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The Hospital Guide to Contemporary Utilization Review: Applying the 2-Midnight Rule to Transfer Patients

Editor’s note: The following is an except from The Hospital Guide to Contemporary Utilization Review, a comprehensive resource designed to identify utilization review (UR) best practices and provide guidance on developing and enhancing a contemporary UR committee. The book includes tips for intradepartmental collaboration to guide professionals through the process of selecting a physician advisor and partnering with nurses, case managers, and revenue cycle team members.
The 2-midnight rule also changes the way patient transfers are handled. If a patient requires hospital care that is expected to require more than two midnights, but the plan at the time of admission to the originating hospital is to transfer the patient to another facility prior to the second midnight, he or she should be placed as outpatient with observation services at the initial hospital. If the patient requires hospital care at the originating hospital that is expected to exceed two midnights and the initial plan is to care for the patient at the original hospital but then transfer if his or her condition deteriorates, the patient should be admitted as inpatient. If the patient is subsequently transferred, even within hours of admission, the billing status remains inpatient based on the initial plan.
The UR specialist in access management at the receiving hospitals should now consider any medically necessary midnights spent at the transferring hospital (including time spent emergency department at the sending hospital) and the number of anticipated midnights at their institution when making the decision on the proper status. For example, if a patient spent two or more midnights at the transferring hospital and is transferred for a procedure that may not require another midnight (i.e., a cardiac catheterization after a myocardial infarction), the UR specialist at the receiving hospital should still recommend inpatient admission. The stay at the receiving hospital may not pass any midnights, but the rule states the receiving hospital should admit the patient as inpatient. The patient will incur an inpatient deductible for the admission at the first hospital but since the admission to the second hospital is within the 60-day “spell of illness,” there is no deductible for that second admission. It will also not be considered a readmission as part of the CMS’ Hospital Readmission Reduction Program as the index admission will be coded using discharge status 02 (transfer to another acute care hospital), which is not counted as a readmission.
It should also be noted that CMS stated in the 2014 IPPS final rule that it expects providers to clearly document the need for hospitalization, including the risks and their plans for the patient:
The factors that lead a physician to admit a particular beneficiary based on the physician’s clinical expectation are significant clinical considerations and must be clearly and completely documented in the medical record. Because of the relationship that develops between a physician and his or her patient, the physician is in a unique position to incorporate complete medical evidence in a beneficiary’s medical records, and has ample opportunity to explain in detail why the expectation of the need for care spanning at least 2 midnights was appropriate in the context of that beneficiary’s acute condition.
—Medicare Program, 2013

Note from the Instructor: CMS provides additional guidance on chronic care management

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
CMS provided updated guidance to hospitals and practitioners on chronic care management (CCM) in two recent releases, both of which can be downloaded from the CMS website:
Although these updates are primarily aimed at physician and non-physician practitioners (NPP), there are also ramifications for outpatient hospital departments and clinics. An important point of clarification is that individuals providing CCM must have 24/7 access to the electronic care plan, rather than the entire medical record.
CMS also responded to a number of requests for additional information in the form of Frequently Asked Questions (FAQ). These FAQs are set out in SE1516 and cover several specific areas, including claims submission, intersection with transitional care management services, and the provision of CCM services in facility settings.


There is a growing awareness and acknowledgment by both CMS and the healthcare community that care management is an important component of primary care, often leading to better outcomes, as well as cost savings. To that end, for dates of service on and after January 1, 2015, Medicare began paying practitioners under the Medicare physician fee schedule (MPFS) for non-face-to-face care coordination services furnished to Medicare beneficiaries with multiple chronic conditions (reported with CPT code 99490).

Overview of FAQs

The remainder of this note will focus on key information relating to CCM services furnished in hospital outpatient settings. For purposes of this discussion, such hospital outpatient settings include hospital outpatient departments, as well as provider-based departments and clinics, and will be referred to generally as “HOPDs.” This information is primarily set out in some of the above-referenced FAQs.

FAQ #18. Are HOPDs eligible to bill CPT code 99490 under the OPPS?
Medicare will pay for CCM facility services (also reported with CPT code 99490) under the OPPS when the requirements in FAQ #19 are met. Since CPT code 99490 is defined as a physician-directed service, Medicare will pay for the CCM facility services only when the hospital’s clinical staff furnishes the services at the direction of the physician/NPP. Separate payment for the physician’s/NPP’s time spent directing CCM services in the HOPD setting is made under the MPFS at the facility rate.

FAQ #19. What are the requirements to bill CCM under the OPPS?
Since CPT code 99490 is defined as a physician-directed service, when the CCM service is furnished in an HOPD, the HOPD may only bill and be paid for the facility portion of CCM services furnished to eligible hospital outpatients under the OPPS if:
  • The hospital’s clinical staff furnishes at least 20 minutes of care management services under the direction of the physician/NPP during the calendar month; and
  • The billing physician/NPP directing the CCM services meets the requirements to bill CCM services under the MPFS set out below:
  1. Patient Eligibility—patient has two or more chronic conditions expected to last at least 12 months or until the death of the patient, placing the patient at significant risk of death, acute exacerbation/decompensation, or functional decline;
  2. Patient Agreement—patient consent to receive CCM services has been obtained by the practitioner and documented in the medical record;
  3. CCM Scope of Service Elements—all applicable Scope of Service Elements (as set out in the MPFS final rules for calendar years (CY) 2014 and 2015) are furnished by the HOPD; and
  4. CCM Certified Technology—the HOPD furnished the CCM services using a version of certified EHR that is acceptable under the EHR Incentive Programs as of December 31 of the CY preceding each Medicare MPFS payment year (referred to as “CCM Certified Technology”). The hospital must also meet the requirements to use electronic technology in providing CCM services, such as 24/7 access to the care plan, and electronic sharing of the care plan and clinical summaries (other than by fax), specified in the MPFS final rules for CYs 2014 and 2015.
FAQ # 20. How does CMS define a “hospital outpatient” for whom a hospital may bill CCM services (CPT code 99490)?

