Medicare: CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending

CMS required prior authorization as a demonstration in 2012 for certain power mobility devices, such as power wheelchairs, in seven states. Under the prior authorization process, MACs review prior authorization requests and make determinations to approve or deny them based on Medicare coverage and payment rules. Approved requests will be paid as long as all other Medicare payment requirements are met.

GAO was asked to examine CMS's prior authorization programs. GAO examined 1) the changes in expenditures and the potential savings for items and services subject to prior authorization demonstrations, 2) reported benefits and challenges of prior authorization, and 3) CMS's monitoring of the programs and plans for future prior authorization. To do this, GAO examined prior authorization program data, CMS documentation, and federal internal control standards. GAO also interviewed CMS and MAC officials, as well as selected provider, supplier, and beneficiary groups.

Prior authorization is a payment approach used by private insurers that generally requires health care providers and suppliers to first demonstrate compliance with coverage and payment rules before certain items or services are provided to patients, rather than after the items or services have been provided. This approach may be used to reduce expenditures, unnecessary utilization, and improper payments. The Centers for Medicare & Medicaid Services (CMS) has begun using prior authorization in Medicare through a series of fixed-length demonstrations designed to measure their effectiveness, and one permanent program. According to GAO's analyses, expenditures decreased for items and services subject to a demonstration. GAO's analyses of actual expenditures and estimated expenditures in the absence of the demonstrations found that estimated savings from all demonstrations through March 2017 could be as high as about $1.1 to $1.9 billion. While CMS officials said that prior authorization likely played a large role in reducing expenditures, it is difficult to separate the effects of prior authorization from other program integrity efforts. For example, CMS implemented a durable medical equipment competitive bidding program in January 2011, and according to the agency, it resulted in lower expenditures.

Many provider, supplier, and beneficiary group officials GAO spoke with reported benefits of prior authorization, such as reducing unnecessary utilization. However, provider and supplier group officials reported that providers and suppliers experienced some challenges. These include difficulty obtaining the necessary documentation from referring physicians to submit a prior authorization request, although CMS has created templates and other tools to address this concern. In addition, providers and suppliers reported concerns about whether accessories deemed essential to the power wheelchairs under the permanent durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) program are subject to prior authorization. In practice, Medicare Administrative Contractors (MAC) that administer prior authorization programs review these accessories when making prior authorization determinations, even though they are not technically included in the program and therefore cannot be provisionally affirmed. As a result, providers and suppliers lack assurance about whether Medicare is likely to pay for these accessories. This is contrary to a CMS stated benefit of prior authorization—to provide assurance about whether Medicare is likely to pay for an item or service—and to federal internal control standards, which call for agencies to design control activities that enable an agency to achieve its objectives.

CMS monitors prior authorization through various MAC reports. CMS also reviews MAC accuracy and timeliness in processing prior authorization requests and has contracted for independent evaluations of the demonstrations. Currently, prior authorization demonstrations are scheduled to end in 2018. Despite its interest in using prior authorization for additional items, CMS has not made plans to continue its efforts. Federal internal control standards state that agencies should identify, analyze, and respond to risks related to achieving objectives. CMS risks missed opportunities for achieving its stated goals of reducing costs and realizing program savings by reducing unnecessary utilization and improper payments.

GAO recommends that CMS (1) subject accessories essential to the power wheelchairs in the permanent DMEPOS program to prior authorization and (2) take steps, based on results from evaluations, to continue prior authorization. The Department of Health and Human Services neither agreed nor disagreed with GAO's recommendations but said it would continue to evaluate prior authorization programs and take GAO's findings and recommendations into consideration in developing plans or determining appropriate next steps.

Prior authorization is a payment approach used by private insurers that  generally requires health care providers and suppliers to first demonstrate  compliance with coverage and payment rules before certain items or  services are provided to patients, rather than after the items or services  have been provided. This approach may be used to reduce expenditures,  unnecessary utilization, and improper payments. The Centers for  Medicare & Medicaid Services (CMS)—the agency within the Department  of Health and Human Services (HHS) that administers the Medicare  program—has begun using prior authorization to help ensure program  integrity for selected items and services with high levels of unnecessary  utilization and improper payments. In fiscal year 2017, the federal  government made an estimated $36.2 billion in improper payments for the  Medicare fee-for-service program. Since 1990, we have designated  Medicare a high-risk program because of its size, complexity, and  susceptibility to mismanagement and improper payments.

CMS required prior authorization as a demonstration in 2012 for certain  power mobility devices in seven states. CMS conducts demonstrations to  test or measure the effect of program changes, such as new or innovative  payment approaches. Since that time, CMS has expanded this  demonstration to additional states and implemented three additional  demonstrations for other items or services, such as non-emergency  hyperbaric oxygen therapy, and established a permanent program for  certain types of power wheelchairs. For the purposes of our report, we  refer to the demonstrations and the permanent program collectively as  prior authorization programs unless otherwise noted.

