RSSAll Entries in the "Note from the Instructor" Category

Note from the instructor: As the healthcare world turns…

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

While healthcare providers waited for the outcome of the Senate vote on H.R. 4302: Protecting Access to Medicare—which will impact Medicare payments to physicians and non-physician practitioners, as well as delay ICD-10 implementation until October 1, 2015 and extend the 2-Midnight Rule review period by an additional six months in FY2015—I thought I would take a few minutes to point out the highlights of the latest information from CMS regarding the latter topic.

On March 12, CMS posted two new documents to its Inpatient Hospital Reviews website. These documents were posted not long after the most recent version that was published on February 24.

In the document titled “Questions and Answers Related to Patient Status Reviews” there is some new information as well as updated or clarified questions that providers should review in greater detail. Here are some highlights that I think are worth mentioning: 

  • (A1.3) If a MAC identifies no issues (defined as 0–1 claim denials) during the probe review, the MAC will cease further such reviews for that hospital for dates of admission spanning October 2013 to September 2014, unless there are significant changes in billing patterns for admissions.
    I have often wondered what “minor, ” “moderate, ” “significant, ” or “major” concerns are when reviewing the document “Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013.” There does not appear to be any written guidance to providers to know which category they clearly fall into and why. At least now providers will know that if they have one claim denied out of their sample of either 10 or 25 records, they will not have further reviews conducted unless their billing patterns change. I am not sure if this clarification will be very comforting to providers overall.
  • (A2.2) The receiving hospital is allowed to take into account the pre-transfer time and care provided to the beneficiary at the initial hospital. That is, the start clock for transfers begins when the care begins in the initial hospital.
    If a hospital is going to use the outpatient time spent at a transferring hospital to count toward their 2-midnight benchmark time, clear documentation should be obtained and maintained in the receiving hospital’s medical record to support their claim.  


  • (A4.10) …Thus, CMS does not require the treating physician to admit the beneficiary as an inpatient in these or any other circumstances…Accordingly, where the treating physician expects a beneficiary to require medically necessary hospital care spanning 2 or more midnights, we encourage the physician to consider ordering an inpatient admission, with the understanding that such a claim will not be denied by a Medicare review contractor for inappropriate status if all other requirements are met. CMS may monitor hospital outpatient billing trends for the incidence of prolonged outpatient stays so that we can provide education on when an inpatient admission is generally appropriate under the 2-midnight rule.
    Although CMS may not require admission as an inpatient, the fact that prolonged outpatient stays may be monitored by CMS should give pause to hospitals that continue to have more than 24 hours of observation services. Hospitals should consider reviewing these records in addition to their 0–1 midnight inpatient stays.
  • (A4.11) MACs will issue determinations for such claims based on the general 2-Midnight benchmark instruction. In other words, if the physician reasonably expects the beneficiary to require a hospital stay for 2 or more midnights at the time of the inpatient order and formal admission, and this expectation is documented in the medical record, the inpatient admission is generally appropriate for Medicare Part A payment.
    This is a new Q&A and is referring to cancelled surgical procedures after inpatient admission. However, if an inpatient surgery is cancelled and the stay is no longer medically necessary, hospitals could fall into a trap similar to what hospitals experienced with OIG audits for cancelled inpatient-only procedures. In these scenarios, Condition Code 44 should be considered in a timely manner.

In the other document, titled “Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013,” there were two items that may be of interest to providers.


  • (III.D.1.) If an unforeseen circumstance results in a shorter beneficiary stay than the physician’s reasonable expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis and hospital inpatient payment may be made under Medicare Part A…Examples include unforeseen: death, transfer to another hospital, departure against medical advice, clinical improvement, and election of hospice care in lieu of continued treatment in the hospital.
    An unforeseen circumstance that was clarified in this section is the election of hospice care.
  • In the section titled Patient Status Reviews, hospitals need to be aware that the Medicare review contractors are also assessing compliance with the admission order and certification requirements. Specifically, hospitals should verify that the orders and all elements of the certification are appropriately signed prior to discharge. This may cause challenges for facilities that are using a variety of areas in the medical record for the certification elements (i.e., history and physical, progress notes, order, etc.).


One other nugget I wanted to point out to hospitals that may have skimmed over it comes from the “Hospital Inpatient Admission Order and Certification” document that came out on January 30. This excerpt is in regards to the responsible physician not countersigning an initial or verbal order when they are in disagreement with the admission order.


