A recent spate of Office of Inspector General audit reports calls into question some programs from the Centers for Medicare & Medicaid Services. It remains uncertain why the release of these audit reports have come within such a short window of time, but the fact that they are occurring should be an indication that CMS’s methods and processes are far from perfect.
The following is a look at some of the recent OIG critiques of CMS.
Audit MIC performance
An early assessment of the efforts of Audit Medicaid Integrity contractors to identify overpayments in Medicaid, generated this report. Released on March 20, it indicates that only 11% of the study-assigned audits were completed with findings of $6.9 million in overpayments, $6.2 million of which resulted from seven completed collaborative audits involving Audit MICs, Review MICs, states, and CMS.
This leaves 81% of audits in which the MICs were unable or unlikely to identify any underpayments or overpayments. The OIG deduced that problems with the data used and analyses conducted by Review MICs and CMS to identify audit targets hindered the performance of the Audit MICs.
In addition to showing the ineffectiveness of the Audit MICs, this report also may provide an early look at what to expect with Medicaid RACs. William Malm, ND, RN, CMAS, senior data projects manager at Craneware, Inc., based in Edinburgh, Scotland with a US office in Atlanta, suggests that the report essentially verifies CMS concerns about the Medicaid RAC proposed and final rules.
"States are having difficulty auditing on the Medicaid side due to the diversity and complexity of the regulations, and the lack of billing specifics in the individual state guidelines," Malm says. "These business practices have not been well documented and there is no defensible source authority to proclaim that something is an overpayment or an underpayment."
Report on CERT errors overturned through appeals
On March 9, the OIG published a review of the comprehensive error rate testing errors overturned through the appeals process for fiscal years 2009 and 2010. The report details the OIG’s review of the Medicare fee-for-service error rate, which is calculated by CMS and used in the estimate of improper payments that CMS submits to Congress each year.
CERT claim payment denials overturned after the cutoff date for determining the error rate for each fiscal year would have reduced the reported error rates from 7.8% to 7.2% for FY 2009 and from 10.5% to 9.9% for FY 2010, according to the report.
Approximately 5.5% of the CERT claim payment denials for FY 2009 and 7.6% for FY 2010 were overturned during one of the first three levels of the appeals process, but if these overturned CERT claim payment denials had been included in the initial error-rate calculations, the estimated value of reported errors for FYs 2009 and 2010 would have decreased by approximately $2 billion each year, according to the report.
In other words, the OIG report determined that the methodology used by CMS in calculating the error rate is flawed, which led to CMS overstating the amount of improper payments by approximately $2 billion in both 2009 and 2010. CMS failed to account for some providers’ successful appeals from denials issued by the CERT contractor, which led to the overstating.
Good news for providers
In an odd way, this is good news for providers in the sense that the OIG has publicly announced that the error rate is flawed, but unfortunately this information is unlikely to reach the audience that it should, according to Debbie Mackaman, RHIA, CHCO,regulatory specialist for HCPro, Inc.
"In general, the public hears so much from the media about how providers have bilked the Medicare and Medicaid system out of billions of dollars," she says. "We rarely hear a follow-up story like this that shows that what was originally published is not accurate. A $4 billion error is a considerable overstatement by any account."
The other good news for providers is that this report shows that provider appeals are successful, which should add a little fuel to their fire, according to Mackaman.
"Providers should be encouraged by this report and continue to appeal denials when appropriate and cost-effective to do so," she says. "It also might not be a bad idea for providers to lobby their own local media and congressional members to make sure that this side of the story is also told."
CMS’s Medi-Medi program
Though it’s not a CMS audit program, the Medicare-Medicaid data match program (Medi-Medi program) was also reviewed by the OIG in a report released on April 17. This program enables program safeguard contractors and participating state and federal government agencies to collaboratively analyze billing trends across the Medicare and Medicaid programs to identify potential fraud, waste, and abuse.
In the report, the OIG analyzed data from 2007 and 2008 that was collected from CMS, PSC, State Medicaid program integrity agencies, and other federal and state agencies participating in the program. The review found that the Medi-Medi program produced limited results and few fraud referrals.
During 2007 and 2008, the 10-state voluntary program received $60 million in appropriations and avoided and recouped $57.8 million. It produced 66 referrals to law enforcement and law enforcement accepted 27 of these referrals. Among the 10 participating states, each State averaged 2.8 Medicare referrals to law enforcement per year and law enforcement accepted an average of 1.15 referrals per state per year.