You asked us to review CMS’s use of prior authorization in Medicare,  including findings from current programs, benefits and challenges, and  any opportunities for expansion. This report examines  1.  the changes in expenditures and the potential savings for items  and services subject to prior authorization demonstrations.  2.  the reported benefits and challenges of prior authorization.  3.  CMS’s monitoring of prior authorization programs and its plans for  future prior authorization.

To determine changes in expenditures and the potential savings for items  and services subject to prior authorization demonstrations, we analyzed  Medicare monthly expenditure data. We did not analyze expenditure data  for the permanent program because it was implemented in March 2017.  We calculated monthly expenditures for each demonstration for 2 time  periods: 1) the 6 months prior to implementation of each demonstration  and 2) the start of implementation of each demonstration through March  2017, the month for which the most recent reliable data were available at  the time of our analysis. We analyzed these data separately for three  groups of states: initial demonstration states (states that were part of the  initial implementation), expansion demonstration states (states added  after the initial implementation of the demonstration), and non- demonstration states (states that were never part of the demonstration).  We calculated average monthly expenditures by state for each of the  three groups of states. We then estimated potential savings by comparing  average monthly expenditures before and after implementation in initial  and expansion demonstration states. For the power mobility device  demonstration, we also estimated potential savings from reduced  expenditures in non-demonstration states, since CMS officials stated that  savings may occur in all states—even those not part of the  demonstration—in part because they think that larger nationwide  suppliers could have improved their compliance with CMS policies in all  states based on their experiences with prior authorization. Finally, we  analyzed the effect of prior authorization over time by determining the  percentage of the total reduction in expenditures that took place in the  first 6 months of implementation for each demonstration. We did not  independently verify the accuracy of these data on CMS’s Medicare  expenditures; however, we checked these data for obvious errors and  omissions, compared analyses results to CMS’s publicly reported  information about expenditures, and interviewed CMS officials to resolve  any identified discrepancies. On the basis of these actions, we  determined that these data were sufficiently reliable for the purpose of our  reporting objectives. We also interviewed CMS officials and reviewed  CMS documents, such as CMS’s annual program integrity report, to  identify other program integrity efforts that may have affected  expenditures.

To identify reported benefits and challenges of prior authorization, we  interviewed multiple stakeholders. First, we interviewed a non- generalizable sample of officials from nine Medicare beneficiary and  provider and supplier groups to learn about their experiences with  Medicare prior authorization, including challenges they faced and their  views on program benefits. Second, we interviewed officials from CMS  and the six Medicare Administrative Contractors (MAC) that administer  the Medicare prior authorization programs about program benefits and  challenges implementing and conducting the programs. When possible,  we reviewed relevant documentation, such as the prior authorization  programs’ operational guides, to corroborate information reported by  stakeholders. Third, we interviewed a sample of four private health  insurers and two associations that represent health insurers about their  experiences with prior authorization. To identify private health insurers,  we considered which insurers had the greatest market share among large  group insurers in states with Medicare prior authorization programs and  which offered Medicare Advantage plans, as well as whether the insurer  had been discussed in stakeholder interviews as having particularly  relevant experience. We then compared CMS’s efforts to mitigate  reported challenges to federal standards for internal controls related to  control activities.

To determine the monitoring CMS conducts of prior authorization and its  plans for future prior authorization, we obtained and reviewed CMS and  Medicare contractor documents including Federal Register notices,  proposed and final rules, and CMS prior authorization demonstration  status updates. We interviewed CMS officials regarding the agency’s  monitoring of prior authorization and the extent to which the agency has  plans for future prior authorization. We also interviewed private health  insurers about their prior authorization programs and the evaluations they  conduct, including how they determine whether to add or remove items  and services from prior authorization. We then compared CMS’s efforts in  these areas to identified federal standards for internal control related to  risk assessment.

We conducted this performance audit from November 2016 through April  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Since September 2012, CMS has subjected selected items and services  to prior authorization and pre-claim reviews—a process similar to prior  authorization where review takes place after services have begun— through four fixed-length demonstrations and a permanent program.  The prior authorization demonstrations are for certain power mobility  devices, repetitive scheduled non-emergency ambulance services, non- emergency hyperbaric oxygen therapy, and home health services; while  the permanent program is for certain durable medical equipment,  prosthetics, orthotics, and supplies (DMEPOS) items. By using prior  authorization, CMS generally seeks to reduce expenditures, unnecessary  utilization, and improper payments, although specific objectives for the  programs vary based on the statutory authority CMS used to initiate each.

