Medicare Outpatient Therapy: Implementation of the 2012 Manual Medical Review Process
Published: 2013-07-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: In 2011, Medicare, the federal health program insuring 48 million people  who are age 65 and older or disabled, paid about $5.7 billion to provide  three outpatient therapy services—physical therapy (PT), occupational  therapy (OT), and speech-language pathology (SLP)—for 4.9 million  beneficiaries. Medicare’s total spending was approximately $565 billion  that year. Therapy services help treat a range of conditions from stroke  recovery to the effects of Parkinson’s disease, and are provided in a  variety of settings including hospital outpatient departments, skilled  nursing facilities, and outpatient rehabilitation facilities. The Centers for  Medicare & Medicaid Services (CMS)—the agency within the Department  of Health and Human Services (HHS) that administers the Medicare  program—applies financial limits, known as therapy caps, to help control  growth in expenditures for and discourage medically unnecessary use of  outpatient therapy services. According to CMS, between 1998 and 2008,  Medicare expenditures for outpatient therapy increased at a rate of   10.1 percent per year while the number of Medicare beneficiaries  receiving therapy services increased by 2.9 percent per year. In addition,  we and the HHS Office of Inspector General (OIG) have previously  reported that outpatient therapy is susceptible to improper payments and  fraud.
Although Medicare therapy caps, which originally took effect beginning in  1999 under the Balanced Budget Act of 1997 (BBA),  are set annually at  a level exceeding that used by most beneficiaries receiving therapy  services, concerns had been raised that patients with extensive need for  outpatient therapy services might be affected adversely. As a result,  Congress imposed temporary moratoria on the caps several times from  1999 through 2006, when it required the agency to implement an  exceptions process to provide coverage for beneficiaries in need of  services above the caps.
The Middle Class Tax Relief and Job Creation  Act of 2012, enacted in February 2012, in addition to extending the  exceptions process through December 31, 2012, made several changes  affecting the processing of claims for outpatient therapy services. In  particular, the act required CMS to conduct manual medical reviews  (MMR) of requests for exceptions for therapy claims over an annual  threshold of $3,700 for OT and $3,700 for a combination of PT/SLP for  services provided on or after October 1, 2012. The act also mandated  that GAO report on the implementation of the 2012 MMR process. In this  report, we discuss (1) CMS’s implementation of the MMR process for  outpatient therapy services conducted from October 1, 2012, through  December 31, 2012, and (2) the number of individuals and claims subject  to MMRs during the 3-month process and the outcomes of these reviews.
To describe CMS’s implementation of the MMR process, we reviewed  relevant statutes, including the Middle Class Tax Relief and Job Creation  Act of 2012, the Deficit Reduction Act of 2005 (DRA), and the BBA; CMS  policies and guidance for the MMR of Medicare outpatient therapy claims;  and CMS data on MMRs for services provided during this 3-month period.  We also interviewed CMS staff responsible for implementation and  oversight of the mandated MMR process as well as staff from the  Medicare Payment Advisory Commission (MedPAC) and representatives  from three professional associations for providers of outpatient therapy.  Further, we interviewed officials from three Medicare Administrative  Contractors (MAC) selected from among the 15 MACs responsible for  Medicare therapy claims processing in order to learn how they  implemented and collected data on the MMR process. The three MACs  interviewed accounted for nearly 50 percent of the MMR workload and  processed claims for states previously determined by the HHS OIG to be  at a higher risk for outpatient therapy improper payments and fraud. The  information collected from these interviews is not generalizable to all  MACs.
To report on the number of individuals and claims subject to MMRs during  the last 3 months of 2012 and the outcomes of these reviews, we  analyzed CMS’s Therapy Cap Weekly Workload reports. These weekly  reports were compiled by CMS with aggregate data from all 15 MACs  implementing the mandated MMR process. We interviewed both CMS  and MAC officials responsible for the collection of these data to learn  about the data collection process and to assess the reliability of the data.  Those officials acknowledged that data from the weekly reports provide  an estimate of the number of individuals and claims subject to MMR, but  are not an accurate and exact count. We believe that the data are  sufficiently reliable to provide a reasonable estimate of the scope of the  MMR process.
