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Note from the instructor: NCCI Manual Updated for January 1, 2015

This note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.  

CMS posted on its website an update to the National Correct Coding Initiative Policy Manual for Medicare Services which will be effective with dates of service January 1, 2015.

The National Correct Coding Initiative (NCCI) edits were created many years ago “to promote national correct coding methodologies and to control improper coding that leads to inappropriate payment in Part B claims.” There are two sets of edits – one for physicians and a separate file for hospitals. NCCI edits apply only to Medicare Part B claims and they do not apply to hospital inpatient services or any other services covered under Medicare Part A.

According to the NCCI Manual, the NCCI is developed by CMS for the Medicare program and the most important consideration in developing the edits is CMS Policy. CMS also considers American Medical Association’s Current Procedural Terminology (CPT) Manual, national and local Medicare policies and edits, coding guidelines developed by national societies, standard medical and surgical practice, and current coding practice.

NCCI includes three types of edits:

  • Procedure-to-Procedure (PTP) edits are pairs of CPT or HCPCS Level II codes that are not both separately payable when billed by the same provider for the same beneficiary for the same date of service, unless an appropriate modifier is reported;
  • Medically Unlikely Edits (MUEs) represent the maximum number of units reportable for a HCPCS code by the same provider for the same beneficiary for the same date of service, in most circumstances; and,
  • Add-on Code edits describe a service that is always performed in conjunction with another primary service and is eligible for payment only when provided with an appropriate primary service.

In reviewing the new manual for 2015, it appears Chapter 1 General Correct Coding Policies contains the most changes. Specifically, there were extensive revisions to the MUEs section. The changes included an explanation of the Modifier Adjudication Indicator (MAI), appealing a MAC’s denial, and the prohibition of issuing an Advance Beneficiary Notice or billing the patient when an MUE edit is triggered.

Chapter 1 of the updated NCCI manual did incorporate additional guidance in regards to Modifier 59 from MLN Matters article SE1418. This article was released earlier this year. It describes the three other limited situations in which two services may be reported as separate and distinct because they are separated in time and describe non-overlapping services even though they may occur during the same encounter.

In relation to Modifier 59 and the new subset modifiers X{ESPU}, an updated version of Modifier 59 article is also posted on the NCCI Edit website. Unfortunately, it does not provide any much needed guidance or examples for the use of the new modifiers. We continue to wait for further instruction from CMS and MACs on their required use although CMS is encouraging hospitals and physicians to begin using them on January 1.

Coding and billing staff, compliance and auditing staff, as well as department managers should at a minimum review Chapter 1 and any other applicable sections to their line of business. All changes are designated by italicized red font.

Note from the instructor: Therapy Caps Applied to Hospital and Critical Access Hospital (CAH) Outpatient Therapy

This note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  

Note from the instructor: Therapy Caps Applied to Hospital and Critical Access Hospital (CAH) Outpatient Therapy

CMS released the updated outpatient therapy cap threshold for 2015. The outpatient therapy cap for 2015 will be $1940 for physical therapy and speech language pathology combined and $1940 for occupational therapy per beneficiary per year. This represents an increase from $1920 in 2014. The application of the therapy caps, and the exception process, is very different for PPS hospital outpatient departments and CAHs. In my note I thought I would take the opportunity to clarify how the application of the caps and the exception to the caps differs and what the means for therapy in CY 2015.

Therapy Caps Applied to PPS Hospitals

The therapy caps originally only applied to PPS hospitals for a very short period of time beginning October 1, 2012, through December 31, 2012. Subsequent legislation extended the application of the caps, with the latest extension through March 31, 2015, in the Protecting Access to Medicare Act of 2014 (PAMA). Unless further action is taken by Congress, the therapy caps will no longer apply to therapy provided in PPS hospital outpatient departments beginning April 1, 2015.

While the therapy caps apply to therapy in PPS hospitals, PPS hospitals can use the legislative exception process to the caps to provide and be paid for medically necessary therapy in excess of the caps. The exception process is also time limited and has also been extended through March 31, 2015, in PAMA.   When PPS hospitals provide therapy in excess of the therapy caps, and they determine the therapy is medically necessary, the therapy can be billed with the –KX modifier and the MAC will pay the therapy under the exception process up to $3700.

Once $3700 of therapy has been paid on behalf of the beneficiary additional therapy is subject to manual review by Recovery Auditors to verify it is medically necessary. The provider initially bills therapy they believe is medically necessary with the –KX modifier. Once the $3700 manual review threshold is reached, the MAC will either pay the claim (subject to manual post payment review) or hold the claim for prepayment manual review. Pre-payment review is conducted in the states included in the prepayment Recovery Auditor demonstration project (California, Florida, Illinois, Louisiana, Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania, and Texas) and post-payment review is conducted in all other states.

Unless Congress acts, the therapy caps will no longer apply to PPS hospital therapy effective April 1, 2015. Congress could extend the therapy caps to hospitals for an additional limited timeframe or indefinitely. If that occurs, it will be important for PPS hospitals to determine if the therapy cap exception process is also extended. If it is not extended, therapy will be limited to the then-current threshold and the KX modifier will not allow claims in excess of the threshold to be paid. If, however, Congress elects to allow the application of the caps to PPS hospitals to expire, then PPS hospital will not need to be concerned about the extension of the exception process because therapy in their outpatient departments will not be limited by the cap.

