by Daniel E. Gospin and Amy F. Lerman

As part of continued efforts to expand the Medicare Recovery Audit Contractor (“RAC”) program, the Centers for Medicare & Medicaid Services announced in November 2011 the implementation of a demonstration project that will allow RACs to conduct prepayment reviews on certain types of Medicare claims that historically have resulted in high rates of improper payments.

The prepayment review demonstration project will focus these efforts in 11 states—seven of which were selected because they have significant populations of fraud- and error-prone providers, and four states were selected for having relatively high claims volumes of short inpatient (“one day”) stays. The demonstration project is expected to begin in the summer of 2012.

Providers should consider that prepayment review, through implementation of this demonstration project, may become the new model for RAC review, in line with the government’s theory that it is easier to stop money from getting out than to “pay and chase” improper payments once they have been made. As such, providers must take necessary steps to assess, analyze, and, as needed, make investments to improve internal auditing and monitoring policies, procedures, and processes.

Read the full alert here