RSSAll Entries in the "Note from the Instructor" Category

Note from the Instructor: Changes to Audits of Inpatient Admissions

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

In the 2016 OPPS Proposed Rule, CMS announced that October 1, 2015 they will be transitioning the medical review of inpatient admissions from Medicare Administrative Contractors (MAC) to Quality Improvement Organizations (QIO). This policy will limit the future review of inpatient admissions by the Recovery Auditors and may be related to CMS’ withdrawal of the Request for Quotes for new Recovery Auditors announced July 10.

As discussed last week in Judith’s note on the OPPS Proposed Rule, CMS proposed changes to the current regulation that includes the 2-Midnight Benchmark and related provisions. The benchmark will remain unchanged and generally allows Part A payment where the physician expects the patient to require two midnights of medically necessary hospital care. The amendment would also allow case-by-case payment under Part A for admissions the physician expects to be less than two midnights, but nevertheless believes are appropriate for inpatient admission, as supported with appropriate documentation.

CMS indicates this change is an expansion of their “rare and unusual” circumstances exception that currently only includes the clinical case of newly initiated mechanical ventilation. They emphasized the “case-by-case” nature of this new exception, indicating these cases will be subject to the clinical judgment of medical reviewers. Cases with less than a one night stay will be prioritized for review.

In the same section of the rule, CMS discussed changes in how these reviews will take place. Currently, reviews of inpatient admissions are being performed by the MACs as part of a probe-and-educate process initially introduced by CMS during the implementation of the 2-Midnight Rule and later required by Congress. The statutory requirement for the MACs to conduct reviews ends October 1, and at that time, presumably reviews were set to revert back to the Recovery Auditors, with some reviews still conducted by MACs as well. CMS instead announced they will implement a new medical review strategy for inpatient admissions utilizing the QIOs, rather than MACs or Recovery Auditors, effective October 1.

CMS announced they will make this change in review strategy October 1 regardless of whether the proposed change to the 2-Midnight Rule is adopted. Other policies published in the proposed rule, including the proposed 2-Midnight Rule amendment, will be finalized in November with an effective date of January 1, 2016—long after expiration of the current review strategy mandated by Congress. CMS takes great pains to explain the statutory and regulatory appropriateness of the QIOs conducting these reviews under their current scope. Presumably, this is CMS’ explanation for adopting this change in strategy effective October 1 without finalizing it through the comment and response process of the proposed rule. Nevertheless, this new policy is likely to be viewed as a very provider- and beneficiary-friendly change and, in all likelihood, would have faced little opposition through the comment and review process anyway.

Under the new “strategy,” the QIOs will conduct post payment reviews on a sample basis looking for practice patterns that may require additional education or further auditing. The practice patterns CMS highlighted in the rule include high denial rates, consistently failing to adhere to the 2-Midnight Rule, frequent admissions of less than one midnight or failure to improve after education by the QIO. Providers identified as having these practice patterns will be referred to the Recovery Auditors for further focused reviews of their inpatient admissions. This brings us to the state of the Recovery Audit program and contracts. The current Recovery Audit contracts were set to expire in August 2014. Due to delays in contracting with new Recovery Auditors, the contracts for the current Recovery Auditors were extended at that time.

In November 2014, CMS announced that two of the new contracts would be in place by December of that year and the remaining three by late summer 2015. However, on July 10 CMS announced on the Recovery Audit Program Recent Updates page that they have withdrawn the Requests for Quotes to replace the current contractors and are updating the Statements of Work (SOW) for the new contracts. They indicate the current Recovery Auditors will continue with “active” reviews through December 31, with new contractors not on the horizon until 2016.

Presumably, the new SOW will include the limitation on inpatient admission reviews announced as part of CMS’ new medical review strategy with the QIOs. This new strategy changes the economics of the contracts for the bidders. The Recovery Auditors get a portion of monies recovered and inpatient cases are the highest dollar cases and denials of these admission have been the most lucrative for them. This new strategy is unlikely to change the review of the medical necessity of procedures provided during inpatient admission (i.e., reviews focused on the medical necessity of the procedure rather than the status of the patient), which are a current focus of some Recovery Audits.

The new SOW will undoubtedly also include the improvements to the Recovery Audit program detailed in late 2014. These improvements include many provider-friendly changes such as a limitation on the length of time to review inpatient claims submitted in a timely manner (within three months) and limitations on the number of cases that can be reviewed, which varies based on the rate of denial. In the rule, CMS indicated that under the new strategy for review of inpatient cases, the number of claims reviewed by Recovery Auditors would be based on claim volume and denial rates determined by the QIO, which is consistent with that approach.

If providers have questions about the new medical review strategy, the new QIO audits, or how the process for referral to the Recovery Auditors will work, they may wish to submit comments to the OPPS Proposed Rule by the deadline of August 31. Although the discussion of the new medical review strategy is not technically a proposed rule and is presumably only an announcement of the new strategy, CMS would likely answer questions submitted by providers.

Note from the instructor: CMS issues proposed Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule for calendar year (CY) 2016, Part II

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

On July 1, 2015, CMS released proposed CY 2016 changes to payment policies, rates, and quality initiatives for the majority of Medicare outpatient facility services, including services provided in hospital outpatient departments (HOPD), generally payable under the OPPS, and those provided in ASCs, generally payable under the ASC Payment System. In last week’s note, we focused on key proposed changes to the OPPS. The proposed rule also recommended changes to the so-called “2-Midnight Rule,” the primary criteria for determining coverage under Part A for inpatient hospital discharges on and after October 1, 2013. In this week’s note, we will discuss the proposed changes to the 2-Midnight Rule.

Background on Part A reimbursement and coverage policy, in general

In contrast to reimbursement under Part B, which continues to permit multiple separate payments for individual HOPD covered services payable under the OPPS (and other fee schedules), payment for most inpatient hospital services covered under Part A is made in the form of a single payment under the inpatient prospective payment system (IPPS).