Therapy Caps Applied to CAHs

When Congress applied the therapy caps to PPS hospitals, they did not address CAH services. In the first extension of the application of the caps to PPS hospitals, they included CAH services in the calculation of the caps for CY2013, but did not actually apply the caps to CAH services themselves. The amount included in the caps for CAH services is calculated at the Medicare Physician Fee Schedule (MPFS) amount payable, rather than the cost-based payment the CAH receives to avoid penalizing patients receiving therapy at CAHs. For 2013, therapy provided at a CAH was counted toward the cap and could cause therapy at another provider to exceed the cap and require the KX modifier or trigger manual review. But if therapy services provided solely at the CAH exceeded the cap, no payment limitation would apply.

Congress did not further amend the Social Security Act related to application of the caps to CAHs; however, CMS applied the caps to CAHs through regulatory action. In the CY2014 MPFS Final Rule, CMS adopted regulations to apply the therapy caps to CAHs effective January 1, 2014. Unlike the caps applicable to PPS hospital therapy, this regulatory provision is not time-limited and will continue indefinitely unless CMS or Congress acts to change the application of the caps. This means CAH hospitals must be aware of the status of the exception process. If Congress allows the exception process to expire March 31, 2015, CAHs will not be able to bill therapy in excess of the caps after that time because the KX modifier exception process will no longer allow payment of medically necessary therapy.

In summary, the temporary application of the therapy caps to PPS hospitals may expire April 1, 2015, without further action by Congress, but the application of the caps to CAHs is not temporary and will not change unless Congress or CMS acts. The exception process allowing medically necessary therapy beyond the cap is also set to expire April 1, 2015, without congressional action. Providers should monitor the status of these provisions to ensure they know how therapy provided after April 1, 2015, will be treated when it exceeds the new $1940 caps for 2015.

Note from the instructor: Qualifying for and Calculating the Disproportionate Share Hospital (DSH) adjustment for FY 2015

This note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

In this note we will discuss one more potential adjustment to the IPPS payment for inpatient hospital discharges during FY 2015. Most inpatient short-term acute-care hospitals are reimbursed for inpatient stays based upon the IPPS. Under the IPPS, hospitals generally receive a single payment for all services provided to a particular patient during that inpatient stay, based upon the DRG to which the stay is assigned. The DRG payment is composed of two portions: a DRG operating payment and a DRG capital payment.

In recent years, CMS has implemented a number of programs that require an adjustment to the DRG operating and/or capital payments. In today’s issue we will focus on the Medicare DSH adjustment, which originally became effective for discharges occurring on or after May 1, 1986. Significant changes were made to this program with respect to discharges on or after the beginning of FY 2014. I recently researched these changes in preparation for teaching a custom MBC-H class and thought it would be beneficial to review them with the larger hospital community.

Scope and purpose of DSH adjustments

DSH adjustments are designed to compensate hospitals serving a disproportionate share of low-income inpatients. Qualifying hospitals may receive an adjustment (an increase) in the DRG payment they receive for each IPPS case. There are separate DSH adjustments for the operating and capital portions of the DRG payment. These DSH adjustments are generally based on the percentage of days attributable to low income individuals (the “DSH Percentage”) and the size and location (urban versus rural) of the hospital.

There are two categories of patients considered to be low income for DSH purposes:

  • Medicare Part A beneficiaries who are eligible for Supplemental Security Income (SSI); and
  • Medicaid patients without Medicare Part A coverage.

A Medicare beneficiary enrolled in a Medicare Advantage plan is included in the calculation of the Medicare Part A fraction. A patient without Medicare Part A coverage is included in the low- income count so long as the patient was eligible for Medicaid inpatient services, regardless of whether Medicaid actually covered or paid for the patient’s hospitalization. CMS is required to assist hospitals in obtaining relevant data to calculate the number of low-income Medicare Part A/SSI patients. The hospital, however, has the primary burden of furnishing data adequate to prove eligibility for each Medicaid inpatient day claimed.

Determining the hospital’s qualification for the DSH adjustment

There are two methods for a hospital to qualify for the Medicare DSH adjustment. The primary method is for a hospital to qualify based on a statutory formula used to determine the hospital’s DSH Percentage. The DSH Percentage is equal to the sum of the percentage of Medicare inpatient days attributable to patients eligible for both Medicare Part A and SSI, and the percentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A. The DSH Percentage is calculated using the following formula:

 

                                     Medicare SSI Days                            Medicaid, Non-Medicare Days

            DSH%   =   ______________________    +     ___________________________

                                 Total Medicare Part A Days                     Total Patient Days (All Payers)

 

The alternate special exception method (the “Special Exception Method”) applies to large urban hospitals (100 or more beds) able to demonstrate that more than 30% of their total net inpatient care revenue comes from State and local government programs for indigent care (other than Medicare or Medicaid).

A hospital qualifies for a DSH operating adjustment if the hospital has a DSH percentage over 15% or if it satisfies the requirements of the Special Exception Method. Only urban hospitals with 100 or more beds potentially qualify for a DSH capital adjustment. Urban hospitals with 100 or more beds will qualify for a DSH capital adjustment if the hospital serves any low income patients or if it satisfies the requirements of the Special Exception Method.