Power mobility devices demonstration: In September 2012, CMS  implemented prior authorization for certain scooters and power  wheelchairs, items the agency has identified with historically high levels of  fraud and improper payments, for Medicare beneficiaries in seven states:  California, Florida, Illinois, Michigan, New York, North Carolina, and  Texas. The demonstration, established under Section 402(a) of the Social  Security Amendments of 1967, is intended to develop or demonstrate  improved methods for the investigation and prosecution of fraud in  providing care or services under Medicare. In October 2014, CMS  expanded the demonstration to 12 additional states: Arizona, Georgia,  Indiana, Kentucky, Louisiana, Maryland, Missouri, New Jersey, Ohio,  Pennsylvania, Tennessee, and Washington. CMS also extended the  program, which was originally scheduled to end in 2015, until August  2018.

CMS officials reported that since the prior authorization programs’ implementation, the  agency made more than 100 referrals to its contractors that investigate fraud. However,  due to the length of time fraud investigations typically take, results from these referrals are  not yet available. extended the program, which was originally scheduled to end in 2017,  through November 2018.

Non-emergency hyperbaric oxygen therapy demonstration: In March  2015, CMS implemented prior authorization for non-emergency  hyperbaric oxygen therapy in three states the agency has identified with  high utilization and improper payment rates, based on the therapy  facility’s location: Illinois, Michigan, and New Jersey. Medicare covers  hyperbaric oxygen therapy for certain conditions, such as diabetic  wounds of the lower extremities, after there have been 30 days of no  measurable signs of healing during standard wound care treatment.  According to CMS, previous experience indicates that hyperbaric oxygen  therapy has a high potential for improper payments and raises concerns  about beneficiaries receiving medically unnecessary care. The  demonstration, established under Section 1115A of the Social Security  Act, is intended to reduce expenditures while preserving or enhancing  quality of care. The demonstration ended in February 2018.

Home health services demonstration: In August 2016, CMS  implemented prior authorization for home health services in Illinois. The  demonstration, established under Section 402(a) of the Social Security  Amendments of 1967, is intended to develop or demonstrate improved  methods for the investigation and prosecution of fraud in providing care or  services under Medicare. The demonstration was originally scheduled to  incorporate other states the agency has identified with high rates of fraud  and abuse: Florida, Massachusetts, Michigan, and Texas. However, as of  April 2017, CMS paused the demonstration while it considered making  improvements. As of February 2018, the demonstration has not resumed.

Permanent DMEPOS program: In December 2015, CMS established a  permanent prior authorization program for certain DMEPOS items under  Section 1834(a)(15) of the Social Security Act. This program aims to  reduce unnecessary utilization for certain DMEPOS items. To select the  items that would be subject to prior authorization, CMS compiled a Master  List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have  an average purchase fee of $1,000 or greater (adjusted annually for  inflation) or an average rental fee schedule of $100 or greater (adjusted  annually for inflation), and 3) meet one of these two criteria: the item was  identified in a GAO or HHS Office of Inspector General report that is  national in scope and published in 2007 or later as having a high rate of  fraud or unnecessary utilization, or the item is listed in the 2011 or later  published Comprehensive Error Rate Testing program’s annual report.  CMS may choose specific items from this Master List to include on the  required prior authorization list, and there is no set end date for requiring  prior authorization for those items. CMS may suspend prior authorization  for those items at any time. (See app. I for the items on the Master List.)  In March 2017, CMS began requiring prior authorization for two types of  group 3 power wheelchairs from the Master List for beneficiaries with a  permanent address in selected states (Illinois, Missouri, New York, and  West Virginia) and expanded the program nationwide in July 2017. As  of February 2018, CMS has not identified any other items from the Master  List for prior authorization. See figure 1 for each prior authorization  program’s implementation and end dates.

MACs that administer the prior authorization programs review prior  authorization requests for items and services, along with supporting  documentation, to determine whether all applicable Medicare coverage  and payment rules have been met. CMS expects requests for prior  authorization to include all documentation necessary to show that  coverage requirements have been met, for example face-to-face  examination documentation or the detailed product description. The  referring physician—or the physician who conducts the face-to-face  examination of the beneficiary and orders the item or service—provides  this documentation to a provider or supplier who subsequently furnishes  the item or service. According to multiple MACs’ officials, the provider or  supplier who furnishes the item or service typically submits the prior  authorization request. CMS has specified that MACs review initial prior  authorization requests and make a determination within 10 business  days. MACs make one of the following decisions:

Provisionally affirm (approve) – Documentation submitted meets  Medicare’s coverage and payment rules. A prior authorization  provisional affirmation is a preliminary finding that a future claim  submitted to Medicare for the item or service meets Medicare’s  coverage and payment requirements and will likely be paid.

