RSSAll Entries in the "Compliance" Category

Medical Necessity 2014: Inpatient Admissions and the 2-Midnight Rule

Join us at 1 p.m. (Eastern) Wednesday, April 16 for the live 90-minute webcast “Medical Necessity 2014: Inpatient Admissions and the 2-Midnight Rule.”

MACs recently selected more than 29,000 records for review as part of CMS’ probe audits of inpatient claims with admission dates on or after October 1, 2013. CMS’ effort to determine compliance with the 2-midnight rule makes it more important than ever for hospitals to avoid denials by staying on top of ever-changing guidance.

During this show, our expert speakers Ralph Wuebker, MD, MBA, and Jonathan G. Wiik, MSHA, MBA, will discuss preliminary results of the audits and provide real-world examples of denied inpatient claims. You’ll also get tips for determining medical necessity and the latest guidance on 2-midnight rule compliance.

Click to hear why speaker Ralph Wuebker, MD, MBA, thinks you should attend this program.

For more information or to register, click here or call 800-650-6787.

At the conclusion of this program, you will be able to:

  • Apply best practices for physician documentation of medical necessity at your facility
  • Recognize appropriate standard order sets and physician documentation of medical necessity
  • Identify cases that are at risk for denials or audits by MACs and Recovery Auditors
  • Discuss preliminary results of CMS’ probe audits

Update on laboratory billing: New 2-midnight guidance

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

In this  note, I wanted to briefly update you on the billing issues that Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, highlighted in the last note and also review some recent updates posted on CMS’ Inpatient Hospital Review site related to the 2-midnight rule.

First, CMS published MLN Matters Article SE1412 this week addressing billing of outpatient hospital laboratory services under the new rules that went into effect in January. As Debbie pointed out in her note, there were issues with hospitals’ use of type of bill (TOB) 14X to bill for separate payment under the Clinical Laboratory Fee Schedule (CLFS) for laboratory services that were not packaged under CMS’ new laboratory packaging policy.  

The new MLN officially announces a modifier, yet to be named, that will be used to bill laboratory services for separate payment on a normal outpatient TOB 13X, rather than on a reference lab TOB 14X. The modifier will be effective back to January, but it will not be implemented until the July OPPS update. Providers have the choice of holding their billing until that time and billing with the modifier for services all the way back to January or billing with the TOB 14X until the modifier is implemented and then switching to the modifier.  

CMS provided special instructions for providers that receive a differential payment for their separately paid laboratory services, such as sole community hospital (SCH) and rural SCH. In order to get the higher payment rate they to which they are entitled, they will have to wait until July to bill their laboratory services on a 13X with the modifier. In the meantime, for laboratory services already billed they will have to cancel and rebill claims in July once the modifier is implemented.

The MLN also provides several billing examples. Providers should review the MLN and consider the alternatives for billing laboratory services pending implementation of the new modifier.

The second update relates to new guidance published February 24 on the Inpatient Hospital Review site, where CMS has posted most of the guidance for the new 2-midnight rule. CMS posted updated versions of all the guidance documents posted there as well as a new document reviewing the status of the probe and educate audits, including examples of some of the errors the MACs have found in audits thus far.

One of the most significant, and awaited, clarifications relates to patients transferred from another hospital. CMS clarified in its guidance to hospitals that the receiving hospital may take into account the time the patient spent at the transferring hospital when determining whether the patient meets the 2-midnight benchmark for admission. The hospital should be careful not to include any wait time or time when care was delayed. CMS stated that review contractors may request records from the transferring hospital to verify time spent there prior to transfer. 

There was also a clarification related to off-campus provider-based emergency departments (e.g., freestanding ED). CMS clarified that when these locations are provider-based facilities, they are like any other department of the hospital and time spent in the freestanding ED prior to admission would count into the 2-midnight calculation in the same manner as time in a traditional ED. However, they did note that the transportation of the patient from the freestanding ED to the hospital for admission would be the responsibility of the hospital (i.e., Medicare would not pay for the transport), noting that it would be similar to the patient moving from the on-campus ED to a specified floor for admission.

Finally, CMS announced that it is requesting the MACs re-review denials made in the probe and educate audits to this point. CMS wants the MACs to be certain that any denials are consistent with the most recent guidance and clarifications issued, particularly related to orders and certification. As a result of a re-review of a denial, the MAC can issue payment without an appeal by the provider if they find the claim is payable in light of the most recent guidance.

Because a claim may be paid as a result of a re-review, CMS encouraged providers to verify with the MAC whether a claim had been “re-reviewed” prior to filing an appeal. CMS is waiving the timely filing requirement of 120 days for appeals of denials for claims with dates of service prior to January 30 (when the most recent order and certification guidance was updated) and is allowing appeals to be submitted through September 30, 2014, for those denials if they are not overturned on re-review. 

I encourage providers to review the most recent guidance as there were several other minor revisions and updates. 

 

Note from the instructor: Billing Outpatient Laboratory Services – TOB 131 vs. TOB 141

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

Since the implementation of the calendar year (CY) 2014 Outpatient Prospective Payment System (OPPS) final rule, there has been much confusion and discussion regarding the requirement to bill certain outpatient lab services on Type of Bill (TOB) 141 rather than TOB 131. Under the new OPPS packaging rules, reimbursement for most outpatient lab services is bundled into other separately payable services on the outpatient claim, excluding molecular pathology.

As of January 1, 2014, date of service, CMS expanded the use of TOB 14X to allow separate billing and payment at Clinical Laboratory Fee Schedule (CLFS) rates for hospital outpatient laboratory tests. However, this change is not only counterintuitive for facilities, it also creates major operational issues.