A hospital outpatient is generally defined as a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient and receives outpatient services from the hospital. Since CPT code 99490 will ordinarily not be performed face-to-face, the patient will typically not be a registered outpatient when receiving the service. As noted above, in order to bill for the service, the hospital’s clinical staff must provide at least 20 minutes of facility CCM services under the direction of the billing physician/NPP. Because of the practitioner’s direct relationship with the beneficiary, he or she should inform the patient the hospital will be performing care management services under the practitioner’s direction.
FAQ # 21. When CCM services are furnished by a physician in a hospital outpatient department, can the physician and the hospital both bill Medicare for the CCM services?
When professional CCM services are furnished by a physician/NPP in an HOPD to an eligible patient, the physician/NPP may bill Medicare for payment under the MPFS, reporting CPT code 99490 and place of service 22 (outpatient hospital), which will result in payment at the facility rate. The hospital may also bill Medicare for payment of the facility CCM services under the OPPS by reporting CPT code 99490.
FAQ #23. Is CPT code 99490 payable to provider-based hospital outpatient departments under the hospital OPPS? May a hospital-owned practice that is not provider-based bill the OPPS for CCM services?
A provider-based outpatient department of a hospital is part of the hospital and, therefore, may bill for facility CCM services furnished to eligible patients, provided that it meets all applicable requirements. A hospital-owned practice that is not provider-based is not part of the hospital and, therefore, is not eligible to bill for facility services under the OPPS. The physician/NPP practicing in the hospital-owned practice, however, may bill for payment under the MPFS for professional CCM services furnished to eligible patients, provided all MPFS billing requirements are met.
FAQ # 24. What is the supervision level for facility CCM services furnished in the hospital setting?
CPT code 99490 is assigned a general supervision level under the OPPS when furnished in the HOPD setting. General supervision means the procedure is furnished under the physician's/NPP’s overall direction and control, but the physician's/NPP’s presence is not required during the performance of the procedure. Under general supervision, the training of the non-physician personnel who actually perform the procedure and the maintenance of the necessary equipment and supplies are the continuing responsibility of the physician/NPP.
Interestingly, facility CCM services are considered to be outpatient hospital therapeutic services, which are generally subject to coverage requirements under the facility “incident to” a physician’s services requirements (see 42 CFR §410.27). Under these “incident to” requirements, the default level of physician/NPP supervision is “direct supervision,” which requires the supervising practitioner to be immediately available and able to furnish assistance and direction throughout the performance of the procedure. The decision to assign the lower level of general supervision to CPT code 99490 to facility CCM services was at the initiation of CMS, effective for dates of service on and after January 1, 2015.

Hospitals are encouraged to review the recent releases referenced above for more specific information on professional and facility CCM services.

Note from the Instructor: Improved Edit Resources from CMS

This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  
In last week’s note, Judith wrote about the Medical Unlikely Edits (MUE), one aspect of the National Correct Coding Initiative (NCCI). This week I thought I would take the opportunity to review the new, improved format for another of the NCCI edits, the Procedure to Procedure (PTP) edits. Additionally, CMS has made available an extended Integrated Outpatient Code Editor (IOCE) data file that contains information on many of the other edits applied through the broader IOCE, giving providers even more information on the edits applied to their claims.

Updates to the PTP Edit File
The latest version of the PTP edits, published for April, contains a new column with the rationale for each edit. The rationale column includes descriptions such as:

·         Standards of medical/surgical practice,
·         HCPCS/CPT procedure code definition,
·         CPT® ‘separate procedure’ definition, or
·         Misuse of column two code with column one code.

I was unable to find a further explanation of the meaning of these rationale, but they do give providers a place to start further researching the basis of a PTP edit.

The new rationale column also identifies “Mutually exclusive procedures.” This is important because this information has not been available since the reformatting of the excel files containing the edits in April 2012. CMS places the codes in column one and column two differently for mutually exclusive edits than for the other bundling edits. For mutually exclusive edits, the first column contains the least expensive code, and if the provider does not apply a modifier, the column two code (or more expensive code) will be rejected for payment.

It’s important to review mutually exclusive edits carefully. For the other bundling edits, if no modifier applies, the column one code is generally the correct code and the column two code should be removed. However, for mutually exclusive procedures either code could be correct. The coder needs to reassess the pair of codes to determine not only if a modifier applies, but also, if a modifier doesn’t apply, which code to remove. Failure to do this will cause the lower paying code to pay, when the higher paying code may represent the correct code for the procedure provided.

New IOCE Data File Available
Beginning in January, CMS has made available the IOCE Quarterly Data files, along with PC and Mainframe software. Previously, CMS had only published the IOCE Specifications, which contains a detailed explanation of the edits, and the IOCE Summary of Data Changes, which contains a listing of the codes changed for that quarter. CMS continues to publish these two files along with the new files on the CMS website.

The new Quarterly Data File contains all HCPCS/CPT® codes and information about the codes and their inclusion in various edits applied through the IOCE. The file provides the status indicator for each code and information such as whether it is:

·         Treated as a conditionally bilateral code for coding purposes,
·         A procedure that requires a device to be billed,
·         A device that satisfies the procedure/device edit,
·         A separate procedure under the inpatient only separate procedure exception, or
·         A comprehensive APC procedure.

This file, along with the detailed explanations in the IOCE Specifications, allows providers to research edits applied through the IOCE and determine how to correct claims.

Unfortunately, I have tried several times to download and install the PC software that is also now available and have been unable to get the software to run on my computer. I have viewed it on another computer and it appears to allow a provider to enter various codes and modifiers and receive the output from the IOCE (i.e., whether an edit applies). I encourage interested providers to download the software, though it appears to run better on Windows 7® and prior versions.

Overall, the new information available through these two edit systems gives providers access to far more information in researching and resolving the reasons for denials. CMS seems to be providing more information to providers about their edits and this is a very positive trend for provider compliance, as well as revenue integrity.