Few fraud referrals
In comparison, each state averaged 0.5 Medicaid referrals to law enforcement per year; law enforcement accepted an average of 0.2 referrals per state per year, according to the report. As a result of these findings, the OIG recommended that CMS reevaluate the goals, structure and operations of the Medi-Medi program to determine what aspect of the program, if any, should be part of CMS’ overall program integrity strategy.
CMS agreed with the OIG’s assessment, stating that since the period of the review, it has made significant strides in enhancing the effectiveness of the Medi-Medi program, but the OIG states that CMS has yet to provide any data to illustrate the enhanced effectiveness of the program.
Providing this data would enable Congress to make an informed decision whether to continue to fund the program and enable State and Federal agencies to make an informed decision on whether to participate.
Last month, the Office of Inspector General issued a report that presents an early assessment of the efforts of Audit Medicaid Integrity Contractors to identify overpayments in Medicaid. Contained within the report are drastic figures that convey the fact that Audit MICs are having a difficult time identifying overpayments in their audits.
Only 11% of the study-assigned audits were completed, with findings of $6.9 million in overpayments, $6.2 million of which resulted from seven completed collaborative audits involving Audit MICs, Review MICs, states, and CMS, according to the report.
This leaves 81% of audits in which the MICs were unable or unlikely to identify any underpayments or overpayments. The OIG suggests that problems with the data used and analysis conducted to identify audit targets led to this performance.
Another possible reason for the low volume of overpayments found is the lack of an overarching governing body over the Medicaid auditing landscape, suggests William Malm, ND, RN, CMAS,senior data projects manager in the Atlanta office of Craneware, Inc.
"States are having difficulty auditing on the Medicaid side due to the diversity and complexity of the regulations, and the lack of billing specifics in the individual state guidelines," he says. "These business practices have not been well documented and there is no defensible source authority to proclaim that something is an overpayment or an underpayment."
One thing for providers to take note of with this report is the fact that, much like the Audit MICs in this report, Medicaid RACs are also being rolled out with different state guidelines and a lack of a standardized set of rules. According to Elizabeth Lamkin, CEO, Pace Healthcare Consulting, LLC, in Hilton Head, SC., this may provide an early look at what to expect with the Medicaid RACs.
Malm agrees, saying that this report helps to essentially verify that everything that CMS suggested might be a concern in the Medicaid RAC proposed and final rules, is starting to happen now.
"Already before the Medicaid RACs have even started, there is evidence of some of these concerns showing up now," he says. "These concerns include overpayments being slow or nonexistent and leaving it up to the states to determine individual rules."
Now, what exactly does this mean for providers? One immediate need and point of action, when it comes to Medicaid RACs, should involve the training or hiring of an educated care manager, according to Lamkin.
"The government will likely get better and better at auditing—and you can see how aggressive they have been as of late—so hospitals are going to need to get better at front-end documentation," she says. "Providers may also want to have a care manager that is qualifying beneficiaries and documenting admission approvals on the front end that is well-versed in both the state and federal guidelines. I think that’s the only way providers will really be able to attack all of this."
Also, and as is usually the case, providers should be proactive in their approach, as opposed to being reactionary when the auditor comes knocking.
"Medicare RACs (Recovery Auditors) have already proven to be distressing and difficult to manage for most hospitals, so this will add a layer of uncertainty to which they have yet to know, says Malm. "Providers need to really look at this and come up with a strong action plan."
This is the second in a series covering various topics in the world of recovery auditors. Part two will focus on Medicaid RACs. Part one is here.
Since Medicaid recovery audit contracts officially launched on the first day of 2012, there hasn't been much news surrounding the program. That said, the actual "rollout" of audits and documentation requests are still to come, so providers should start familiarizing themselves with Medicaid's version of the Recovery Auditor Program.
State-by-state differences
While many of the administrative and organizational efficiencies that providers currently use to protect against other government auditors will help, there are a number of marked differences between the two programs. First and foremost is that each state will be set up differently. "This is going to be interesting to say the least, so providers will need to pay particular attention to any guidance released on this program," says Elizabeth Lamkin, CEO, Pace Healthcare Consulting in Hilton Head, SC.