Payment for a particular Part A covered inpatient stay is based upon the payment group (referred to as the “Medicare Severity Diagnosis-Related Group” or “MS-DRG”) to which the stay is assigned. MS-DRG assignment is based primarily upon the patient’s diagnoses (principal and secondary), procedures performed, and certain demographic factors (e.g., age, sex). Like the OPPS, the IPPS is a prospective payment system, which provides for a predetermined MS-DRG-based average payment amount for each inpatient stay.

Prior to CMS’ implementation of the 2-Midnight Rule, hospitals and other stakeholders made repeated requests for additional clarification of inpatient coverage criteria under Part A. This became an even greater concern following the introduction of the permanent Recovery Audit (RA) Program in January 2009. Prior to the implementation of the RA Program, certain contractors (referred to as “Quality Improvement Organizations” or “QIOs”) had primary review responsibility to determine whether inpatient stays were medically necessary, and, therefore, met Medicare’s Part A coverage criteria. In doing so, the QIOs integrated peer review into the process, applying relatively specific criteria (e.g., Interqual, Milliman) to each case. They also took a collaborative approach, providing significant guidance in the form of related education and training to healthcare providers.

As part of the RA Program, contractors referred to as “Recovery Auditors” replaced the QIOs as the primary contractors responsible for post-payment reviews. As part of their authority, Recovery Auditors were given broad discretion to determine whether prior paid inpatient hospital stays met applicable Part A coverage criteria. Moreover, they were also given the latitude to apply different coverage criteria from those originally used to adjudicate the claim for that stay. In addition, the Recovery Auditors were reimbursed on a contingency basis; the higher the amount of overpayments identified, the higher their reimbursement, incentivizing them to focus on higher cost services (e.g., inpatient stays) and to apply stringent coverage criteria when performing related post-payment reviews.

This resulted in a much higher percentage of post-payment inpatient hospital denials under Part A, which led to significant increases in the number of related appeals, overwhelming the Medicare appeals process. Hospitals were able to recover some of their costs by rebilling under Part B, but it was often too late for them to do so. In any event, these denials also led to significant adverse consequences to beneficiaries, including the following:

  • Additional cost sharing responsibility in the form of Part B deductible and coinsurance amounts when services were rebilled under Part B; and/or
  • Denial of Medicare coverage under Part A for subsequent inpatient skilled nursing facility (SNF) admissions based on failure to meet the three-day qualifying inpatient hospital stay requirement.

To address all of the above-noted concerns and repeated stakeholder requests for clarification of Part A inpatient coverage criteria, CMS created and implemented the 2-Midnight Rule.

Coverage under the 2-Midnight Rule, as initially implemented

As part of the fiscal year (FY) 2014 IPPS Final Rule, CMS established the following Part A coverage criteria for inpatient hospital discharges on and after October 1, 2013:

  1. An inpatient order signed or authenticated by the ordering physician or other authorized practitioner; and
  2. An expectation that the patient will require hospital care for at least two midnights; and
  3. A physician certification for cases that either

a.Qualify as long stays (20 days or longer); or
b.Reach the cost outlier point.

The most significant requirement is the 2-Midnight Rule, which actually encompasses two different standards, depending upon when the rule is applied. At the time that the physician makes the decision to admit the patient, he or she should apply the 2-Midnight Benchmark. Under the benchmark, the physician must determine whether he or she reasonably expects the patient to require medically necessary hospital care for at least two midnights.

In determining whether the patient is expected to receive hospital care for two midnights, the practitioner may consider not only care anticipated after inpatient admission, but also hospital care received prior to admission, either at a transferring hospital before transfer or in the HOPD (e.g., the emergency department, observation). In determining whether the patient reasonably requires medically necessary care for two midnights, the physician must exercise his or her independent medical judgment, based on relevant complex medical factors (e.g., patient history and comorbidities, severity of signs and symptoms), all of which should be carefully documented in the medical record to support the reasonableness of the admission decision. At the time of the rule’s implementation, CMS also acknowledged certain exceptions to the requirement of a two-midnight stay (e.g., inpatient-only procedure, initiation of mechanical ventilation).

Under the 2-Midnight Rule, once the patient has remained for at least two midnights after the inpatient order, Medicare will apply a different standard, referred to as the 2-Midnight Presumption. That is, absent evidence of gaming or a record of prior inappropriate status determinations, contractors should assume that the inpatient stay was medically necessary and, therefore, covered.

For hospital discharges from October 1, 2013, through September 30, 2015, Recovery Auditors are prohibited permanently from conducting post-payment status reviews. During this period, MACs have been directed to conduct initial (and, if issues are identified, subsequent) prepayment “probe and educate” audits for each hospital with stays of fewer than two midnights. If results are negative and the stay is denied, hospitals may rebill under the AB rebilling rules. In addition, any such denials give rise to appeal rights under the regular Medicare appeals process.

Proposed changes to the 2-Midnight Rule

Not surprisingly, despite CMS’ efforts to ease the transition to the new inpatient coverage rules, hospitals and other stakeholders continue to have concerns, most of which focus on requests for more specific guidance on the factors physicians need to document in order to support the reasonableness of their length-of-stay expectations.

In an attempt to address some of these concerns, CMS is recommending several changes to the 2-Midnight Rule, which would become effective for discharges on and after January 1, 2016. Most of the recommendations focus on process, rather than substance, with renewed emphasis on the importance of physicians in making the initial status decisions, and the role and approach of contractors in reviewing those decisions.

To emphasize the importance of the physician’s role in the status decision, CMS is proposing the following clarifications:

  • For stays expected to last fewer than two midnights (in circumstances not listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis, based on the judgment of the admitting physician, as supported by documentation in the medical record, and subject to medical review.
    • CMS believes it would be rare for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital expected to keep him or her in the hospital for less than 24 hours; CMS will monitor the number of these types of admissions and plans to prioritize these cases for medical review.
  • For hospital stays that are expected to last two midnights or longer, CMS’ policy is unchanged; if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Medicare Part A payment, as long as the record supports that expectation. This includes stays in which the physician’s expectation is supported, but the length of the actual stay was less than two midnights due to unforeseen circumstances such as unexpected death, transfer, clinical improvement, or departure against medical advice.
CMS is also recommending the following changes in its approach to educating providers and enforcing the 2-Midnight Rule:
  • The QIOs will conduct first line medical reviews of providers who submit claims for inpatient admissions, rather than MACs or Recovery Auditors. QIO patient status reviews will focus on educating physicians and hospitals about the Part A payment policy for inpatient admissions.
  • The Recovery Auditors will conduct patient status reviews only for those hospitals that have consistently high denial rates, based on QIO patient status review outcomes.

