Prepayment Audits: Medicare Rationing by Procedure, Region, and Physician

Government is a poor manager. It is, of necessity, large and cumbersome. It must administer public funds and must account for every penalty. It has no choice but to become “bureaucratic ” Every government is, by definition, a government of forms. This means high costs. For “control” of the last 10 percent of phenomena always cost more than the control of the first 90 percent.

Peter F. Drucker (1909-2005), The Daily Drucker, 2004

January 5, 2012- Picture yourself as a Medicare manager charged with preventing budget overruns by limiting overuse of medical procedures. As such, you are sensitive to media reports, such Dr. Atul Gawande’s article “The Cost Conundrum “ in the June 1, 2009 New Yorker on the overuse of cardiac procedures in McAllen, Texas, and two front page Wall Street Journal pieces on March 29, 2011 “Medicare Road Reveals Troubling Trail of Surgeries” and April 13, 2011 “Hospital Bars Surgeon from Operating Room,” based on abusive overuse of spinal fusions by a Portland, Oregon surgeon.

What would you do? You would turn to your massive Medicare data bank to find what procedures were costing too much. Those would be heart,joint replacement, and spinal fusion procedures. You would use that same data to identify physicians who stand out as doing more, many more, procedures than their colleagues. You would see what regions of the country where excessive number of procedures occur. And you would ration those procedures by reviewing costly and overdone procedures, region, and physician, before the procedures were done and by not paying for them.

Starting January 1, 2012

That is exactly what started to take place on January 1, 2012. On that date, CMS launched its Medicare Prepayment Claim Reviews, a demonstration project that will be conducted over the next 3 years.

Medicare will require pre-payment audits for hospital stays for certain cardiac care replacements, and spinal fusion believed to be “improper” under the Recovery Audit Prepayment Demonstration Act of 2010. Recovery Auditors will focus on high-cost cardiac, joint replacement, and back procedures in 7 states with high rates of “improper payments ”in states said to be prone to fraud and abuse (Florida, California, Michigan, Texas, New York, Louisiana, and Illinois) and in 4 states with high claims volumes for short hospital stays (Pennsylvania, Ohio, North Carolina, and Missouri) for a total of 11 states.

The following procedures will be audited before payment is rendered in the 11 states.

226- Cardiac defibrillator implants without (w/o) cardiac catheter with (w/) major complications or comorbidities (MCC)

227 – Cardiac defibrillator implants (w/o) cardiac catheter w/MCC

242 - Permanent cardiac pacemaker w/MCC

243 – Permanent cardiac pacemaker w/CC

244 – Permanent cardiac pacemaker w/CC or MCC

245 – Automatic implantable cardiac defibrillator (AICD) generator procedure

247 – Percutaneous cardiovascular procedure w/drug eluting stent w/o MCC

251- Percutaneous cardiovascular procedure w/o coronary art stent 1/o MC
253 – Other vascular procedures w/CC

264 – Other circulatory system procedures

287 – Circulatory disorders except acute myocardial infraction (AMI) w/cardiac catheter w/0 MC

458 – Spinal fusion except cervical w/spinal curve, malign, or 9+ fusion c/0 CC
460 – Spinal fusion except cervical w/o MCC

470 – Major jo9int replacement or reattachment of lower extremity w/o MCC

490 – Back and Neck procedure except spinal fusion w/CC/MCC or disc device /neurostimulator.

Reducing Improper Payments

Through these audits and other efforts , CMS hopes to reduce improper payments by $50 billion, cut errors by half, and recover $2 billion in improper payments. Whether a large and cumbersome bureaucracy like Medicare will succeed in its efforts, and how much it will cost to reduce overpayments is unknowable. It is, however, worth observing that control of the last 10% of any government phenomena always costs more than control of the first 90%.

Tweet: On 1/1/12, CMS launched a 3 year project in 11 states to prevent payments for improper heart, joint replacement, and spinal fusion procedures.