  • (B.2.d.) Inpatient status begins at the time of formal admission by the hospital pursuant to the physician order, including an initial order (under (B)(2)(a)) or a verbal order (under (B)(2)(b)) that is countersigned timely, by authorized individuals, as required in this section. If the physician or other practitioner responsible for countersigning an initial order or verbal order does not agree that inpatient admission was appropriate or valid (including an unauthorized verbal order), he or she should not countersign the order and the beneficiary is not considered to be an inpatient. The hospital stay may be billed to Part B as a hospital outpatient encounter.
    When appropriate, hospitals should consider this guidance carefully as an option to using Condition Code 44 or Part B inpatient billing.


It is getting more and more difficult to keep an eye on these moving targets as CMS continues to clarify and add new information to the 2-midnight rule documents, although it does not appear that it is always indicated with red italic writing. All providers impacted by the regulations would be well served to monitor the CMS website and review any new posts with a fine tooth comb. Each time I read these documents I seem to discover something new.

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. 


2-Midnight Rule clarifications continue

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

As we await more instructions from CMS on implementation of the OPPS and MPFS final rule, I thought I would take this time to let those who missed the CMS notice know that they will be hosting another National Provider Call on Tuesday, January 14th from 1:30 to 3:00 p.m. EST.  The purpose of this call is to provide an overview and review of the 2-Midnight Rule that most hospitals, excluding inpatient rehabilitation facilities (IRFs), have been struggling with since admissions on October 1, 2013. This is the third or fourth provider call since the implementation of the 2-Midnight Presumption and the 2-Midnight Benchmark.

During this call, CMS will be using common case scenarios extracted from sample medical records to demonstrate how the rules apply in hospital settings. They will also be answering some of the frequently asked questions that have been received so far in the CMS designated inbox  Registration is necessary prior to the call, and further information can be found at:

In reviewing the presentation slides, I noticed that one of the questions I had previously submitted to the IPPS Admissions mailbox was added to the list of “unforeseen circumstances” that results in a shorter inpatient stay than was expected – election of hospice care. Although I did not receive a response directly from CMS regarding my inquiry, it is reassuring to know that they are reviewing the questions. I did notice that CMS has changed its terminology in regards to exceptions to the 2-Midnight Benchmark from “rare and unusual” circumstances to more consistently using “unforeseen” circumstances as well as changing “unforeseen clinical improvement” to “unforeseen recovery”. Although these changes in terminology may seem minor, it actually gives a broader definition to these events. CMS also clarifies when the 2-Midnight Benchmark clock starts in regards to outpatient services. This has been an area of a lot of discussion by hospital staff in regards to nursing triage activities and carrying out physician protocols and the actual time the physician spent (documented) making the admission decision. Providers may want to ask for more clarification on this topic.

The presentation for the National Provider Call can be downloaded at:

Anyone involved in the 2-Midnight Rule process, including physicians and non-physician practitioners, case managers, CDI staff, coding and billing just to name a few, should try to be available to gain more insight into this challenging new rule. It seems like every time CMS updates a document, I am once again enlightened and sometimes confused by their clarifications.

CMS has also posted updated documents regarding selection of records for the Probe and Educate medical review period, reviewing claims that meet the 2-Midnight Benchmark, and an extensive updated list of questions which included several clarifications:

  • CMS has “disallowed permanently” the review by Recovery Auditors any admissions of less than two midnights during the period of 10/1/13-3/31/14
  • A new exception to the 2-Midnight Benchmark was identified for newly initiated mechanical ventilation, excluding anticipated intubation following surgery
  • A change in definition and voluntary use for Occurrence Span Code 72
  • CMS will review cases where the physician documented the patient would not meet the 2-Midnight Benchmark and the admission was appropriate

These revised documents can be found at:

Another item to watch is H.R.3698 – Two-Midnight Rule Delay Act of 2013 which was introduced to the House of Representatives on December 11, 2013 and referred to the House Committee on Ways and Means later that day.  There has not been much movement on this bill since its introduction but we also have to consider the time that Congress was away for the holiday break. This bill is intended to “delay the enforcement of the Medicare two-midnight rule for short inpatient hospital stays until the implementation of a new Medicare payment methodology for short inpatient hospital stays and for other purposes”. This bill can be monitored through Open Congress at:

Although the 2-Midnight Rule has created a lot of work for facilities in complying with the regulation because it has been clarified as we go, it has provided an excellent opportunity for hospitals to communicate with CMS regarding real world application of the rule as well as opening up lines of communication within hospitals regarding their own admission practices.