Determining the DSH adjustment factors for discharges prior to FY 2014

If a hospital qualifies for a DSH operating adjustment, the applicable DSH operating adjustment factor depends on the hospital’s DSH percentage.

 

  • If the hospital’s DSH percentage is equal to or greater than 15% but less than or equal to 20.2%, the following formula applies:

 

2.5% + (65% x (Hospital’s DSH% – 15%))

 

  • If the hospital’s DSH percentage is greater than 20.2%, the following formula applies:

 

5.88% + (82.5% x (Hospital’s DSH% – 20.2%))

 

There are limits applied to the DSH operating adjustment factor for certain categories of hospitals.

 

If a hospital qualifies for a DSH capital adjustment, for hospitals not subject to the Special Exception Method, the DSH capital adjustment factor is determined based on the following formula:

Adjustment Factor = Antilog of 1(0.2025 x DSH%) –  1

(Note: The antilog of 1 is approximately 2.718)

 

For hospitals subject to the Special Exception Method, the DSH capital adjustment factor is the same as the hospital’s DSH operating adjustment factor.

Determining the DSH adjustment factors for discharges on and after October 1, 2013

Effective for discharges on or after October 1, 2013, the amounts otherwise payable to a hospital under the above-referenced DSH operating adjustment rules are reduced by 75%. For FY 2014 and subsequent fiscal years, the remainder, equal to 75% of what otherwise would have been paid as DSH operating adjustment payments, will become available for uncompensated care payments, subject to certain reductions for changes in the percentage of uninsured individuals. Each Medicare DSH hospital will receive an additional uncompensated care payment based on its share of insured low income days as reported by all Medicare DSH hospitals. This additional amount will be equal to the product of the following three factors:

  • Factor 1: 75% of the estimated DSH payments that would otherwise be made under the old DSH operating adjustment methodology;
  • Factor 2: 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for each of FYs 2015 through 2017); and
  • Factor 3: A hospital’s amount of uncompensated care relative to the amount of uncompensated care for all DSH hospitals expressed as a percentage.

Applying the DSH adjustment factors

The DSH operating and/or capital adjustment factors are applied to the respective DRG operating and/or capital payments after any applicable Hospital Readmission Reduction Program or Hospital Value-based Purchasing Program adjustments, but before any applicable Hospital Acquired-condition Reduction Program adjustment or outlier payment calculation.

Source authorities

More information on DSH adjustments can be found in the following principal source authorities:

FY 2015 IPPS Final Rule, 79 Fed. Reg. 49854–50449

FY 2014 IPPS Final Rule, 78 Fed. Reg. 50496–51040

42 CFR § 412.106

42 CFR § 412.320 

Medicare Claims Processing Manual, Chapter 3 § 20.3

 

The DSH operating and/or capital adjustment factors are applied to the respective DRG operating and/or capital payments after any applicable Hospital Readmission Reduction Program or Hospital Value-based Purchasing Program adjustments, but before any applicable Hospital Acquired-condition Reduction Program adjustment or outlier payment calculation.

 

Note from the Instructor: CMS Releases OPPS Final Rule

This note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  

CMS released the OPPS final rule. There are three significant changes I wanted to discuss in my note this week. First, CMS finalized the packaging of most ancillary services. They also finalized the Comprehensive APC (C-APC) policy. Lastly, certification for most inpatient cases was eliminated.

For CY2015, CMS eliminated the ancillary services status indicator X and conditionally packaged most of these services, reassigning them to status indictor Q1. Status indicator Q1 triggers packaged payment if any other code with a status indictor S (significant procedure), T (surgical procedure) or V (visit) is reported on the claim. The service is only paid separately if no other service with an S, T, or V status indicator is reported. This separate payment will be made based on the codes reported on the claim and no additional action will be required by the provider, unlike the laboratory packaging for CY2014 which requires application of the modifier L1 for labs to be paid separately.

Under this new increased packaging policy, CMS conditionally packaged services with a geometric mean cost of $100 or less, except preventative services, psychiatry–related services, and drug administration services. The number of services assigned status indicator Q1 increased from 11 to 538. Newly conditionally packaged services include minor procedures such as foreign body removals, application of splints and strapping; diagnostic procedures such as x-rays and ECGs; and pathology and blood product– related services along with many others.

Continuing the increased level of packaging under OPPS, CMS finalized 25 C-APCs that make a single comprehensive payment for expensive primary procedures and all the related and “adjunctive” services reported on the claim with them. There are 248 primary procedures, identified by status indicator J1. CMS ranked each of the primary procedure codes in a table in Addendum J. The assignment of the final C-APC is controlled by the highest ranking primary procedure code reported on the claim.

CMS finalized a “complexity adjustment” allowing the C-APC to be increased one level if specific secondary or add-on codes are reported on the claim with the primary procedure. CMS finalized 63 complexity adjustment pairs affecting only 29 of the 248 primary procedure codes. The complexity adjustment pairs are published in a table in Addendum J.

CMS also published a list of services that will be excluded from the C-APC payment in Table 6 of the final rule. In general, services required to be paid separately by statute continue to be paid separately, including: preventative services; pass-through drugs, biologicals and devices; brachytherapy seeds and sources; and cost based services such as vaccines. Also excluded are services paid on other fee schedules, including ambulance services, mammography services, and therapy provided under a plan of care and reported on a separate monthly claim.