Historically and by definition, TOB 14X is for non-patient (specimen only) lab services where the patient does not receive outpatient services on the same date of service. Prior to January 1, 2014, the non-patient lab services were easy for hospitals to identify and systematically direct the claim to process under TOB 141. Under the new billing guidance, hospitals have had to create back-end processes and in some cases, separate review by staff to identify if the outpatient lab should be billed on TOB 141 to receive separate reimbursement under the “exceptions” guidance provided by CMS.

According to the Medicare Claims Processing Manual Transmittal 2845, lab tests may be (or must be for a non-patient specimen) billed on a 14X claim in the following circumstances:
  1. Non-patient laboratory specimen tests; non-patient continues to be defined as a beneficiary that is neither an inpatient nor an outpatient of a hospital, but that has a specimen that is submitted for analysis to a hospital and the beneficiary is not physically present at the hospital;
  2. Beginning in 2014, when the hospital only provides laboratory tests to the patient (directly or under arrangement) and the patient does not also receive other hospital outpatient services during that same encounter; and
  3. Beginning in 2014, when the hospital provides a laboratory test (directly or under arrangement) during the same encounter as other hospital outpatient services that is clinically unrelated to the other hospital outpatient services, and the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services provided in the hospital outpatient setting. In this case the lab test would be billed on a 14X claim and the other hospital outpatient services would be billed on a 13X claim.

In addition to the operational and compliance concerns that have been created under this new guidance, another issue surfaced. A former student, Melinda McCaslin of Solders + Sailors Hospital in Wellsboro, Pa., raised the question regarding the rural sole community add-on payment that certain hospitals receive when lab is billed on TOB 131. If the hospital must bill their “lab only” or “unrelated lab” on TOB 141, the add-on payment may not be triggered which could be a significant reduction in revenue depending on outpatient lab volumes. Although CMS stated in the OPPS final rule that the application of the rural adjustment for rural sole community hospitals would remain the same and that some APCs had been recalibrated to accommodate this change, it would appear that billing certain outpatient lab under TOB 141 would prevent the add-on payment from being generated as this bill type is only paid under the CLFS. McCaslin later confirmed that their hospital was not receiving their additional payment in these types of situations.

I inquired with CMS in regards to what appeared to be a lack of payment for the rural sole community adjustment for lab. After several emails back and forth, it was alluded that there may be a change in this OPPS policy in the near future. The CMS representative indicated that the use of a modifier on TOB 131 may replace the requirement to report outpatient lab on TOB 141. Shortly after the response I received from CMS, a letter was posted to the National Uniform Billing Committee (NUBC) website that indicated this change may be forthcoming.

I found several of the NUBC’s statements in the January 21 letter to CMS worthy of noting:
  • “…writing on behalf of the members of the National Uniform Billing Committee (NUBC) to express our concern about a recent Centers for Medicare & Medicaid (CMS) action that alters the official definition and purpose of an NUBC data element (as indicated in the Official UB-04 Data Specifications Manual (UB-04 Data Set)).“
  • “Unless the situation is corrected, the NUBC plans on filing a HIPAA complaint with CMS OESS for failure to adhere to the HIPAA standards.”
  • “Even if CMS had done so, the rule making process is not applicable to an external code list that is not within the purview of CMS to arbitrarily change. The NUBC has a change request process that CMS, in this instance, did not follow.”

CMS provided a written response to the NUBC February 18 and indicated that it has requested a modifier to be created for “lab only” and “unrelated lab” situations and that hospitals would be directed to return to billing under TOB 131 once the modifier was approved. This modifier would be retroactive to January 1, 2014, dates of service; however, CMS indicated in its letter to the NUBC that billing instructions to hospitals would probably not be published until the July quarterly OPPS update transmittal.

Hospitals should continue to bill using TOB 141 until CMS provides further instruction. At this time, it is unknown if hospitals will need to rebill certain TOB 141 claims using the new modifier or if the MACs will reprocess these claims for them. Based on the issues discussed above, it is my best guess that providers will be responsible to rebill claims because MACs will not be able to identify which labs are truly non-patient services appropriately billed on TOB 141 and those that are truly outpatient labs that had previously been billed on TOB 131. Stay tuned!

Join us on the podium at the 2014 Medicare Compliance Forum

We are currently seeking speakers to present at the 2014 Medicare Compliance Forum to be held October 23-24, 2014 at the Hyatt Regency in Orlando, Florida.

We seek speakers to present on all aspects of Medicare compliance and encourage case studies of successful compliance programs. Here is a list of additional topics that would make great conference sessions:

  • Navigating the 2-Midnight Rule and observation
  • Establishing an effective UR committee
  • Revenue cycle management

If you are interested in speaking at the 2014 Medicare Compliance Forum, please download and fill out our speaker application form and send it to Jaclyn Zagami at jzagami@hcpro.com.

Note from the instructor: 90-Day Implementation Period for 2-Midnight Benchmark

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

On September 28, CMS held another special open door forum on the 2-Midnight Benchmark and its implementation, starting October 1, 2013. CMS declined to delay implementation of the inpatient status benchmark, but instead put in place a 90-day “implementation period” with a moratorium on audits with the exception of “probe and educate” reviews by  Medicare Administrative Contractors (MACs). The open door forum also reviewed several frequently asked questions (FAQs) and allowed an open question and answer time.

During the open door forum, CMS discussed a written announcement dated September 26, placed on their medical review website regarding audits during the 90-day implementation period. CMS stated it will not permit Recovery Auditors to review cases with less than two midnights of inpatient care for the 90 days following the October 1 implementation of the 2-Midnight Benchmark. During this time however, CMS has instructed the MACs to audit a probe sample from every hospital of 10-25 cases that had less than two midnights of care.

The probe audits will be done on a pre-payment basis, and if the hospital receives a negative determination on a case, the hospital will be able to rebill the case under the new Part B inpatient billing rules. Following the probe audit, the MAC will identify “issues” with the hospital’s cases and provide further education if necessary.  If no “issues” are identified, the MAC has been instructed not to conduct further reviews of cases with less than two midnights during that 90 day implementation period.

