In addition to this automated  process, the MACs may conduct MMRs when they are unable to  determine whether the services provided were medically necessary on  the basis of the information on the claim. Providers and  beneficiaries may appeal denials of services that are based on these  reviews. Medicare Outpatient Therapy Spending

Medicare spending for outpatient therapy has increased from $1.3 billion  in 1999 to $5.7 billion in 2011. The Therapy Caps Exceptions Process

The therapy caps that were first imposed in 1999 to control spending  growth raised concern that patients with extensive need of outpatient  therapy services would be affected adversely, and the caps were only in  effect in 1999 and for part of 2003 due to a series of temporary  congressional moratoria. The  American Taxpayer Relief Act of 2012 extended the Medicare therapy  caps exceptions process, including the requirement for the manual review  of claims over $3,700, through December 31, 2013. CMS did not issue complete guidance at the start of the  MMR process, causing implementation challenges for the MACs, and the  MACs were unable to fully automate systems for tracking the reviews of  preapproval requests in the time allotted. CMS Implemented MMRs of Preapproval Requests and of Claims Submitted without Preapproval

CMS implemented two types of MMRs during the last 3 months of 2012— reviews of preapproval requests and reviews of claims submitted without  preapproval. CMS officials  told us that they included the preapproval request process in 2012 in  order to help protect beneficiaries from being held liable for payment of  claims not affirmed by the MMR, as the process would give the provider  and beneficiary guidance as to whether the MACs would affirm or not  affirm payment for the requested outpatient therapy services. The MACs were also required to manually review submitted claims before  providing payment for therapy services provided above $3,700 without a  preapproval request. Effective for dates of service on or after October 1,  2012, CMS required the MACs to implement an edit in part of the claims  processing system to stop claims that reached the $3,700 threshold and  to trigger MMRs by the MACs. 2.) If a MAC  requested additional documentation, the review time frames would begin  again. MACs Did Not Receive Timely Guidance from CMS and Could Not Fully Automate Systems for Processing Preapproval Requests

The MACs did not receive complete CMS guidance before the start of the  3-month MMR process regarding how the MACs should manage  incomplete preapproval requests, how they should count the 10-day  review time frame, and how they should handle preapproval requests  received in the wrong phase. In addition, the MACs did not have enough  time to fully automate systems for tracking and processing preapproval  requests before the start of the MMR process. Further, CMS did not provide guidance on how the MACs should process  incomplete preapproval requests, which accounted for approximately   23 percent of the total requests submitted, until November 7, 2012. CMS initially  instructed the MACs to make decisions on preapproval requests and  inform providers and beneficiaries of their decisions within 10 business  days of receipt of all requested documentation, and to automatically  approve requests they were unable to review within 10 days. The MACs we interviewed adapted their systems to manage the  preapproval process in different ways with varying degrees of automation. CMS Estimates That Preapproval Requests and Claims for over 115,000 Beneficiaries Were Subject to MMRs, but the Final Outcomes of These Reviews Remain Uncertain

CMS officials estimate that preapproval requests and claims for over  115,000 Medicare beneficiaries were subject to approximately 167,000  MMRs conducted by the MACs as of March 1, 2013. MACs Reviewed an Estimated 167,000 Preapproval Requests and Claims and Affirmed 60 Percent

CMS staff estimated that the MACs manually reviewed more than  167,000 preapproval requests and claims without preapprovals for  outpatient therapy from October 1, 2012, through December 31, 2012,  affecting more than 115,000 Medicare beneficiaries. Of these MMRs, an   and 57,000 were for  estimated 110,000 were for preapproval requestsclaims for services that were not preapproved. CMS officials told us that  MACs did the “best they could” and that the final numbers provided in the  MMR weekly workload report were obtained outside the MACs’  computerized systems and should be considered approximate or an  estimate of the results of the reviews at the time of this report. Agency Comments

HHS provided written comments on a draft of this report. HHS highlighted  CMS’s 2012 efforts to review the medical records associated with  requests for exceptions for outpatient therapy services in excess of the  annual $3,700 threshold. The department noted that CMS managed the  new workload without additional funding and within a short time frame,  and that the MACs shifted staff from other responsibilities to the MMR  process. Outpatient therapy manual reviews were extended for 2013 and,  according to HHS, CMS streamlined the MMRs of therapy services by  transitioning the responsibility for these reviews from the MACs to the  agency’s RACs as of April 1, 2013.
Why GAO Did This Study

