Health Law Alert: Three New Medicare Demonstration Projects

December 07, 2011

On November 15, 2011, CMS announced three new demonstration projects designed to reduce improper payments in the Medicare and Medicaid programs. All of these programs take effect on January 1, 2012. Limited information is available at present, but we will continue to update you as CMS releases additional details. Here’s a quick summary:

Recovery Audit Prepayment Review: In seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, and IL) and four states with high volumes of short stay admissions (PA, OH, NC and MO), this demonstration project will allow the RAC to review claims prior to payment. We will continue to follow this project closely for additional information and new developments, as pre-payment reviews have significant revenue implications for all providers, and none of the existing procedural protections (in the Statement of Work, regulations and policy manuals) have been designed with widespread pre-payment reviews in mind. The only current analog for pre-payment review of Part A and B claims is in the fraud context, and the procedural protections for providers undergoing those types of reviews are very limited.

Prior Authorization for Certain Medical Equipment: In seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, IL and NC), prior authorization will be required for certain items of medical equipment. In phase I of the demonstration, MACs will conduct prepayment reviews on certain medical equipment claims, and in phase II, prior authorization will be fully implemented.

Part A to Part B Rebilling: Of perhaps the most interest to our hospital clients is CMS’ third new demonstration project. This project, which is offered on a “first come, first served” basis to the first 380 hospitals who sign up, will allow a hospital whose part A “short stay” claim is denied by a RAC, MAC, CERT or self-identified by the provider to cancel the part A claim and rebill under part B, receiving 90% of the part B allowable payment, after co-insurance and deductible amounts are subtracted. Currently, if a part A short stay claim is denied, the hospital can either rebill under part B (if within the timely filing limit—otherwise the hospital receives $0) or must appeal (and win)--a process that is expensive and time consuming. This project will impact claims denied by contractors or identified by providers on 1/1/2012 or later. Only Medicare PPS hospitals are eligible to participate; PIP providers, psych hospitals, children’s’ hospitals, LTCHs, IRFs, cancer hospitals and CAHs are not eligible.

On December 8, 2011, CMS will have an open-door forum to answer additional questions, and sign-up begins on December 12, 2011 at 2 p.m. eastern.

We have contacted CMS for additional information on the Part A to Part B Rebilling Demonstration Project and are closely monitoring this Demonstration Project for additional developments and details. Because of the limited number of facilities to be included in this demonstration, hospitals will have to act quickly in order to participate. If you would like more information on the Part A to Part B Rebilling Demonstration Project, or any other of these demonstration projects, please contact one of the Phelps Dunbar Health Care attorneys.


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