Additionally, CMS reiterated the 2-Midnight Presumption, noting they have instructed the MACs and Recovery Auditors not to review cases with at least two midnights of inpatient care from October 1 through December 31. It was not clear from the notice if this limitation on review of cases with two midnights was limited to the implementation period. However, based on the guidance on the 2-Midnight Presumption, it would seem this is not limited to the implementation period. Rather this prohibition on reviews would seem to apply after the implementation period as well, unless a provider is found to be gaming the system or delaying care to meet the two midnight requirement, as indicated in prior guidance.

In addition to discussing limitations on audits, CMS also reviewed several FAQs it had received with pre-written answers that were read by CMS representatives. The FAQs were to be placed on CMS’ medical review website within a “few days,” however, they have not appeared on the website. Several of CMS’ sites have a notice indicating they are not up to date because of the government budget shut down, and these FAQs may be victims of bad timing. Hopefully, they will be posted soon as they represent essential guidance to the provider community.  Providers can watch for them here.

Note from the Instructor: FY2014 IPPS Final Rule

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

It is Friday, August 2, and the clock is just about to chime and announce the weekend has arrived when suddenly a notice appears in my inbox. Yes, as expected, it is the 2014 Inpatient Prospective Payment System (IPPS) Final Rule with the delivery of a little bit of good news and, in my opinion, a whole lot of bad news for hospitals and critical access hospitals (CAH) across the country.

The good news is that the IPPS operating payment rates will increase by 0.7% for those hospitals that successfully participate in the Hospital Inpatient Quality Reporting (Hospital IQR) Program. Of course, it could have been at least 1% higher, but hospitals took a -0.8% hit on the mandatory documentation and coding recoupment adjustment and a 0.2% decrease to accommodate the shifts from inpatient to outpatient or vice versa with the implementation of the new “two midnights” regulation.

 

Two Midnights Rule

To understand the new “two midnights” regulation, we have to break it down into its individual parts. First, CMS is clarifying and specifying in the regulations that payment for a Medicare Part A stay is directly tied to a physician’s or other qualified practitioner’s order for inpatient care. Going forward, the written order will be required for payment of hospital inpatient services.

Second, CMS is specifying a revised timeframe to determine when Medicare Part A payment is generally appropriate. While CMS has historically used a 24-hour benchmark for inpatient admissions, they are now specifying that the 24 hours related to inpatient admission decisions are those that span or cross over two midnights, which corresponds to how Medicare utilization is assessed against patients and providers. According to CMS, this new regulation is being implemented to provide both consistency and clarity. However, physicians will still be expected to make that “complex medical decision” to admit or not admit based on what they know at the time of the inpatient order. Each patient is unique in his or her presentation and resolution of illness and even CMS states in the rule that they “have expected and continue to expect that physicians will make the decision to keep a beneficiary in the hospital when clinically warranted and will order all appropriate treatments and care in the appropriate location based on the beneficiary’s individual medical needs.”

Here is where it gets a little confusing: the “two midnights” timeframe actually begins when the patient starts receiving services in the hospital. This includes outpatient observation, emergency department services, procedure or treatment room services, or services provided in the operating room. Although the time a beneficiary spends as an outpatient before the inpatient order is written is not considered to be true inpatient time, the physician or the Medicare review contractor may consider this period when determining whether it is appropriate to expect the patient to stay in the hospital at least two midnights as part of an admission decision, according to CMS. However, if the patient stays less than two midnights due to unforeseen circumstances, the documentation must clearly support why this occurred. Otherwise, the review contractors will generally determine that those services should have been provided on an outpatient basis instead. CMS stated that the inpatient-only procedures would be excluded from the “two midnights” requirement.

Unfortunately, it appears that the “two midnights” rule paints all of the patients with the same brush and paints the physicians into a corner. CMS’ concern—the OIG recently agreed with them in another report—is that the patients are staying too long in observation, which is a service intended for making a decision whether to admit, discharge, or transfer. If physicians are now tasked with looking into their crystal ball to determine whether the patient will stay for two midnights—and if so, write the admit order—more physicians may be inclined to leave the patient as an outpatient rather than risk an admission being deemed not medically necessary because their patient improved faster than anticipated.

In addition to hospital concerns, the patient will be left paying coinsurance, deductible, and out-of-pocket expenses for outpatient services, regardless whether the facility is charging observation, when there is a doubt whether the patient will stay for two midnights. CMS stated that it would be easy for the patient to understand the “two midnights” rule, but if patients are being cared for in inpatient areas—which is not uncommon for patients who are receiving observation services—and they stay two midnights, this will not necessarily mean they are an inpatient and they may incur greater out-of-pocket expenses.

The “two midnights” rule has the potential to create a huge operational burden for facilities, beyond what they already do to try to stay in compliance with monitoring the appropriateness of admissions, applying Condition Code 44 when appropriate, and Part A to Part B rebilling. It also has the potential to significantly impact a patient’s out-of-pocket expense if physicians become leery about writing the order to admit.

 

Part A to B Rebilling

Related to the new “two midnights” rule is the final rule for the Part A to Part B rebilling process. CMS has extended this process to “self-denials,” which are those instances where the hospital determined after the patient has been discharged that the patient should not have been admitted as an inpatient. This will be different than the current interim rule that allows facilities to only rebill for Part B services for denials received by Medicare contractors and includes claims that were filed more than one year prior. The IPPS Final Rule will implement the one-year timely filing deadline, which all claims currently fall under, for the rebilling process when identified through self audits. The one-year timely filing deadline for Part B rebilling runs from the date of discharge, not from the date the Part A claim was denied, if applicable. In other words, the Part B rebilling claim is not viewed as an adjustment claim when a prior Part A claim was originally billed. The interim rule that was issued on March 13 will remain in place for claims that have a date of admission before October 1, 2013, but are denied after September 30, 2013.