Note from the Instructor: Review of CMS rules on application of Medically Unlikely Edits

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
Under the NCCI, CMS has implemented three types of edits designed to promote correct coding and to discourage incorrect coding. Unfortunately, incorrect coding often leads to inappropriate payments, primarily overpayments. Currently, the following three types of NCCI edits are updated and maintained by CMS contractor Correct Coding Solutions, LLC:
  • Procedure to Procedure Edits;
  • Medically Unlikely Edits; and
  • Add-on Code Edits.
The NCCI edits only apply to Medicare services covered under Part B. The NCCI policy manual and edits may be downloaded from the CMS website, which instructs providers to address concerns regarding specific NCCI edits to the current NCCI administrator. During a recent MBC-H class, participants had a number of questions and concerns regarding the application of the Medically Unlikely Edits, more commonly referred to as MUEs.

Background on MUEs
The MUEs are unit of service limitations which have been introduced incrementally since 2008. Prior to implementation of the MUEs, CMS declined to disclose to providers the limitations for specific services. Following implementation, providers only learned they had exceeded an MUE limitation for a particular service when they billed units in excess of that limitation. After repeated requests for disclosure, CMS began to release MUE limitations for specific services. It is still not clear, however, whether CMS has released the MUE limitations for all services subject to these edits. Currently, CMS has released MUEs for more than 10,800 Medicare-covered services.

Initial application of MUEs
One of the most troubling areas surrounding the MUEs is how they are applied. Initial guidance from CMS indicated that the MUE limitations were to be applied on a per line item basis, so that the number of units on a single line did not exceed the limitation. If providers furnished what they believed to be medically necessary units (to the same beneficiary on the same date of service (DOS)) in excess of the limitation, they were told to bill those excess units on separate line items, with an appropriate modifier, so no single line item for that service contained units in excess of its MUE. In many cases, that methodology appeared to work. For those cases, as long as no line item exceeded the MUE, there was no denial of units in excess of the limitation when billed on a separate line with an appropriate modifier.

In other cases, however, CMS appeared to be applying the limitation on a DOS basis. That is, CMS appeared to be adding together all units of that service performed for the same beneficiary on the same date of service. If the sum of all units exceeded the limitation, then CMS either denied all line items on the claim with the HCPCS code for that service or denied the entire claim. At that point, there was considerable confusion as to how CMS was applying MUEs.

Introduction of MUE adjudication indicators
In response to this confusion and requests for clarification, CMS introduced three MUE adjudication indicators (MAI), which identify how CMS will apply MUEs to each specific service. These three MAIs are designated, defined and applied as follows:

  • MAI 1—applied by claim line
o   Each line reporting services is subject to MUEs edited against the MUE separately
o   For codes subject to MUE limitations, providers should report medically appropriate units in excess of the limit on separate lines, with an appropriate modifier, so no single line exceeds the limitation
o   MUEs with MAI of 1 denied for units in excess of the MUE are generally appealable to the MAC
  • MAI 2—applied by date of service
o   If billed in error, the provider may request reopening to correct
o   All claim lines with the same HCPCS code, regardless of modifier, and the same DOS will be summed and compared to the MUE value
o   All claim lines with that specific code will be denied if the total units exceed the MUE
o   The edit is based on statute, regulation, or subregulatory guidance and the MAC is bound by these rules for both initial decisions and redeterminations
§ Higher-level appeal adjudicators may not be bound by these rules, but should give deference to them

  • MAI 3—applied by date of service
o   If billed in error, the provider may request reopening to correct
o   All claim lines with the same HCPCS code, regardless of modifier, and the same DOS will be summed and compared to the MUE value
o   All claim lines with that code will be denied if the total units exceed the MUE
o   The edit is based on clinical information, and the provider may be able to successfully appeal denial to the MAC if there is adequate documentation of medical necessity

Additional questions and concerns

As noted above, the MUE edit tables are available for download from the CMS website. In the edit tables, CMS has identified each service subject to an MUE by HCPCS code. Beside each HCPCS code, CMS has listed the applicable MUE unit limitation and MAI designation, indicating the basis upon which the MUE is applied to that service. CMS encourages providers to contact the current NCCI administrator, Correct Coding Solutions, if they have questions or concerns about specific MUE limitations. In prior guidance, CMS also suggested that providers contact the national societies whose members order services subject to MUE limitations if they believe certain limitations are too restrictive based upon accepted medical practice.

One area of particular concern is CMS’ decision to deny all line items for services with an MAI of 2 or 3 (indicating the MUE is applied on a DOS basis) when the sum of the units exceeds the limitation, rather than only denying the units in excess of the limitation. This seems unnecessarily punitive, particularly when providers believe the excess units are medically appropriate. This concern might be an area where a coordinated, concerted approach would be more effective than individual action.

Note from the Instructor: CMS Issues FY 2016 IPPS Proposed Rule for IPPS Hospitals

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

On Friday, April 17, CMS put on display the FY 2016 IPPS proposed rule. The proposed rule is normally put on display around the first of April. It is unclear why the rule was delayed this year. The proposed rule contains multiple changes to the various quality measures that apply to hospitals, in addition to the standard payment policy changes. Interestingly, although FY 2016 is the first year Medicare Severity Diagnosis Related Groups (MS-DRGs), and therefore payments, will be based on the ICD-10-CM/PCS, there is scarce mention of the transition in the accompanying Fact Sheet or the Executive Summary included in the proposed rule.

General Payment Provisions
CMS is proposing a market basket update of 2.7%. After applying other adjustments, this results in a 1.9%[1] update to the operating standardized rates used to calculate payments. The Electronic Health Record (EHR) Meaningful Use adjustment and the Inpatient Quality Reporting (IQR) adjustment are both applied to this update[2].
Readers who review and use the tables published with the rule to predict hospital-specific payment changes will notice one big change to the tables. The multiple wage index tables normally included are being consolidated into two new tables[3] organized by hospital provider number and Core Based Statistical Areas (CBSA). I really like the new organization and found the new tables much more helpful in finding both hospital-specific and CBSA-specific information. The counties that make up each CBSA (formerly Table 4E) have also been moved to a new “data file” on the separate data file page.