Non-affirm (deny) – Documentation submitted does not meet  Medicare rules or the item or service is not medically necessary.  However, a non-affirmed request may be revised and resubmitted for  review an unlimited number of times prior to the submission of the  claim for payment. CMS has specified that MACs make a  determination on a resubmission within 20 business days.

For the demonstrations, claims that are submitted without a prior  authorization provisional affirmation are subject to prepayment review,  which is medical review before the claim is paid. In addition, for the  home health services and power mobility devices demonstrations, claims  submitted without a prior authorization provisional affirmation that are  determined payable during the medical review will be subject to a 25  percent reduction in payment. For the permanent program, claims that  are submitted without a prior authorization provisional affirmation are  denied. (See fig. 2 for the prior authorization process.)

As of March 31, 2017, MACs had processed over 337,000 prior  authorization requests—about 264,000 initial requests and about 73,000  resubmissions, as shown in table 1.

MACs’ provisional affirmation rates for both initial and resubmitted prior  authorization requests rose in each demonstration between their  implementation and March 2017, often by 10 percentage points or more.  For example, the provisional affirmation rate for initial submissions for  repetitive scheduled non-emergency ambulance services rose from 28  percent in the first 6 months after implementation (December 2014  through May 2015) to 66 percent in the most recent 6 months for which  data are available (October 2016 through March 2017). Some MAC  officials attributed this rise in part to provider and supplier education,  which improved documentation being submitted.

Medicare Expenditures Decreased After Prior Authorization Began in Four Demonstrations

Expenditures Decreased After Prior Authorization Began and Estimated Savings May be as High as About $1.1 to $1.9 Billion, with Most Occurring Soon After Implementation

According to our analysis, expenditures decreased for items and services  subject to prior authorization in four demonstrations. For example,  expenditure decreases in initial demonstration states from implementation  through March 2017 ranged from 17 percent to 74 percent. Figure 3  shows the average monthly expenditures per state from 6 months prior to  the start of each demonstration through March 2017 for each of three  groups of states: states that were part of the initial demonstration, states  that were part of the demonstration expansion, and non-demonstration  states. (See app. II for monthly expenditures for items and services  covered under each demonstration from their implementation through  March 2017.)

Our analysis also shows potential savings for items and services subject  to prior authorization, based on the difference between actual  expenditures and estimates of what expenditures would have been in the  absence of the demonstrations. For each demonstration, we estimated  expenditures had the demonstration not been implemented by assuming  that expenditures would have remained at their average for the 6 months  prior to the demonstration starting in each state. We then compared  actual expenditures to these estimated expenditures and found that  potential savings could be as high as about $1.1 to $1.9 billion.

Estimated potential savings in states that were part of the  demonstrations since either their initial implementation or expansion  may be as high as $1.1 billion. For items and services subject to prior  authorization in these states, estimated expenditures in the absence  of the demonstrations would have been over $2.1 billion, while actual  expenditures were about $1.0 billion.

Estimated potential savings may be as high as about $1.9 billion if, for  the power mobility device demonstration, we estimate savings in both  demonstration states and non-demonstration states since  implementation. With this method, estimated savings since the power  mobility device demonstration’s implementation change from over  $600 million in demonstration states since each state’s  implementation to about $1.4 billion in all states since the  demonstration began in September 2012, a nearly $800 million  increase. This increase is due to including non-demonstration states  in the analysis and changing the assumptions for expanded  demonstration states in the analysis. CMS officials have reported  that certain power mobility device expenditures have declined  significantly in both demonstration states and non-demonstration  states in part because they think that larger nationwide suppliers  improved their compliance with CMS policies in all states based on  their experiences with prior authorization. CMS did not make a similar  statement for the other demonstrations, and in December 2017, CMS  officials said that the agency has not analyzed expenditures in non- demonstration states for the other demonstrations. See table 2 for  estimated potential savings for prior authorization demonstrations  from implementation through March 2017.

According to our analysis, more than half of the reduction in monthly  expenditures took place within the first 6 months of each demonstration.  We calculated the average monthly expenditures for the 6 months prior to  the start of each demonstration, the monthly expenditures in the 6th  month after implementation, and the monthly expenditures in March 2017  for initial demonstration states in the power mobility device, repetitive  scheduled non-emergency ambulance services, and non-emergency  hyperbaric oxygen therapy demonstrations. We compared these  expenditures and found that 58, 99, and 91 percent of the reduction in  monthly expenditures during this time took place during the first 6 months  of each demonstration, respectively.

