if
there is no money coming in the front door. By the time the carrier
gets around to paying the supplier, the supplier may have had to
close its doors.”

Question: Why are prepayment reviews on an
increase?

Answer: CMS has determined that for every
dollar it expends in pursuing fraud cases, or simply collecting
repayments, it receives many dollars in return. Instead of relying
on recouping dollars previously paid, CMS has determined that it is
cost-effective to “attack the problem” on the front end by
requiring suppliers to justify payment before payment is
made.

Secondly, as baby boomers age, there is an increase in demand
for DME. Third, suppliers provide relatively expensive items. Any
item that carries a high dollar reimbursement or, as a whole,
accounts for significant dollars paid out on claims, becomes more
likely to be the subject of post-payment audits and prepayment
reviews. Lastly, auditors themselves are becoming more
sophisticated. As this occurs, the auditors become stricter in
deciding whether medical necessity has been established for a given
piece of DME.

Question: What types of contractors does CMS contract
with to conduct audits and reviews?

Answer: CMS contracts with five types of
contractors: Medicare Administrative Contractors, or MACs;
Comprehensive Error Rate Testing (CERT) contractors; Recovery Audit
Contractors, or RACs; Program Safeguard Contractors, or PSCs; and
Zone Program Integrity Contractors, or ZPICs. (PSCs are being
converted into ZPICs.) MACs conduct prepayment reviews and
post-payment audits; CERT contractors conduct post-payment audits;
PSCs and ZPICs conduct prepayment reviews and post-payment audits;
and RACs conduct post-payment audits.

Question: What causes a supplier to become a target of a
prepayment review?

Answer: Generally, a supplier becomes subject
to a prepayment review either because it provides an item that has
been selected for prepayment edit; or it has caught the attention
of the MAC or ZPIC due to the results of a post-payment audit, data
analysis indicating the supplier is outside the norm or complaints
filed against the supplier.

Question: What are the steps in the prepayment review
process?

Answer: The supplier will submit the claim to
the MAC. An Additional Documentation Request (ADR) letter will be
sent to the supplier. The supplier will send the additional
documentation to the auditor within 30 days. (The claim will
automatically deny if documentation is not received within 45
days). The claim is reviewed by the medical review nurse and a
determination on whether to pay or not is made. An Explanation of
Benefits (EOB) is provided to the supplier.

Question: What is the timeframe for the review of each
claim?

Answer: The MAC should review the claim within
60 days from the receipt of additional documentation. The timeframe
may be longer if the review is by a PSC or ZPIC.

Question: How long will the supplier remain on
prepayment review?

Answer: Normally, the supplier will be on
prepayment review until its charge denial rate (CDR) is less than
or equal to 20 percent. If the supplier is subject to prepayment
review due to specific items being placed on a prepayment edit and
the supplier provides a high volume of such items, then the
supplier may be able to work with the auditor to limit the number
of claims subjected to prepayment review.

Question: Will 100 percent of the supplier’s claims be
reviewed until the CDR reaches 20 percent?

Answer: No. When the CDR drops below 75
percent, a targeted review is initiated.

Question: What is a targeted review?

Answer: A targeted review is a review of a
portion of claims submitted based on the CDR. For example, if the
supplier’s CDR was 40 percent, then only 40 percent of the
supplier’s average number of claims submitted in a month would be
reviewed.

Question: What steps should a supplier take to get
removed from prepayment review as soon as possible?

Answer: If the supplier is subject to a
prepayment review due to specific items being placed on a
prepayment edit and the supplier provides a high volume of such
items, it should contact the auditor and request to limit the
number of claims subjected to prepayment review.

Question: Where can a supplier look to determine areas
likely for prepayment reviews?

Answer: MAC listserv; Quarterly Advisory
Newsletter; OIG reports; CERT reports; OIG work plan; Office of
Evaluation and Inspection reports; Office of Audit Services
reports; Supplier Manual; and Medicare Learning Network.

Question: What are some practical tips in handling
prepayment ADRs?

Answer: Read the ADR letter carefully. Note the
due date given in the letter (denials will often occur if a
response is not received within the stated timeframe). Note where
to send the response, and be sure to respond to the correct office
(delays and possible denials will occur if the response is to the
wrong office).

Put the request letter on top of the documents that are included
in the response (this helps ensure that the documents are routed
appropriately when received by the contractor). Respond only one
time. Do not send the response multiple times (duplicates can delay
the contractor from making a decision).

Do not combine responses. If the request letter asks for
documentation on just one claim, only include documentation for
that claim in the response (delays can occur if the supplier
combines request letters and sends them as one response). Send all
response documents at one time; do not send a portion now and a
portion later (delays and denials will occur if the supplier does
not send everything in one response).

Do not file duplicate claims. The supplier should keep track
when it has received a request for additional documentation on a
prepayment claim. Do not file another claim for the same items just
because the supplier has not received a response as quickly as a
claim where documentation was not requested (duplicate claims can
delay the contractor from making a decision).

Jeffrey S. Baird, Esq., is chairman of the Health Care Group
at Brown & Fortunato, P.C., a law firm based in Amarillo,
Texas. He represents pharmacies, infusion companies, home medical
equipment companies and other health care providers throughout the
United States. Baird is Board Certified in Health Law by the Texas
Board of Legal Specialization. He can be reached at 806/345-6320 or
[email protected].