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CMS FY 2022 Budget Justification Requests Increased Funding for Medical Review

The Centers for Medicare and Medicaid Services’ (CMS) FY 2022 Budget Justification request to Congress indicates a greater focus on audit activities, including a doubling of CMS’ medical review budget, and an effort to decrease the number of claim denials overturned through the Medicare appeals process. While still in the proposal phase, the budget justification provides a glimpse into CMS’ priorities for the coming fiscal year. Specifically, CMS requests $96.7 million to be used as discretionary funding for medical review activities, which represents an increase of $50.5 million above the FY 2021 Enacted level. Medical review activities can be conducted pre-payment or post-payment and concentrate on areas identified through a variety of means, including targeted data analysis, Comprehensive Error Rate Testing (CERT) results, and oversight agency findings that indicate allegedly questionable billing patterns.

CMS contracts with Medicare Administrative Contractors (MACs) to perform analysis of claims data to identify atypical billing patterns and perform claims review, including medical reviews. The FY 2022 request supports ongoing medical review operations, including Targeted Probe and Educate (TPE) reviews, which CMS temporarily suspended for a portion of 2020 in response to the Public Health Emergency (PHE). CMS recently announced in June 2021 that MACs are authorized to begin conducting post-payment medical reviews for dates of service during and after March 2020. CMS states that the FY 2022 Budget Justification “proposes to significantly increase funding to allow MACs to conduct additional review in FY 2022.” MAC medical reviews were previously limited to dates of service prior to March 2020, which means we can expect to see MACs begin audits of claims submitted during the PHE.

The FY 2022 Budget Justification also would allocate $19 million to the Supplemental Medical Review Contactor (SMRC) to conduct SMRC audits, which provide support for a variety of tasks meant to lower the improper payment rates and increase efficiencies of the medical review function of Medicare. SMRC audits were similarly paused for a period of time during 2020 in response to the PHE. In FY 2020, the SMRC reviewed approximately 80,197 claims, whereas CMS expects the SMRC to review 792,800 claims in FY 2022. So, providers may also anticipate increased SMRC medical reviews.

Given the significant pause in audit and medical review activity because of the PHE, there is no surprise that CMS is requesting increased funding to support greater efforts in these areas. Audits of claims submitted during the PHE are prone to be increasingly complex due to the multiple policy changes, waivers, and flexibilities CMS issued in response to COVID-19. Providers should aim to be well-informed during audits and medical reviews and remember that the results of Medicare and other audits can generally be appealed if the provider acts within the applicable timeframe.

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