Prior Authorization in Traditional Medicare: Yes, It Exists - McDermott+Consulting

Prior Authorization in Traditional Medicare: Yes, It Exists

Prior Authorization in Traditional Medicare: Yes, It Exists

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February 22, 2024 – When stakeholders think about prior authorization in the Medicare program, they usually focus on its use in Medicare Advantage (MA), and not how it is used in traditional Medicare. In fact, a few weeks ago, the Centers for Medicare & Medicaid Services (CMS) issued a final reg that, among other policies,  established new prior authorization requirements that apply to certain private plans (including MA plans) but that exclude traditional Medicare. CMS noted in the reg that although the requirements do not directly pertain to traditional Medicare, the agency wants the traditional Medicare program “to be a market leader on data exchange” (although CMS did not indicate how or when it plans to achieve that goal). Based on the language in the reg and CMS’s overall emphasis on regulating the use of prior authorization among MA plans, one might assume that prior authorization doesn’t exist in traditional Medicare. However, one would assume wrong.

To help me provide some history and context for the use of prior authorization in traditional Medicare, I’m bringing in my colleague, Leigh Feldman.

What sparked our interest in this space was a notice CMS released last week seeking public comments on the information that will be required to be collected for a new demonstration project called the Prior Authorization Demonstration for Certain Ambulatory Surgical Center (ASC) Services. The notice is only 4-pages long and does not include many details about the demonstration. In fact, the purpose of the notice is not to fully describe the demonstration, but instead to fulfill CMS’s obligation under the Paperwork Reduction Act (PRA), which requires federal agencies like CMS to publish a 60-day notice whenever they plan to collect information. In the notice, CMS states that it seeks to develop and implement the demonstration project but does not specify a timeline for doing so. CMS also does not state which ASC services will be subject to prior authorization under the demonstration.

This new demonstration project is being developed under the US Department of Health and Human Services’ (HHS’s) “402 waiver” authority to test new payment models. This authority allows the HHS Secretary to “develop or demonstrate improved methods for the investigation and prosecution of fraud in the provision of care or services under the health programs established by the Social Security Act.” CMS believes that this demonstration will “assist in developing improved procedures for the identification, investigation, and prosecution of Medicare fraud occurring in ambulatory surgical centers providing services to Medicare beneficiaries.” However, again, CMS does not include any details in the notice about what Medicare fraud it has identified or plans to investigate with respect to ASC services.

The information that will be required for prior authorization includes “all documentation necessary to show that the service meets applicable Medicare coverage, coding, and payment rules,” according to the notice. CMS also stated that under the demonstration, providers should submit this information to the Medicare Administrative Contractors (MACs) prior to delivering the services. “Trained clinical reviewers” at the MACs will then review the information to determine if the requested services are “medically necessary and meet Medicare requirements.” If an ASC provider does not submit a prior authorization request before delivering the service and submitting a claim to Medicare for payment, the MAC will request the required information from the ASC provider to determine if the service meets applicable Medicare coverage, coding and payment rules before the claim is paid. Comments from the public are due by April 16, 2024.

This is not the first time CMS has used its demonstration authority to implement prior authorization requirements in traditional Medicare. Using this same 402 waiver authority, CMS has tested two Review Choice Demonstrations: one applying to home health services and the other to services furnished by inpatient rehabilitation facilities. While these Review Choice Demonstrations were also announced through PRA notices (although interestingly the PRA notices did include a bit more detail about the demonstrations themselves), we can’t assume that the Prior Authorization Demonstration for Certain ASC Services will be anything like these. However, for context, we want to provide some background on these other demonstrations.

  • Home Health Demonstration: Under the Review Choice Demonstration for Home Health Services, home health agencies (HHAs) located in Illinois, Ohio, Texas, North Carolina and Florida choose between three options for medical review of their traditional Medicare claims: pre-claim review, post-payment review or minimal review with a 25% payment reduction. HHAs that select pre-claim review or post-payment review are evaluated for six months, at which point the intensity of review is determined based on the HHA’s claim approval rate. HHAs with an approval rate of 90% or greater may choose from pre-claim review, selective post-payment review or spot check review, while HHAs with an approval rate of less than 90% must choose one of the three initial options.
  • Inpatient Rehabilitation Facility Demonstration: The Review Choice Demonstration for Inpatient Rehabilitation Facility (IRF) Services currently applies currently to IRFs in Alabama and soon will apply to IRFs in Pennsylvania, Texas and California. Under this demonstration, IRFs choose from two options for medical review of their traditional Medicare claims: pre-claim review or post-payment review. IRFs are evaluated every six months, at which point the intensity of review is determined based on the IRF’s claim approval rate.

CMS has also used its Innovation Center authority under section 1115A of the Social Security Act to test a prior authorization model for repetitive scheduled nonemergent ambulance transport (RSNAT). Section 1115A of the Social Security Act authorizes the HHS Secretary to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid and Children’s Health Insurance Program beneficiaries. Under the RSNAT model, prior authorization for RSNAT services rendered by ambulance providers/suppliers is voluntary. However, if the ambulance supplier elects to bypass prior authorization, applicable RSNAT claims will be subject to a prepayment medical record review. Claims for the first three round trips (six one-way trips) may be billed without prior authorization and without being subject to prepayment medical record review. The model was expanded nationwide in 2022.

Further, CMS used authority granted under Section 1834(a)(15) of the Social Security Act to create a prior authorization program for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). Section 1834(a)(15) authorizes the HHS Secretary to develop and periodically update a list of DMEPOS that the Secretary determines are frequently subject to unnecessary utilization and to develop a prior authorization process for these items. In 2015, CMS issued a final reg implementing a national prior authorization policy for certain DMEPOS items, and CMS selected the first set of services subject to prior authorization as a condition of payment beginning in 2017. CMS maintains a master list of DMEPOS items, updated at least once a year, that may be subject to a face-to-face encounter and/or a written order, or other prior authorization requirements, prior to delivery.

Finally, under its “controlling unnecessary increases in volume” authority under Section 1833(t)(2)(F) of the Social Security Act, CMS established a national prior authorization policy for certain hospital outpatient department services beginning in 2020 and has added to the list of services subject to the policy each year since. This policy was implemented through notice and comment rulemaking in a major calendar year payment reg (not a notice or smaller, separate reg): the Calendar Year 2020 Outpatient Prospective Payment System/Ambulatory Surgical Center Final Reg.

As we learn more about the Prior Authorization Demonstration for Certain ASC Services, we will keep you updated. In the meantime, it will be interesting to see if CMS makes any other announcements regarding prior authorization in traditional Medicare.

Until next week, this is Jeffrey (and Leigh) saying, enjoy reading regs with your eggs!

For more information, please contact Jeffrey Davis. To access the full archive of Regs & Eggs, visit the American College of Emergency Physicians.

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