CMS also extended the  program, which was originally scheduled to end in 2015, until August  2018. Medicare Prior Authorization Process

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. 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. See table 2 for  estimated potential savings for prior authorization demonstrations  from implementation through March 2017. 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. For example,  in January 2011, CMS implemented a DMEPOS competitive bidding  program required by the Medicare Prescription Drug, Improvement,  and Modernization Act of 2003. 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. 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. 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. 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. 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. Federal internal control standards state that agencies should identify,  analyze, and respond to risks related to achieving objectives. Many stakeholders, including  providers, suppliers, and MAC officials, support prior authorization, citing  benefits such as reduced unnecessary utilization. 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. The Administrator of CMS should subject accessories essential to the  group 3 power wheelchairs in the permanent DMEPOS program to  prior authorization. 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. 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).
Why GAO Did This Study

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.

What GAO Found

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.

What GAO Recommends

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.