We conducted this performance audit from December 2012 to June 2013  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.
subsections: section_title: Background
paragraphs: Health care providers submit claims to the Medicare program in order to  receive payment for services provided to beneficiaries. Financial limits  known as therapy caps are one tool used to better manage spending on  outpatient therapy services. Congress directed CMS, beginning in 2006,  to establish an exceptions process for beneficiaries in need of services  above the therapy caps.
subsections: section_title: Medicare Claims Payment Overview
paragraphs: Since the program was created in 1965, CMS has administered Medicare  through private contractors, currently known as MACs. The MACs are  responsible for reviewing and paying claims in accordance with Medicare  policy, and conducting provider outreach and education on correct billing  practices. The MACs process more than 1.2 billion claims per year (the  equivalent of 4.5 million claims per work day). The MACs use electronic  payment systems, and they transfer any claims submitted on paper into  electronic format for processing.
The computer systems that the MACs use for processing and paying  claims execute automated prepayment “edits,” which are instructions  programmed into the system software to identify errors on individual  claims and to prevent payment of incomplete or incorrect claims. The  system edits also help ensure that payments are made only for claims  submitted by appropriate providers for medically necessary goods or  services covered by Medicare for eligible individuals. Edits may result in  automatic rejection of claims due to missing information or data errors, or  in payment denial for ineligible services. 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. The MACs solicit  documentation of medical necessity from the provider by issuing an  additional documentation request (ADR) for the medical records  associated with a service; providers are required to submit the records to  the MACs within 45 days. Upon receipt, the MMRs are performed within  60 days by licensed health care professionals. Providers and  beneficiaries may appeal denials of services that are based on these  reviews.
Manual reviews can be conducted either before or after a claim is paid  and are referred to as prepayment or postpayment reviews, respectively.  CMS reports that although the MACs have the authority to review any  claim at any time, the volume of claims prohibits manual review of most  claims. In general, CMS directs the MACs to focus their MMRs on  program integrity efforts targeting payment errors for services and items  that pose the greatest financial risk to the Medicare program. We have  previously reported that, overall, less than 1 percent of Medicare’s claims  are subject to medical record review by trained personnel.
section_title: Medicare Outpatient Therapy Spending
paragraphs: Medicare spending for outpatient therapy has increased from $1.3 billion  in 1999 to $5.7 billion in 2011. (See fig. 1.) During this 12-year period,  mean per user spending on outpatient therapy grew threefold from about  $400 to almost $1,200. In 2011, about 80 percent of the 4.9 million  Medicare beneficiaries who used OT and PT/SLP did not exceed the  annual cap of $1,870. Twenty percent of the Medicare beneficiaries using  outpatient therapy (about 980,000 individuals) exceeded the cap that year  and spent, on average, $3,000 on outpatient therapy. Therapy provided in  nursing homes and private practice offices accounted for over 70 percent  of outpatient therapy services in 2011, with the remaining services being  provided in hospital outpatient departments and outpatient rehabilitation  centers, and by home health agencies.
In addition, studies have found that utilization of outpatient therapy  services is not evenly distributed across the country. For example, in  2010, the HHS OIG reported on 20 counties with spending per beneficiary  72 percent higher than the national average. MedPAC’s analysis of  outpatient therapy claims data from 2011 showed that average per- beneficiary spending varied widely by county, ranging from $406 to  $3,582.