"Providers will need to be especially proactive when it comes to the Medicaid RAC process because the statement of work is so much more vague than the Medicare [Recovery Auditor Program] statement of work," she says. "Though it says that it's modeled after the Medicare statement of work; every state really has the freedom to customize its own program, including the appeals process, different timelines, and the amount of issues they will look at, and so on."
"One hard and fast rule is that RACs have to notify providers of overpayment findings within 60 calendar days. But when it comes to the provider's timeline for returning documentation, each state is going to be different. Providers will definitely need to utilize RAC educational resources for their state's Medicaid."
Potential problems
One of the main points of contention when it comes to Medicaid RACs is how hospital systems that serve multiple states will be handled. Since Medicaid programs are going to be state-administered, many hospitals may find themselves pulled in different directions when it comes to handling this process.
Organizations that fall into this category should work with their hospital association, state and federal legislators, and the American Hospital Association to lobby for uniformity across the country, in terms of rules and regulations. In addition, providers can also go directly to an auditor that serves multiple states to attempt to make it standardized, according to Lamkin.
Concerning some of the actual issues that the RACs will be auditing, it's a bit early to offer trends or hot topic areas, but it's likely that some of the same CMS-identified issues for Medicare recovery auditors will be approved for Medicaid RACs.
These include medical necessity claims, durable medical equipment claims, units-of-therapy claims, as well as other high-dollar issues such as cardiac claims, which are already highly-targeted in the Medicare program, suggests Lamkin.
What can providers do now?
In terms of anticipatory planning and preparation, there are a number of different things for providers to consider, says Lamkin.
"First, providers should stay on top of the general Medicaid billing rules, not just RACs and appeals, and they should also conduct real-time, open chart audits to ensure accurate and compliant documentation," she says. "In addition, it may be beneficial for a provider to have someone on the front end at registration that is qualifying and screening potential Medicaid recipients."
"While real-time management of the bed placement and appropriate documentation are crucial to getting the rules right on the front end, measurement of accuracy and exchange of information are equally important for long-term success and accountability."
There must be some type of structure that brings together the finance, clinical, and utilization review functions, Lamkin says. All roles related to billing compliance should serve on the billing/compliance RAC committee or any other type of centralized committee.
It will be important for everyone to see the big picture when as the hospital determines how to handling the Medicaid auditing process. This is where enterprise-wide performance improvement of the process is housed, she added.
This is part one in a series covering various topics in the world of recovery auditors. Part one focuses on CMS's esMD (Electronic Submission of Medical Documentation) program.
A year ago this month, CMS announced its esMD tool, which is an option for providers to electronically send medical documentation that is requested of them by recovery auditors and other government entities contractors.
Phase 1 of esMD kicked off on September 15, 2011. During this period, providers will still receive medical documentation requests via paper mail, but will have the option to electronically send their documentation to the requesting review contractor.
Region D recovery auditor HealthDataInsights plans to participate in the program starting this month, and Region C recovery auditor Connolly next month.
Benefits of the esMD gateway
Ask any provider currently involved in its facility's recovery audit program—or any government auditing contractor, for that matter—and they won't hesitate to illustrate some of the correspondence issues that they are experiencing with the respective reviewing contractor. With the implementation of esMD, providers may find a decreasing administrative burden and improved submission tracking when it comes to record requests, suggests Amanda Berglund, MS, MBA, COO, Pace Healthcare Consulting, LLC.
"Right now, providers are still saving medical records to CD ROMs as PDF files and shipping these CD ROMs to contractors. Even though you've have a tracking number and somebody's signed for it, the recovery auditor or the MAC may say they didn't get it. The facility may need to recreate and reship the files to ensure acceptance within the set deadlines."
"But with esMD, there's an electronic trail and a report that indicates when the entity has received your medical records, whereas right now it's very proactive; you have call UPS or FedEx, see who at the contractor signed for it, and check on claim status tool to see if it's been received or not."
The ultimate goal of the program is more than likely aimed toward converting the process to an all-online process, says Elizabeth Lamkin, MHA, and CEO of Pace Healthcare. In addition, the program is going to go a long way in protecting providers from a HIPAA standpoint.
"It will reduce paperwork and costs, but also, with everyone being mandated to go to an EHR system, this is the logical next step. Also, with the Office of Civil Rights all over HIPAA, this definitely makes sense from a security standpoint."
In essence, sending electronic files via a secure connection directly to the recipient is not only a safer bet then paper mail, but clearly a better option overall.