Disproportionate Share Hospital payments will continue to decrease as the portion CMS calculates for uncompensated care continues to decrease. CMS attributes the decrease to the declining rate of uninsured patients under the Affordable Care Act, which they are statutorily required to adjust for in their calculation of the uncompensated care amounts paid to hospitals. The reduction from FY 2015 to FY 2016 is $1.3 billion, making the total distributed in uncompensated care payments to hospitals $4.6 billion in FY 2016.

Other policy updates include a revised list of MS-DRGs subject to the payment reduction policy for cases implanting a device received without cost or with a credit. CMS also discussed the impact of the ICD-10 transition on the New Technology payment provisions. CMS is proposing to discontinue New Technology payments for Voraxaze®, Zenith® Fenestrated AAA Endovascular Grafts, and Zilver Peripheral Drug Eluting Stents. New Technology payment would continue for KcentraTM, Argus®II Retinal Prosthesis System, CardioMemsTM HF Monitoring System, MitraClip System, and the Responsive Neurostimulator (RNS® system). CMS also discussed applications for nine other new technologies in the proposed rule.

Transition to ICD-10 and Changes to the MS-DRGs
As part of the transition to ICD-10-CM/PCS, CMS is proposing to use ICD-10 CM/PCS MS-DRG Version 33. The volume of changes related to MS-DRG logic, complications and comorbidities (CC)/major complications and comorbidities (MCC) and other coding related changes is consistent with prior years, perhaps due to the fact we are still in a code freeze year. The following is a review of the changes to the MS-DRG logic from Version 32 discussed and proposed in the rule:
  • CMS considered a request related to endovascular embolization, but declined to make any changes to MS-DRGs 020–027.
  • CMS proposed two new MS-DRGs for percutaneous intracardiac procedures (within the heart chambers), distinguishing them from intracoronary procedures (within the coronary vessels): MS-DRG 273 and 274 (Percutaneous Intracardiac Procedures, w/ and w/o MCC).
  • CMS considered a request to add severity levels for MS-DRG 245 Automatic Implantable Cardioverter-Defibrillator (AICD) generator procedures and determined it qualified for severity levels based on FY 2014 data but not on FY 2013 data. CMS declined to make a change this year but they will reconsider in future years.
  • CMS considered and declined to create a new set of MS-DRGs for the Zilver peripheral drug eluting stent, which will also no longer receive New Technology payment in FY 2016.
  • CMS proposed to revise the logic related to ICD-10 PCS code 02UG3JZ (Supplemental Mitral Valve with Synthetic Substitute, percutaneous approach) to match its assignment under the ICD-9 MS-DRGs, Version 32.
  • CMS considered MS-DRG placement of the Zenith fenestrated abdominal aortic aneurysm graft, which resulted in a proposal to delete MS-DRGs 237 and 238 (Major Cardiovascular Procedures, w/ and w/o MCCs) replacing them with five new MS-DRGs: MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon, w/ and w/o MCC) and MS-DRGs 270–272 (Other Major Cardiovascular Procedures, w/MCC, w/CC, and w/o CC/MCC).
  • CMS proposed to revise the logic for MS-DRGs 466–468 (Revision of Hip or Knee Replacements) to more closely match the assignment to the MS-DRGs of ICD-10 PCS codes related to removal of a spacer prior to insertion of a new joint prosthesis to those under ICD-9 Vol. 3.
  • CMS proposed to change the title for MS-DRGs for spinal fusions from 9+ fusions to “extensive fusions” to reflect terminology in ICD-10 PCS.
  • CMS removed several codes from the list of Operating Room (OR) procedures related to introduction of substances, such as cervical ripening gel, during pregnancy and delivery with normal delivery.
  • CMS considered a request for a new MS-DRG for cases using CroFab anti-venom, but determined the small number of cases (19) did not warrant a new MS-DRG.
  • CMS considered a request for a new severity level for burn cases assigned to MS-DRG 927 (Extensive Burns or Full Thickness Burns with Mechanical Ventilation 96+ Hours with Skin Graft) for cases using dermal regenerative grafts but declined to make any change.

The Deficit Reduction Act (DRA) Hospital-Acquired Condition (HAC) provision prevents increases to an MS-DRG based on specified reported HACs. CMS did not propose to add or remove any conditions from the current list of DRA HACs. The conditions were formerly identified by ICD-9-CM codes posted on the CMS website. CMS directs readers to the ICD-10-CM/PCS MS-DRG v33 Definitions Manual, Appendix I for the new ICD-10 codes to be used in FY 2016.

Solicitation of Comments and Other Commentary
The proposed rule solicits comments on the potential expansion of bundled care models under the Bundled Payments for Care Improvement (BPCI) initiative. Since 2011, CMS has been developing and testing payment models under the BPCI that make a single payment for a bundle of care. There are currently four models consisting of various bundles that may include care such as post-acute care and even physician professional services. The proposed rule reviews the four models and requests comments on their potential expansion and specific topics such as episode definition, the role of organizations and relationships, and setting payment.

CMS also included a short section in which they discussed the feedback they have received on short inpatient hospital stays and long outpatient observation stays, including the audit activity around these stays. CMS reviewed the steps they have taken that they believe have mitigated some of the issues, including limiting the auditing of cases subject to the 2-Midnight Rule under the Probe and Educate program and multiple improvements to the Recovery Audit Program. They did not further address any of the concerns expressed by providers, but rather deferred to the CY 2016 OPPS rule to be published in August. They indicated at that time they would further discuss these issues, including the negative 0.2% adjustment enacted with the 2-Midnight Rule to recoup anticipated increased inpatient volume under the rule.