CMS’ proposed changes in enforcement policy are encouraging and likely to be viewed positively by the healthcare community, based on providers’ prior experience with the QIOs. In the past, both hospitals and physicians appreciated the QIOs’ integration of peer review into the review process, as well as their collaborative approach. The relationships between providers and the QIOs were generally collegial, rather than adversarial. In particular, the QIOs past focus has been to provide significant guidance in the form of related education and training on accepted standards of medical practice and identification of factors supporting the appropriateness of inpatient admission, from a medical perspective. This is exactly the kind of guidance providers have been requesting for years.

Opportunity for public comment For additional information on the proposed changes or to provide comments to CMS, please refer to the following websites: View CMS-1633-P. View the fact sheet. View the fact sheet on the 2-Midnight Rule. Leave a comment.

Note from the instructor: CMS issues proposed OPPS and ASC rule for calendar year (CY) 2016, Part I

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro. On July 1, 2015, CMS released proposed CY 2016 changes to payment policies, rates, and quality initiatives for the majority of Medicare outpatient facility services. Such services include those provided in hospital outpatient departments (HOPD), generally payable under the OPPS, and those provided in ASCs, generally payable under the ASC Payment System. The proposed rule also includes recommended changes to the 2-Midnight Rule, which has been the primary criteria for determining coverage under Part A for inpatient hospital discharges since October 1, 2013. In this week’s note, we will focus on key proposed changes to the OPPS. In next week’s note, we will discuss proposed updates to the 2-Midnight Rule. Brief background on the OPPS The OPPS is the principal payment methodology for covered Part B services, including both outpatient services provided in HOPDs and certain inpatient services that are not covered under Part A. The OPPS is a prospective payment system. That is, for those services that are separately payable under the OPPS, there is a predetermined average payment amount that is payable for each covered service based upon the payment group (referred to as the “ambulatory payment classification” or “APC”) to which it is assigned. Under the OPPS, however, not all covered separately billable services are separately payable. In many instances, the payment for those services is packaged into the payment for other separately payable related services. For example, payment for the use of the operating room, anesthesia, surgical supplies, and implantable devices will generally be packaged into the payment for the related surgical service. In recent years, CMS has been moving away from separate individual OPPS payments to more and more packaging. In addition, starting in CY 2008, CMS began to reimburse providers for certain combinations of specific related services with a single composite APC payment. Beginning January 1, 2015, CMS implemented even more comprehensive single payments for certain primary procedures and virtually all “adjunctive” services (services integral or ancillary to, supportive of, or dependent on, that primary procedure), based on “comprehensive” APCs or “C-APCs.” Proposed OPPS changes for CY 2016 There were no real surprises included in the proposed OPPS updates for the coming calendar year. Signaling that it intends to continue moving in the direction outlined above, CMS has proposed the following key OPPS policy and payment changes for CY 2016:
  • Payment update. CMS proposes to update OPPS rates by -0.1% based on the projected hospital market basket increase of 2.7% minus both a 0.6% adjustment for multifactor productivity and a 0.2% adjustment required by the Affordable Care Act. CMS is also proposing an additional 2% reduction to address inflation in the APC payment rates for separately payable OPPS services. These rates were originally calibrated to cover the costs of packaging the majority of clinical diagnostic laboratory services (CDLS) with dates of service on and after January 1, 2014. In reality, however, a significantly higher proportion of laboratory tests than expected continue to be paid separately under the clinical diagnostic laboratory fee schedule (CDLFS) rather than being packaged into applicable OPPS payment rates.
  • OPPS spending for CDLS. CMS is proposing to reduce the CY 2016 conversion factor to account for roughly $1 billion in inflation in OPPS payments resulting from a significant overestimate of the costs of packaging CDLS, beginning in CY 2014. In anticipation of the packaging of most CDLS performed on and after January 1, 2014, CMS shifted $2.4 billion previously paid under the CDLFS into APC payments for the services into which the laboratory services were expected to be packaged. As noted above, however, a much higher than expected portion of CDLS continues to be paid separately under the CDLFS, requiring CMS to address the inflated OPPS payment rates.
CMS is also proposing to implement a new conditional packaging status indicator for laboratory tests that will make it easier for hospitals to receive separate payment for tests that are provided without other related OPPS services.
  • Chronic Care Management (CCM) Services. In response to hospital requests for clarification, CMS is proposing further guidance on coverage, billing, and payment rules for outpatient hospital CCM services. CCM services are non-face-to-face care management services for Medicare beneficiaries who have two or more significant chronic conditions. To be covered, hospital CCM services must be performed under the direction of a physician or authorized non-physician practitioner.
  • CAPCs for CY 2016. As noted above, a C-APC is an APC that provides for an encounter-level payment for a designated primary procedure and most adjunctive and secondary services provided in conjunction with the primary procedure. During CY 2015, there are 25 C-APCs, which primarily involve device-dependent procedures. For CY 2016, CMS is proposing nine new C-APCs, including several surgical APCs and a new C-APC for comprehensive observation services.
Currently, CMS provides a single composite payment for non-surgical encounters with a high-level visit and eight or more hours of medically necessary observation care. In addition, CMS pays separately for most covered ancillary services performed during the period of observation. Under the proposed rule, CMS would create a C-APC to provide comprehensive payment for all services received when receiving comprehensive observation services. These comprehensive services would include a nonsurgical encounter with a high-level outpatient hospital visit and eight or more hours of observation, as well as any ancillary services provided during the period of observation. The beneficiary would be responsible for only a single coinsurance payment, capped at the current calendar year inpatient deductible amount.
  • Expanded packaging. In CY 2015, CMS conditionally packaged many ancillary services. For CY 2016, CMS is proposing to conditionally package a limited number of additional ancillary services, including certain minor procedures and pathology services. CMS is also proposing to package payment for a few drugs that function as supplies during a surgical procedure. These changes were initially proposed in the CY 2014 OPPS/ASC rule, but were not finalized at that time.
  • OPPS device pass-through process. Medicare prefers to package payment for implantable devices into the payment for the procedures that utilize them. CMS currently provides separate pass-through payments, however, for newly FDA-approved implantable devices for a period of at least two, but not more than three, years. This gives CMS the opportunity to track utilization of those devices in order to determine which procedures to package them into. CMS is proposing to make some changes to the current process in response to stakeholders’ requests for more transparency and to align the outpatient process more closely to a similar process used for evaluating new technology add-on payment requests under the inpatient prospective payment system (IPPS).
Although CMS will continue to accept and review device pass-through applications on a quarterly basis, CMS is proposing to include discussions and accept public comments on preliminary decisions (both approvals and denials) in the next OPPS proposed rule. This would allow CMS to take those comments into consideration before arriving at a final determination for each application, which would then be published in the final rule. CMS is also proposing to add a newness criterion similar to the newness requirement that technologies must meet to qualify for IPPS add-on payments. Opportunity for public comment In next week’s note we will continue our discussion on the proposed OPPS/ASC rule, focusing on the recommended changes to the 2-Midnight Rule. In the meantime, hospitals and other interested entities and individuals are encouraged to carefully review CMS’ suggested changes to determine the potential impact on themselves, their organizations, and other stakeholders. In addition, they are encouraged to submit relevant comments and concerns, along with supporting documentation, to CMS by August 31, 2015. For additional information on the proposed changes or to provide comments to CMS, please refer to the following websites: View CMS-1633-P. View the fact sheet. View the fact sheet on the 2-midnight rule. Leave a comment.

