Payment Systems
by Mary Barton, RN and Jennifer Gibson, RN, HCS-D ICD-10-CM, COS-C

The Centers for Medicare and Medicaid Services (CMS) is continuing to reinforce its ongoing focus on decreasing the per capita cost of care, while simultaneously improving outcomes and managing population health. Recently, CMS announced the Pre-Claim Review Demonstration, commonly known in the industry as prior authorization. This action is aimed at identifying care that is not within the “reasonable and necessary” guidelines before home health agencies file their final claims with Medicare. This project will begin in the five states identified as having the largest concentration of over-utilization in the nation:

  • Illinois
  • Florida
  • Texas
  • Massachusetts
  • Michigan

Previously called preauthorization, the Pre-Claim Review Demonstration will require agencies to submit all supporting documentation for medical necessity for review before final claims are billed and paid. Originally, the legislation would have required documentation before the start of care. But the industry rallied behind a concerted effort to express its concerns regarding timely initiation of care of the patient. Because of this, CMS modified the proposal for prior authorization in such a way that agencies will submit this documentation after initiation of patient care, and just after submitting a Request for Anticipated Payment (RAP). For the initial five states, there will be penalties up to 25 percent of the claim amount, or outright denial of claims for noncompliance in submitting the required documentation.

What Agencies Need to Know

  1. With a pre-claim review, care has already begun. The request is submitted after all of the initial assessments and intake procedures. The pre-claim review occurs after the RAP has been billed but prior to the final claim being submitted.
  2. The pre-claim review request should include all documents and information that support medical necessity for the beneficiary needing the applicable level of home health services. The Medicare Administrative Contractor (MAC) websites provide more specific information for each of the states.
  3. Medicare will make every effort to issue a decision on a pre-claim review request within 10 business days. Remember: This applies to all claims and all patients.
  4. If the initial pre-claim review request was rejected due to error(s), agencies may resubmit the request with additional documentation as many times as necessary. Medicare will work closely with the agency to explain why the submission was insufficient. Meanwhile, your RAP payment will be recouped until you get affirmed.
    • Medicare will make every effort to issue a decision on resubmitted requests within 20 business days.
    • An agency is allowed an unlimited number of resubmissions.
  5. Medicare Administrative Contractors (MACs) will list the pre-claim review tracking number on the decision notice. This specific tracking number must be submitted on the final claim.
  6. Pre-claim review requests can be sent to the MACs via mail, fax or through the Electronic Submission of Medical Documentation (esMD) system. The method used to submit the request is the same method that will be used to send the decision.
  7. If the request is denied, the beneficiary is only responsible for payment of services if he or she has signed an Advanced Beneficiary Notice (ABN) at the start of the home health services.
    • Home Health Agencies will not be allowed to require that beneficiaries sign an ABN. A beneficiary has the right to refuse to sign.
  8. If a provider submits a claim for payment without submitting a pre-claim review request, they may still be paid, but only after a pre-payment review, and with a 25 percent reduction of the full claim amount.
  9. The payment reduction, which will not apply during the first three months of the demonstration, is not subject to appeal. After a claim is submitted and processed, appeal rights on the claim determination are available as they normally are.

Illinois is the first state to fall under this demonstration project; Florida follows in October; Texas in December; and Michigan and Massachusetts in January. Agencies in these states can get prepared by reading the CMS Frequently Asked Questions (located at

As CMS continues its focus on increasing patient care and decreasing cost, more regulations are sure to follow that help increase accountability for agencies and reduce the risk of fraud. Some of these regulations may increase the burden of documentation on homecare providers, but with proper preparation and education, agencies can still thrive in the new era of preauthorization. Amidst all these changes, it is increasingly important for providers to remember the most important thing in health care—the patient.