In 2011, Medicare paid about $5.7 billion to provide outpatient therapy services for 48 million beneficiaries. Rising Medicare spending for outpatient therapy services--physical therapy, occupational therapy, and speech-language pathology--has long been of concern. Congress established per person spending limits, or "therapy caps," for nonhospital outpatient therapy, which took effect in 1999. In response to concerns that some beneficiaries needing extensive services might be affected adversely, Congress imposed temporary moratoria on the caps several times until 2006, when it required CMS to implement an exceptions process. The Middle Class Tax Relief and Job Creation Act of 2012, in addition to extending the exceptions process, required CMS to conduct MMRs of requests for exceptions for outpatient services provided on or after October 1, 2012, over an annual threshold of $3,700. The act also mandated that GAO report on the implementation of the MMR process.
This report describes (1) CMS's implementation of the 2012 MMR process, and (2) the number of individuals and claims subject to MMRs and the outcomes of these reviews. GAO reviewed relevant statutes, CMS policies and guidance, and CMS data on these reviews. GAO also interviewed CMS staff and officials from three MACs that accounted for almost 50 percent of the MMR workload and that processed claims for states previously determined to be at a higher risk for outpatient therapy improper payments.

What GAO Found

The Centers for Medicare & Medicaid Services (CMS) implemented two types of manual medical reviews (MMR)--reviews of preapproval requests and reviews of claims submitted without preapproval--for all outpatient therapy services that were above a $3,700 per-beneficiary threshold provided during the last 3 months of 2012. However, CMS did not issue complete guidance on how to process preapproval requests before the implementation of the MMR process in October 2012, and the Medicare Administrative Contractors (MAC) that conducted the MMRs were unable to fully automate systems for tracking preapproval requests in the time allotted. CMS required the MACs to manually review preapproval requests within 10 business days of receipt of all supporting documentation to determine whether the services were medically necessary, and to automatically approve any requests they were unable to review within that time frame. CMS officials told GAO that the purpose of the preapproval process was to protect beneficiaries from being liable for payment for nonaffirmed services by giving the provider and beneficiary guidance as to whether Medicare would pay for the requested services. If a provider delivered services without submitting a preapproval request, the MACs were required to manually review submitted claims above the $3,700 threshold prior to payment within 60 days of receiving the needed documentation. The MACs faced particular challenges with implementing reviews of preapproval requests because CMS continued to issue new guidance on how to manage preapproval requests after the MMR process started. For example, CMS did not inform the MACs how to process incomplete requests or count the 10-day preapproval request review time frame until November 7, 2012, and the MACs initially handled requests differently. In addition, all three MACs GAO interviewed told GAO that MMRs of preapproval requests were especially challenging because they did not have time to fully automate systems for tracking and processing the requests before the start of the MMR process, although they adapted their systems to manage the requests in different ways.
CMS officials estimated that the MACs reviewed an estimated total of 167,000 preapproval requests and claims for outpatient therapy service above the $3,700 threshold provided from October 1, 2012, through December 31, 2012. Of these reviews, CMS estimated that 110,000 were for preapproval requests and 57,000 were for claims submitted without prior approval. However, due in part to the lack of automation, CMS officials reported that the total number of reviews should be considered estimates of the results of the MMR process at the time of this report. CMS estimated that the MACs affirmed about two-thirds of the preapproval requests and about one-third of the claims submitted without preapproval. Because providers can appeal denials of payment, the final outcome of the MMRs remains uncertain. CMS also estimated that by December 31, 2012, over 115,000 beneficiaries were affected by the reviews in 2012, a number that will rise as more claims subject to review are submitted throughout 2013.
In its comments on a draft of this report, HHS emphasized that CMS managed the 2012 MMR process without additional funding and within a short time frame. HHS noted that the MMR process was extended for 2013 and CMS transitioned the responsibility for these reviews to other contractors as of April 1, 2013.