Berglund says, "The ultimate point I'd make with esMD is that this is now available and providers should be using it, as it's sure to be more effective, secure and expedient than sending your records out in the mail."
As of September 2011, the following review contractors have been approved to participate in the esMD program:
The Centers for Medicare & Medicaid Services released a revised recovery audit contractor statement of work September 12 that contains several revisions and clarifications as well as new additions that will affect providers in a number of ways.
Among the areas of potential interest for providers, the newly released guidance addresses the RACs' treatment of the discussion period, according to Michael Taylor, MD, vice president of clinical operations at Executive Health Resources in Newtown Square, PA.
"When the discussion period first rolled out, CMS and the RAC contractors were heavily promoting it. It could be done in a verbal format, but now, it is clear that discussion period has to be in a written format. If the provider is pursuing discussion, and an appeal is filed during that time period, the RAC is charged—at that point—with ending the discussion period," said Taylor.
He continued, "So providers are going to have to make the choice of going right into the appeals process or using the discussion period first, because providers could find it fruitless to do this at the same time because of the new policy."
With this new change, providers will have to take more of a targeted approach. If a provider seeks to appeal early in the process to prevent recoupment, managing timelines becomes crucial. Depending on the timeliness of correspondence with the RACs, providers may opt not to use the discussion period because it may slow their process down and it could put their ability to file that first level appeal in time to prevent recoupment in jeopardy, according to Taylor.
The updated SOW also places an emphasis on the fact that RACs are expected to give CMS feedback on areas where guidance is unclear, which—down the road—could ultimately be quite beneficial for providers. Take LCDs (local coverage determinations), for example. The updated CMS guidance states:
The majority of coverage policy in Medicare is defined through Local Coverage Decisions (LCD). Therefore, LCDs typically provide the clinical policy framework for Recovery Auditor medical necessity reviews. If a LCD is out of date, technically flawed, ambiguous, or provides limited clinical detail it will not provide optimal support for medical review decisions.
CMS states in the SOW that RACs are using guidance in the LCDs for medical necessity decision making, and that the RACs will be tasked with helping CMS and the other contractors to improve that guidance over time, according to Taylor.
"So what could be an outcome of that? It's possible that we may begin to see the evolution of more specific types of medical necessity guidance, which would make the hospitals' jobs a lot simpler," he says.
Other items of potential interest for providers include:
Complete denials vs. partial denials
Although it is not a change from the previous program, CMS now states that a recovery auditor may find a full or partial overpayment, but it is now written in such a way that suggests that the contractor should be denying the overpayment, but permitting payment for the lower level—and medically necessary— level of care, says Taylor.
"What's so interesting about this is the fact that, across the country, we see that a common practice of the RACs is to deny an entire claim instead of a partial denial, and so why aren't we seeing these partial denials? If we have a patient that is admitted for an inpatient admission when observation was appropriate, then the SOW would suggest that the RAC should just be down coding the claim to a partial denial, instead of issuing a full denial. It will be interesting to see if this statement of work changes RAC behavior," he said.
Semi-automated reviews
Many providers are already aware that recovery auditors—which are now the official names for RACs, according to the new SOW—have been using what are known as "semi-automated reviews." These reviews are now officially recognized as a form of claims review in the new SOW as follows:
[Semi-automated reviews] are a two-part review that is now being used in the Recovery Audit Program. The first part is the identification of a billing aberrancy through an automated review using claims data. This aberrancy has a high index of suspicion to be an improper payment. The second part includes a Notification Letter that is sent to the provider explaining the potential billing error that was identified.
Conclusion
In order to be current on the recovery audit process, providers should definitely take a look into the updated guidance on the discussion period, medical necessity, and semi-automated reviews, suggests Taylor.
Recovery audit contractors, previously responsible for issuing demand letters to providers, will shift this responsibility to Medicare administrative contractors. The move reflects the program's desire to increase consistency and efficiency through automation, according to the Centers for Medicare & Medicaid Services.
The RACs will continue to handle this responsibility until January 3, 2012, when the responsibility officially switches over to the MACs. As a result, when a recovery auditor finds that improper payments have made been, it will submit claim adjustments to the MAC, and the MAC will then establish receivables and issue automated demand letters for any recovery auditor identified overpayment.
The MACs will then follow the same process used to recover any other payment, according to the accompanying MLN Matters article.