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: FY 2014 IPPS Final Rule adjustments and preparation (Part I): The Hospital Readmission Reduction Program

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

In the August 6, 2013, issue of Medicare Insider, Debbie Mackaman provided a broad overview of the recently released FY 2014 Inpatient Prospective Payment System (IPPS) final rule. Here, and the next three issues of Medicare Insider, we will review certain adjustments to n hospitals’ inpatient reimbursement for inpatient admissions covered under Part A. All three of these adjustments are part of CMS’ movement toward “pay for performance” as part of CMS’ overall Hospital Quality Improvement Program.

Two of these adjustments are effective for most IPPS hospital discharges occurring on or after October 1, 2012 (the beginning of FY 2013). These adjustments were implemented under the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBPP). These two programs are in effect for most IPPS inpatient hospital discharges occurring during FY 2014, with certain changes. The third adjustment will become effective for certain IPPS and Maryland waiver hospital discharges occurring on or after October 1, 2014, (the beginning of FY 2015) under the yet to be finalized Hospital-Acquired Condition Reduction Program (HACRP).

Hospitals looking for more specific guidance are encouraged to review the FY 2014 IPPS Final Rule, which was published in the Federal Register Monday, August 19, 2013.


On the way to pay for performance

CMS has been moving toward pay for performance under its overall Hospital Quality Improvement Program for several years, beginning with a 2% reduction in payment for inpatient services when hospitals fail to meet certain quality indicator reporting requirements. This was followed by CMS’ decision to ignore the presence of certain conditions for purposes of DRG assignment when these conditions have been identified by CMS as hospital-acquired conditions (HAC) that CMS has determined would not arise after admission if the hospital was providing an acceptable quality of care, but were not documented as being present at the time of admission.

CMS’ most recent steps toward pay for performance, implementation of the HRRP and HVBPP, is effective for inpatient services provided on or after October 1, 2012.


Application of HRRP adjustments to “base operating portion of the DRG payment”

Adjustments under the HRRP for applicable hospitals are based on what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or cost of living adjustments applicable to the standardized amount for that hospital, plus any applicable new technology add-on payment. If applicable, the base operating amount used is also based on the acute or post-acute transfer amount.

However, the base operating amount does not include DSH, IME, or LV hospital adjustments or any applicable inpatient operating outlier payment. In addition, CMS clarified in the FY 2014 IPPS final rule that, for purposes of the HRRP adjustment, the base operating amount does not include any otherwise applicable HVBPP adjustment.


Basis of HRRP reductions for FYs 2013 and 2014

For discharges during FY 2013, the HRRP requires a reduction to most hospitals’ base operating DRG payments to account for excess readmissions of selected applicable conditions—acute myocardial infarction, heart failure, and pneumonia. Although there will be no expansion of applicable conditions for FY 2014, several conditions will be added to the program for FY 2015.

For purposes of the HRRP, a “readmission” occurs when a patient is discharged from an applicable hospital (initial index hospitalization) and then admitted to the same or another acute care hospital within 30 days of the date of discharge from the initial hospital. Only one readmission during the 30 days following the discharge from the initial hospitalization will count as a readmission for purposes of calculating the excess readmission ratio. Certain readmissions, including planned readmissions, are not counted for these purposes. In the FY 2014 IPPS final rule, CMS also clarified that an unplanned readmission after a planned readmission within 30 days of an initial index discharge will not be counted as a readmission.

We will discuss additional exclusions (e.g., certain patients, hospitals, and readmissions), as well as the source of data to be used for purposes of determining excess readmissions and related factors after we have discussed the formula for calculating an applicable hospital’s HRRP adjustment factor in next week’s Medicare Insider.


Determining a hospital’s HRRP adjustment factor and impact on hospital reimbursement

For FY 2013, an applicable hospital’s HRRP adjustment factor is the higher of a hospital-specific ratio or a floor adjustment factor of .99, resulting in a maximum reduction in base operating DRG payments of 1%. The hospital-specific ratio will be rounded to the fourth decimal place. For FY 2014, the floor adjustment will increase to 0.98, or a maximum reduction of 2%, and for FY 2015 and subsequent fiscal years, the floor adjustment will increase to 0.97, or a maximum of 3%.

The ratio used to calculate the HRRP adjustment factor is equal to the following: 1 – (“aggregate payments for excess admissions”/“aggregate payments for all discharges”)

The term “aggregate payments for excess readmissions” for a specific hospital for a specific period is defined as the sum, for applicable conditions, of the product (for each applicable condition) of:

  • The base operating DRG payment for that hospital for that period for that condition
  • The number of admissions for that hospital for that period for that condition
  • The “excess readmission ratio” for that hospital for that period minus one

The “excess readmission ratio” for an applicable hospital for each applicable condition is equal to the following: (“risk-adjusted readmissions based on actual readmissions”/“risk-adjusted expected readmissions”)

The term “aggregate payments for all discharges” for a specific hospital for a specific period is defined as the sum of the base operating DRG payment amounts for all discharges for all conditions from that hospital for that period.