Lastly, CMS finalized their revised proposal to exclude self-administered drugs from packaging to the C-APC unless they function as supplies integral to the procedure. In CY2014, CMS had originally proposed to package the self-administered drugs into the C-APC. The finalized rule means patients will still be responsible for most self-administered drugs in hospital outpatient departments.

Also included in this otherwise outpatient rule was a change to the requirements for certifications for hospital inpatients. CMS eliminated the need for certification for most inpatients, with the requirement now only applying to patient stays of 20 days or greater and cost outlier cases. This change provides relief from a very onerous requirement for providers. However, the requirement for a certification prior to billing an outlier case will require hospitals to be diligent in monitoring for cases that hit outlier. These cases can be difficult to identify because it requires you know the final DRG as well as all the charges on the case, some of which may be added later.

Additionally, I had hoped that CMS would allow inpatient status orders to be signed in the same manner as other orders. They had previously taken the position that the order had to be signed before discharge because it was the first element of the certification which had to be signed before discharge. Now that certification is not required in most cases, I was hoping they would loosen this requirement to match the requirements for other kinds of orders. In the preamble commentary to the rule, however, they reiterated the requirement that the inpatient order must be signed before discharge, even if the case does not require a certification.

Providers interested in these new rules should review the comment and response sections of the CY2015 OPPS Final Rule preamble because they contain good clarifications and information. Additionally, the Addenda contains detailed information on the status indicators for codes and the rankings and complexity adjustments for the C-APCs, and can be found on the final rule home page.

Note from the instructor: Summary of potential adjustments to Inpatient Prospective Payment System (IPPS) payment for inpatient hospital discharges during FY 2015, Part II

This note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

Under the HVBPP, for each FY (beginning with FY 2013), value-based incentive payments are made to hospitals that meet or exceed certain performance standards for that FY, resulting in an upward adjustment to the hospital’s base operating payment. The incentive payments for each FY are funded by a prescribed percentage reduction (the “applicable percent”) to the total base operating payments of all hospitals subject to the HVBPP, resulting in a downward adjustment to every participating hospital’s base operating payment.

Those hospitals subject to the HVBPP include most IPPS hospitals, except the following:

  • Hospitals subject to the reduced update for failure to meet Inpatient Quality Reporting program requirements;
  • Hospitals for which the Department of Health and Human Services (DHHS) has cited deficiencies posing immediate jeopardy to health/safety of patients; and
  • Hospitals that fail to meet minimum number of cases/measures for that FY.

Given the possibility of both an upward and a downward adjustment, a specific hospital’s total HVBPP adjustment may result in either an increase or a decrease to the hospital’s base operating payment for each case during the FY. The HVBPP adjustment is made by applying the hospital’s FY “value-based incentive payment adjustment factor” to each inpatient discharge. CMS publishes both proxy and final adjustment factors in Tables 16A and 16B, respectively, of the IPPS Final Rule for each FY.

For each FY, a hospital’s value-based incentive payment, if any, is based on the hospital’s Total Performance Score, as determined by its “Achievement” or “Improvement” score (whichever is higher) during the Performance Period. The “Achievement Score” is based on the hospital’s performance compared to all other hospitals. The “Improvement Score” is based on the hospital’s performance compared to its performance during the “Baseline Period.”

For discharges during FY 2015, CMS has implemented the following changes to the HVBPP:

  • CMS is withholding 1.5% of anticipated DRG operating payments to create the funding pool for incentive payments
  • There are four quality domains
    • The Clinical Process of Care domain, weighted at 20%
    • The Patient Experience of Care domain, weighted at 30%
    • The Outcomes domain, weighted at 30%
    • The Efficiency domain, weighted at 20%
  • The Performance Period for each domain is as follows:
    • For the Clinical Process of Care and Patient Experience of Care domains–CY 2013
    • For the Outcomes domain
      • Three 30-day mortality measures—10/1/12-6/30/13
      • Agency for Healthcare Research and Quality patient safety indicator 90 (AHRQ PSI-90)—10/15/12-6/30/13
      • Central line-associated bloodstream infection (CLABSI)—2/1/13-12/31/13
    • For the Efficiency domain–5/1/13-12/31/13

HACRP adjustments for inpatient discharges during FY 2015

The HACRP is designed to reduce the number of HACs, including HAIs, arising during inpatient hospital stays. Effective for discharges on or after 10/1/14, payment to “applicable hospitals” is equal to 99% of what would otherwise apply to such discharges. As noted earlier, this reduction adjustment is made to the “base operating portion of the applicable hospital’s DRG payment,” which includes all applicable DSH, IME, LV, HRRP and HVBPP adjustments  For purposes of the HACRP, “applicable hospitals” include IPPS hospitals, sole community hospitals (SCH)s, and Indian Health Service (IHS) hospitals.

Adjustments are only made to applicable hospitals with the worst HAC rates. For FY 2015, these are hospitals that rank in the top quartile of all subsection (d) hospitals for HACs acquired during the “applicable period.” DHHS will determine the HACs to be counted and the “applicable period” during which measurement will be taken to determine a hospital’s “Total HAC Score” for a specific FY.