So how exactly will this affect providers, if at all? According to Kimberly Anderwood Hoy, JD, CPC,director of Medicare and compliance for HCPro, Inc, it should help.
"Many providers face timing difficulties when it comes to demand letters and actual recoupments," she says. "That will be consolidated at the MAC level and thus eliminate the confusion of MAC and RAC coordination."
"It should help providers have more consistency with the process of recoupment and ease the process of anticipating dates of recoupment," she added.
On the other side of things, the transition of responsibility from RAC to MAC raises some concerns for larger facilities, according to Rachel Williams, RHIT,audit contractor coordinatorat Indiana University Health in Indianapolis.
"Our organization has seven acute-care hospitals across the state, and we currently have issues with obtaining audit information from our FI/MAC because they send communication via the addresses on our 855A form which are either physical facility locations or PO boxes in another state," she says. "They don't address [correspondence] to specific individuals as our RAC currently does, so our concern is obtaining and responding to the demand letters within the 30 days prior to recoupment."
"Our organization has a policy that we do not allow recoupment to occur. Instead we refund or appeal, so this transition could impact our response to those deadlines," she continued.
Whether the CMS announcement has a positive, negative, or neutral affect, it remains fact that it's something that providers need to know, because as of January 3 of next year, the letters will no longer becoming from their respective RACs.
The Centers for Medicare & Medicaid Services released a Recovery Audit Contractor update on July 15 that details the amount of overpayments and underpayments identified in the most recent quarter, as well as the total amount identified since the start of the national program.
In the Q3 FY 2011 update, CMS identified $233.4 million in overpayments and $55.9 million in underpayments with a total correction amount of $289.3 million – more than $100 million more than in the previous quarter.
The report shows that the figures identified by CMS continue to grow drastically; in the second quarter of fiscal year (FY) 2011, CMS identified $162 million in overpayments and $22.6 million in underpayments, with a total of $184.6 million in corrections.
While this brief CMS report is essentially self-explanatory, the figures within it are certainly telling, according to Kimberly Anderwood Hoy, JD, CPC,director of Medicare and compliance for HCPro, Inc.
"First quarter in FY2011 was more than all over FY2010 combined. You can really see the efforts being geared up when you look at this report, as each quarter goes up significantly more than the last."
In addition to the figures, the report also contains the top RAC issue per region for Q3 FY 2011. The issues are as follows:
Region A: Renal and urinary tract disorders (medical necessity)
Region B:Extensive operating room procedure unrelated to principal diagnosis (DRG validation/incorrect coding)
Region C: Durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) provided during an inpatient stay (Durable medical equipment)
Region D: Minor surgery and other treatment billed as inpatient (Medical necessity)
Some of these issues may not come as a surprise to many, but providers should take a closer look at some of the issues, says Donna Wilson RHIA, CCS, CCDS, senior director at Compliance Concepts, Inc., in Wexford, PA.
"After seeing the top issue in Region A, I reviewed the MS-DRG tables only to discover no MS-DRG entitled Renal and Urinary Tract Disorders.' However, I did find an MDC (Major Diagnostic Category) for 'Disease and Disorders of the Kidney and Urinary tract,'" she says. "Providers are left to wonder, what falls into this denial category: Simple urinary tract infections or simple urinary/renal procedures?"
"When it comes to the top issue in Region D," she continued, "regarding the medical necessity of minor surgical procedures, providers need to be cognizant of the correct patient status. Also, keep in mind the typical recovery period for these minor surgical procedures is usually 4-6 hours."
Region B switches gears from the other RAC contractors by finding success in denying the higher weighted MSDRGs 981-983. Coders should consider a second-level (prebill) review of any records grouped into MSDRG 981-983. Applying this best practice technique will ensure the claim is coded and/or sequenced correctly resulting in less denials, according to Wilson.
While none of the information in the report can be considered groundbreaking, it does serve as a reminder to the provider community that not only are RACs not going away, but they are expanding, so providers need to remain diligent and keep open all lines of communication.
"RAC's are taking advantage of their ability to run automated reviews around the clock on much less cost than a complex review not yielding big dollars. Just because a hospital is not getting record requests, don't assume that you are not being audited and losing money," said Elizabeth Lamkin, a partner atPACE Healthcare Consulting.