Note from the Instructor: Coverage of prescription drugs under Medicare Parts A, B, C, and D, Part II

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro. Several weeks ago, we began a discussion on coverage of prescription drugs under Medicare Parts A, B, C, and D. Although each part of Medicare provides some coverage for drugs, there are distinct differences among them regarding the requirements for, and scope of, such coverage. In the prior note, we discussed drug coverage available under Parts A, B, and C, including relevant limitations. In this note, we will focus on Part D, which is the most recently implemented part of Medicare and specifically designed to close some of the gaps in Medicare drug coverage. We will also explore the potential for additional coverage for prescription drugs under Part D when those drugs are not covered under other parts of Medicare. Coverage under Parts A, B, and C First, let us briefly review coverage under Parts A, B, and C. Medicare covers most drugs provided during an otherwise covered Part A inpatient stay. However, there are limitations on the number of inpatient days covered under Part A. Coverage for prescription drugs provided to hospital outpatients under Part B is more limited. Generally, outpatient hospital drugs are not covered unless they fall within one of the following three exceptions:
  • Certain categories of outpatient drugs covered by statute (e.g., blood clotting factors for hemophilia patients, etc.);
  • Outpatient drugs that are provided “incident to” a physician’s services and are “not usually self-administered,” as determined by the MAC with jurisdiction for those hospital services; and
  • Certain self-administered drugs if they are an integral component of a procedure, are directly related to it, or facilitate the performance of, or recovery from, the procedure.
Some coverage may also be available under Part B for prescription drugs provided to hospital inpatients when there is no coverage under Part A. Under inpatient Part B, coverage is generally on the same terms and conditions as those that would have applied had the services been provided in the outpatient setting. Under Part C, managed care plans (currently referred to as “Medicare Advantage Plans” or “MA Plans”) contract with Medicare to provide coverage to their enrollees for all services (including prescription drugs) otherwise covered under Parts A and B. Since their inception, MA Plans have also been permitted to offer additional benefits in the form of reduced cost sharing or additional services. Many of them have elected to offer expanded outpatient drug coverage. In addition, starting in 2006 with the implementation of Part D, many MA Plans are either required, or have elected, to provide Part D drug coverage to their enrollees. Coverage under Part D Part D is an optional federal Medicare program designed to subsidize the costs of prescription drugs and prescription drug insurance premiums for individuals entitled to Medicare benefits under Part A and/or enrolled in Medicare benefits under Part B. Beneficiaries who enroll in most MA Plans, as well as those who qualify for both Medicare and Medicaid (full benefit dual-eligible) automatically receive the Medicare drug benefit. Enacted as part of the Medicare, Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”), Part D originally went into effect on January 1, 2006, and has been subsequently amended by several federal statutes, including the Medicare Improvements for Patients and Providers Act of 2008. Under the MMA, Medicare beneficiaries generally receive coverage for prescription drugs in one of two ways:
  • Enrollment in a supplemental Prescription Drug Plan (PDP) offered by a private insurance company, to supplement the health coverage they receive under Medicare Part A and/or B; or
  • Enrollment in a private MA Plan that offers coverage for prescription drugs (MA-PD) as an integral part of the health coverage it provides under Medicare Part C.
Organizations offering drug plans (both PDPs and MA-PDs, referred to collectively as “Drug Plans”) have flexibility in the design of the prescription drug benefit packages they offer, including the establishment of formularies. Formularies are lists of prescription drugs that have been approved by that Drug Plan for coverage. Even when not included on the formulary, beneficiaries may request an exception in certain circumstances. Other variables include deductibles, coinsurance, coverage, and out-of-pocket limits. In addition, currently, there is a coverage gap—popularly referred to as the donut-hole—during which the beneficiary bears the primary responsibility for payment of otherwise covered prescription drugs. This gap occurs between the time the beneficiary has met the initial coverage limitation under the particular PDP or MA-PD and before he or she has reached his or her out-of-pocket threshold. Over time, the intent under Part D is for coverage to expand and cost sharing to diminish. Potential coverage under Part D when there is no coverage under Parts A, B, and/or C In its brochure “How Medicare Covers Self-Administered Drugs Given in Hospital Outpatient Settings,” Medicare notes that most self-administered drugs provided in the hospital outpatient setting will not be covered and that the hospital will probably bill the beneficiary for those non-covered drugs. In that case, they recommend that a Medicare beneficiary with Part D do the following:
  • Check with the hospital to see if it participates in Part D;
  • If the hospital pharmacy does not participate in Part D, the beneficiary may need to pay up front and out-of-pocket for these drugs and submit the claim to his or her PDP for a refund;
  • Follow the instructions in the PDP’s enrollment materials on how to submit an out-of-network claim, or call the PDP for information about how to submit a claim; and
  • Keep copies of any receipts and any paperwork sent to the PDP.
The PDP will probably ask the hospital for the following additional information:
  • Certain records, including the emergency room bill that shows what self-administered drugs were given. He or she may also need to explain the reason for the hospital visit; and
  • The PDP may ask if the beneficiary could reasonably have obtained any of the drugs from a participating network pharmacy. For example, if he or she could have taken a dose of a drug obtained from a network pharmacy before the outpatient hospital appointment, the PDP may not pay for that drug.
To determine whether the drug is covered under Part D, the PDP will check to see whether it is included on the PDP’s formulary or qualifies under an exception. Even if the drug is covered, the PDP may only reimburse the in-network cost for the drug, minus any deductibles, copayments, or coinsurance that normally apply. In addition, the beneficiary also may need to pay the difference between what the hospital charged and what the PDP paid. This amount will be counted toward his or her Part D out-of-pocket costs, as long as he or she submits the claim to the PDP. If the drug is not covered, the beneficiary will be obligated to pay the full amount that the hospital charged for the drug. Arguably, following the same analysis, prescription drugs that are provided in the inpatient hospital setting but are neither covered under Part A nor fall within a coverage category under inpatient Part B, would also potentially qualify for coverage under Part D. A similar argument might be used for coverage under Part D when certain prescription drugs are not covered under Part C; the MA Plan is neither an MA-PD nor does it otherwise provide additional drug benefits. Hospitals are encouraged to educate themselves and their patients with respect to the coverage policies and procedures for prescription drugs under Parts A, B, C, and D and to facilitate their patients’ ability to communicate and seek guidance from their respective PDPs and MA-PDs on these issues, if applicable. Additional resources In the meantime, additional information is available in the following source authorities:

Note from the Instructor: More on Medicare Preventive Services

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, CCDS, regulatory specialist for HCPro.  
 
A few weeks ago, I wrote an article about billing for preventive services in a rural health clinic (RHC). Since then I have received several questions about preventive services, specifically the Initial Physical Preventive Exam (IPPE) and the Annual Wellness Visit (AWV), which are performed in hospital outpatient departments, provider-based clinics/departments, and freestanding physicians’ offices.

Medicare differentiates between these exams based on eligibility, timing, and the purpose of the visit:
  • The IPPE is an introduction to Medicare and covered benefits, with a focus on health promotion and disease detection. It must be performed within the first 12 months after the effective date of the beneficiary’s Medicare Part B coverage.
  • The AWV is intended for reviewing the patient’s history, risk factors for diseases, and medications. It is also intended to provide personalized health counseling and establish or update a written personalized prevention plan.

Although there are very specific HCPCS codes used to bill for the IPPE (G0402) and the AWV (G0438 initial and G0439 subsequent), Medicare does not require a specific diagnosis code for coverage of these services. The HCPCS code and the frequency in which the services are provided drive the coverage rules.

Hospitals may encounter difficulties with billing and payment when other diagnostic services are ordered in connection with the IPPE or AWV. For example, it is not uncommon for a physician to order laboratory services following these exams and give an ICD-9 diagnosis code in the range of V70.0–V70.9 (general health examination) as the reason for the test. However, the Medicare National Coverage Determinations (NCD) Coding Policy Manual and Change Report, Clinical Diagnostic Laboratory Services (otherwise known as the Lab NCD Manual) lists these diagnosis codes as never covered. If a code from the non-covered section of the manual is provided, the provider may bill the test to the Medicare beneficiary without issuing a mandatory ABN. By reporting the non-covered diagnosis code, it would appear to Medicare that the test was performed for screening rather than diagnostic purposes. Instead, the practitioner or the provider may issue a voluntary ABN to inform the patient of his or her financial liability in the case of a never covered item or service.

Unfortunately, the patients and sometimes the practitioners are under the assumption that the lab services are also covered as part of the IPPE or AWV. While there are several other laboratory preventive services that are covered by Medicare, they also have specific HCPCS codes and frequency limitations and many have specific diagnosis code requirements as well. A list of these tests can be found in the links that follow.
Practitioners who order additional services and the providers who may perform them must be aware of the coverage and billing differences between diagnostic and screening services that may result as a follow up to one of the covered preventive exams. Not only will the provider’s bottom line be affected by incorrectly billing for additional services without a covered diagnosis, but the patient’s out-of-pocket expense will potentially increase.
The following resources provide complete coverage and billing guidance for Medicare preventive services when provided in any setting.

Note from the Instructor: Coverage of prescription drugs under Medicare Parts A, B, C, and D

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
                                                                                       
During several recent custom and open-registration Medicare Boot Camps-Hospital Version, participants have expressed confusion about coverage of prescription drugs under Medicare Parts A, B, C, and D. Each part of Medicare provides some coverage for prescription drugs, primarily depending upon whether those drugs are medically necessary to care for the condition for which they are prescribed and the setting in which they are provided.

In this note, we will discuss drug coverage available under Parts A, B, and C, including the limitations of such coverage. In a subsequent note, we will focus on Part D, which is the most recently implemented part of Medicare, specifically designed to close some of the gaps in Medicare coverage for prescription drugs. We will also explore the potential for additional coverage for prescription drugs under Part D when those drugs are not covered under other parts of Medicare.

Coverage under Part A
 
Part A is primarily responsible for inpatient facility services, including services provided to hospital inpatients. Most prescription drugs provided to hospital inpatients during covered Part A days are covered as long as they are “reasonable and necessary” for the care and treatment of the inpatient for whom they are prescribed. Coverage under Part A, however, is generally limited to 90 regular inpatient benefit days per benefit period, during which the beneficiary is only responsible for certain deductible and coinsurance amounts. Each time an old benefit period ends and a new benefit period begins, the beneficiary once again has 90 covered benefit days during that benefit period.