Other CMS Efforts May Have Contributed to Expenditure Reductions

CMS had other program integrity efforts underway before implementing  prior authorization, and these efforts may have also contributed to the  reduction in expenditures for items and services subject to prior  authorization in these demonstrations. CMS officials said that it is likely  that prior authorization played a large role in the expenditure reduction for  those select items and services. However, CMS officials also reported  that it is difficult to separate the effects of prior authorization from other  program integrity efforts, and the agency has not developed a  methodology for determining the independent effect of prior authorization  on expenditures. We found that some of these other program integrity  efforts have addressed provider screening and enrollment and certain  durable medical equipment, and these may have contributed to the  reductions in Medicare expenditures.

Provider screening and enrollment: CMS has taken steps to keep  potentially fraudulent providers and suppliers from billing Medicare. For  example,  in September 2011, CMS began revalidating providers’ and suppliers’  enrollment in Medicare to ensure that they continue to be eligible to  bill Medicare. Revalidation involves confirming that the provider or  supplier continues to meet Medicaid program requirements, including  ensuring that a provider or supplier does not employ or contract with  individuals who have been excluded from participation in federal  health care programs. We previously reported that screening all  providers and suppliers—not just the ones subject to prior  authorization—resulted in over 23,000 new applications being denied  or rejected and over 703,000 existing enrollment records being  deactivated or revoked from March 2011 through December 2015.  We also reported that CMS estimated the revised process avoided  $2.4 billion in total Medicare payments to ineligible providers and  suppliers from March 2011 to May 2015, some of which may have  been payments for items and services subject to prior authorization.  in July 2013, CMS implemented moratoria on enrollment of new  providers for home health services and for repetitive, scheduled non- emergency ambulance transport in select counties. As of January  2018, CMS had extended the home health services moratoria  statewide to Florida, Illinois, Michigan, and Texas and the repetitive,  scheduled non-emergency ambulance transport moratoria statewide  to Pennsylvania and New Jersey. During a moratorium, no new  applications to enroll as a billing provider of the affected service types  are reviewed or approved. In October 2017, CMS officials said that  home health and non-emergency ambulance services’ expenditures  may have been affected by provider enrollment moratoria.

Certain durable medical equipment pricing, payments, and  education and outreach: CMS has taken steps to change how certain  durable medical equipment is paid for and to provide ongoing durable  medical equipment education and outreach. For example,  in January 2011, CMS implemented a DMEPOS competitive bidding  program required by the Medicare Prescription Drug, Improvement,  and Modernization Act of 2003. Under the program, only  competitively selected contract suppliers can furnish certain durable  medical equipment items at competitively determined prices to  Medicare beneficiaries in designated areas. CMS began the program  in 9 of the largest metropolitan areas, and in July 2013 expanded to  an additional 100 large metropolitan areas. In January 2016, CMS  implemented competitive bidding program-based adjusted prices for  non-designated areas for durable medical equipment items that were  previously, or are currently, included in the competitive bidding  program. According to CMS, the program—which generally results in  lower competitively bid prices—is reducing expenditures for  approximately half of the beneficiaries receiving power mobility  devices nationwide. We have previously reported that prices  decreased for power mobility devices in the competitive bidding  program; some of these devices are also subject to prior  authorization.  in January 2011, CMS eliminated the lump sum purchase option for  standard power wheelchairs. This change reduced expenditures for  power wheelchairs used on a short-term basis because payments for  short-term rentals are lower than for the purchase of these items. durable medical equipment MACs and CMS provide continuous  DMEPOS education and outreach. According to CMS, the education  and outreach may have contributed to reducing expenditures for  power mobility devices by helping providers and suppliers to  understand how to bill correctly and to submit fewer claims that do not  meet Medicare coverage and payment requirements.

Providers and Suppliers Reported that Prior Authorization Is an Effective Tool, but They Face Difficulty Obtaining Documentation, and Concerns Exist for One Program

Many Providers and Suppliers Reported Prior Authorization Benefits, and CMS Has Addressed Some of Their Initial Concerns

Many of the officials we interviewed representing provider, supplier, and  beneficiary groups, as well as CMS and MACs, reported benefits to prior  authorization. Officials from some of these groups said that prior  authorization is an effective tool to reduce unnecessary utilization and  improper payments. Some officials who reported benefits said that prior  authorization helps educate providers and suppliers about allowable  items and services under Medicare and improves providers’ and  suppliers’ documentation. Some officials also said that providers and  suppliers appreciate the assurance of knowing that Medicare is likely to  pay for these items and services. Officials from three provider and  supplier groups said that by getting provisional prior authorization, their  claims will likely not be denied, and they can thus avoid the appeals  process, for which there are significant delays. In addition, officials from  two provider and supplier groups believe that prior authorization may  deter fraudulent suppliers from participating in Medicare. Because of  these benefits, these provider and supplier group officials recommended  that CMS expand its use of prior authorization.