"Only front-end compliance and documentation can prevent these takebacks," she continued. "Each provider needs a coordinated and comprehensive approach to ensure that the financial and clinical departments are communicating to connect these dots. For instance, clinical department directors—especially in the outpatient department—should be informed on a regular basis if there are recoupments in their particular areas."
For more information on the RAC appeals process, click here.
In an effort to provide helpful information to providers, CMS has released a special edition MedLearn Matters (MLN) article that disseminates diagnosis-related group (DRG) coding vulnerabilities for inpatient hospitals.
Recovery auditors review the entire medical record when performing DRG validation reviews, but oftentimes hospitals code the record prematurely, according to Donna Wilson RHIA, CCS, CCDS, senior director at Compliance Concepts, Inc. in Wexford, PA.
"As we know, hospitals code and finalize the claim without the final discharge summary documentation, given the struggles in meeting bill hold deadlines imposed by financial deadlines," she said. "External auditors—such as the recovery audit contractors (RACs)—have access to the entire medical record, which includes the discharge summary."
This practice puts hospitals at risk since they are responsible for reporting codes that accurately reflect the patient's conditions and procedures, therefore hospitals increase their chances of errors or denials. The article points out, for example, that the emergency department report, history, and physical (H&P), and early progress notes may indicate the patient has one condition, but continuing workup and evaluation may determine something entirely different.
By having access to the complete medical record, more accurate codes can be assigned, since auditors will review data from the entire medical record.
While this may not come as ground-breaking news to many providers, it is still a trend that needs to be addressed in many hospitals, according to Wilson.
"Oftentimes, a diagnosis may appear on the discharge summary that may not have been addressed in the medical record (pending test results, etc)," she said. "Best practice is to wait on the complete medical record since rebilling could result in a higher-weighted DRG that will automatically be reviewed by the QIO (quality improvement organization)."
"If internal financial policies lessen their bill hold timeliness then the discharge summary could be available and reviewed by a coding quality coordinator to ensure coding compliance," she said.
When coding claims, if there is conflicting or contradictory information in the record, a coder should query the attending physician to clarify the correct principal and secondary diagnoses, according to the article.
In addition, CMS cites Coding Clinic, First Quarter 2004: "If there is conflicting physician documentation and the coder fails to query the attending physician to resolve the conflict, hospitals are encouraged to code the attending physician's version, but that the failure of the attending physician to mention a consultant's diagnosis is nota conflict."
In these situations, it is a more prudent move to query the physician concurrently, according to Elizabeth Lamkin, MHA,partner, PACE Healthcare Consulting, LLC.
"Accurate documentation begins with the proper review by case management and physician advisor to give guidance to the attending/admitting physician," she said. "I'd recommend a clinical documentation improvement specialist (CDIS) to then review the documentation concurrently and assist the physician in navigating the chart."
If the physician documentation missed a note from a consulting physician or someone in the therapy department, for example, the CDIS can notify and query the physician during the patient's stay for clarification, she said. "The result should be more accurate documentation, better coding in the health information management (HIM) department, and appropriate reimbursement and billing compliance."
Editor’s note: This article is the third in a series of three IPPS-related updates. The first article on the three-day payment window clarification can be found here and the second article on replacement devices can be found here.
Within the inpatient prospective payment system (IPPS) proposed rule are an assortment of major and minor clarifications which—to a varying degree—will have an effect on a number of hospital departments. One of these updates comes in the form of a clarification to Medicare’s “under arrangement” provision.
When a patient is at a PPS hospital, the hospital is required to provide all covered services the patient needs. In some cases, however, the patient may require a service that the hospital cannot provide. For example, the patient may require a positron emission tomography scan and the hospital does not have a PET scanner.
The hospital may send the patient to a nearby hospital or facility for this service, but keep the patient as their inpatient throughout the process. This scenario is a perfect example of “under arrangement” services, according to Kimberly Anderwood Hoy, JD, CPC,director of Medicare and compliance for HCPro, Inc.
In the most recent IPPS proposed rule, the Centers for Medicare & Medicaid Services clarified that diagnostic and therapeutic services may be provided “under arrangement with another provider, but routine services such as nursing and medical social services must be provided by the hospital, according to Hoy.