  • For FY 2015, CMS has finalized measures in the following two domains:
    • Domain 1, composed of a single composite measure, AHRQ PSI-90, which is a claims-based measure, weighted at 35%; and
    • Domain 2, composed of two CDC National Healthcare Safety Network (NHSN) measures, weighted at 65%
      • Central line-associated bloodstream infection (CLABSI); and
      • Catheter-associated urinary tract infection (CAUTI), which are chart-abstracted measures
  • The 24-month applicable periods are
    • 7/1/11-6/30/13 for the AHRQ measures
    • 1/1/12-12/31/13 for the two NHSN measures

Source authorities

More information on the issues discussed above can be found in the following principal source authorities:

FY 2015 IPPS Final Rule, 79 Fed. Reg. 49854–50449 

FY 2014 IPPS Final Rule, 78 Fed. Reg. 50496–51040 

FY 2013 IPPS Final Rule, 77 Fed. Reg. 53258–53750 

Fact sheets: CMS to Improve Quality of Care during Hospital Inpatient

Stays

Fact sheets: Fiscal Year 2015 Policy and Payment Changes for Inpatient

Stays in Acute-Care Hospitals and Long-Term Care Hospitals

Note from the instructor: CMS Revises Audit Timeframes and Reminds Auditors of Quality Obligations

This note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  

 

CMS issued a transmittal changing the audit timeframe for complex reviews from 60 to 30 days for some MAC and Recovery Audit Contractor (RAC) reviews. The change could significantly affect the volume and timeliness of complex reviews for providers. The transmittal also contained a number of other “Business Requirements” reminding auditors of requirements related to the quality of their determinations.

CMS changed the timeframe for MAC complex pre-payment reviews and RAC complex post-payment reviews to 30 days when providers submit documents within the prescribed 45 days following the advanced development request (ADR). The transmittal did not affect MAC post-payment reviews or reviews by other contractors. Presumably, the transmittal also did not affect pre-payment reviews by RACs under the pre-payment demonstration, although they were not addressed specifically in the transmittal.

Contractors must make and document their review determination within 30 days. In addition to making their determination, the MAC must enter the determination in the Fiscal Intermediary Shared System and the RAC must communicate their determination to the provider within the allowed 30 day timeframe. If the determination is affected by state laws requiring an evidentiary hearing for the beneficiary, the contractor should review the claim within 30 days, conduct the hearing, and then “continue with processing the claim” on the next day.

The 30 days are counted from when the records are received in the contractor’s mail room. Additional funding is not being provided for the MACs, so according to the transmittal they will have to “adjust their medical review strategy and medical review workloads” to meet the requirements. Not only will this change significantly increase the timeliness of complex reviews for providers, but MACs may do fewer reviews overall in order for their current staff to complete reviews in the required new timeframe. Their only other option would be to hire more reviewers; however, with no additional funding being provided, it is unlikely MACs will want to increase staff.

Speaking of staff, the transmittal also addresses the credentials of the review staff of RACs and Supplemental Medical Review Contractors (SMRCs), reminding them to comply with their Statements of Work (SOW). The transmittal also reminds RACs and SMRCs to follow the requirements from their SOW for consulting other healthcare professionals.

The “Business Requirements” discuss the establishment of a QI process by the RAC, SMRC and Comprehensive Error Rate Testing (CERT) contractors. The QI process should verify “the accuracy of MR decisions” and include inter-rater reliability assessments that must be reported as required by CMS. The transmittal also reminds auditors, including the RAC, CERT, SMRC and Zone Program Integrity Contractors (ZPICs) that they must request ABNs in situations where an ABN is mandatory.

Overall the transmittal seems to be directed at improving the complex medical review process for providers, in terms of timeliness, quality and, indirectly, volume.

 

Note from the instructor: Critical Access Hospitals and Patient Coinsurance Amounts

This note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.  

The OIG published a report regarding the amount of coinsurance a Medicare beneficiary pays when receiving outpatient services at a critical access hospital (CAH). A CAH is a rural hospital that is reimbursed based on a reasonable cost methodology rather than being paid a prospectively determined amount under the outpatient APC or inpatient MS-DRG payment systems. As of July 1, there are 1,326 CAHs in the country which creates a significant impact on the Medicare system and its beneficiaries.

A CAH must follow unique licensure limitations including operating a combined maximum of 25 acute care beds and swing beds used for skilled nursing services. A CAH is also limited to an annual average per patient length of stay of 96 hours. With the implementation of the 2-midnight rule, a physician must also certify that the patient can be expected to be discharged or transferred from the CAH within 96 hours of the order to admit.

A CAH is reimbursed 101% of its reasonable costs for inpatient and outpatient services. Each CAH submits a cost report on an annual basis which is used by the MAC to identify its reasonable costs and create the CAH-specific annual interim payment rate. The patient’s deductible and coinsurance for inpatient services is calculated in exactly the same manner as a PPS hospital based on a benefit period. However, when the patient is receiving outpatient services, the patient pays 20% of the CAH’s reasonable charge rather than a pre-determined amount that is a portion of the total APC payment.

