The Centers for Medicare and Medicaid (CMS) has experimented with pre-claim review processes — and new research suggests that this Medicare program can be highly effective, but only in certain states.

Medicare pre-claim reviews for home health services cut spending in Illinois by 13% and reduced an estimated $1.2 billion in traditional Medicare home health expenditure during the study period, according to a new study published in Health Affairs. 

Pre-claim reviews did not lead to statistically significant declines in Medicare spending in three other states included in the study: Florida, North Carolina and Ohio. The findings suggest pre-claim review could benefit areas with higher cases of suspected fraud, such as in Chicago, rather than acting as a general policy guideline.

“Evidence from Illinois suggests that reductions in spending were driven by reductions in services that were more susceptible to fraud and reductions in spending in a geographic area with a history of home health fraud,” the study’s authors wrote. “Our results from Illinois add to a growing body of research that suggests that prior authorization (and prior authorization–like) programs can reduce health care spending and use.”

Illinois, particularly the Chicago area, has been linked with home health fraud over the last decade. 

Researchers examined whether a pre-claim review program affected unnecessary or fraudulent home health spending. The program required home health agencies to file the necessary documentation after services began but before payment was made. Medicare approves the claim if the home health agency provides sufficient evidence that the patient is homebound and under a physician’s approved care plan, which is required to satisfy Medicare’s coverage requirements.

To test the efficacy of pre-claim review, the researchers used 100% traditional Medicare claims, the Medicare Master Beneficiary Summary File and the Medicare Provider Analysis and Review file. They analyzed nationwide Medicare claims from 2014 through 2023, comparing four states that implemented pre-claim review — Illinois, Florida, North Carolina and Ohio — against a group of states that never implemented the pre-claim review process.

They looked at hospitalizations as an unintended consequence of pre-claim reviews, as hospitalizations are more likely to occur if pre-claim reviews deny or discourage quality health care, the authors explained.

When examining Illinois’s pre-claim review period from 2014 to 2023, the authors found a decline of $8.89 per Illinois beneficiary, representing a 13% decrease compared to the period before pre-claim reviews began. They then calculated that pre-claim reviews cut traditional Medicare home health spending in Illinois by about $1.2 billion during the study period.

A sharp decline in community-initiated home health care after the initiation of pre-claim review largely drove the spending reduction. Home health spending per user did not change considerably under pre-claim review. Additionally, the study authors found no notable increase in hospitalizations following the implementation of pre-claim review.

As for why other states showed statistically insignificant findings, the authors noted that this could have been due to state-level variation in home health services that may not have met Medicare’s coverage requirements. The onset of the COVID-19 pandemic lockdowns in early 2020 may have also influenced the results of pre-claim review implementation.

The study authors noted certain limitations. First, focusing on hospitalizations as an unintended consequence fails to measure other patient-centered outcomes, such as beneficiary satisfaction or caregiver burden, that come from applying a pre-claim review. The findings might also not apply to other states or services outside of home health, they added.

“Our results emphasize that prior authorization-like programs do not uniformly decrease spending. Home health pre-claim review reduced spending in some areas, such as Cook County, but did not have statistically significant effects in other states,” the authors wrote. “Policy makers should be cognizant of this potential heterogeneity in designing future prior authorization programs.”