As part of an ongoing effort to reduce fraudulent payments from Medicare and Medicaid, CMS announced the launch of the Recovery Audit Prepayment Review Demonstration Program.  In the prepayment review program, recovery auditors will review medical billing claims before they are paid to ensure that providers comply with all Medicare payment rules. Recovery Auditors will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments.

Recovery Auditors currently work on a contingency basis to identify improper payments after claims have been paid – the traditional “pay and chase” method of recovering fraudulent payments. The most effective way to limit taxpayer dollars lost due to fraud is to review the claim before it is paid to ensure that services were performed, documented, and billed properly.

This program will be conducted for 3 years, beginning January 1, 2012 and ending December 31, 2014 and implemented in 11 states. Seven states were chosen based on their high level of fraudulent claims (FL, CA, MI, TX, NY, LA, IL) and four states were selected based on high claim volumes for short inpatient hospital stays (PA, OH, NC, MO).

Medicare estimates $60 Billion in fraudulent payments a year.  CMS is taking a proactive stance against fraud with this program.  CMS will take three years to perfect this program.  I would hope claims will not be “held up” for reimbursement with even longer delays, allowing honest providers to be paid within reasonable time periods.  As a taxpayer I appreciate any effort to reduce waste.  Chasing monies already paid is a reactive process (investigations, lawyers, trials, incarcerations, liquidations, etc.) and it’s expensive and time consuming.   It would be faster and cheaper to catch fraud before any monies are paid.  As a taxpayer and business owner, prevention makes more sense than our current “pay and chase” method.  As they say “an ounce of prevention is worth a pound of cure”.