This process will allow hospitals the ability to bill and get paid for all Part B services, rather than the “short list” under the current guidance for TOB 121, when the facility has determined that the stay did not meet medical necessity criteria or could apply when the patient did not stay two midnights and the documentation is not strong enough to support the short stay. Even though the inpatient hospital stay is paid under Part B, the hospital stay remains inpatient from the time of admission and may continue to count toward qualification for skilled nursing facility coverage. However, the patient will be responsible for outpatient coinsurance, deductible and out-of-pocket expenses, even for services that occurred prior to the inpatient order being written because the three-day payment window will not apply for PPS hospitals. CMS also stated in the final rule that the decision by a hospital to not bill the patient for their portion of the outpatient services may implicate other regulations (e.g., beneficiary inducement and anti-kickback laws) and that hospitals should contact the OIG for more guidance.

CMS expects the “two midnights” rule to reduce the volume of this type of Part A claim denial and the need for hospitals to rebill under Part B. In addition, CMS stated that the current Condition Code 44 regulation will remain intact for those rare occasions that hospitals have to use this process.

Other significant changes include:

  • The Hospital-Acquired Condition Reduction Program, which will begin in FY 2015
  • Updates to the measures and financial incentives for the Hospital Value-Based Purchasing and Readmissions Reduction programs
  • Adjustment to the Medicare Disproportionate Share Hospital payments
  • Expiration of the Medicare Dependent Hospital program payment adjustments
  • Expiration of the current temporary Low Volume Hospital payment adjustment and return to the previous definition and payment adjustment methodology that was in place prior to FY 2011

Hospitals should review the display copy of the 2014 IPPS Final Rule and begin educating physicians, staff, and patients on the new “two midnights” rule and Part A to Part B rebilling process. These will be major operational changes and challenges for all hospitals, including CAHs.

Note from the instructor: On the road to a more prospective OPPS, part II

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

Last week we discussed CMS’ movement from a largely fee-for-service outpatient hospital reimbursement methodology to a more prospectively determined outpatient prospective payment system (OPPS) payment methodology. Looking at the proposed calendar year (CY) 2014 OPPS/Ambulatory Surgery Center (ASC) rule, we spent most of our time focusing on CMS’ proposal to create comprehensive ambulatory payment classifications (APCs) for the 29 most costly device-dependent primary services. Under this proposal, CMS would make a single prospective payment based on the cost of all individually reported codes that represent the provision of one of these primary services and all adjunctive services provided to support the delivery of that primary service. This would result in a significant reduction in the number of individual separate payments for OPPS covered items and services.

We also noted CMS’ recommendation to significantly expand the number and type of OPPS covered items and services subject to “packaging.” When a covered item or service that is payable under the OPPS is packaged, the payment for that item or service is included in the payment for the related primary service of which it is an integral, supporting part. In the remainder of this week’s note, we will focus on the specific details of CMS’ proposed expansion of packaging for CY 2014. This expansion would also significantly reduce the number of individual separate payments for OPPS covered items and services.

 

Historical perspective on packaging

Since August 2000, the OPPS has been the primary payment methodology for most hospital outpatient services covered under Medicare Part B and certain inpatient hospital services that are not covered under Part A but are covered under Part B. Under the OPPS, as originally implemented, most covered services were separately payable based upon the HCPCS code that identified those services and the APC to which that HCPCS code was assigned.

From the beginning, certain dependent services that Medicare considered to be covered and payable under the OPPS were not separately payable. These items and services were referred to as  “packaged.” As noted above, the payment for a packaged item or service is included in, or “packaged into,” the payment for the related primary service of which it is an integral part.

Initially, packaged items and services tended to be relatively low cost and were usually furnished in support of some other more significant independent service. Items and services that have been traditionally packaged include anesthesia, use of the operating/treatment/procedure room, drugs, devices, and observation. Effective January 1, 2008, CMS vastly expanded the number of packaged items and services to include many that are fairly expensive and that might be used independently, at least in some circumstances. The expanded list of packaged items and services includes diagnostic radiopharmaceuticals, contrast agents, guidance services, image processing services, intraoperative services, and imaging supervision and interpretation services.

 

Proposed CY 2014 packaging expansion

In the proposed CY 2014 OPPS/ASC rule, CMS has recommended packaging the following additional items and services:

  • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure
  • Drugs and biologicals that function as supplies or devices when used in a surgical procedure
  • Clinical diagnostic laboratory tests
  • Procedures described by add-on codes
  • Ancillary services (currently identified with status indicator ‘‘X’’)
  • Diagnostic tests on the bypass list
  • Device removal procedures

Let us look at each of these categories in more detail.

 

Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure

In its rationale for expanding packaging to include these items and services, CMS noted that it currently unconditionally packages the following six categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies):

  • Those with per day costs at or below the packaging threshold (for CY 2014, the proposed packaging threshold is $90 per day based on historical claims data from CY 2012)
  • Diagnostic radiopharmaceuticals
  • Contrast agents
  • Anesthesia drugs
  • Drugs used as supplies according to § 419.2(b)(4)
  • Implantable biologicals

CMS noted that the same rationale that justifies packaging diagnostic radiopharmaceuticals and contrast agents that function as supplies when used in specific diagnostic tests or procedures should logically be expanded to package all drugs, biologicals, and radiopharmaceuticals that function as supplies in such circumstances. Thus, CMS proposes to unconditionally package all drugs, biologicals, and radiopharmaceuticals that function as a supply when used in a diagnostic test or procedure, except when the drug, biological, or radiopharmaceutical has pass-through status. For purposes of this proposed expansion, a diagnostic test or procedure is defined as any kind of test or procedure performed (i) to aid in the diagnosis, detection, monitoring, or evaluation of a disease or condition; or (ii) to determine which treatment option is optimal.