section_title: The Therapy Caps Exceptions Process
paragraphs: 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. As implemented in 2006, when the moratoria  expired, Congress required CMS to implement a process to allow  exceptions to the caps for certain medically necessary services. This  exceptions process allowed for two types of exceptions. The first was an  automatic exception for certain conditions or complexities, such as hip  and knee replacements. The second—called a manual exceptions  process by CMS— was a preapproval process whereby a provider could  submit a letter and supporting documentation requesting an exception— called a preapproval request—for up to 15 days of treatment above the  annual cap, which would be manually reviewed by the MAC. If the  services qualified for either an automatic or a manual exception, CMS  guidance instructed the provider to include a “KX” modifier on each line of  the resulting claim that contained a service above the cap. This modifier  represented the provider’s attestation that the services rendered were  medically necessary, and it triggered an exception in the Medicare claims  processing system, which ensured payment for those outpatient therapy  services above the cap.
An automatic exceptions process for claims with a KX modifier was  extended through 2012 for claims over the annual cap of $1,880, with  manual reviews required for claims above the threshold of $3,700. 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.
According to CMS, in 2012, claims for services above the $1,880 cap  without a KX modifier or above the $3,700 threshold were considered a  benefit category denial, making the beneficiary liable for payment. To  protect beneficiaries from unexpected liability for payment of denied  claims above the threshold, CMS gave providers the option to send  beneficiaries an Advance Beneficiary Notice of Noncoverage (ABN)  informing them that Medicare might not pay for an item or service and  that they might be liable for payment. An ABN enables the beneficiary to  make an informed decision about whether to get services and accept  financial responsibility for those services if Medicare does not pay.
section_title: CMS Implemented Two Types of MMRs, but the Process Lacked Timely Guidance and Fully Automated Systems
paragraphs: 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 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.
subsections: section_title: CMS Implemented MMRs of Preapproval Requests and of Claims Submitted without Preapproval
paragraphs: CMS implemented two types of MMRs during the last 3 months of 2012— reviews of preapproval requests and reviews of claims submitted without  preapproval. First, CMS directed the MACs to manually review  preapproval requests for outpatient therapy services above the   $3,700 threshold—one for OT and one for PT/SLP combined—before the  services were provided. Providers were permitted to request up to   20 days of treatment up to 15 days before providing medically necessary  outpatient therapy services above $3,700. In contrast to the MMR  process as implemented in 2006, CMS guidance did not allow any  automatic exceptions for certain conditions; the MACs had to manually  review preapproval requests for any services above $3,700. 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.
In order to manage the expected volume of preapproval requests  submitted to MACs at the start of the MMR process, CMS divided all  outpatient therapy providers among three phases, based primarily on  their past billing practices. Providers were instructed to submit  preapproval requests during their assigned phase. CMS assigned  providers with the highest average billing per patient for outpatient  therapy services in 2011 to the first phase, which began on October 1,  2012. According to CMS, these high billers accounted for approximately  25 percent of all outpatient therapy providers and were subject to MMR  for the full 3 months of the MMR process during 2012. The second phase  began on November 1 and included providers with the next highest billing  (also about 25 percent of the total number of providers). The third phase,  which included the remaining 50 percent of outpatient therapy providers,  generally the lowest billers, began on December 1. CMS officials  explained that providers with historically low billing were less likely to  have patients who would reach the threshold. CMS also included  providers identified by law enforcement or the HHS OIG as being involved  in active fraud investigations in the third phase. CMS officials stated that  they did not include these providers until the third phase to avoid conflicts  with ongoing investigations. As of December 1, all outpatient therapy  providers were included in the MMR process.
CMS notified providers about the preapproval request process and  assignment of phases by letter and provided further information through  three conference calls and additional agency communications. CMS  instructed providers to submit preapproval requests by mail or fax,  including key information such as provider and beneficiary identification  numbers as well as supporting documentation including treatment notes  and progress reports. CMS also instructed the MACs to post guidelines on their websites to educate providers about these requirements. In  addition, CMS sent letters in mid-September 2012 to all Medicare  beneficiaries who had received therapy services totaling over $1,700 by  that date informing them that they might have to pay for services over the  cap should the MACs determine that the services were not medically  necessary.