In a CAH, a unique situation is born in that a patient who receives an outpatient service in a CAH actually pays more out of pocket for the same exact service that could have been provided in a PPS hospital. In the report, the OIG cites that Medicare patients paid two to six times more for coinsurance at a CAH than at a PPS hospital. According to the 2009 and 2012 claims data for 10 common HCPCS codes, the patient paid on average 47% of the costs for outpatient services.

As with most hospitals, a CAH’s charge for an individual service is usually more than the actual cost of the service or the Medicare payment. Although a CAH’s charges are not directly tied to their costs, their charges must be reasonable according to the Medicare Provider Reimbursement Manual and general principles of cost reimbursement. Because charges are higher than costs, the amount of coinsurance when calculated based on the charge can represent a considerable proportion of actual payment.

There are several examples listed in the OIG report and here is a general comparison for an Emergency Room Evaluation and Management service between a CAH and an OPPS hospital and the difference in the beneficiary’s out of pocket expense.

E/M = 99284 CAH OPPS
Charge $650.00 $650.00
Cost/Charge Ratio 0.50 0.50
Wage Index N/A 1.00
Total Payment $328.25 $293.71
Patient’s Coinsurance $130.00 $58.75

 

In the report, the OIG recommends CMS seek legislative authority to modify how coinsurance amounts are calculated for outpatient services received at CAHs. One of the OIG’s suggestions was to calculate the coinsurance based on the interim payment rate, which would significantly decrease the beneficiary’s coinsurance amounts. Another suggestion was to use the same coinsurance amounts that are assessed under OPPS. CMS responded to the report but did not agree with or comment on the recommendations.

CAHs have been under much scrutiny by the OIG and CMS over the past 18 months and changes are imminent due to the costs to the Medicare program and its beneficiaries. We recently saw this when some CAHs, including necessary provider CAHs, were reclassified as urban under the revised wage indices and now must reapply to maintain their CAH designation. If the coinsurance calculation were to change as recommended by the OIG, this would significantly impact the bottom line of the CAHs across the country unless CMS agrees to make up the difference-which is doubtful.

Note from the instructor: Summary of potential adjustments to Inpatient Prospective Payment System (IPPS) payment for inpatient hospital discharges during FY 2015, Part I

This note is from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

The most significant changes to the IPPS are implemented as of the beginning of the government’s FY, which is October 1. Most inpatient short-term acute-care hospitals are reimbursed for inpatient stays based upon the IPPS. The IPPS is a prospective payment system implemented in 1982. Under the IPPS, hospitals generally receive a single payment for all of the services provided to a particular patient during that inpatient stay. That single payment is based upon the DRG to which the stay is assigned. The reimbursement for each DRG is based upon the average resources necessary to treat a patient with the same principal and secondary diagnoses, procedure(s) and other relevant factors.

In recent years, CMS has implemented a number of programs designed to encourage cost and administrative efficiency, while preserving the quality of inpatient hospital services. Many of these programs fall under the rubric of what CMS refers to as “pay for performance.” Recently, I have been reviewing the IPPS FY 2015 Final Rule (FY 2015 FR), including the potential adjustments to the otherwise applicable IPPS payment for a particular inpatient stay. Trying to find all of the relevant information on these adjustments has been a daunting task. I thought it might be helpful to provide a brief summary of the major adjustments to which hospitals’ IPPS payments may be subject during FY 2015. This is Part I of a two-part series that will focus on these adjustments. Part II will appear in the November 4 edition of the Medicare Insider.

Since not all of the particulars are set out in the FY 2015 FR, I will list the principal souces I used to identify relevant information at the end of this Note. Also, to keep the summary as brief as possible, I will use acronyms for a number of the particulars. Please see the source authorities for more information on these acronymns and other details with respect to the IPPS adjustments discussed. Finally, these potential adjustments apply to IPPS payment for inpatient discharges during FY 2015 (October 1, 2014—September 30, 2015).

Potential adjustments to the Operating Standardized Amount (OSA)

The IPPS payment is composed of two separate payments: the DRG operating payment (Operating Payment) and the DRG capital payment. The majority of adjustments, if any, are made to the Operating Payment. To calculate a particular hospital’s Operating Payment during FY 2015, the hospital has to begin with the applicable OSA, from Table 1A or 1B of the FY 2015 FR. The OSA is the average per case operating costs for all inpatient stays in IPPS hospitals for that FY. Those hospitals whose wage index (WI) is greater than one will find their OSA in Table 1A. Those whose WI is equal to or less than one will find their OSA in Table 1B. Each year, CMS determines the OSA for that year, based upon the full market basket increase, which is 2.2% for FY 2015. They then divide each OSA into a labor and non-labor related portion.

Inpatient Quality Reporting Program (IQR). A number of years ago CMS implemented the first of its quality initiatives, currently referred to as the IQR. Under the IQR, hospitals are required to meet certain quality reporting and reliability criteria in order to receive the full market basket increase for that FY. For FYs prior to FY 2015, hospitals that failed to meet these criteria were subject to a two percentage point reduction to the otherwise applicable full market basket increase for each of their Operating Payments.

For FY 2015, any hospital that fails to meet the relevant IQR requirements will be subject to a one-quarter reduction of the full market basket update, rather than a two percentage point reduction. This will result in its receiving an update of 1.475%, rather than the full market basket update of 2.2%.