If a hospital is subject to an HRRP adjustment, CMS will apply the HRRP adjustment factor to all discharges from that hospital during the respective fiscal year, not just to discharges from that hospital for applicable conditions.


Sources of data to be used for purposes of determining excess readmissions and related factors

CMS has determined that 3 years’ worth of data is necessary to determine excess readmission ratios and related factors, including a hospital’s HRRP adjustment factor for a given year. The applicable period for FY 2013 is July 1, 2008-June 30, 2011, and the applicable period for FY 2014 is July 1, 2009-June 30, 2012.

As noted above, certain readmissions, based on the nature of the patient involved, the hospital to which the patient is admitted, and the readmission itself, are excluded for purposes of determining excess readmissions and other HRRP related factors. In the FY 2014 IPPS Final Rule, CMS provided additional guidance about certain exclusions set out below, as well as the data to be relied on in determining whether these exclusions apply:

  • Discharges for patients, where death is reported with Discharge Status Code 20 as the discharge event
  • Discharges where the patient is reported as having been discharged AMA
  • Discharges that are determined to be transfers for payment purposes, based on identification/review of contiguous stays, not based upon the reporting of applicable discharge status Codes
  • Discharges for patients under age 65 (eligible for Medicare by reason of disability, etc.), based on information from the Medicare Enrollment Database
  • Discharges for patients enrolled in Medicare Part C (Medicare Advantage), based on information from the Medicare Enrollment Database
  • Same day discharges for AMI, based upon admission and discharge dates from MedPAR claims data

In addition, although most short-term, acute care hospitals, particularly those paid under the IPPS, are subject to the HRRP, Puerto Rico hospitals are generally exempt, and Maryland waiver hospitals are exempt for services provided during FYs 2013 and 2014. The latter exemption is based on CMS’ determination that Maryland has implemented a State program for FY 2014 that is expected to achieve comparable savings in Maryland waiver hospitals to what would be achieved under the HRRP, were they to be subject to it during FY 2014.

Hospitals are encouraged to review the FY 2014 IPPS Final Rule if they have additional questions about the HRRP changes for FY 2014. In next week’s Note, we will continue our review of adjustments to IPPS payment, focusing on changes to the HVBPP adjustment for FY 2014.

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.

CMS releases additional guidance on Part A to B rebilling

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

Over the past few weeks, CMS has released several documents regarding the rule change that allows for full Part B payment for certain inpatient stays that were previously denied by a Medicare contractor as being not reasonable and necessary. On March 13, CMS released the interim ruling CMS-1455-R which did not provide very many operational details and then on March 22, CMS released Transmittal R1203OTN that supplied the nuts and bolts that providers and contractors were waiting for. You can review the details of the transmittal and interim ruling in a previous Medicare Insider article written by Kimberly Hoy.
Last week, CMS issued instructions to contractors to address the delay for the automated claims process that will not be implemented until July 1, 2013.This may come as good news for providers who may be running into “timely” rebilling issues because under the interim rule, claims must be submitted within 180 calendar days from the claim denial date, unfavorable appeal decision or a provider’s order for dismissal of a current appeal. Prior to this announcement, claims could not be accepted for processing and payment by the MAC until after July 1 which would have caused some providers to miss out on this revenue opportunity.
In the short-term, providers will need to take some manual steps in order for claims that meet the rebilling criteria to be processed for payment now. Keep in mind that these are only temporary instructions for both Types of Bills (TOB) 12X and 13X.
  • For electronic submissions:  Providers are instructed to place the appropriate (pre-authorized) code above into Loop 2300 REF02 (REF01 = G1). Please note, the loop and segment are included for billing purposes, but only SPN65 needs to be present in the field:
    • REF*G1*SPN65~
      • The original denied inpatient claim (CCN/DCN/ICN) number shall be included in the Billing Notes loop 2300/NTE (NTE01 = ADD) in the format: NTE*ADD*12345678910999~
  • For DDE or paper claims:Providers are instructed to use fields 5/MAP1715 (for DDE) or first line of the Treatment Authorization field #63 (for paper) and the following format:
    • SPN65 
      • The original denied inpatient DCN/CCN/ICN shall be added to the Remarks Field (form locator #80) on the claim.