Long Term Care Hospitals
One proposal of note for Long Term Care Hospitals (LTCH) is a new site neutral payment for certain payments that do not meet clinical criteria to qualify for the standard LTCH payment rate. This payment provision will reduce payments to LTCH by 4.6% or $250 million in FY 2016. Even though the industry will experience an overall decrease in payment, cases meeting the clinical criteria to receive the higher LTCH rates will receive a 1.9% payment increase.

Overall, the rule is consistent with prior years and contains few surprises. Perhaps the biggest surprise is the rather small amount of information on the implementation of the ICD-10 coding system for payments beginning with FY 2016, though this is perhaps due to the work done over the prior years developing parallel ICD-9/ICD-10 versions of the MS-DRG definitions. Nevertheless, I had the impression the rule would contain more information about the transition. The rule also leaves us wanting more on both the BPCI and the short inpatient/long outpatient stay discussion, but we will have to wait until later in the summer for both.
[1] The Fact Sheet accompanying the proposed rule states the increase for hospitals is 1.1%, which includes an additional 0.8% decrease for the mandatory documentation and coding adjustment related to the implementation of the MS-DRG payment system.
[2] The EHR reduction/adjustment is equal to 50% of the market basket or -1.35%, resulting in an update of just 0.55% for hospitals failing to meet Meaningful Use standards. The IQR reduction/adjustment is equal to 25% of the market basket or - 0.675%, resulting in an update of just 1.225%. Failure to meet the requirements of either program will result in loss of 75% of the market basket or -2.025%, resulting in a negative update of -0.125%.
[3] New Table 2 is organized by CMS Certification Number (CCN, also known as the provider number) and will contain the information formerly in Tables 2, 4J, 9A, and 9C. New Table 3 is organized by CBSA (i.e. geographical region) and will contain the information formerly in Tables 3A, 3B, 4A, 4B, 4C, 4D, and 4F.

Note from the Instructor: Medicare Contractors Allowed to Up Code or Down Code

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, CCDS, regulatory specialist for HCPro.  
CMS recently released Transmittal 585 adding language to Chapter 3 of the Medicare Program Integrity Manual. This chapter has gone through major changes in the last year or so and focuses on verifying billing and coding errors and the corrective actions that can be taken by CMS contractors. Section - Coding Determinations has new language that should be of interest to all providers.

Effective May 4, 2015, MACs, Comprehensive Error Rate Testing (CERT) contractors, Supplemental Medical Review Contractor (SMRC), Recovery Auditors, and Zone Program Integrity Contractors (ZPICs) may up code or down code a claim in certain situations. However, this excludes determinations made by contractors based on whether or not the item or service is “reasonable and necessary” under current CMS policy. It also instructs contractors not to substitute the payment amount for a different amount when the determination is based on the item or service not being medically necessary under the circumstances.

When the medical record supports a higher or lower level procedure or diagnosis code, the MAC, SMRC, CERT, ZPIC and Recovery Auditor will not deny the entire claim and instead will change the code and adjust the payment. CMS policy will continue to take precedence over coding guidelines listed in the Current Procedural Terminology-4 (CPT-4), Coding Clinic for ICD-9, and Coding Clinic for HCPCS. However, all of the appropriate coding guidelines for the procedure or diagnosis code must be met in order for the contractor to make the change.

Although this new guidance applies to certain situations, CMS did not provide any details on what those situations are other than providing the following examples. The examples provided appear to be more clerical in nature or errors based on clear documentation. I have added additional information to show the potential payment impact based on the national payment amounts.
  • CBC with differential (85025) was ordered and billed but CBC without differential (85027) was provided:
o   85025 = $10.58
o   85027 = $8.81
  • CT chest with contrast (71260) was ordered and billed but CT chest without contrast (71250) was provided:
o   71260 = $240.92
o   71250 = $120.02
  • DRG 193 was billed but the medical records supports DRG 195 (in the following example, wage index = 1.00 and no other payment adjustments made):
o   DRG 193 Simple Pneumonia with MCC (1.4491) = $8,510.30
o   DRG 194 Simple Pneumonia with CC (.9688) = $5,689.59
o   DRG 195 Simple Pneumonia without CC/MCC (.7044) = $4,136.81
  • ER E&M level 3 (99283) was billed but the medical record supports level 2 (99282):
o   99283 = $62.57
o   99282 = $41.48
o   The example provided would most like apply to professional services as CMS permits hospitals to develop their own internal systems for assigning E/M levels for ED encounters.

The ability for a contractor to change the code and adjust the payment may or may not have an impact on reducing the number of appeals submitted by providers. In doing the math, the number of denials attributed to contractors will certainly decrease. Providers should watch for more information on the implementation of this change and how information will be provided on the Remittance Advice when these actions occur.

Note from the Instructor: CMS releases updated educational tool on coverage, billing and payment for preventive services

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
In its April 2, 2015 MLN Connects Provider ENews, CMS released a revised “Preventive Services” Educational Tool (ICN 006559), which is now available in a user-friendly interactive format. This revised resource is designed to provide information on Medicare-covered preventive services, including related guidelines on coverage, billing and payment. Let us review the information available to those who utilize this new tool.
Information available
In the updated “Preventive Services” Educational Tool, CMS provides the following information on Medicare preventive services:
  • Healthcare Common Procedure Coding System (HCPCS)/Current Procedural Terminology (CPT) codes;
  • International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis codes;
  • Coverage requirements;
  • Frequency limitations; and
  • Beneficiary liability for each Medicare preventive service.
CMS also indicated which of the listed preventive services can be delivered via telehealth.
The updated tool contains relevant information for 26 preventive services, listed in alphabetical order, ranging from Alcohol Misuse Screening and Counseling to Ultrasound Screening for AAA.