In addition, CMS has improved the prior authorization programs by  responding to some of the providers’ and suppliers’ initial concerns. For  example, for the power mobility device demonstration, CMS and MAC  officials that process DMEPOS claims reported that providers and  suppliers were initially confused about whether beneficiaries with  representative payees—persons or organizations authorized to accept  payment on a beneficiary’s behalf—were exempt from the prior  authorization program. To address this issue, CMS revised and clarified  its guidance related to representative payees. In addition, for the non- emergency hyperbaric oxygen therapy demonstration, officials from CMS  and a MAC administering the demonstration said that providers and  suppliers raised concerns that a Medicare-covered condition  (compromised skin grafts) included in the demonstration required  immediate care and therefore should not be subject to prior authorization.  In response, CMS removed the condition from the list of conditions  subject to prior authorization.

Providers and Suppliers Report Difficulty Obtaining Documentation for Prior Authorization Requests, and CMS Is Taking Steps to Address This Challenge

Some provider and supplier group officials we interviewed reported that  obtaining the documentation necessary to submit a prior authorization  request can be difficult. For example, some of these officials told us that  providers and suppliers may spend 3 to 7 weeks obtaining necessary  documentation from referring physicians and other relevant parties before  submitting a prior authorization request. While CMS’s documentation  requirements did not change under prior authorization, officials from a  provider and supplier group we spoke with said that prior authorization  exacerbates existing documentation challenges because they must obtain  all required documentation before providing items and services to  beneficiaries. As we noted in a previous report, two durable medical  equipment MACs said that referring physicians may lack financial  incentives to submit proper documentation since they are unaffected if a  durable medical equipment or home health claim is denied due to  insufficient documentation, while the provider or supplier submitting the  claim loses the payment.

Furthermore, according to some provider and supplier group  representatives, CMS’s documentation requirements can be difficult to  meet. Representatives from one supplier and provider group said that  there is a high standard of proof to meet the information needed to  support their medical necessity requirements. For example,  documentation in the medical record is required to show whether the  referring physician considered other options. Also, representatives from  another provider and suppler group said that, unlike private insurers,  CMS has more requirements that providers and suppliers consider  administrative. For instance, MACs deny prior authorization requests for  missing physician signatures.

In addition, representatives from a provider and supplier group said it may  be necessary to collect documentation from multiple providers that  treated the beneficiary in order to meet CMS’s medical necessity  requirements. However, officials from one private insurer said that their  medical necessity requirements for certain items and services may  necessitate receiving documentation from several providers as well,  although this does not occur often.

CMS officials acknowledged that the agency’s requirements may be more  difficult to meet than those of private health insurers. However, this  scrutiny may be beneficial because, unlike private insurers, Medicare  must pay for health care delivered by any eligible physician willing to  accept Medicare payment and follow Medicare requirements.

We found that CMS and the MACs have taken some steps to assist  providers and suppliers in obtaining documentation from referring  physicians. For example, CMS has created e-clinical templates for home  health services and power mobility devices that can be incorporated into  progress notes to help ensure physicians meet medical necessity  requirements. CMS and the MACs have also created documentation  checklists, prior authorization coversheets, and other tools to assist  providers and suppliers in verifying that they have obtained the  documentation necessary to meet CMS’s documentation requirements.  Agency officials have stated that they are working on additional changes  to reduce provider and supplier burden, for example, developing e-clinical  templates for additional items and services.

Furthermore, representatives from each of the MACs said that they call  providers and suppliers that receive certain prior authorization non- affirmations to ensure suppliers and providers understand what  information is required to obtain a provisional affirmation. Some MAC  representatives said that having a phone conversation with suppliers  allows them to resolve non-affirmations more expediently and reduces the  number of resubmissions. Representatives from one MAC estimated that  when they call providers and suppliers, they are able to resolve 50 to 80  percent of the issues that led to the non-affirmations. Several MAC  representatives also said calling helps providers and suppliers gain a  better understanding of CMS’s documentation requirements, which will  increase their likelihood of having future requests provisionally affirmed.  In addition, CMS officials said that the agency encourages MACs to call  referring physicians directly, when necessary, to remedy curable errors or  obtain additional documentation needed to affirm a request because non- affirmation may be resolved faster without providers and suppliers serving  as intermediaries.