EHR Incentive Program. In addition, any hospital that is subject to the EHR Incentive Program, but is not a meaningful EHR user for FY 2015, will also be subject to a one-quarter reduction of the full market basket update. This will result in its receiving an update of 1.475%, rather than the full update of 2.2%.

These two reductions are cumulative. Therefore, any hospital that fails to meet both the IQR and EHR requirements for FY 2015 will be subject to an update of .75, rather than 2.2%, for all discharges during FY 2015.

Tables 1A and 1B include the applicable OSA amounts (divided into labor and non-labor related portions) for each of the above-noted scenarios for FY 2015.

WI adjustments. CMS has long recognized that inpatient hospital services are labor intensive, constituting a significant portion of a hospital’s total operating costs. CMS has also long recognized that labor costs vary, depending upon where a hospital is located. Therefore, CMS, with the assistance of the Office of Management and Budget (OMB), periodically classifies hospitals into certain common geographic areas (currently referred to as core-based-statistical areas [CBSAs]). These classifications presume comparability in terms of labor and other related hospital operating and capital costs. Once classified to a particular CBSA, CMS determines the WI for all hospitals located in that CBSA. The WI is a comparison of the average labor costs for all hospitals located in that CBSA to the average labor costs for all hospitals across the country.

During the calculation of a particular hospital’s Operating Payment, Medicare adjusts the labor-related portion of that hospital’s OSA by multiplying it by the hospital’s current WI. Once adjusted, the WI-adjusted labor-related portion of the OSA is added back to the non-labor-related portion of the OSA, before continuing the computation process.

OMB has just completed a revision of the market basket CBSAs, based upon the 2010 Census data. This revision resulted in a number of changes to the CBSAs to which specific hospitals are assigned, and, in many cases, changes to the WIs for those hospitals. During FY 2015, hospitals standing to benefit from these changes will be subject to the WI of the CBSA to which they were assigned under the new OMB delineations. To minimize any adverse impact on Operating Payments due to the adoption of these new OMB delineations, CMS is adopting a one-year transition for all hospitals standing to experience a decrease in their wage index exclusively due to the implementation of the new OMB delineations. During FY 2015, their WI will be based on a 50/50 blend of the WI of the CBSA in which they were geographically located in FY 2014 and the WI of the CBSA to which they were classified under the new OMB delineations. The new OMB delineations will be fully implemented for these hospitals in FY 2016, at which time they will be fully subject to the WI of their new CBSA classification.

CMS is also adopting a three-year transition for the relatively few hospitals previously located in an urban county that would become rural under the new OMB delineations. For FYs 2015, 2016, and 2017, assuming no other form of WI reclassification or redesignation is granted, CMS will assign these hospitals to the area WI of the urban CBSA in which they were geographically located in FY 2014.

Source authorities

More information on the issues discussed can be found in the following principal source authorities:

FY 2015 IPPS Final Rule, 79 Fed. Reg. 49854–50449

FY 2014 IPPS Final Rule, 78 Fed. Reg. 50496–51040

FY 2013 IPPS Final Rule, 77 Fed. Reg. 53258–53750 

Fact sheets: CMS to Improve Quality of Care during Hospital Inpatient

Stays

Fact sheets: Fiscal Year 2015 Policy and Payment Changes for Inpatient

Stays in Acute-Care Hospitals and Long-Term Care Hospitals

Note from the instructor: Defending Medical Review Decisions at ALJ Hearings

This note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.  

As providers seek answers and further clarification while they consider taking CMS up on their 68% solution, a transmittal has been published regarding a CMS contractor’s obligation to participate in ALJ hearings going forward. Transmittal 543 creates a new section to Chapter 3 of the Medicare Program Integrity Manual and directs MACs to assign a physician to take part in ALJ hearings when the claim is directly related to their own determination or redetermination.

In November 2012, the OIG published a report for FY 2010 asserting ALJs reversed Qualified Independent Contractor (QIC) decisions 56% of the time and decided in favor of appellants due to different interpretations of Medicare policies. However, when MACs participated in appeals at the ALJ level, the tables were turned in favor of the MAC. It is no surprise the OIG recommended that CMS increase its participation at the ALJ level of appeals and that CMS concurred. Transmittal 543 now directs the MACs to do so. Other contractors, such as Recovery Auditors, Zone Program Integrity Contractors (ZPICs) and the new Supplemental Review Contractors (SMRCs) will also be participating in more ALJ hearings as directed through their scope of work.

According to CMS, a significant amount of time and effort is spent by its contractors to ensure that review staff are making quality decisions and they have taken the position that a decision to deny a claim at any level should be more consistently justified. In this transmittal, CMS identified several factors to be considered in defense of their medical review findings including CMS and MAC policies, the amount of the claim being appealed, and if the claim at issue is a part of a recurring theme seen in past and current ALJ appeals. In most circumstances, the Contractor Medical Director (CMD) or other employed physician will have oversight of the MAC’s participation in the ALJ hearing with additional support provided by an attorney, nurse reviewers or other clinicians, as needed.