Below is an example of the information available for one of the listed services:

Alcohol Misuse Screening and Counseling (Also referred to as the Screening and Behavioral Counseling Interventions in Primary Care to Reduce Alcohol Misuse)

G0442 – Annual alcohol misuse screening, 15 minutes
G0443 – Brief face-to-face behavioral counseling for alcohol misuse, 15 minutes

ICD-9-CM Codes
No specific diagnosis code
   Contact local Medicare Administrative Contractor (MAC) for guidance

Who Is Covered
All Medicare beneficiaries are eligible for alcohol screening.
Medicare beneficiaries who screen positive (those who misuse alcohol but whose levels or patterns of alcohol consumption do not meet criteria for alcohol dependence) are eligible for counseling if:
  • They are competent and alert at the time that counseling is provided; and
  • Counseling is furnished by qualified primary care physicians or other primary care practitioners in a primary care setting.
  • Annually for G0442; or
  • For those who screen positive, 4 times per year for G0443
Beneficiary Pays
  • Copayment/coinsurance waived
  • Deductible waived
CMS also provides additional guidance in the form of Frequently Asked Questions and a listing of related resources. The tool permits users to print individual or complete guidelines.

Assistance with limitation on liability and hospital outpatient notification process
In particular, this tool may aid hospitals with their outpatient notification process when limitation on liability (LOL) applies. LOL requires hospitals to notify beneficiaries when they believe certain outpatient services ordered by practitioners will not be covered under Medicare because those services:
  • fail to meet Medicare’s medical necessity guidelines for the patient’s condition;
  • are screening or preventive services subject to frequency limitations;
  • are custodial in nature; or
  • are experimental or for research purposes.

Many preventive services included in this educational tool are subject to frequency limitations, as well as other coverage requirements. Medicare only provides coverage for specific preventive services so long as those services are not provided more frequently than their respective frequency limitations and meet other applicable coverage guidelines.

For example, once a beneficiary has reached the age of 40, the frequency limitation for coverage of a screening mammography is 11 full months after the last covered screening mammography. If a beneficiary has a screening mammography in April 2015, she will not be eligible for another covered screening mammography until April 1, 2016.

When a hospital believes that certain services (including those subject to frequency limitations) will not be covered because LOL applies, it is required to notify the beneficiary prior to the performance of the service that the hospital will look to the beneficiary for payment if:
  • he or she has the services performed; and
  • Medicare denies payment.

The current form of required notification is the Advanced Beneficiary Notice of Noncoverage (ABN).

In this user-friendly interactive educational tool, CMS has pulled together relevant coverage information on preventive services, making it much easier for hospitals using this tool to implement an appropriate ABN process with respect to these services.
CMS email update subscriptions

If they have not already done so, hospitals are encouraged to subscribe to CMS email updates, including the MLN Connects Provider ENews, through the Email Updates web site. The site can be accessed through the “CMS Email Update Lists – Subscriber’s Main Page” link on HCPro’s links page. The MLN Connects Provider ENews is published every Thursday and contains valuable information on MLN national provider calls and events; CMS announcements; claims, pricer and code updates; and MLN educational products.

Note from the Instructor: Sustainable Growth Rate fix legislation and other hot topics from Medicare/Medicaid Payment Institute

This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  
Last week I had the pleasure of attending the American Health Lawyers Association Institute on Medicare and Medicaid Payment Issues in Baltimore, Maryland. It was announced on the first day that there were over 150 regulators from the OIG, CMS and HHS in attendance. I had the pleasure of personally speaking with Marc Hartstein, Twi Jackson, Tiffany Swygert, and Dan Schroder, all from CMS. They were all very receptive to audience questions and confirmed and clarified several recent items for me.

Although there were many informative sessions, there is one item I wanted to share that could directly affect some of your payments. Additionally, it may require action to verify you are receiving the correct payments not only from your MAC, but also anyone using the CMS PCPricer to set payment rates (e.g. Medicare Advantage plans). The FY2015 IPPS pricer issued to the MACs, as well as the PCPricer, has been incorrectly applying the rural wage index floor, which was just discovered by CMS last week.

The rural wage index floor applies when an area’s wage index is lower than the statewide rural wage index for their state. In that case, the wage index is brought up to the statewide rural average, which can have a potentially large impact on a provider’s payments. Application of the rural wage index floor has been increasing. For example, in California where I live, at least 16 metropolitan areas use the rural floor, including cities like LA and San Diego.

To determine if you are receiving the rural wage index floor, compare your wage index in Table 4A with the wage index for your state in Table 4B. If they match, your area has been brought up to the rural floor and you should verify you have been paid at that rate. You can actually use the PCPricer’s change data feature to change the wage index to the index published for you and compare that to the payments you are receiving. It is important you don’t just verify the wage index CBSA on the information screen for your provider because, as I understand the error, if your CBSA is correct it may be pulling the calculated wage index for that CBSA, rather than the rural floor as it should. If you find a discrepancy, you should bring it to the attention of your MAC or check their website about reprocessing of claims with this error. CMS indicated all these claims would have to be reprocessed.

One of the biggest topics of discussion was House bill H.R. 2 Medicare Access and CHIP Reauthorization Act of 2015, better known as the Sustainable Growth Rate (SGR) fix. Kimberly Brandt, who works with members of the US Senate Finance Committee, discussed various items included in the Senate version of the bill, as well as coordination between the House and Senate for passage of the bill before the negative payment rate adjustment of approximately 21% hits physicians April 1. The House did pass the bill on Thursday March 26; however, the Senate didn’t take action prior to leaving for a two week scheduled break on Friday. With the 14 day payment hold on claims, they would return just in time, on April 13, to allow the rates to be corrected before claims are paid for April 1 dates of service.

In addition to elimination of the SGR reduction, there are several provisions in the law that will affect hospitals. It extends the probe and educate audits on the 2-midnight rule, as well as the prohibition on RAC review of patient status, through the end of this fiscal year (September 30, 2015). But it’s not all good news for hospitals. One of the ways the increase to the doctors will be paid for is by spreading the documentation and coding adjustment return payment across six years in .5% increments beginning in 2018. Originally, the full 3.2% payment increase was to be added back to rates in 2018.

