CMS Announces FY2011 Error Rates and New Demonstrations to Target Improper Payments

The Centers for Medicare & Medicaid Services (CMS) released the FY 2011 Medicare and Medicaid payment error rates and announced three new demonstrations that are intended to help curb improper payments. The Medicare fee for service program improper payment rate was 8.6 percent and the Medicaid rate is 8.1 percent. 

The most notable demonstration project involves the Recovery Audit Contractors (RAC). The Recovery Audit Prepayment Review demonstration will allow RACs to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments. These prepayment reviews are a significant shift from the traditional “pay and chase” methods of looking for improper payments after they have been made. 

The second demonstration will require prior authorization for certain medical equipment for all people with Medicare who reside in seven states with high populations of fraud- and error-prone providers (CA, FL, IL, MI, NY, NC and TX). 

The third initiative will allow hospitals to rebill for 90 percent of the Part B payment when a Medicare contractor denies a Part A inpatient short stay claim as not reasonable and necessary due to the hospital billing for the wrong setting.