CMS mentioned two specific drugs that would be included in this expanded packaging category in addition to currently packaged diagnostic radiopharmaceuticals and contrast agents: stress agents and hexaminolevulinate hydrochloride (Cysview®). Stress agents are composed of a class of drugs that are used in certain diagnostic tests (primarily myocardial perfusion imaging) to evaluate certain aspects of cardiac function. Stress agents include those drugs currently identified by HCPCS codes J0152, J1245, J1250, and J2785. Cysview® (HCPCS code C9275) is an optical imaging agent indicated for use in the cystoscopic detection of non-muscle invasive papillary cancer of the bladder among patients suspected or known to have lesion(s) on the basis of a prior cystoscopy.

The drugs, biologicals, and radiopharmaceuticals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”

 

Drugs and biologicals that function as supplies or devices when used in a surgical procedure

Since the implementation of the OPPS, CMS has packaged virtually all medical devices (except for those subject to temporary pass-through status), medical and surgical supplies, and surgical dressings. For purposes of these packaging rules, supplies constitute a large category of items that are typically either for single patient use or have a shorter life span than equipment. Supplies include not only minor, inexpensive, or commodity-type items, but also a wide range of products used in the hospital outpatient setting, including certain implantable devices and biologicals. CMS has long considered these implantable devices and biologicals to be integral to the surgical implantation procedures using them, and, except for devices and biologicals subject to temporary pass-through status, CMS has packaged payment for them into the payment for the related surgical procedure of which they are an integral part.

As with the prior expansion category, CMS has moved from the specific to the general, proposing to unconditionally package all drugs and biologicals that function as supplies or devices when used in a surgical procedure.

In its discussion, CMS identified one specific class of drugs or biologicals that would fall within this category: skin substitutes. The term ‘‘skin substitutes’’ refers to a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers. These products do not actually function like human skin and are not a substitute for a skin graft. Instead, these products are various types of wound dressings that stimulate the host to regenerate lost tissue and replace the wound with functional skin. Skin substitutes are subject to regulation by the FDA as medical devices, human tissue, or cellular products and are applied to wounds during surgical procedures described by CPT codes 15271 through 15278. Some of these products have dual uses and can be used either as skin substitutes or implantable biologicals, depending on whether they are applied externally or internally.

The drugs and biologicals within this packaging category that are identified by specific HCPCS codes are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”

 

Clinical diagnostic laboratory tests

Up to this point, clinical diagnostic laboratory tests have been paid under the clinical laboratory fee schedule (CLFS), rather than the OPPS. However, the secretary of HHS has broad discretion to determine which covered items and services are to be paid under the OPPS. In the interest of moving toward a more prospective OPPS, and after a careful review of how, why, and when laboratory tests are performed in the outpatient hospital setting, CMS has determined that the vast majority of such tests are integral, ancillary, supportive, dependent, or adjunctive to the primary services provided and should be packaged.

Therefore, except for molecular pathology tests, CMS is proposing to package laboratory tests when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. This would be the case when they are provided on the same date of service as the primary service and are ordered by the same practitioner who ordered the primary service.

CMS would consider a laboratory test to be unrelated to a primary service and, thus, not part of this packaging policy, when the laboratory test is the only service provided on that date of service or when the laboratory test is provided on the same date of service but is ordered for a different purpose by a different practitioner from the one who ordered the primary service. The laboratory tests not included in this packaging proposal would continue to be paid separately at CLFS rates when billed on a 14X bill type. As noted above, CMS also proposed that molecular pathology tests described by CPT codes 81200 through 81383, 81400 through 81408, and 81479 should be exceptions from this packaging policy.

The HCPCS codes for the laboratory tests subject to this packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”

 

Procedures described by add-on codes

Add-on codes describe procedures that are always performed in addition to a primary procedure. The example that CMS discussed is the procedure described by CPT code 11001 (debridement of extensive eczematous or infected skin; each additional 10% of the body surface, or part thereof), which is used for additional debridement beyond that described by the primary procedure code. Currently, add-on codes typically receive separate payment based on APC assignment and are assigned status indicator ‘‘T.’’

Because add-on codes represent an extension or continuation of a primary procedure, CMS argues that they are typically supportive, dependent, or adjunctive to that primary procedure and, consequently, their payment should be packaged into the payment for the primary procedure. Therefore, CMS is proposing to unconditionally package all procedures described by add-on codes in the OPPS.

The specific HCPCS codes for the add-on codes subject to this packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “N.”

 

Ancillary services (status indicator ‘‘X’’)

Under the OPPS, CMS currently pays separately for certain ancillary services that are assigned to status indicator ‘‘X,’’ defined as ‘‘ancillary services.’’ In most instances, these services, which include a number of minor diagnostic tests (e.g., x-rays, pathology laboratory tests) are actually performed ancillary to a primary service. However, in certain circumstances they may be performed independently.

Consistent with their desire to develop a more prospective OPPS and the packaging principles discussed above, CMS believes that these ancillary services, which are assigned status indicator ‘‘X,’’ should be packaged when they are performed with another primary service, but should continue to be separately paid when performed independently. Therefore, CMS is proposing to conditionally package all ancillary services (except for preventive services) that were previously assigned a status indicator of ‘‘X’’ and to assign to these services status indicator ‘‘Q1’’ instead (packaged when provided with a service assigned a status indicator of ‘‘S,’’ ‘‘T,’’ or ‘‘V’’). Status indicator ‘‘X’’ would be discontinued. For preventive services previously assigned to status indicator ‘‘X,’’ CMS is proposing to change their status indicator to ‘‘S’’ and to continue to pay for them separately.

The specific HCPCS codes for those ancillary services previously assigned a status indicator of “X” and subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with a status indicator of “Q1.”