At first blush, this does not seem concerning because these are not the types of services normally thought of as provided “under arrangement.” However, the CMS makes it clear that it considers even registry or contracted nursing services to be provided “under arrangement” and not by the hospital:
In situations in which certain routine services are provided under arrangements ‘‘in the hospital,’’ for example, contracted nursing services, we believe the arrangement generally results in the hospital exercising the same level of control over those services as the hospital does in situations in which the services are provided by the hospital’s salaried employees. Therefore, if these services are provided in the hospital to its inpatients, we consider the services as being provided by the hospital. However, if these services are provided outside the hospital, the services are considered as being provided under arrangement, and not by the hospital.
CMS’s clarification does afford hospitals an exception for the most common of these registry or contracted nurses arrangements, as long as the service is provided in the hospital. However, it leaves some unanswered questions that may be addressed in the final rule, Hoy says. “What about clinical social worker (CSW) services? Does this extend to those services and will the same exception apply that if they are provided in the hospital they will be considered to be provided by the hospital? Presumably whatever change is made would also apply to these services, but it’s unclear as of now.”
Other open questions include how the clarification will apply to nursing services associated with diagnostic and therapeutic services that are purchased under arrangements (e.g. recovery services) and to what extent it may affect other contractual arrangements when the hospital has to provide services that it is unable to provide directly.
“While this isn’t a huge change, it’s definitely something of which providers should be aware. If you look at the example of CSW services provided during inpatient stays—which is an approved issue for all four recovery audit contractors (RACs)—this clarification could have implications for how this is billed if the ‘in hospital’ exception is not extend broadly to all contracted services, leaving these unbillable by both the hospital and the CSW,” Hoy says.
Since this clarification was in the IPPS proposed rule, providers—particularly those that provide inpatient services outside of the hospital—will want to keep an eye out for the final rule later this year. In addition, affected providers should submit comments on this rule if they have questions or concerns about how this will affect contracted medical social services or other services they provide, Hoy says.
Editor's note: This article is the second in a series of three IPPS-related updates. The first can be found here.
The April 19 inpatient prospective payment system (IPPS) proposed rule contains an abundance of notable clarifications and updates that will affect multiple departments. Of these proposals, the Centers for Medicare & Medicaid Services' clarification on payment for recalled and replaced devices stand out as one of the most significant for providers.
The 2008 IPPS rule implemented a policy that reduced a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that had been recalled determined the base MS-DRG assignment for that procedure. At that time, CMS stated it would "reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit equal to 50% or more of the cost of the device when a manufacturer provided a credit for a recalled device".
As a result, CMS implemented condition codes to trigger the payment reduction, according to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc. When the device is replaced at no cost due to a malfunction of the device prior to the end of its normal lifecycle, condition code 49 is reported. If the device is replaced due to an FDA or manufacturer recall, condition code 50 is reported. Mackaman adds that in this case, the amount of the credit is reported on the UB04 claim form with a value code FD, and that amount is subtracted from the hospital's DRG payment.
Similarly, CMS implemented a "partial credit" policy in the 2008 outpatient prospective payment system (OPPS) reduced the amount of payment for an implanted device made under the OPPS. It was determined that a significant portion of the payment can be attributed to the cost of an implanted device when the provider receives partial credit for the cost of a replaced device, but only where the amount of the device credit is greater than or equal to 50% of the cost of the implanted replacement device, according to CMS.
Payment reductions are then triggered by using modifiers –FB (without cost) or –FC (partial credit), in addition to using the above condition codes (49 or 50), according to Mackaman.
"Not only does the reduction in payment affect the hospital, it also affects the amount of co-insurance the patient pays out-of-pocket which is different than the IPPS rule, which applies deductibles and co-insurance based on 'benefit days.'"
In the IPPS proposed rule for 2012, CMS recognizes the discrepancy between the IPPS policy and the OPPS partial credit policy for replacement devices. For the OPPS partial credit policy, credit must be 50% or greater of the cost of the replacement device, and for the IPPS policy – it does not specify whether the credit should be 50% or greater of the replacement device or the original device.
CMS believes that these two policies should be consistent with each other on the issue of whether the 50% or more credit is with respect to the replacement or original device. As a result, CMS is proposing to clarify the IPPS policy to state that the policy applies where "the hospital received a credit equal to 50% of more of the cost of the replacement device."
Providers should respond to this proposal accordingly, according to Mackaman.
"Since this is a clarification and not a change to the actual regulation, hospitals should review their current policies and align with the CMS policy by ensuring that the language concerning the credit is for the replacement device and not for the original malfunctioning or recalled device."