Under the temporary instructions, most hospitals will be paid at 90% of the usual payment amount that would be due to them for TOB 12X if they had originally submitted the claim as an outpatient claim. This partial payment is made based on the OPPS Pricer amount or the lab fee schedule amount after subtracting the beneficiary’s unmet deductible and any coinsurance amounts. Maryland Waiver hospitals will be paid their 90% amount based on the outpatient payment that would have been available if the claim was originally paid as an outpatient claim.

When calculating the expected payment, hospitals need to be aware that CMS will apply this temporary payment methodology at the claim level rather than at the line level. After July 1, contractors will notify providers through their usual methods that they will perform a mass adjustment for all TOB 12X claims that were previously processed under the temporary 90% payment methodology and at that time, providers will receive full payment. When using this temporary billing method, hospitals will receive their regular payment for the outpatient services that are billed on the TOB 13X. This includes those outpatient services provided in the three-day payment window on the day of admission and prior to the inpatient admission including provider-based clinic visits, emergency department visits and observation services.

While hospitals are in the process of identifying claims that meet the rebilling criteria and using the temporary payment methodology, they should not forget to comment on the proposed rule that may eliminate the current exception for timely filing. Comments must be submitted by 5:00 pm on May 17th to be considered by CMS.

CMS continues to provide updates on the Medicare and Medicaid EHR Incentive Programs

Editor’s note: Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., is the author of this week’s note from the instructor.

To keep eligible professionals, hospitals and critical access hospitals (CAHs) informed on the Medicare and Medicaid Electronic Health Record Incentive Programs (the “EHR Incentive Programs”), CMS has recently added two new Frequently Asked Questions (FAQs) and an updated FAQ to the CMS FAQ Database.

These EHR Incentive Programs are intended to provide incentive payments to eligible professionals, eligible hospitals and CAHs as they adopt, implement, upgrade and demonstrate meaningful use of certified EHR technology.

EHR Overview

Under applicable regulations, an electronic health record (EHR)—sometimes called an electronic medical record (EMR)—allows healthcare providers to record patient information electronically instead of using paper records. Since EHRs are often capable of doing much more than just recording information, the EHR Incentive Programs encourage providers to use the capabilities of their EHRs to identify and analyze relevant patient data—including the establishment of appropriate benchmarks–that can lead to improved patient care, as well.

Although most hospitals will be able to receive a payment from both programs, eligible professionals must choose which program in which to participate. Only those professionals who meet the applicable program requirements as set out below would be eligible to receive incentive payments under that incentive program.

Eligible professionals under the Medicare EHR Incentive Program include:

  • Doctor of medicine or osteopathy
  • Doctor of dental surgery or dental medicine
  • Doctor of podiatry
  • Doctor of optometry
  • Chiropractor

Eligible professionals under the Medicaid EHR Incentive Program include:

  • Physicians (primarily doctors of medicine and doctors of osteopathy)
  • Nurse practitioner
  • Certified nurse-midwife
  • Dentist
  • Physician assistant who furnishes services in a Federally Qualified Health Center of Rural Health Clinic that is led by a physician assistant.

In addition, hospital-based eligible professionals are not eligible for incentive payments. An eligible professional is considered hospital-based if 90% or more of his or her services are performed in a hospital inpatient (Place Of Service code 21) or emergency room (Place Of Service code 23) setting.

For relevant eligibility information, hospitals and CAHs are encouraged to visit the Eligible Hospital Information page available at CMS’ official EHR website.

New and Updated EHR FAQs

Here are the two new EHR FAQs recently added to the CMS FAQ Database:

FAQ8035. Can attestation information submitted for the EHR Incentive Programs be updated, changed, cancelled or withdrawn after successful submission in the EHR Registration and Attestation System?

A. If an eligible professional (EP) or hospital participating in the Medicare EHR Incentive Program chooses to change or withdraw their attestation, an attestation amendment form or incentive payment attestation withdrawal form must be completed and sent back along with any incentive payments already received.

Medicare Attestation Amendment Form:

Medicare Incentive Payment Withdrawal Form:

An EP or hospital wishing to change or withdraw their attestation in the Medicaid EHR Incentive Program should contact their state directly to make this request.

Please note that the Centers for Medicare and Medicaid Services (CMS) do not require providers who relied on flawed software for their attestation information to submit amended attestation data. For additional information, please see FAQ#6097.

FAQ8037.Can eligible professionals (EPs) or eligible hospitals round their patient volume percentage when calculating patient volume in the Medicaid EHR Incentive Program?