 

Diagnostic tests on the bypass list

For a number of years, CMS has created a bypass list of separately paid services. The list is used to convert claims with multiple separately payable procedures, which are generally not used for rate-setting purposes, into claims with a single separately paid procedure that can be used for rate setting. Services on the bypass list have limited associated packaged costs so they can be bypassed when assigning packaged costs on a claim to a separately paid procedure on that same claim.

CMS noted that in the past and under the current proposal, they have packaged or recommended packaging a number of adjunctive diagnostic tests into the primary procedures of which they are an integral part. CMS argues that the diagnostic tests on the bypass list share many characteristics with these other conditionally or unconditionally packaged or proposed packaged categories of items and services. Examples include a barium swallow test (CPT code 74220) and a visual field examination (CPT code 92081). In many instances, these tests are integral, ancillary, supportive, dependent, or adjunctive to a primary service. However, in certain circumstances they may be performed independently.

Therefore, CMS is proposing to conditionally package these procedures (except for preventive services) when performed adjunctively and to continue to pay for them separately when performed independently. CMS is proposing the assignment of status indicator “Q1” for these codes. Some of the diagnostic tests on the bypass list are currently assigned to status indicator ‘‘X’’ and would be conditionally packaged under the proposed policy to conditionally package ancillary services currently assigned status indicator ‘‘X.’’ Thus, the only diagnostic codes on the bypass list affected by this proposal are currently assigned to status indicator ‘‘S.’’ Preventive services will continue to be paid separately.

The specific HCPCS codes for services on the bypass list that are subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “Q1.”

 

Device removal procedures

Implantable devices frequently require removal or replacement due to a variety of factors such as wear, failure, recall, infection, etc. Since the beginning of the OPPS, most implantable devices (except for those subject to pass-through status) have been packaged as supplies, implantable prosthetics, or implantable DME into their associated procedures. Device removal is sometimes reported with a code that describes both removal and repair/replacement, or with a code that only describes removal. Although device removal procedures are frequently performed with procedures to repair or replace devices, device removal may occur without repair or replacement if the clinical indication for the device that was removed no longer exists.

When a separately coded device removal procedure is performed with a separately coded device repair or replacement procedure, CMS argues that the device removal procedure actually represents an integral part of an overall primary procedure that is removal plus repair or replacement of the device. Consistent with their desire to develop a more prospective OPPS and the packaging principles discussed above, CMS is proposing to conditionally package device removal codes when they are billed with other surgical procedures involving repair or replacement and to assign to these services a status indicator  of ‘‘Q2’’ (packaged when provided with a service assigned a status indicator of ‘‘T’’).

The specific HCPCS codes for removal services that are subject to this expanded packaging category are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “Q2.”

 

Clarification regarding packaging of medical and surgical supplies

CMS provided one additional clarification regarding the packaging of medical and surgical supplies under the OPPS. Although such items are generally unconditionally packaged, prosthetic supplies are sometimes paid separately. Prosthetic devices are paid according to the DMEPOS fee schedule if paid separately. In a recent review, CMS discovered many supplies that should be paid under the OPPS as packaged items and services, but that are currently assigned to status indicator ‘‘A’’ and are being paid separately, according to the DMEPOS fee schedule.

For CY 2014, CMS is proposing to revise the status indicator for all supplies described by Level II HCPCS A-codes (except for prosthetic supplies) from status indicator ‘‘A’’ to ‘‘N,’’ so that these supplies are  unconditionally packaged under the OPPS, as required by applicable regulations. The specific HCPCS codes for the supplies that are subject to this change are included in both Addendum B and Addendum P to the proposed CY 2014 OPPS/ASC rule, with status indicator “N.”

 

Correctly reporting packaged items and services and their related charges

Even though there is no separate payment for covered packaged items and services, hospitals are strongly encouraged to report them on the same claim as the more significant services of which they are an integral part, whether required by CMS to do so or not. They should be reported as separate line items, along with their related charges. This is to ensure that these charges are appropriately allocated so the payments for the separately payable services of which they are an integral part are calibrated to cover the cost of the related packaged items and services. With the increase in the number of packaged items and services, including very high cost drugs, biologicals, and devices, it has become even more important for hospitals to accurately and completely identify and report their respective costs.

Note from the instructor: OIG report on usage of financial liability “G” modifiers

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

The OIG recently released a report on problems with how Medicare contractors process claims with “G” modifiers indicating provision of an advanced beneficiary notice or ABN (GA and GX) and indicating Medicare non-coverage (GY and GZ).  The report, entitled Medicare Payments for Part B Claims with G Modifiers, highlights $744 million of claims paid with one of these “G” modifiers.

The OIG report seems to imply that the $744 million was paid in error because it was for claims providers “expected to be denied as not reasonable and necessary or as not covered by Medicare”.  However, this is misleading because the vast majority of these claims (97.7%) were for services with the GA modifier, which in fact simply indicates that an (advance beneficiary notice of noncoverage) ABN was given, but does not necessarily indicate the service isn’t covered.

An ABN may be given for a covered service if the provider initially believes it is non-covered, but later discovers information (e.g., additional diagnostic information from the physician or even results from the test the ABN was given for) indicating it is covered.  In many cases, the provider would continue to include the GA modifier on their claim because they did in fact give the patient an ABN, even though the service turns out to be covered based on information obtained after provision of the ABN.

Arguably, based on the definition of the GA modifier (“Waiver of liability statement issued, as required by payer policy”), an ABN isn’t required, and therefore the GA is inapplicable and shouldn’t be reported.  However, many providers think that because they believed it was required at the time it was given and they did give the ABN, it would be incomplete reporting to not indicate they provided the ABN.

Additionally, it is operationally very difficult to verify every case where an ABN was provided to ensure no additional information was obtained.  Trying to do so would mean the provider would have to essentially run ABN software to evaluate whether to give the ABN, and then run it again with final bill information to determine whether it was in fact necessary.  Most providers do not have a process to re-run the ABN software to verify the ABN was needed and simply leave the GA modifier on the line if an ABN was given at the time of service.