Another area that will see potentially limited increases in coming years to pay for the fix is the post-acute setting, including skilled nursing, home health, hospice, inpatient rehab hospitals, and long term acute care hospitals. Their market basket increase, essentially the rate of annual inflation in their rates, will be frozen at 1%, while the market basket typically exceeds 2 or 2.5%. There was discussion in one session of the conference that, based on some current proposals from the Medicare Payment Advisory Commission (MedPAC), this may in fact provide the post-acute setting more of an update than was recommended.

Other provisions included an extension of the Low Volume Hospital adjustment and the Medicare Dependent Hospital Adjustment. Unlike in prior years, when the adjustments were approved in single year increments, this bill actually extends them through the remainder of FY2015, as well as FY2016 and FY2017.

Likewise, the therapy caps and exception process, as it currently exists, also were extended through October 1, 2017. However, they did make a tweak to the manual review process. Currently, there is a manual review when therapy claims for a particular patient exceed $3,700. That process will now be directed at providers with high denial rates, questionable billing practices, newly enrolled providers, or for specific services that might be questionable.

Included in the bill was also a related bill that had previously been introduced called the Protecting the Integrity of Medicare Act (PIMA). This additional section of the bill directs the MACs to implement a new program called the Improper Payment Outreach and Education Program aimed at giving providers more information on the audit process, audits being done, and how to avoid the errors being identified. CMS will also be required to provide the MACs information to support their efforts.

One additional provision, oddly located in the PIMA, but potentially relating more to the SGR fix, is a prohibition on CMS implementing their plan to eliminate the 10 and 90 day global period in favor of a 0 day global period. This was big news when CMS announced it and would have caused significant difficulty and increased billing and costs for the professional provider community, so this is undoubtedly a welcome change for physicians.

Again, this bill has passed the house and a similar bill was pending in the Senate, and Kimberly Brandt indicated it would undoubtedly pass. Additionally, one of the other conference speakers, John Hellow, of Hooper, Lundy & Bookman, PC, stated that President Obama indicated he would sign the bill even if the length of the CHIP extension (the key difference between the House and Senate versions) is for the shorter timeframe in the House bill. He indicated this signals a presumably favorable treatment of the bill by House Democrats. We’ll keep you posted on the passage of this bill.

Note from the instructor: CMS issues quarterly OPPS and I/OCE updates

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
CMS recently issued the April 2015 quarterly updates to the OPPS (Claims Processing Transmittal 3217) and the I/OCE (Claims Processing Transmittal 3218). Last week we focused on the discussion in the quarterly OPPS update regarding CMS’ decision to allow payment for certain preadmission inpatient only procedures bundled into a subsequent inpatient claim under the so-called three- (or one-) day window rules. This week we will review the other key changes set out in the April OPPS and I/OCE updates.
Summary of additional key OPPS and I/OCE changes
Addition of one new pass-through device category: Effective April 1, 2015, CMS has created one new pass-through device category identified by HCPCS code C2623. Reimbursement for C2623 is cost based, subject to an offset amount equal to the policy-packaged portion of the APC to which the procedure utilizing the device is assigned. The policy-packaged portion of the applicable APC payment is the portion of the payment that was designed to cover the predecessor device used with that procedure.
Addition of six new pass-through drugs and biologicals: Effective April 1, 2015, CMS has approved six new pass-through drugs/biologicals. These pass-throughs—C9445, C9448, C9449, C94502, C9451, and C9452—are reimbursed based upon average sales price (ASP) + 6%, updated on a quarterly basis. If ASP data is not yet available, reimbursement is based on wholesale average cost (WAC) + 6%. If WAC data is not yet available, reimbursement is based on 95% of average wholesale price (AWP); however, as soon as ASP data is available, ASP + 6% is the basis for payment.
Other changes to drugs and biologicals: CMSreleased updated April 1, 2015, ASP data, as well as retroactive ASP updates for certain prior quarters. In particular, hospitals should review these updates to determine whether to submit adjustment claims for prior quarters.
Effective April 1, 2015, CMS also made the following changes:
  • Changed the status indicators (SIs) for the following two drugs:
o   J0365—changed from SI of “K” to “E” (not recognized by Medicare)
o   J7180—changed from SI of “N” to “K” (separately payable under OPPS)
  • Reassigned two skin substitute products—Q4150 and Q4153—from low cost to high cost status
  • Replaced HCPCS code Q9975, Factor VIII FC Fusion Recomb, with HCPCS code C9136, Factor viii (Eloctate)
Finally, CMS is correcting coinsurance (initially set at 20%) for the following two drugs, as set out below:
  • For HCPCS code J7315, effective January 1, 2014, through March 31, 2015; and
  •  For HCPCS Code C9447, effective January 1, 2015, through March 31 2015
Implementation of the “PO” HCPCS modifier. In keeping with its finalized instructions in the CY 2015 OPPS final rule, CMS emphasized that the “PO” HCPCS modifier should be reported with every code for outpatient hospital services furnished in an off-campus hospital provider-based department (PBD), beginning with dates of services on and after January 1, 2016. In preparation, hospitals may begin voluntarily reporting this new modifier during CY 2015.
The “PO” modifier, however, should not be reported for remote locations of a hospital, satellite facilities of a hospital, or for services furnished in an emergency department. In response to an informal query regarding whether critical access hospitals (CAHs) are also subject to the mandatory reporting of the “PO” modifier, one CMS representative has indicated that CAHs are not required to do so. CAHs may want to seek further confirmation by contacting their MACs or raising this issue during an open door forum call.
Two billing clarifications. CMS also provided clarification on the following two services:
  • Hospitals may report C2625 (Stent, non-coronary, temporary, with delivery system) when utilizing the Propel™ and Propel Mini™ drug eluting sinus implants by Intersect ENT; and
  •  Hospitals are reminded to report two claim lines when billing for cystoscopy procedures using Cysview® (hexaminolevulinate hydrochloride):
o   One claim line with an appropriate cystoscopy procedure code; and
o   A separate claim line with HCPCS code C9275 (Injection, Hexaminolevulinate Hydrochloride, 100 mg, per study dose)
I/OCE processing of inpatient-only procedure, subject to emergency exception. In the April 2015 I/OCE update, CMS clarified the processing of an inpatient-only procedure performed emergently in the outpatient setting in the following circumstances:
  • The patient died prior to being admitted to the inpatient setting; and
  • On the same date of service, the hospital performed another procedure (SI of “J1”) for the same patient that would otherwise qualify for payment under a comprehensive APC
In these circumstances, CMS stated the hospital should follow the rules applying to the emergency exception to the inpatient only rules. Under the inpatient-only rules, Medicare generally denies payment not only for the inpatient-only procedure performed in the outpatient setting, but for all other outpatient services performed for that patient on the same date of service, including those services otherwise payable under the OPPS.
The emergency exception applies when an inpatient-only procedure is performed emergently, but the patient dies before he or she can be admitted. Under this exception, Medicare will pay for a single inpatient-only procedure under APC 0375, and all other outpatient services performed for the patient on the same date of service are packaged. To trigger the applicability of the emergency exception, the hospital must attach the CA modifier to the inpatient-only procedure and report patient status code 20 (patient expired) in FL 17 on the UB-04.
In the April I/OCE update, CMS clarified by stating the emergency exception rules should be followed even when a procedure with a SI of “J1” is reported on the same claim with the same date of service as the inpatient-only procedure. The specified inpatient-only procedure APC (0375) will be assigned as the payable APC. The comprehensive APC procedure will be assigned to its comprehensive APC; however, the comprehensive APC will be packaged with SI = N, along with all other lines on the claim.
Additional resources on this topic