When a provider appeals at the second level, the QIC makes the reconsideration decision based on all pertinent information, both information previously submitted to the MAC and any new evidence. When the provider or Medicare contractor chooses to appeal to the third level, all previously submitted information is passed along to the ALJ and a hearing date is set. Beginning on October 27, 2014, all Medicare contractors will need to coordinate with the QIC to receive the notice of ALJ hearing. Unfortunately, this transmittal does make reference to the two-year moratorium on scheduling ALJ hearings that was imposed earlier this year. Once the hearing notice is issued, a MAC must elect to participate in the hearing process within 10 calendar days of the notice. The QIC may also participate with the MAC so collaboration on their position statements and timing between the two entities is critical to defending their case.

There are two ways that the MAC can become involved in a case at the ALJ level.

  • Electing ‘party status’ requires CMS approval. As a party, the MAC can file position papers, call or cross-examine witnesses of other parties, and request discovery. The MAC may also be questioned by the ALJ or other parties regarding any issue related to the claim under appeal. If CMS does not approve the MAC’s request for party status, the MAC may be a participant instead.
  • Electing ‘participant status’ allows the MAC to file position papers and provide testimony to clarify CMS and MAC policies related to the case. However, they may not call or cross examine witnesses of another party. The MAC must respond to ALJ questioning but may defer answering questions by the appellant.

With either type of participation, the MAC must be able to confidently discuss the details of each claim under appeal, as well as the background on earlier appeal decisions and provide clarification on coverage policies and payment requirements. And just as providers anticipate to what level they may take their appeal to before accepting an adverse determination, CMS has directed the MACs to also be more proactive in evaluating if providers can be expected to appeal up through the ALJ hearing level. The current rule of thumb for providers is to write the initial appeal letter as if the intent was to take it to the ALJ level. This method has proven to be very effective and efficient for providers and we can expect to see the same from MACs.

Since providers also spend a more than a significant amount of time and money appealing cases to the ALJ level, it is difficult to say if providers will see a decrease in their success rate as MACs become more involved in the ALJ hearings as the OIG found in FY 2010. However, it can be assumed that providers will need to put more weapons in their cache to maintain their current level of effectiveness. This new mandate will not be affected by the 68% solution being offered and it could prove to be very time consuming for MACs and their CMDs given the volume of current ALJ appeals written by savvy and aggravated providers and mired in this very broken system.

Note from the instructor: Medicare clarifies key components of claims processing for clinical diagnostic laboratory services

This note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

In transmittal (R3071CP) and related MLN Matters article (MM8883), CMS updated its guidelines for correct processing of certain laboratory services (“lab services”). These updates primarily focus on the appropriate claims billing jurisdiction for lab services performed by “independent laboratories,” including the applicable billing jurisdiction for related specimen collection fees and travel allowance. For further information, hospitals should review the relevant sections of the Medicare Claims Processing Manual (MCPM), Chapter 16.

Definition of relevant terms

Let us begin with definitions of key terms found in Chapter 16 of the MCPM. For purposes of these billing rules, an “independent laboratory” is both independent of an attending or consulting physician’s office and of a hospital that meets at least the requirements to qualify as an emergency hospital under relevant provisions of the Social Security Act. A “referring laboratory” is a Medicare-approved laboratory that receives a specimen to be tested and refers the specimen to another laboratory for performance of the laboratory test. A “reference laboratory” is a Medicare-enrolled laboratory that receives a specimen from another, referring laboratory for testing and actually performs the test.

Billing rules regarding who can bill for referred lab services provided by an independent laboratory

Medicare has special billings rules for referred lab services performed by an independent laboratory. In such cases, a referring laboratory generally may bill for certain lab services (those listed on the clinical laboratory fee schedule) when performed by a reference independent laboratory only if the referring laboratory meets certain conditions:

  • the referring laboratory is located in, or is part of, a rural hospital;
  • the referring laboratory is wholly owned by the entity performing such test, the referring laboratory wholly owns the entity performing such test, or both the referring laboratory and the entity performing such test are wholly-owned by a third entity; or
  • the referring laboratory does not refer more than 30% of the clinical laboratory tests for which it receives requests for testing during the year (not counting referrals made under the wholly-owned condition described above)

On the other hand, claims for referred laboratory services may be made only by suppliers having specialty code 69 (i.e., independent clinical laboratories). Claims for referred laboratory services made by other entities will be returned as unprocessable. Independent laboratories should use modifier 90 to identify all referred laboratory services. The name, address, and CLIA number of both the referring laboratory and the reference laboratory should be reported on the claim.

In any event, only one entity may bill for a lab service referred to an independent laboratory. It is the responsibility of the referring laboratory to ensure the reference laboratory does not bill Medicare for the referred service if the referring laboratory does so (or intends to do so).

Please note that the above-referenced restrictions on the billing of referred lab services apply only to lab services performed by independent laboratories and do not apply to services performed in a physician office laboratory or a qualified hospital laboratory.

Updates on billing jurisdiction

Irrespective of who may bill for referred lab services, in its recent update, CMS clarified that the location where the independent laboratory performs the test determines the appropriate billing jurisdiction for the lab services, as well as for the related specimen collection fees and travel allowance. This is the case even if the sample originates in a different jurisdiction from where the sample is being tested. In addition, jurisdiction is not affected by whether or not the independent laboratory uses a central billing office or whether or not the independent laboratory provides services to customers outside its MAC’s service area.

Hospitals are encouraged to review their current lab referral policies and their related claims submission and billing practices to assure they are in compliance with applicable Medicare rules, as clarified in these recent CMS releases.