A. To participate in the Medicaid EHR incentive program, EPs are required to demonstrate a patient volume of at least 30% Medicaid patients over a 90-day period in the prior calendar year or in the 12 months before attestation. The Centers for Medicare and Medicaid Services allow rounding 29.5% and higher to 30% for purposes of determining patient volume. Similarly, pediatric patient volume may be rounded from 19.5% and higher to 20%. Finally, acute care hospitals are required to demonstrate a patient volume of at least 10% Medicaid patients over a 90-day period in the prior fiscal year preceding the hospital’s payment year or in the 12 months before attestation. Hospitals’ patient volume may be rounded from 9.5% and higher to 10%.

Here is the updated EHR FAQ:

FAQ7817.How can an EP that is new to a practice meet the patient volume/practice predominantly criteria to be eligible for the Medicaid EHR Incentive Program?

A. There are three ways an EP could meet the patient volume/practice predominantly criteria to potentially qualify for an incentive payment. For illustrative purposes, assume the EP in the below example joined the practice in 2013:

  • Next year (2014), after the EP establishes his/her own 90-day patient volume period as an EP from the prior calendar year (2013) or 12-month period prior to attestation, if this option is allowed by his/her state.
  • This year (2013), if he/she is part of a group using the group patient volume proxy and it is appropriate to include him/her (i.e., he/she see Medicaid patients*). It is not a requirement that he/she was in the group for the period that is the basis for the proxy. However, using the group patient volume proxy is distinct from whether an EP practices predominantly in a Federally Qualified Health Center (FQHC) or Rural Health Center (RHC). To meet the “practice predominantly” criterion, an EP must use individualized data; there is no group proxy (see below bullet).
  • If the EP is working in an FQHC or RHC, next year (2014), after the EP practiced predominately in his/her the FQHC/RHC for at least 6 months. The EP could then use either individual or group proxy needy individual patient volume. FQHCs/RHCs using the group proxy must follow the regulations, including ensuring all EPs in the clinic use the proxy, and counting only encounters associated with the clinic (not an EP’s outside encounters).

Each state has a method to determine whether or not an EP is considered hospital-based. Generally, the state uses data from the prior fiscal or calendar year to make this determination.

*Note that it is within the state’s discretion to require validation of an EP’s status as a Medicaid provider in the form of a paid encounter from the previous year. If the EP is new to practicing medicine (e.g., a recent graduate of an appropriate training program), he/she is not required to provide such information.

Also, see FAQ #2993.

Additional information on the EHR Incentive Programs is continually being added to and updated on the official CMS Medicare and Medicaid EHR Incentive Programs website. Interested providers are encouraged to visit that website from time to time for more recent updates.

Manual medical review by Recovery Auditors of outpatient therapy claims begins April 1

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

During the last quarter of 2012, hospital outpatient departments temporarily fell under the therapy caps and manual medical review provisions as required under the Middle Class Tax Relief and Job Creation Act. On January 2, 2013, the American Taxpayer Relief Act revised those provisions that impacted outpatient therapy services, including those provided in hospital outpatient departments for services furnished between January 1 and December 31, 2013.

For CY 2013, the therapy payment caps were set at $1,900 for physical therapy (PT) and speech language pathology (SLP) combined and $1,900 for occupational therapy (OT). The payment cap will accrue for claims with dates of service from January 1 through December 31, 2013. The therapy cap applies to all Part B outpatient therapy settings and providers including:
  • Private therapy practices and physician offices;
  • Part B Skilled Nursing Facilities;
  • Home Health Agencies (TOB 034X);
  • Outpatient Rehabilitation Facilities (ORFs) and Comprehensive Outpatient Rehabilitation Facilities (CORFs);
  • Hospital Outpatient Departments (TOB 013X including TOB 012X); excluding CAHs.

Critical access hospitals (CAHs) will not be included in applying the payments caps to their outpatient therapy services or reporting the –KX modifier; however, the therapy visits provided at a CAH will count towards all other providers’ therapy payment caps. In other words, if a patient is seen at a CAH and receives physical therapy that Medicare pays $1,000 for, those services will count toward another hospital’s payment cap if the patient transfers care or starts a new episode of care at another facility in the same calendar year. Of interest is that the CMS representative on the recent March Rural Health Open Door Forum stated that CAHs will be considered for inclusion in the therapy caps in 2014 through the proposed rule making process.

The manual medical review provision of the law affects therapy claims that exceed $3,700 threshold cap for PT and SLP services combined and a separate one for OT services. Although the manual medical review provision has been in place with dates of service beginning January 1, 2013, some MACs put this process on hold until further notice. CMS has announced that effective April 1, 2013, Recovery Auditors (RA) will review all therapy claims which have exceeded the $3,700 threshold cap for the year. Although PT and SLP services are combined for triggering the threshold, the medical review will be conducted separately for each discipline.