Note from the Instructor: Investigational Device Exemption Studies

This note from the instructor is written by Debbie Mackaman, RHIA, CPCO, CCDS regulatory specialist for HCPro.  
In a recent issue of the Medicare Insider, Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro, wrote about the implementation of Condition Code 53 (initial placement of a medical device provided as part of a clinical trial or free sample) for hospital outpatient claims when certain criteria have been met. Since then, we have received several questions about investigational devices so I thought I would take this time to generally review the CMS policy on Investigational Device Exemption (IDE) studies.
Medicare may cover certain FDA-approved investigational devices and related routine care items and services when the investigational device meets certain coverage criteria as posted on the CMS Coverage website. Once approved, the devices are placed in Category A or Category B which have specific billing requirements.
Category A Device
The “absolute risk” of this type of device has not been established and the FDA is unsure whether the device can be safe and effective based on its intended use. Medicare covers only routine care items and services furnished in this type of study, if CMS has determined that the Medicare coverage criteria are met.
Routine care items are items and services that are otherwise generally available to Medicare beneficiaries. This means that a benefit category exists, it is not statutorily excluded, and there is not a national non-coverage decision.
Under a Category A IDE study protocol, a hospital may only submit a claim for the routine care items and services. The device cannot be reported on the claim since the device itself is not eligible for payment under the Medicare program. Payment for the related routine care items may not exceed what Medicare would have paid for comparable items that are usually approved for standard of care.
Category B Device
The “incremental risk” of this type of device is known and it has been determined to be safe and effective. Medicare covers the device and routine care items and services furnished in this type of study if CMS has determined that the Medicare coverage criteria are met.
Providers must notify their MAC before submitting claims for Category B IDE services. Once the MAC notifies the provider that all required information for the IDE has been accepted, the provider may bill for the services. Payment for Category B IDE study devices and routine care items may not exceed what Medicare would have paid for comparable devices and routine care items generally approved by Medicare.
General Billing Guidance
When billing for Category A IDE routine items or Category B IDE device and related routine items, specific information must be included on the claim. Here is a brief summary.
For all hospital claims:
  • Condition Code 30 (“non-research services provided to patients enrolled in a Qualified Clinical Trial”). Until further clarification is received, presumably both conditions codes 30 and 53 may be reported on the same outpatient claim when both criteria are met.
  • Value Code D4 (clinical trial number assigned by NLM/NIH). The number reported with the value code amount is equal to the mandatory 8-digit clinical trial number as specified on the Medicare Coverage webpage or on
  • Charges are reported in the covered column when all applicable coverage criteria are met.
  • ICD-9 code V70.7 (“examination of participant in clinical trial”) must be reported on the claim; when applicable, ICD-10 diagnosis code Z00.6 should be reported.
For hospital inpatient claims:
  • Routine care costs incurred during an approved Category A or B IDE study may be billed on the claim when those items are considered to be otherwise generally available to Medicare beneficiaries.
  • When the hospital incurred a cost for the Category B device, report the IDE number under revenue code 0624 (FDA investigational device) with charges in the covered column.
  • When the hospital receives the Category B device without charge, the device should not be billed on the inpatient claim.
For hospital outpatient claims:
  • For Category B IDE studies, report the IDE number under revenue code 0624.
  • Report the Category B device HCPCS code under revenue code 0624, if one exists.
  • Report Modifier -Q0 (“investigational clinical service provided in a clinical research study that is an approved clinical research study”) to identify all lines containing an investigational item/service.
  • Routine care costs incurred during an approved Category A or B IDE study must be reported with Modifier -Q1 (“routine clinical service provided in a clinical research study that is an approved clinical research study”) to identify all lines containing routine services medically necessary for routine patient care or treatment of complications arising from a Medicare beneficiary’s participation in a Medicare-covered clinical trial.
  • Bill the Category B device and Category A or B routine care items as covered charges.
Billing for IDE services is very complicated and the guidance can be very confusing. More detailed information can be found in the Medicare Benefit Policy Manual, Chapter 14 and the Medicare Claims Processing Manual, Chapter 32.