Why Are They Looking?

Pre-payment Review

We are seeing an increasing trend in pre-payment reviews, especially those focused on R-J modifiers (Residence to Free Standing Dialysis). Due to the subjective nature of non-emergent claims payment determinations, it is difficult for providers running these transports to win these claims on initial submission. If properly supported and argued on appeal, most of these claims should ultimately be paid. However the appeals process, and even the appeals decisions, does not stop the pre-pay review for your company. Pre-payment review is a highly discretionary process that the Carriers/MACs are entitled, even encouraged, to pursue. To not only win payment on the claims, but to also get your company removed from pre-pay review often takes a substantial amount of time and documented correspondence with the Carrier/MAC.



Post-pay Review

Medicare and most Medicaid programs require payment to be made to the provider within 30 days of the submission of the claim. This short time frame and the increasingly high volume of claims being processed make a detailed pre-payment review of claims impossible. Claims are basically paid if they meet some pre-determined criteria, often simply filling in all of the required fields of the claim. Therefore, post-payment review of claims will continue to be the rule, not the exception. You can count on being reviewed by one of the auditing entities at least every few years, and, for the reasons set forth in the next section, you can count on them assessing a significant error rate.



Ambulance Services are a Target

Ambulance claims are ripe for overpayment assessments due to the subjective nature of claims. Specifically, “medical necessity” for ambulance services is often highly debated and a very difficult phrase to place a standard set of determining criteria on. Key elements in overpayment cases for ambulance are usually: The medical necessity of non-emergent claims (whether the patient could have traveled by other means such as a wheelchair van), downcoding from ALS to BLS either because the ALS service was not necessary or was not actually performed, and facility to facility transfers where it is not apparent from the claim why the transfer was required.




Extrapolation is a mathematical formula that allows any of these auditors to pull a random sample of your claims and then determine that the entire universe of your claims is represented by that sample. More specifically, a sample of your claims is reviewed (usually over a two year period), a number of your claims are deemed to have been “overpaid” (usually for one of the reasons previously mentioned), and an error rate is established by calculating the percentage of your claims that have been “overpaid”. Finally, this error rate is used to calculate the overpayment of not just the claims in the sample, but all of your claims for the time frame reviewed. For example: if 10 out of 40 claims reviewed were deemed overpaid, you have a 25% error rate. If you were paid $400,000 by Medicare in the two years reviewed (for ALL claims, not just the ones reviewed), then the extrapolated overpayment is 25% of the $400,000, or $100,000. Thus, the 10 claims may have resulted in an actual overpayment of around $2,500, but an extrapolated overpayment of $100,000. (The math is a little more complex than this, but the result is basically the same).


So why are they looking? Because they can often assess huge overpayments by using extrapolation on just a small sample of your claims. NOTE: This is just an example, often the error rates and actual overpayments are MUCH higher! You can look at your Medicare receivables for a two year time period and then apply a 50% to 90% overpayment error rate to assess your potential liability.