Equally troubling, though, are the 2.3% of claims paid with modifiers that clearly indicate that the service is not a benefit of Medicare (GX and GY) or clearly indicate that it’s not medically necessary and no ABN was provided, which should result in hospital liability.   These modifiers are used by providers to indicate instances where they are not seeking payment from Medicare, but need to bill the service for some other reason (e.g., coverage by another payer), and yet Medicare contractors inexplicably paid them.

This could mean that a provider billed a service correctly indicating it as non-covered, but the contractor in fact paid them, causing the provider to have an overpayment. The provider may not even be aware they have the overpayment, because of automatic posting from the remittance advice.

I would recommend that providers take a look at this report as well as their own use of these modifiers to be sure they are using them correctly.  I would expect that CMS may issue additional guidance to contractors on proper processing of these modifiers in upcoming transmittals that may affect provider use of these modifiers.

Note from the instructor: CMS clarifies payment amount to be applied to payment caps and manual review thresholds for outpatient therapy services provided by critical access hospitals

 

This week’s note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro, Inc.

General Guidelines

In the April 2, 2013 issue of the Medicare Insider, Debbie Mackaman discussed the provisions of the American Taxpayer Relief Act (the “ATRA”) related to outpatient therapy services furnished in various outpatient settings (including outpatient hospital departments) on and after January 1 through December 31, 2013 (CY 2013).  In particular, she noted the following individual beneficiary therapy payment caps and manual medical review thresholds applicable to outpatient therapy services provided during CY 2013:

Therapy payment caps:

  • Physical therapy (PT) and speech language pathology (SLP) combined — $1900
  • Occupational therapy (OT) — $1900

Manual review thresholds:

  • PT and SLP combined — $3700
  • OT — $3700

In the event that providers furnish what they believe to be medically necessary therapy services in excess of the applicable therapy caps for a specific beneficiary, they are to report those services with the –KX modifier.  If providers furnish therapy services in excess of the manual review thresholds for a specific beneficiary, those services are to be manually reviewed by the Recovery Auditors (RAs), effective April 1, 2013.  The RA reviews will be either pre- or post-payment, depending upon the state in which the provider is located.

 

Special Rules for CAH Outpatient Therapy Services

Under the ATRA, critical access hospitals (CAHs) will not be subject to the payment caps and review thresholds for the outpatient therapy services they furnish to Medicare beneficiaries. The outpatient therapy services provided by a CAH, however, will count toward all other providers’ therapy payment caps for those specific beneficiaries.  For example, if a patient is seen at a CAH and receives physical therapy services payable by Medicare, the payment for those services will count toward another hospital’s payment cap and review threshold for that beneficiary if the patient transfers care or starts a new episode of care at that facility during CY 2013.

Initially, CMS indicated that the amount that should be applied against a specific beneficiary’s payment cap and review threshold for services provided by a CAH should be the amount that would be payable for those services under the Medicare Physician Fee Schedule (MPFS).  In a recent Transmittal (R1216OTN) and related MLN Matters Article (MM8278), CMS clarified that Medicare payments for outpatient hospital therapy services should include a multiple procedure payment reduction when more than one unit or procedure is provided to the same patient on the same day by the same provider.  Therefore, when multiple outpatient hospital therapy services are provided to the same patient on the same day by the same provider, the payment amounts applied against payment caps and review thresholds should reflect applicable multiple procedure payment reductions, rather than the full MPFS amount that would otherwise apply.

 

Potential Payment Adjustment

In those instances where a CAH furnished outpatient therapy services to a beneficiary to whom a hospital has also provided outpatient therapy services, the hospital should check to see

  • Whether multiple outpatient hospital therapy services were provided to the same patient on the same day by that same CAH; and
  • If so, whether full MPFS payment amounts for the CAH outpatient therapy services were applied against that specific beneficiary’s payment caps or review thresholds, resulting in denial of claims that would have been payable if the multiple reduction rules had been appropriately applied.

If the answer to both queries above is “yes,” the hospital will need to request that its FI or AB MAC adjust such claims.

Note from the Instructor: Guidance on Implementing Sequestration under the Medicare Fee-for-Service Program

This week’s note from the instructor is written by Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc.

A number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program.  Sequestration, as enacted under the Budget Control Act of 2011 (the “Budget Control Act”) and subsequently amended by the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief Act”), calls for mandatory across-the-board reductions in Federal spending.  These reductions specifically include a two percent reduction in payments for Medicare Fee-for-Service (FFS) claims with dates of service or dates of discharge on or after April 1, 2013.

Historical Background

As all of us are aware, Congress has been kicking the can down the road with respect to addressing a number of financial challenges, including growing national deficits (among them deficits arising from the growing cost of health care services).  Presumably, in an effort to force itself to do so, Congress enacted the Budget Control Act.  Under the Budget Control Act, a Joint Select Committee on Deficit Reduction (the “Joint Committee”) was established and specifically tasked with developing recommendations to reduce the deficit significantly over a period of ten years.  They were to report back to Congress with their recommendations by November 23, 2011.  Congress was then required to consider the Joint Committee’s recommendations by December 23, 2011.

If the Joint Committee failed to refer agreed upon legislation to Congress or did not meet the required savings threshold set out in the Budget Control Act, a sequestration process would be put into effect, government-wide, to reduce Federal outlays by the proposed amount.  Instead of blanket across-the-board cuts to all programs, the Budget Control Act imposed exemptions from the sequestration process. Certain programs, such as Social Security and Medicaid, were to be exempt altogether. Any cuts to Medicare were to be limited to no greater than 2% of the program’s costs, and any such cuts were to come primarily from payments to providers.

