A Summary of Pre-Claim Review for Home Health Agencies

By now, home health agencies are well aware of the new program under development by CMS to crack down on what they believe is a major problem with improper payments for their services.  This is referred to as the “Pre-Claim Review Demonstration”.

This document describes these new regulations that were published in the Federal Register in June.

This effort is a drastic attempt by CMS to reduce the increasing improper payment rates associated directly with home health services.  Essentially, developing a process to examine 100% of all claims submitted by Home Health Agencies (HHA) prior to their approval and final payment.

Pre Claims Review for Home Health

CMS’s Comprehensive Error Rate Testing (CERT) program annually estimates the percentage of payments that did not meet Medicare coverage, coding and billing rules.  For 2015, they calculated the improper payment rate for home health claims at 59%.  This compares to 51.4% in 2014 and 17.3% in 2013.  CERT determined that a majority of errors that occurred in 2014 were due to the fact that the narrative documentation associated with face-to-face encounters did not support the patient’s homebound status and the need for skilled services.  Now CMS no longer requires separate narrative documentation for the face-to-face, but they are still seeing many cases where the documentation provided by the HHA in the medical record does not support the home health benefit they are providing.  These improper payments do not necessarily indicate fraud, it may simply be a lack of documentation, documentation errors, or a lack of understanding of Medicare rules.  However, fraud is a substantial contributor to the problem.

The Health Care Fraud Prevention and Enforcement Action Team (HEAT Task Force) was created by HHS and the Department of Justice in 2007.  Since then, they have charged 2,300 defendants with defrauding Medicare of more than $7 billion and convicted 1,800 of these defendants of felony health care fraud offenses.

These statistics indicate that CMS is losing billions in healthcare payments to HHA that either do not follow the rules established for these services or are intentionally ignoring them.  With their estimates indicating that over half of these claims are paid when they should not have been, CMS is taking the position to take drastic and immediate action.  They have identified the states that are the biggest offenders according to data already examined by CERT and HEAT, these are Texas, Illinois, Florida, Massachusetts and Michigan.  CMS has already taken steps to combat the situation in these states by issuing a moratorium on new home health agencies for the cities of Miami, Chicago, Fort Lauderdale, Detroit, Dallas and Houston.

Because of this concentration of fraud, they have selected these states for the rollout of this new program.  Here are the states and the earliest effective dates.  CMS has stated that it intends to implement these regulations in each state at the earliest opportunity:

Demonstration start dates:

  • Illinois – 8/1/16
  • Florida – 10/1/16
  • Texas – 12/1/16
  • Michigan and Mass – 1/1/17

The purpose of this demonstration is not necessarily the rollout of a new national program, it might happen that way, but the initial purpose is to collect data on Home Health claims from the five states that are the biggest offenders to determine the next course of action.  This data will be analyzed to determine potential fraudulent practices and to develop a new programs to reduce fraud and the number of cases paid without valid supporting documentation.  It will also be used by law enforcement to take criminal action against some of these agencies.

Medicare will also use this demonstration to streamline the process for program expansion.  It will be used to answer questions about the MACs ability to process these new duties.  What is the return of investment from this?  What impact does it have on documentation quality?  How does it impact improper payment rates?  This data could lead to an accelerated expansion of the demonstration program, currently slated for three years, or create a new and entirely different approach to dealing with the problem, depending on what the data indicates and how CMS decides to deal with it.

Under these new regulations, the MACs have been given the responsibility of reviewing these claims and for communicating the results to the HHA in the demonstration states.  They will provide outreach education to the agencies and CMS has already provided instructions and funding to implement these changes.  The MACs have already developed their own guides for internal review of these claims and seem to be prepared to move forward.

CMS has now published the “Pre-Claim Review Operational Guide” that describes in detail how this process will work and how it will be enforced.  Everyone affected by these regulations should become familiar with this guide.

The process goes generally like this, the HHA submits the RAP to CMS for a new beneficiary.  They then submit the pre-certification request when the documentation has been prepared and submitted through current procedures.  The documentation can be submitted by fax or through the esMD document transfer systems provided by third-party vendors.  These documents are linked to the pre-certification request and related claims through an identification number that cross references the documentation with the claim.

CMS has stated that the initial pre-certification request will be processed within 10 days of the receipt of the pre-certification request by the MACs.  If the documentation is approved, they will communicate a positive result to the pre-certification request as described in the operations manual.  If not, they will send a rejection through the same process.

If the documentation is insufficient for approval, the HHA may correct the issue and send another pre-claim certification request for approval.  The MACs will process these subsequent requests within 20 days of receipt.  This can be done an unlimited number of times until approval is received.  This process applies to each and every final claim if you are subject to these new regulations.

If you do not comply, meaning that you send a final claim without the approval transaction from the MAC, the MAC will automatically suspend the final claim for the pre-claim review.  If the documentation is considered insufficient or there are any other problems with the claim, the claim will not be paid.  Even if these uncertified claims are approved, the HHA will be assessed a takeback of 25% of the total payments made toward the services (after a three month grace period).  This penalty is not subject to appeal.

These new regulations, if they apply to you or you are preparing for them, will require several changes to your claims and documentation processing and a coordination between these two processes that was not previously required.  If you do not take anything else out of this, make sure that you DO NOT submit a final claim without the positive pre-approval response from your MAC.  If you do, this will guarantee a loss of 25% of your revenue that cannot be recovered, even if nothing was wrong with your documentation or your claim.

Like other Medicare regulations, the important part is to understand the new process and deal with it as efficiently as possible.  To minimize this potential penalty and the impact to cash flow, examine these aspects of your organization for vulnerabilities.  These are also good topics for internal review even if you are not immediately subject to these regulations:

  • Does your documentation comply with CMS standards for home health services?
    • Do you thoroughly understand these requirements?
    • Do you self-check compliance on a case-by-case basis?
    • Do you track the submission and receipt of all required documentation to CMS?
    • Is this documentation readily available to you when you need it?
    • Is the documentation linked by ID to the appropriate claim?
  • Do you have a process to identify services most often subject to review by CMS?
    • Do you have an internal review before authorizing these services?
    • Do you obtain the ABN if the patient wants services not authorized by Medicare?
    • What is your claim approval rate?
    • What issues have you had in the past regarding denied claims?
    • What action have you taken to correct this?

If these regulations apply to you, you will need to make sure you develop new processes to assure that a pre-claim review certification request follows every RAP and that you monitor the status of each of these requests through a new system that makes sure that no pre-claim certification is missed, each rejected one is corrected and resubmitted and that no final claim is submitted without documented pre-claim certification approval.

This regulation may not be the final tactic used by CMS to combat these improper payment issues, it may simply be the tool that collects the data for the final solution.  Like dealing with the IRS, you don’t have to be perfect, you just need to be the least attractive target when these agencies are looking for offenders.

As you can see from CMS data, by their estimation, over half of the claims submitted by HHA were paid when they should not have been.  With the new data created by this demonstration program and modern analytics systems, the agencies that have made this a habit, through intentional fraud or simple inefficiency, will be identified.  With the money that is at stake and the criminal penalties that could be imposed, all home health agencies need to take steps now to make sure that they are on the “good” list with CMS.  Even if you are not immediately subject to this program.


By Kalon Mitchell, President – MEDTranDirect

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