In addition, each beneficiary covered under Part A has 60 lifetime reserve benefit days, during which he or she is only responsible for certain coinsurance amounts. Unfortunately, lifetime reserve days do not renew; once used, they are gone forever.

Coverage under Part B
 
Coverage of prescription drugs provided to hospital outpatients under Part B is more limited. Generally, outpatient hospital drugs are not covered unless they fall within one of the following three exceptions:
  • Certain categories of outpatient drugs covered by statute;
  • Outpatient drugs that are provided “incident to” a physician’s services and are “not usually self-administered,” as determined by the MAC with jurisdiction for those hospital services; and
  • Certain self-administered drugs if they are an integral component of a procedure, are directly related to it, or facilitate the performance of, or recovery from, the procedure.

Under the first exception, the following categories of outpatient drugs are covered by statute:
  • Blood clotting factors for hemophilia patients;
  • Drugs used in immunosuppressive therapy;
  • Erythropoietin for dialysis patients; and
  • Certain oral anti-cancer drugs and anti-emetics used in certain situations.
Under the second exception, although the MACs are tasked with the responsibility of determining which drugs meet the “incident to” rules and are “not usually self-administered,” Medicare provides the following guidelines:

  • Generally, only those drugs administered by injection, including infusion, are considered to be “not usually self-administered;” and
  • If administered by injection (other than infusion), only those drugs administered by deep, penetrating, intramuscular injection are considered to be “not usually self-administered.”

The MACs are required to report a list of those drugs determined to be “usually self-administered,” and, therefore, not covered, to Medicare. They are also supposed to post that list (referred to as the “Self-Administered Drug” [SAD] list) on their websites.

Medicare continues to stress the limited nature of the third exception. This exception applies only when certain self-administered drugs are an integral component of a procedure, are directly related to it, or facilitate the performance of, or recovery from, the procedure. There is no coverage when the self-administered drug is the treatment itself, regardless of whether it is medically necessary. A prime example would be a hospital emergency room providing insulin to a patient suffering from hyperosmolar hyperglycemic syndrome. Since the patient is an outpatient and the insulin (which is self-administered) is the treatment, rather than an integral component, it would not be covered.

It is important for both hospitals and beneficiaries to understand that Medicare has made a decision to cover only certain drugs provided to hospital outpatients under Part B. That coverage determination is not necessarily related to whether those drugs are medically appropriate for the care and treatment of a specific patient.

Some coverage may also be available under Part B for prescription drugs provided to hospital inpatients when there is no coverage under Part A (e.g., patient is not entitled to Part A or has exhausted Part A inpatient days). Coverage under inpatient Part B is generally on the same terms and conditions as those that would have applied had the services been provided in the outpatient setting.
Coverage under Part C
 
Medicare, as originally implemented in 1965, only included coverage under Parts A and B. Under “original” Medicare, beneficiaries continue to have broad choice of providers for their Part A (inpatient) and Part B (primarily outpatient) services delivered in the traditional manner. Beginning in the 1980s, Medicare began to provide coverage under Part C, using a variety of managed care, risk-based delivery models. At a minimum, these private entity managed care plans (currently referred to as “Medicare Advantage Plans” or “MA Plans”) must provide coverage for all of the services, including prescription drugs, covered under Parts A and B. In addition, since their inception, MA Plans (and their predecessors) were permitted to offer additional benefits in the form of reduced cost sharing or additional services. Many of them elected to offer expanded outpatient drug coverage.

Since the implementation of Part D on January 1, 2006, many MA Plans are required, or have elected to, provide drug coverage under Part D. An MA Plan that provides drug coverage under Part D is referred to as an MA-PD Plan.

Continuing discussion

As noted above, we will continue this discussion in a subsequent note, focusing on Part D, which is the most recently implemented part of Medicare. Part D was specifically designed to close some of the gaps in coverage for prescription drugs. We will also explore the potential for additional coverage under Part D when certain prescription drugs are not covered under Parts A, B, or C.

In the meantime, you can find additional information in the following source authorities:

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Note from the Instructor: Billing for Preventive Services in a Rural Health Clinic

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, CCDS regulatory specialist for HCPro.  
 
I was recently out teaching HCPro’s Rural Health Clinic (RHC) Boot Camp® and we got into a lengthy discussion about billing for a clinic visit with preventive services. Based on our conversation, I thought it might be helpful to examine specific RHC billing issues.

The Rural Health Clinic Services Act of 1977 was passed to assist Medicare patients’ access healthcare in rural areas, where there is a shortage of physicians, and also to increase the use of non-physician practitioners such as nurse practitioners (NP) and physician assistants (PA) in these areas. Approximately 4,000 RHCs nationwide provide access to primary care services in rural areas, according to the CMS Rural Health Clinic Fact Sheet. These RHCs, certified by CMS as such, experience unique billing scenarios.
 

In general, when a patient is seen by a physician or non-physician practitioner in the clinic or other designated area, most of the services provided will be bundled into one line for charging purposes. The patient will pay the usual deductible amount and 20% of the total charge for their coinsurance portion. However, when certain Medicare preventive services are provided as part of a clinic visit, the charge for the preventive service must be deducted from the total charge for the visit in order for the correct deductible and coinsurance to be applied to the medical visit and appropriately waived for the preventive service. The waiver of the deductible and coinsurance applies to those services recommended by the U.S. Preventive Services Task Force with a grade A or B and those preventive services limited by frequency. CMS has published an updated interactive table of preventive services, which can be found on the Medicare Learning Network website.

In most cases, the RHC will be paid under the all-inclusive rate (AIR) for all services provided to the patient on that particular date of service. The RHC-specific AIR is based on the clinic’s allowable costs reported on the annual cost report. Further consideration must be given to billing if the RHC has been designated as provider-based under the current regulations. This also allows the clinic to be paid its actual AIR without regard to the national limitation amount set by CMS every calendar year.