Unfortunately, the Joint Committee failed to report the requisite recommendations for deficit reduction. Under the Budget Control Act as originally enacted, this failure would have resulted in the sequestration process starting automatically, effective February 1, 2013 through January 31, 2022. Congress, however, subsequently passed The Taxpayer Relief Act in 2012, which postponed the start of sequestration from February 1, 2013 to April 1, 2013, and the President issued a sequestration order to that effect on March 1, 2013.  Nevertheless, the current Administration continues to urge Congress to take prompt action to address the current budget uncertainty and the economic hardships imposed by sequestration.

Practical Guidance on Implementing Sequestration

As noted above, a number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program.  After researching CMS’ responses to various inquiries, it appears that CMS is primarily referring them to the various Medicare Administrative Contractors (MACs) for more specific answers to their questions.  The MACs, including Noridian Administrative Services, LLC (Noridian), which is currently the MAC for Jurisdictions 3 and 6, have been providing this guidance in the form of multiple pronouncements under the title “Mandatory Payment Reduction in the Fee-for-Service Program–‘Sequestration’.”  These publications generally follow a user-friendly Q&A format and are available on the indvidual MAC Websites.  A prime example is an update issued by Noridian on April 22, 2013, which can be found at the following Website:  https://www.noridianmedicare.com/p-meda/mandatory_payment_reductions_in_the_in_the_medicare_fee_for_service_program_sequestration.html.

The remainder of this Note will provide a summary of general and specific guidance from various MACs on implementation of sequestration under the Medicare FFS Program.

Timing/Effective Dates of Current Sequestration Order

The current sequestration order signed by the President on March 1, 2013, covers all Medicare FFS payments for services with dates of service or dates of discharge (or a start date for rental equipment or multi-day supplies) April 1, 2013, through March 31, 2014.

Under sequestration, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by 2 percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.  Any claims for rental payments with a “FROM” date of service on or after April 1, 2013, will be subject to the 2% reduction, regardless of when the rental period began. On the other hand, the initial and subsequent monthly rental payments billed with a “FROM” date of service beginning on or prior to March 31, 2013 would not be affected by the 2% reduction.

To prevent making overpayments, CMS has also recently directed the MACs to reduce interim and pass-through payments related to the Medicare cost report by 2 percent. Beginning April 1, 2013, the 2 percent reduction will be applied to Periodic Interim Payments (PIP), Critical Access Hospital (CAH) and Cancer Hospital interim payments, and pass-through payments for Graduate Medical Education, Organ Acquisition, and Medicare Bad Debts.

Scope of FFS Items and Services Subject to Sequestration

According to the MACs, all FFS Medicare claims payments are subject to the 2% reduction. There are no exemptions provided in the law for drugs or any other health care item or service provided under the FFS program. As noted above, the 2% reduction also applies to certain interim payments payable under the FFS program.

Calculation of Sequestration Reduction

Payment adjustments required under sequestration are applied to all claims after determining the Medicare payment amount, including application of the current fee schedule, coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. All fee schedules, Pricers, etc., are unchanged by sequestration. It is only the final payment amount that is reduced by 2%.

Calculation for Assigned Claims

The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an assigned claim:

A provider bills a service with an approved amount of $100.00, and $50.00 is applied to the deductible. A balance of $50.00 remains. Medicare normally would pay 80% of the approved amount after the deductible is met, which is $40.00 ($50.00 x 80% = $40.00). The patient is responsible for the remaining 20% coinsurance amount of $10.00 ($50.00 – $40.00 = $10.00). However, due to the sequestration reduction, 2% of the $40.00 calculated payment amount is not paid, resulting in a payment of $39.20, instead of $40.00 ($40.00 x 2% = $0.80).  Please note that the beneficiary’s deductible and coinsurance liability for this assigned claim is not affected by sequestration.

Calculation for Unassigned Claims

Medicare’s payment to beneficiaries for unassigned claims, however, is subject to the 2% sequestration reduction. The non-participating physician who bills on an unassigned basis collects his/her full payment from the beneficiary, and Medicare reimburses the beneficiary the Medicare portion (e.g., 80% of the reduced fee schedule amount. [NOTE: The "reduced fee schedule" refers to the fact that Medicare’s approved amount for claims from non-participating physicians/practitioners is 95% of the full fee schedule amount]). This reimbursed amount to the beneficiary would be subject to the 2% sequestration reduction, just like payments to physicians on assigned claims. Both are claims payments, but to different parties. If the Limiting Charge applies to the service rendered, physicians/practitioners cannot collect more than the Limiting Charge amount from the beneficiary.

The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an unassigned claim:

A non-participating provider bills an unassigned claim for a service with a Limiting Charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95.00 (assuming that the otherwise approved Medicare amount is $100), and $50.00 is applied to the deductible. A balance of $45.00 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which would be $36.00 ($45.00 x 80% = $36.00). However, due to the sequestration reduction, the $36.00 calculated payment amount is reduced by 2%, resulting in a payment of $35.28, instead of $36.00 ($36.00 x 2% = $0.72), to the beneficiary.

CMS encourages physicians, practitioners, and suppliers who bill unassigned claims to discuss with their Medicare patients the impact of the sequestration reductions to Medicare payments.

Reporting the Sequestration Reduction

Claim adjustment reason code (CARC) 223 is used to report the sequestration reduction on the Remittance Advice (RA).  CARC 223 is defined as “Adjustment code for mandated Federal, State or local law/regulation that is not already covered by another code and is mandated before a new code can be created.”

For institutional Part A claims, the adjustment is reported on the RA at the claim level. For Part B physician/practitioner claims and institutional provider outpatient claims, the adjustment is reported at the line level.

Continuing Guidance

Hospitals and other providers are encouraged to check with their local contractors for new updates, as well as additional guidance and clarification on the practical application of sequestration to the Medicare Program.