Providers on prepayment review could be facing exclusion from Federal healthcare programs if they don't correct the problems which caused them to be subject to prepayment review. CMS has directed its contractors to consider excluding physicians and other providers who have been on prepayment review for extended periods of time without correcting their "inappropriate behavior" from Federal healthcare programs, including Medicare and Medicaid. Exclusion from participation in Federal healthcare programs typically leads to other adverse consequences, such as loss of hospital privileges and being dropped from managed care networks. This directive from CMS becomes effective on January 15, 2014, and was first published in MLN Matters Number MM8394 released on December 13, 2013.

Medicare contractors place physicians and other providers on prepayment review when they suspect the providers are billing the Medicare program inappropriately. Rather than paying these providers upon the submission of claims, the contractors require the providers to send in medical records and other documentation to support the claims, which are then manually reviewed by nurses and other licensed practitioners. The claims are then either approved or denied based on the manual review. Providers generally remain on prepayment review until their average rate of claims approval reaches a sufficiently high percentage – usually 80%.

In its directive, CMS makes clear that keeping noncompliant providers on prepayment review for extended periods of time is a waste of Medicare's resources, which would be better spent on other types of program oversight.