After an eight-month delay, the CMS has set Aug. 27 as the date for the start of a demonstration program that will allow Medicare recovery audit contractors in 11 states to review the medical necessity of claims before the providers are ever paid.

The demonstration program, called recovery audit prepayment review, will focus on certain types of claims that the CMS says are prone to high rates of improper payments. The reviews will focus on seven states with providers prone to errors and fraud (California, Florida, Illinois, Louisiana, Michigan, New York and Texas) and four with large volumes of short inpatient hospital stays (Missouri, North Carolina, Ohio and Pennsylvania).

The program was initially projected to start in January, but was delayed after an outcry from provider groups. The CMS said it's intended to speed a transition away from “pay and chase” enforcement by preventing erroneous payments before they occur.

The demonstration program was announced Nov. 15. Meanwhile another demonstration program announced that day dealing with short stays in hospitals is ongoing.

Under the Part A to Part B rebilling demonstration, a group of 380 hospitals was allowed to bill for Medicare outpatient service rates if their claims for hospital-rate services were rejected for having been delivered in the wrong setting, e.g. outpatient vs. inpatient. Hospitals in the demonstration can bill for 90% of the Medicare Part B claims if their Medicare Part A claims are rejected for that reason.