To expedite the preapproval process, CMS instructed the MACs to review  preapproval requests within 10 business days of receipt of all requested  documentation to determine whether the services were medically  necessary. After reviewing the requests, the MACs were required to  notify providers and beneficiaries of the number of treatment days  affirmed or provide detailed reasons for not affirming a request. In  addition, CMS instructed the MACs to automatically approve any requests  they were unable to review within 10 business days. The MACs had to  inform providers of their decisions by telephone, fax, or letter, and  postmark all letters by the 10th day after receipt of all requested  documentation. Providers were allowed to resubmit nonaffirmed requests  with additional documentation for consideration by the MAC, at which  point the MAC would have another 10 days within which to review the  new request. (See fig. 2.)
Second, CMS instructed the MACs to develop a mechanism for tracking  preapproval requests in order to match the requests with submitted  claims. Because preapproval requests were received by fax or mail, not  through the automated claims payment systems, the MACs had to  manually match the claim with the corresponding preapproval request. If  the services included on the claim matched those affirmed during the  preapproval process, the MAC would pay the claim; if not, the MAC would  issue an ADR for the medical records associated with the services and  conduct further manual review, which could extend the review process  more than 3 months.
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. To manually review claims without  preapprovals, the MACs requested and reviewed supporting  documentation from providers to determine whether the services were  medically necessary. As with typical prepayment manual reviews,  providers had 45 days to provide documentation of medical necessity,  and the MACs had 60 days to review the supporting materials and notify  providers and beneficiaries of their decisions. (See fig. 2.) If a MAC  requested additional documentation, the review time frames would begin  again. In contrast to preapproval request decisions, the MACs’ claims  payment systems automatically send letters notifying providers and  beneficiaries of payment determinations.
section_title: MACs Did Not Receive Timely Guidance from CMS and Could Not Fully Automate Systems for Processing Preapproval Requests
paragraphs: 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.
CMS did not issue complete guidance at the start of the MMR effort and  changed the process throughout the 3-month period, which created  implementation challenges. CMS provided instruction to the MACs  through various forms of written guidance, as well as twice-weekly  conference calls beginning in August 2012. However, CMS did not issue  instructions on how the MACs should conduct MMRs of preapproval  requests until August 31, 2012. The MACs we interviewed stated that  receiving this guidance 1 month before the October 1st start of the MMR  process made it difficult for them to adequately prepare and establish  systems for reviews of preapproval requests. For example, one MAC said  that because of the short turnaround time for implementation, it was not  prepared for the high volume of preapproval requests received in the  early weeks of the process, which caused it to approve requests without  reviewing them. Another stated that it could have better managed the  volume of preapproval requests received if it had more time to develop  needed support systems. This late guidance also made it difficult for the  MACs to train temporary staff assigned to the MMR process in a timely  way; two MACs noted that they were still training temporary staff in  October, after the start of the process, and one added that this made it  difficult to manage the volume of preapproval requests received in  October.
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  officials told us they did not initially issue such guidance because they did  not anticipate receiving a high volume of incomplete submissions. As a  result, the MACs handled incomplete requests in different ways. For  example, one MAC held incomplete requests—as many as several  thousand—as pending without making a determination or providing a  response to providers and beneficiaries within 10 business days. Another  initially determined that incomplete requests would be rejected and  returned to the provider for additional information.
In addition, CMS did not initially issue clear instruction about how the  MACs were to count the 10-day time frame for provider and beneficiary  notification, which may have caused notification delays. 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  stated that they were unclear, however, about how to count the 10-day  time frame. On November 7, 2012, CMS clarified that the count was to  begin on the day the MAC received the preapproval request in its  mailroom, not in its MMR department. The MACs we interviewed stated  that they received a large volume of requests per day—at times several  hundred. In addition, two noted that providers often sent in additional  supporting documentation for prior requests, which added to the volume  of paper files the MACs had to manage and may have created a further  lag between when the complete requests were received and when the  paperwork was given to MMR staff for review. Before CMS issued this  clarifying guidance, providers and beneficiaries may have experienced a  longer wait time than expected if a MAC counted the 10 days beginning  when the MMR department, rather than the mailroom, received the  completed requests.