Providers and Suppliers Report Concerns about Whether the Permanent DMEPOS Program Includes Essential Accessories

Providers and suppliers reported concerns about whether accessories  deemed essential to group 3 power wheelchairs are subject to prior  authorization and can be provisionally affirmed under the permanent  DMEPOS program. According to CMS, the permanent DMEPOS program  requires prior authorization for power wheelchair bases, but not for their  accessories. CMS officials said this is because accessories do not meet  the criteria for inclusion on the Master List. However, according to CMS,  the MACs must review these accessories when they make prior  authorization determinations because their decision to provisionally affirm  a wheelchair base is based in part on their view of the medical necessity  of the accessories. Therefore, if an essential accessory does not meet  medical necessity requirements, a MAC will deny a prior authorization  request for a power wheelchair base. In other words, in practice these  accessories are subject to prior authorization, even though they are not  technically included in the permanent DMEPOS program and therefore  cannot be provisionally affirmed. As a result, providers and suppliers lack  assurance about whether Medicare is likely to pay for these accessories.

In December 2017, CMS officials stated that there have been preliminary  discussions regarding the feasibility and effect of subjecting accessories  essential to the group 3 power wheelchairs in the permanent DMEPOS  program to prior authorization. However, CMS officials did not provide a  timeframe for reaching a decision about whether they would do so.  Federal internal control standards state that agencies should design  control activities that enable an agency to achieve its objectives and  should respond to any risks related to achieving those objectives. By not  including essential accessories in prior authorization so they can be  provisionally affirmed as appropriate, CMS may hinder its ability to  achieve one of the stated benefits of the prior authorization program—to  allow providers and suppliers to know prior to providing the items whether  Medicare will likely pay for them.

CMS Monitors Prior Authorization But Has Not Made Plans for Prior Authorization in the Future

CMS Monitors Prior Authorization and Has Contracted for Evaluations of the Demonstrations

We found that CMS monitoring includes reviewing MAC reports of the  results of prior authorization requests, examining MAC timeliness and  accuracy, and contracting for independent evaluations of the prior  authorization demonstrations.

CMS officials told us that they review weekly, monthly, and annual  MAC reports that include information such as numbers of requests  received, completed, approved, denied, and resubmitted.

According to CMS officials, they monitor MAC timeliness through  these reports and separately have a contractor review MAC accuracy  in processing requests. According to these officials, they have not  identified any issues with MAC timeliness, as the MACs currently  meet the standards for processing initial requests within 10 business  days and resubmissions within 20 business days. In addition, CMS  officials said that a sample of MACs’ prior authorization decisions is  reviewed each month for accuracy for each of the prior authorization  demonstrations, and the reviews have not identified any issues with  these decisions.

CMS officials said that they meet with providers and supplier groups  regularly to solicit feedback, to identify issues that need to be  addressed, and to determine whether there are any problems, such  as reduced beneficiary access to care. According to CMS officials,  they have not identified any negative impact on beneficiary access to  care as a result of implementing prior authorization.

CMS has contracted for independent evaluations of the power mobility  device, repetitive scheduled non-emergency ambulance services, and  non-emergency hyperbaric oxygen demonstrations. In December  2017, CMS officials told us that evaluations will be completed and  results available after the demonstrations end. In December 2017,  officials told us that they also plan to contract for an evaluation of the  permanent program after more time has passed.

Although Most Prior Authorization Is Scheduled to End in 2018, CMS Does Not Have Plans to Continue Efforts

Most prior authorization programs are scheduled to end in 2018, with all  the demonstrations concluding and only the limited permanent program  remaining.

The non-emergency hyperbaric oxygen demonstration ended in  February 2018, the power mobility device demonstration in August  2018, and the repetitive scheduled non-emergency ambulance  services demonstration in November 2018.

The home health services demonstration has been on pause since  April 2017 with no plans to resume as of February 2018, although  CMS stated that they are considering improvements to the  demonstration.

The permanent program, which currently consists of two group 3  power wheelchairs, is the only prior authorization program that will  remain. According to CMS officials, these wheelchairs are very low  volume, and the HHS Office of the Inspector General reported that  these wheelchairs represent just a small percentage of all durable  medical equipment claims.

CMS has not made plans for continuing expiring or paused prior  authorization programs or expanding prior authorization. However,  officials told us that they would like to see prior authorization for additional  items. For example, CMS officials said that they have considered prior  authorization for items such as hospital beds and oxygen concentrators,  because these have high utilization or improper payment rates. In  addition, in December 2017, CMS officials said that the agency is  evaluating whether it has met the requirements for nationwide expansion  of the repetitive scheduled non-emergency ambulance services  demonstration established by the Medicare Access and CHIP  Reauthorization Act of 2015. However, CMS officials also said that have  not yet determined the next steps for the use of prior authorization.  Federal internal control standards state that agencies should identify,  analyze, and respond to risks related to achieving objectives. By not  taking steps, based on results from the evaluations, to continue prior  authorization, CMS risks missed opportunities for achieving its stated  goals of reducing costs and realizing program savings by reducing  unnecessary utilization and improper payments.