Recovery Auditors will conduct both prepayment and post payment reviews when services exceed the threshold cap.

  • Recovery Audit Prepayment Review Demonstration will be conducted in eleven states -FL, CA, MI, TX, NY, LA, IL, PA, OH, NC, and MO. The claims will be reviewed and compared to the medical record before the claim is processed for payment whenever the $3,700 threshold cap is met.
  • The ADR will be sent to the provider by the MAC with instructions to send the records to the RA who will then have 10 business days after receiving the medical record to conduct the prepayment review. The provider will receive a review results letter describing the RA’s findings and their determination.
  • The remaining states will fall under post payment review by RAs for all therapy claims that reach the $3,700 threshold cap. The request for medical records will occur immediately after the claim has been processed for payment.
  • CMS did not indicate a separate timeframe for completion of the post payment review outside of the current RA process; however, if the RA determines than an improper payment has been made, a demand letter will be sent to the provider from the MAC who will initiate the take back.
  • For both prepayment and post payment reviews, the current medical record request limits will not apply to therapy services since they are based on a payment cap. All therapy claims that hit the cap will fall into review outside of the usual RA ADR limits.

Keep in mind that all providers must report the National Provider Identifier (NPI) on the claim form of the physician or non-physician practitioner who is responsible for reviewing the therapy plan of care to prevent claims from being rejected and further delaying payment. Additional guidance on the therapy payment cap and manual medical review can be found on the CMS Therapy Cap web page.

CMS issues recurring update notification highlighting important CY2013 OPPS changes

Editor’s note: Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., is the author of this week’s note from the instructor.

CMS issues recurring update notification highlighting important CY2013 OPPS changes

On Friday, CMS released its annual recurring update notification reflecting the claims processing-related changes implemented in the CY 2013 OPPS final rule. Hospitals and CAHs are encouraged to review the transmittal more thoroughly to assure that they are prepared to implement these changes for services provided on and after January 1, 2013.

Hospitals and CAHs are also encouraged to be on the lookout for a similar transmittal (which has not yet been released) designed to reflect benefit-related changes included in the CY 2013 OPPS final rule. CMS also noted that the January 2013 integrated outpatient code editor (I/OCE) and OPPS pricer will reflect the healthcare common procedure coding system (HCPCS), ambulatory payment classification (APC), HCPCS modifier, and revenue code additions, changes, and deletions identified in this transmittal.


CMS identified the following key changes for CY 2013:

  • Changes to device, radiolabeled product and procedure edits for January 2013. The most current list of device edits can be found at .Failure to pass these edits will result in the claim being returned to the provider.
  • Intracoronary stent placement procedure codes. The deletion of two CPT codes (92980 and 92981) that describe the placement of non-drug-eluting intracoronary stents and two existing HCPCS G-codes that describe the placement of drug-eluting intracoronary stents, along with the creation of nine new HCPCS C-codes in order to maintain the existing OPPS policy of differentiating payment for intracoronary stent placement procedures involving non-drug‑eluting and drug-eluting stents for CY 2013.
  • Outpatient payment for composite APC 8000. Modification of the intracardiac catheter ablation codes that may qualify a cardiac electrophysiologic evaluation and ablation service for composite payment under composite APC 8000 for services provided on and after 1/1/13. CMS’ action follows the AMA CPT editorial panel’s deletion of CPT codes 93651 and 93652 (intracardiac catheter ablation codes), effective 1/1/2013 and creation of new CPT codes 93653, 93654, and 93656, effective 1/1/2013.
  • New ‘sometimes therapy’ services that may be paid as non-therapy services for hospital outpatients, Effective January 1, 2013 the addition of two HCPCS codes (G0456 and G0457) to the list of PT/SLP/OT “sometimes therapy” services that may be paid under certain circumstances to a facility under the OPPS. The limited set of sometimes therapy services are paid under the OPPS when they are not furnished as therapy, that is, when they are not furnished under a certified therapy plan of care.
  • Coding changes for partial hospitalization psychiatric (PHP) services. Following the AMA’s CPT editorial panel deletion of 28 psychiatric CPT codes, including those related to PHP services, and replacing them with 12 new CPT codes (effective for services provided on and after 1/1/13), CMS’ implementation of corresponding changes to the PHP code set that is used for billing and documenting PHP services.
  • Certain changes to drugs, biologicals, and radiopharmaceuticals:
    • Effective for services provided on and after 1/1/13, the creation of several new HCPCS codes to identify those drugs, etc. for which no specific code had previously been created. The new codes are set out in Table 1 of Attachment A to the transmittal;
    • Effective for services provided on and after 1/1/13, changes to the HCPCS/CPT or long descriptor, or both, of certain drugs, etc. These changes are set out in Table 2 of Attachment A to the transmittal. Hospitals are once again admonished to pay close attention to accurate billing for units of service consistent with the dosages contained in the long descriptors of the active CY 2013 HCPCS and CPT codes;
    • For CY 2013, payment for nonpass-through drugs, biologicals and therapeutic radiopharmaceuticals is made at a single rate of ASP + 6%, which provides payment for both the acquisition and pharmacy overhead costs associated with the drug, biological or therapeutic radiopharmaceutical. In CY 2013, a single payment of ASP + 6% will also be made (providing payment for both associated acquisition and pharmacy overhead costs for these pass-through drugs, biologicals and radiopharmaceuticals);
    • Any changes in the payment rates effective for services provided on and after 1/1/13, based on sales price submissions from the third quarter of CY 2012, will be incorporated into the January 2013 release of the OPPS Pricer.
    • CY 2013 OPPS payment adjustment for certain cancer hospitals. CMS’ updating of thetarget payment to cost ratio (PCR)” for CY 2013, for purposes of the cancer hospital payment adjustment, to 0.91 for outpatient services furnished on or after January 1, 2013 through December 31, 2013. Under the Affordable Care Act (ACA), beginning in CY 2012, CMS is to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital’s final payment to cost ratio (PCR) for services provided in a given calendar year is equal to the weighted average PCR (which CMS refers to as the “target PCR”) for other hospitals paid under the OPPS.
    • Changes to OPPS pricer logic:
      • Rural sole community hospitals (SCHs) and essential access community hospitals (EACHs) will continue to receive a 7.1% payment increase for most services (excluding drugs, biologicals, items and services paid at charges reduced to cost, and items paid under the pass-through payment policy) in CY 2013;
      • New OPPS payment rates and copayment amounts will be effective January 1, 2013. All copayment amounts will be limited to a maximum of 40% of the APC payment rate. Copayment amounts for each individual service cannot exceed the CY 2013 inpatient deductible;
      • For hospital outlier payments under OPPS, there will be no change in the multiple threshold of 1.75, which will continue to apply for 2013;
      • In addition, for hospital outlier payments under the OPPS, there will be no change in the fixed-dollar threshold of $2,025, which will continue to apply for CY 2013. The estimated cost of a service must be greater than the APC payment amount plus $2,025 in order to qualify for outlier payments;
      • For outliers for community mental health centers (bill type 76x), there will be no change in the multiple threshold of 3.4, which will continue to apply for 2013;
      • Effective January 1, 2013, 3 devices are eligible for pass-through payment (pass-through payment generally equals charges reduced to cost, sometimes subject to an offset amount) in the OPPS Pricer logic. Category C1830 (Powered bone marrow biopsy needle), has an offset amount of $0, because CMS is not able to identify portions of the APC payment amounts for the related procedure that were associated with the cost of a predecessor device. Category C1840 (Lens, intraocular (implantable)) and C1886 (Catheter, extravascular tissue ablation, any modality (insertable)) have offset amounts included in the Pricer for CY 2013, because CMS was able to identify portions of the APC payment amounts for the related procedures that were associated with the cost of certain predecessor devices. Pass-through offset amounts are adjusted annually;
      • Effective January 1, 2013, there will be one diagnostic radiopharmaceutical receiving pass-through payment in the OPPS Pricer logic. For APCs containing nuclear medicine procedures, Pricer will reduce the amount of the pass-through diagnostic radiopharmaceutical payment by the wage-adjusted offset for the APC with the highest offset amount when the radiopharmaceutical with pass-through appears on a claim with a nuclear procedure. The offset will cease to apply when the diagnostic radiopharmaceutical expires from pass-through status. The offset amounts for diagnostic radiopharmaceuticals are the “policy-packaged” portions of the CY 2013 APC payments for nuclear medicine procedures and may be found on the CMS website;
      • Effective January 1, 2013, the OPPS Pricer will continue to apply a reduced update ratio of 0.980 to the payment and copayment for hospitals that fail to meet their hospital outpatient quality data reporting requirements or that fails to meet CMS validation edits. The reduced payment amount will be used to calculate outlier payments, if any;
      • Pricer will continue to update the payment rates for drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals with pass-through status when those payment rates are based on ASP, on a quarterly basis.

Again, hospitals and CAHs are encouraged to review this transmittal closely to assure that they are prepared to comply with these changes effective for applicable services provided on and after 1/1/13.