Finally, CMS did not initially provide the MACs with instructions about  how to handle preapproval requests and claims submitted in the wrong  phase. In its written guidance issued on August 31, 2012, CMS instructed  the MACs that they should not review preapproval requests any sooner  than 15 days before the start of each phase for providers within that  phase, but did not clarify whether requests received out of phase should  be rejected and returned to providers, not affirmed, or held as pending  until the start of the phase. As a result, one of the MACs we spoke with  stated that it initially held requests received out of phase to be processed  in the correct phase, but later in the process began rejecting such  requests.
CMS and the three MACs we interviewed reported challenges with  processing preapproval requests because they were not able to fully  automate systems to receive and track them in the time allotted. MACs  typically conduct either prepayment or postpayment reviews after claims  have been submitted; they do not typically receive or conduct MMRs of  preapproval requests before the provision of services. All three MACs  interviewed told us that MMRs of preapproval requests were more time- consuming and cumbersome because they had to process them outside  of their claims processing systems. In addition, all three MACs told us  they suspended some of their other medical review efforts in order to  implement the mandated outpatient therapy MMRs. For example, the  MACs we interviewed explained that they typically use automated edits in  their claims processing systems to flag claims for prepayment review in  areas identified to be at higher risk for improper payments, such as  certain billing codes or service areas, but told us they turned off some  other outpatient therapy edits while conducting the mandated MMRs.
All three MACs interviewed said that it was difficult to develop fully  automated systems for processing preapproval requests at the start of the  3-month process. Two noted that they would have required several  months to develop the type of automated systems that, integrated with  their regular claims processing systems, would have enhanced the  efficiency and accuracy of their MMR efforts. However, CMS did not issue  written guidance until August 31, 2012, instructing the MACs to develop  processes for receiving and tracking preapproval requests.
The MACs we interviewed adapted their systems to manage the  preapproval process in different ways with varying degrees of automation.  Two of the MACs received requests by fax, scanned the requests and  supporting documents, and saved them electronically by date or other  identification numbers for tracking. One of these MACs also developed a  database in which it manually entered and tracked its MMR decisions,  which MAC staff then manually searched to match with submitted claims.  The other, however, stated that it did not have time to establish such a  database, and conducted reviews without any automation. A third MAC  received all requests by mail and developed a database in which it  entered its preapproval decisions. This MAC also developed an electronic  edit in its claims processing system that tracked incoming therapy claims  so they could be processed according to the preapproval decision.  Though this MAC was able to automate this step in the preapproval  process, staff explained that they were still in the process of testing the  edit after the start of the MMR process, and continued to address system  errors until December.
section_title: 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
paragraphs: 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. Delays in claim  submissions and pending appeals create uncertainty about the final  outcomes of the 2012 MMR process.
subsections: section_title: MACs Reviewed an Estimated 167,000 Preapproval Requests and Claims and Affirmed 60 Percent
paragraphs: 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. Of the estimated 110,000  preapproval requests reviewed, the MACs affirmed 80,500 (73 percent)  and did not affirm 29,500 (27 percent). As of March 1, 2013, providers  who did not request preapprovals submitted an estimated 57,000 claims  for outpatient therapy services provided during the last quarter of 2012.  The results of the MMRs of claims without preapprovals resulted in  19,500 (34 percent) claims affirmed for payment and 37,000 claims   (66 percent) not affirmed for payment. These estimates indicate that  MMRs of both preapproval requests and claims resulted in a number of  nonaffirmed outpatient therapy services during the last quarter of 2012  (see fig. 3).