Since September 2012, CMS has begun using prior authorization to  ensure that Medicare coverage and payment rules have been met before  the agency pays for selected items and services. During this time,  expenditures for items and services subject to prior authorization have  been reduced. We estimate potential savings may be as high as about  $1.1 to $1.9 billion, although other CMS program integrity efforts may  have contributed to these reductions. Many stakeholders, including  providers, suppliers, and MAC officials, support prior authorization, citing  benefits such as reduced unnecessary utilization. However, providers and  suppliers report concerns about whether accessories deemed essential to  group 3 power wheelchairs are subject to prior authorization and can be  provisionally affirmed. By not including essential accessories in prior  authorization, CMS may hinder its ability to achieve one of the stated  benefits of the prior authorization program—to allow providers and  suppliers to know prior to providing the items whether Medicare will likely  pay for them.

All four prior authorization demonstrations are either paused or will end in  2018, and CMS does not have plans to extend these programs or expand  the use of prior authorization to additional items and services with high  rates of unnecessary utilization or improper payments. By not taking  steps, based on results from the evaluations, to continue prior  authorization, CMS risks missed opportunities for achieving its stated  goals of reducing costs and realizing program savings by reducing  unnecessary utilization and improper payments.

We are making the following two recommendations to CMS.

The Administrator of CMS should subject accessories essential to the  group 3 power wheelchairs in the permanent DMEPOS program to  prior authorization. (Recommendation 1)

The Administrator of CMS should take steps, based on results from  evaluations, to continue prior authorization. These steps could  include:  resuming the paused home health services demonstration; extending current demonstrations; or,  identifying new opportunities for expanding prior authorization to  additional items and services with high unnecessary utilization and  high improper payment rates. (Recommendation 2)

We provided a draft of this report to HHS for comment, and its comments  are reprinted in appendix III. HHS also provided technical comments,  which we incorporated as appropriate.

HHS neither agreed nor disagreed with the recommendations but said it  would continue to evaluate prior authorization programs and take our  findings and recommendations into consideration in developing plans or  determining appropriate next steps. In addition, in response to our  recommendation to take steps to continue prior authorization, HHS noted  that the President’s fiscal year 2019 budget for HHS included a legislative  proposal to extend its statutory authority to permanently require prior  authorization for specified Medicare fee-for-service items and services to  all Medicare fee-for-service items and services.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services, the Administrator of the Centers for Medicare &  Medicaid Services, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact A.  Nicole Clowers at (202) 512-7114 or clowersa@gao.gov or Kathleen M.  King at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Major contributors to this report are listed in appendix  IV.

Appendix I: List of Items That May Be Selected for Prior Authorization

In December 2015, the Centers for Medicare & Medicaid Services (CMS)  established a permanent prior authorization program for certain durable  medical equipment, prosthetics, orthotics, and supplies (DMEPOS). To  select the items subject to prior authorization, CMS compiled a Master  List of items that 1) appear on the DMEPOS Fee Schedule list, 2) have  an average purchase fee of $1,000 or greater (adjusted annually for  inflation) or an average rental fee schedule of $100 or greater (adjusted  annually for inflation), and 3) meet one of these two criteria: the item was  identified in a GAO or Department of Health and Human Services Office  of Inspector General report that is national in scope and published in  2007 or later as having a high rate of fraud or unnecessary utilization, or  the item is listed in the 2011 or later published Comprehensive Error Rate  Testing program’s annual report. The information presented in this  appendix was reprinted from information in a December 2015 final rule.  We did not edit it in any way, such as to spell out abbreviations. (See  table 3 for the Master List.)

Appendix II: Expenditure Data for Items and Services Subject to Prior Authorization

Tables 4 through 7 present monthly expenditures for items and services  subject to prior authorization in initial demonstration states, expansion  demonstration states, and non-demonstration states from 6 months prior  to each demonstration’s implementation through March 2017, the most  recent month for which reliable data is available.

Appendix III: Comments from the Department of Health and Human Services

Appendix IV: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Martin T. Gahart (Assistant  Director), Lori Achman (Assistant Director), Peter Mangano (Analyst-in- Charge), Sylvia Diaz Jones, and Mandy Pusey made key contributions to  this report. Also contributing were Sam Amrhein, Muriel Brown, Eric  Wedum, and Jennifer Whitworth.

In an effort to reduce improper payments and reduce expenses, the Medicare program has experimented with requiring prior authorization. This means beneficiaries need approval before they can receive certain services or items like powered wheelchairs.

We found this approach, which started in 7 states in 2012, reduced spending on these items and services by as much as $1.9 billion. Providers and suppliers reported benefits from the approach, but also had concerns about uncertainties created over what is covered.

Most prior authorization programs are slated to end. We recommended Medicare take steps to continue prior authorization.

Prior Authorization Programs’ Implementation and End Dates