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. 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. 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. 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. 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 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. 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. 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. 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.) 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. 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.
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.