In the case of a clinic visit and an Initial Preventive Physical Exam (IPPE) occurring on the same date of service, the RHC will be paid two AIRs–one for the clinic visit, which includes most of the charges for the visit and one for the IPPE. The deductible and coinsurance will be waived for the IPPE, and the patient will be responsible for the coinsurance amount for other services billed on the clinic visit line. Let me walk through a simplified example to demonstrate the complexity of billing RHC services.

A patient presents to a provider-based RHC for an IPPE under his Medicare benefit. After the IPPE is completed, the physician also addresses the patient’s chronic fatigue and blood is drawn for a complete blood count (CBC) test to be performed by the hospital laboratory. In an RHC, an E/M code (e.g., 99213) is not reported for non-preventive services, as the level of service does not drive the actual reimbursement. If the venipuncture is performed by the RHC staff, the venipuncture charge is included in the same line with the visit charge. Laboratory services are not included in the AIR and patients usually do not have any out-of-pocket expenses, so they must be billed separately.

Key billing points of this example:
  • The RHC will report the IPPE, medical evaluation, and venipuncture on the UB04 claim form using TOB 0711.
  • The clinic will report the medical portion of the visit (chronic fatigue) with revenue code 0521 without an E/M level on the claim.
  • The clinic will include the venipuncture charge in the line with charge for the medical visit.
  • The patient will pay his remaining Part B deductible and 20% of the total charge for the medical portion of the visit, which includes the evaluation for chronic fatigue and the venipuncture.
  • The clinic will report the IPPE on a separate line using revenue code 0521 and HCPCS G0402 in order to waive the patient’s deductible and coinsurance for the preventive service only.
  • The RHC will receive two AIR payments—one for the medical visit and one for the IPPE performed on the same date of service.
  • The main provider of the provider-based RHC will bill for the laboratory services only on the appropriate bill type (i.e., TOB 031 OPPS or TOB 0851 CAH) and be paid under its associated payment methodology.

The key to compliant billing in this setting is to understand how to bill for non-RHC services and when the patient will be financially responsible for a portion of the visit. In a future article, I will address the difference between billing for independent and provider-based non-RHC services.

Note from the Instructor: Increasing Amounts of Data Available on Providers

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

Providers may be surprised at the information that can be easily downloaded about them from the CMS website. This week two fact sheets from CMS announced provider specific data sets available with detailed information on the types of claims and charges submitted to Medicare by hospitals and physicians. These documents show just a sampling of the information available. CMS maintains a website to provide access to Medicare Provider Utilization and Payment Data. The site contains data on inpatient and outpatient hospital charges as well as physician and non-physician provider data, including both charges and prescribing information.

Inpatient hospital data, by specific hospital, is available for the top 100 DRGs by volume. The data includes information on the number of discharges, and averages charges and payments, including total payments from all sources. Individual sites for fiscal years 2011, 2012, and 2013 contain both hospital-specific and national/state aggregate downloadable files, in either Excel or Comma Separated Value files. The data allows providers and others to easily compare hospitals in a specific area or compare a hospital to statewide and national averages.

The inpatient hospital data has been used by media and authors for dramatic effect, tending to focus on charges, which can have a surprisingly small correlation with what providers are paid from government payers. With the increasing use of creative contracting strategies and alternate payment models, charges may also bare little correlation to payments from other insurers either. Unfortunately for uninsured patients, these are the amounts they are billed, although many states have laws that limit the charges to or require discounts for uninsured patients. None of this information is generally taken into account in media articles looking to dramatize the data.

The site also includes data on hospital outpatient charges for 30 common APCs, including minor procedures (e.g., debridements, excisions and biopsies, certain endoscopies and injections), diagnostic tests (e.g., ultrasounds, MRIs, cardiac and pulmonary tests), and clinic visits. Noticeably missing is data on surgical procedures such as vascular procedures, stenting, and pacemakers, which is included in the inpatient data. If outpatient charge and payment information was available for these procedures, it would allow an easier comparison between inpatient and outpatient payments from Medicare for these procedures, which has been very controversial since implementation of the 2-Midnight Rule.

While the hospital data is detailed, the physician data seems almost invasive. It lists the physician’s name, NPI, credentials, specialty, address, and even gender. Files are available for 2012 and 2013 and contain a line for each HCPCS code billed by the provider more than 10 times during the year. For privacy reasons, lines are not included for HCPCS codes billed 10 or fewer times per year. Information for each HCPCS code includes, among other things, allowed amounts, the provider’s average charges, and Medicare payment amounts.

Additionally, a separate site contains files that list each physician and the drugs they have prescribed during 2013 that were paid through Medicare Part D. The file contains a line for each drug prescribed and information such as the number of claims for the drug, number of days supplied, and cost of the drug for all patients as well as for beneficiaries over 65. The file also identifies expenditures for brand name and generic versions of the drug.

The CMS website indicates the data is being made available as part of efforts to “make our healthcare system more affordable and accountable.” However, the detailed level of the data seems to lend itself to abuses. For example, pharmaceutical companies could use the data to market to physicians if the physician’s prescribing pattern indicates higher usage of generic versions or attorneys could use the data in cases against providers to compare them, fairly or unfairly, against other providers. And we’ve already seen the inpatient data used to make dramatic arguments that sometimes did not portray the reality of the financial picture for hospitals. Providers cannot exclude themselves from the data, but they should at least familiarize themselves with the data publicly available about them.

Note from the Instructor: Update on FY 2015 OIG enforcement actions and priorities

This week’s note from the instructor is written by Judith L. Kares, JD,regulatory specialist for HCPro.  
                                                                                       