Both CMS officials and MAC staff acknowledged that the MACs were not  able to process all the preapprovals submitted in a timely manner. The  MACs do not usually conduct preapprovals of services, and the MACs  stated that the high volume of preapproval requests outpaced the  capacity of the MACs to review them. For example, the MACs we  interviewed reported receiving thousands of preapproval requests by mail  or fax prior to the start of the MMRs. By mid-October 2012, the MACs  estimated they had received 46,000 preapproval requests for outpatient  therapy services above the $3,700 threshold. In addition, the MACs  rejected about 23 percent of all preapproval requests because they were  incomplete. Incomplete requests could be resubmitted. In November  2012, on average more than 24,000 preapproval requests were  categorized as having not been reviewed at the end of each of the   4 weeks. Overall, the MACs estimated they completed MMRs for about  52 percent of the total preapproval requests received within the 10 days  required by CMS. (See fig. 4.)
By the end of December 2012, the MACs had conducted MMRs on about  15,000 claims submitted without preapproval requests. However, the  MACs were not under the same time constraints when reviewing claims  because, unlike the preapproval requests, CMS guidance permits the  MACs 2 months to conduct MMRs after they receive the supporting  documentation. In addition, claims for therapy provided during the last  quarter of 2012 were submitted incrementally, increasing from about  15,000 at the end of December to almost 57,000 by March 1, 2013. As a  result, the MMRs of these claims are staggered over time. CMS officials  indicated that the number of claims submitted and beneficiaries affected  by these prepayment MMRs would continue to increase in 2013.
section_title: Final Outcomes of MMRs Remain Uncertain Due to Data Limitations and Timing
paragraphs: Although CMS was able to estimate the results of the MMRs conducted,  the final outcomes of the 2012 MMRs remain uncertain due to  inconsistencies among the MACs in how the data were collected, and  errors in the calculation of the number of preapproval requests received  and the MMR decisions made. In addition, the time lag for submitting  claims and finalizing the appeals process means that the final outcome of  the MMR process will not be known for months. 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.
The manual processes CMS and the MACs used to complete the weekly  MMR workload reports resulted in inconsistencies in the data. Both the  CMS and MAC officials interviewed acknowledged that human error may  have contributed to discrepancies in the reported numbers because the  reports were assembled manually. In addition, due to the timing of CMS  guidance throughout the MMR, the MACs reported collecting key data  elements differently. For example, one MAC included the number of  requests rejected in the total number of requests completed while two  others did not. CMS officials also reported that they identified gaps or  errors in MACs’ weekly workload reports, but the agency did not require  the MACs to go back to revise prior weeks’ data. As a result, the running  totals included errors from prior weeks and the final numbers do not total  correctly. For example, the total number of treatment days that CMS  estimates were requested (2.4 million) is significantly greater than the  estimated total number of treatment days affirmed plus days nonaffirmed  (1.9 million).
The combination of potential delays in billing, the prepayment review of  claims, and the appeals process also creates uncertainty about the final  outcomes of the mandated MMRs associated with outpatient therapy  services provided in 2012. Because claims for services provided from  October 1, 2012, through December 31, 2012, may be submitted to the  MACs as late as December 31, 2013, the total number of claims reviewed  will not be known until 2014. In addition, CMS officials, some MAC staff,  and outpatient therapy provider association representatives reported the  filing of appeals for denials of payment for therapy provided during this  period. The appeals process—which may involve five levels of review— could take more than 2 years to reach a conclusion, and any reversals of  prior therapy coverage denials will affect the final outcomes of the 2012  MMR process.
section_title: Agency Comments
paragraphs: 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. The RACs are conducting  prepayment review of claims at the $3,700 threshold in California, Florida,  Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio,  Pennsylvania, and Texas, and are conducting immediate postpayment  reviews in all other states. HHS’s comments are printed in appendix I.
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section_title: Appendix I: Comments from the Department of Health and Human Services
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Martin T. Gahart, Assistant  Director; George Bogart; Anne Hopewell; and Sara Rudow made key  contributions to this report.