The OIG of the HHS is the primary enforcement arm of the HHS. As stated in the recently released FY 2015 Work Plan Mid-Year Update (the “Update”), the OIG was created to protect the integrity of HHS programs and operations and the well-being of federal healthcare program beneficiaries by doing the following:
  • Detecting and preventing fraud, waste, and abuse;
  • Identifying opportunities to improve program economy, efficiency, and effectiveness; and,
  • Holding accountable those who do not meet program requirements or who violate federal healthcare laws.
In FY 2014, more than 75% of the OIG’s budget was directed at oversight of the Medicare and Medicaid Programs. Periodically, the OIG assesses the resources available and prioritizes the issues to be addressed, primarily by establishing a work plan for each FY, which is reviewed and updated at midyear. The OIG also provides a report to Congress, generally on a semi-annual basis, on its progress to date. The Semiannual Report to Congress (the “Report”) for the first half of FY 2015 was released last week.
In this note, we will focus on key updates relating to services provided to Medicare beneficiaries by hospitals and critical access hospitals (CAH), including recent OIG auditing and recovery activities.
Overview of initiatives relating to hospitals and CAHs included in the Update
The Update continues to divide hospital initiatives into the following previously existing categories (no separate categories for CAHs), and sub-categories, and adds two new initiatives:
Hospital-Related Policies and Practices
  • Reconciliations of outlier payments
  • Hospitals’ use of outpatient and inpatient stays under Medicare’s 2-midnight rule
  • Medicare costs associated with defective medical devices
  • Analysis of salaries included in hospital cost reports
  • Medicare oversight of provider-based status
  • Comparison of provider-based and free-standing clinics
Hospitals—Billing and Payments
  • Inpatient claims for mechanical ventilation
  • Duplicate graduate medical education payments
  • Indirect medical education payments
  • Outpatient dental claims
  • Nationwide review of cardiac catheterizations and endomyocardial biopsies
  • Payments for patients diagnosed with Kwashiorkor
  • Bone marrow or stem cell transplants
  • Review of hospital wage data used to calculate Medicare payments
  • NEW Intensity-modulated radiation therapy
o   The OIG will review Medicare outpatient payments for intensity-modulated radiation therapy (IMRT) to determine whether the payments were made correctly. IMRT is an advanced mode of high-precision radiotherapy that uses computer-controlled linear accelerators to deliver precise radiation doses to a malignant tumor or specific areas within the tumor. To be processed correctly and promptly, a bill must be completed accurately. In addition, certain services should not be billed when they are performed as part of developing an IMRT plan. (See Medicare Claims Processing Manual, Ch. 1, § 80.3.2.2 and Ch. 4, § 200.3.2 for more detailed guidance.)
Hospitals—Quality of Care and Safety
  • Inpatient rehabilitation facilities—Adverse events in post-acute care for Medicare beneficiaries
  • Long-term-care hospitals—Adverse events in post-acute care for Medicare beneficiaries
  • NEW Hospital preparedness and response to high-risk infectious diseases
o   The OIG will describe hospitals’ efforts to prepare for the possibility of public health emergencies resulting from infectious diseases. Several HHS agencies, including the CDC, the Office of the Assistant Secretary for Preparedness and Response (ASPR), and CMS provide resources for hospitals as they prepare. Additionally, the OIG will determine hospital use of HHS resources and identify lessons learned through recent experiences with pandemic or highly-contagious diseases, such as Ebola.

Overview of OIG auditing, enforcement, and other oversight activities relating to hospitals and CAHs
 
In the Report, the OIG noted several areas of concern relating to hospital and CAH payments, including the following:
  • Reconciliation of hospital outlier payments—Medicare contractors Pinnacle Business Solutions (Pinnacle), Noridian Healthcare Solutions (Noridian), and National Government Services (NGS) did not always refer Medicare cost reports whose outlier payments qualified for reconciliation to CMS. In addition, the three contractors did not always reconcile the outlier payments associated with cost reports whose outlier payments qualified for reconciliation. The financial impact to Medicare of the unreconciled outlier payments and cost reports was approximately $14.4 million (Pinnacle), $31.8 million (Noridian), and $19 million (NGS).
  • Swing-bed usage at CAHs—Medicare spending for swing-bed services at CAHs steadily increased to almost four times the cost of similar services at alternative facilities. Medicare could have saved $4.1 billion over a six-year period at CAHs if swing-bed services were reimbursed using the skilled nursing facility prospective payment system rate (SNF PPS). CAHs ensure beneficiaries in rural areas have access to a range of hospital services. CAHs provide swing-bed services, which are the equivalent of services performed at a SNF. Medicare reimburses CAHs at 101% of their reasonable costs for providing services to beneficiaries rather than at rates set by Medicare’s PPS or Medicare’s fee schedules. Although CMS did not concur, the OIG continues to recommend that CMS seek legislation to adjust CAH swing-bed reimbursement rates to the lower SNF PPS rates paid for similar services at alternative facilities.
  • Beneficiary cost sharing for CAH services—Beneficiaries typically pay more in coinsurance for outpatient services received at CAHs than for outpatient services received at other acute care hospitals. For example, for 10 frequently provided outpatient services at CAHs, beneficiaries paid between two and six times the amount in coinsurance that they would have for the same services at acute-care hospitals. Without a change in how coinsurance for CAH outpatient services is calculated, beneficiaries will continue to pay more for these services. CMS neither concurred nor non-concurred with the OIG’s recommendation to seek legislative authority to modify how coinsurance is calculated for outpatient services received at CAHs.
In other reports of recent auditing activity, the OIG has focused on the following compliance issues:
Outpatient hospital services
  • Improper payments for sleep study services that did not meet Medicare reimbursement requirements;
  • Failure of hospitals to seek credit available against the cost of replacement devices for outpatient services;
  • Failure of hospitals to report credit received against the cost of replacement devices for outpatient services;
  • Billing for excess units/inappropriate use of certain drugs (e.g., Herceptin, Aflibercept); and
  • Inappropriate reporting of modifiers without supporting documentation, resulting in overpayments.
Inpatient hospital services
  • Failure of hospitals to seek credit available against the cost of replacement devices for inpatient services;
  • Failure of hospitals to report credit received against the cost of replacement devices for inpatient services;
  • Upcoding inpatient claims, resulting in higher DRG assignment than justified by the medical record;
  • Incorrectly billing as inpatient under Part A when stay was not reasonable and necessary under inpatient criteria;
  • Billing same-day discharge and related re-admission to same hospital on two separate claims; and
  • Incorrect reporting of diagnosis code for Kwashiorkor, not justified by medical record.
Keeping up with the OIG
If you have not already done so, hospitals and CAHs are encouraged to subscribe to the OIG List Serv, which can be accessed through the link on HCPro’s links page, under “Listserve Subscriptions.” Click here to access HCPro’s links page.