Note from the instructor: CMS Releases Guidance on Modifier L1 and Clarifies Lab Payment for TOB 12X
A few weeks ago, CMS released the recurring OPPS update Transmittal 2971, as well as the recurring Integrated Outpatient Code Editor (I/OCE) specifications Transmittal 2957 for dates of service beginning July 1. In these transmittals, CMS officially announces the new modifier L1 for use by PPS hospitals when submitting claims for separate payment of outpatient lab tests that are paid under the Clinical Laboratory Fee Schedule (CLFS). In previous issues of the Medicare Insider, I wrote about the concerns surrounding billing for unrelated lab on Type of Bill (TOB) 14X and the lack of additional reimbursement for sole community hospitals (SCH).
As of January 1 date of service, hospitals have been reporting separately payable labs on TOB 14X which created confusion and controversy for facilities and the National Uniform Billing Committee (NUBC). Historically and by definition, TOB 14X was for non-patient (specimen only) lab services where the patient did not receive outpatient services on the same date of service. These types of labs were easy for hospitals to identify and systematically direct the claim to process under TOB 141X. In order to comply with the new billing guidance, hospitals have had to create back-end processes and, in some cases, separate review by staff to identify if the outpatient lab should be billed on TOB 14X to receive separate reimbursement under the “exceptions” guidance provided by CMS.
Transmittal 2971 announces that beginning July 1 date of service, separately payable labs should be billed on TOB 13X and with modifier L1. This guidance directs all hospitals to revert back to billing non-patient lab tests on TOB 14X which is consistent with the NUBC’s definition of this bill type—just when hospitals finally have their registration and billing staff re-trained one way.
According to Transmittal 2971, modifier L1 will be used with lab services only in either of these two circumstances:
- When the hospital collects the specimen and only provides lab services on that date of service; or,
- When the hospital provides outpatient lab services and they are clinically unrelated to other hospital outpatient services furnished on the same day.
In order to apply the second circumstance correctly, hospitals need to understand that “unrelated means the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services, for a different diagnosis.” If the definition is met, the lab test would be eligible to be reported with modifier L1 to trigger separate payment. If the definition is not met, modifier L1 would not be reported and the lab payment would be packaged into another separately payable service. PPS hospitals do not have to resubmit claims for lab tests that had previously been billed using TOB 14X prior to July 1 date of service.
But what about those SCHs that have not been receiving their add-on payment since January 1 for separately payable lab billed on TOB 14X? SCHs have to go back to MLN Matters Article SE1412 that was published March 5 for additional guidance as Transmittal 2971 does not provide this information.
MLN Matters Article SE1412 explains that TOB 14X does not trigger the differential payment rates (CLFS amount/0.6 X 0.62) for SCHs with qualified laboratories. Unfortunately, MACs will not reprocess claims for SCHs because the MACs have no way of knowing which labs should have been paid the add-on payment vs. which labs should have been paid as true non-patient labs. These providers may need to cancel or adjust claims that were submitted without the modifier L1 prior to July 1 and then submit a new TOB 13X with the appended modifier after July 1 in order to receive the corrected reimbursement.
Also in Transmittal 2971, CMS expounds and clarifies its current payment policy regarding the limited set of Part B inpatient services that a hospital may bill for when a beneficiary is either not eligible for or not entitled to Part A coverage or when a beneficiary has exhausted their Part A benefits. Included in that short list of services is lab service paid under the CLFS.
CMS clarifies that in these scenarios, lab testing is excluded from OPPS packaging rules if the primary service with which the lab would have been bundled into is not a payable Part B inpatient service. CMS has adjusted its claims processing logic to make separate payment for laboratory services paid under the CLFS that would otherwise be packaged under OPPS beginning in 2014.
For those hospitals that billed under TOB 12X and were denied payment for lab services, they have to read the fine print in the transmittal to identify the next step:
“Medicare contractors shall adjust 12X claims for beneficiaries who are either not entitled to Part A at all, or are entitled to Part A but have exhausted their Part A benefits where the laboratory services were packaged for 2014 dates of service that are brought to their attention.”
In other words, if hospitals want to collect their separate reimbursement for lab services that were denied on TOB 12X, they must take the initiative to rebill for those services. Hospitals should contact their MACs for additional guidance on how to appropriately resubmit claims to prevent further delays in payment.
In addition to guidance for new modifier L1, both of these transmittals have other details that facilities should review regarding brachytherapy services, new HCPCS codes for drugs and biologicals, and payment updates for specific HCPCS codes that facilities should consider rebilling for the appropriate reimbursement.
Note from the instructor: CMS releases proposed FY 2015 Inpatient Prospective Payment System (IPPS) payment adjustments, Part II
This note is about FY 2015 IPPS proposed payment adjustments and is written by Judith Kares, JD, regulatory specialist for HCPro.
This note is the second in a three-part series focusing on certain adjustments to reimbursement for short-term acute-care inpatient hospital stays covered under Part A. All three of these adjustments are part of CMS’ movement toward “pay for performance” as part of its overall Hospital Quality Improvement Program. Two of these adjustments were implemented under programs that became effective in FY 2013—the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBPP). The third adjustment will become effective in FY 2015 under the yet to be finalized Hospital-acquired Condition Reduction Program (HACRP). All three of these adjustments are discussed in considerable detail in the recently published proposed IPPS rule for FY 2015. (See 79 Fed. Reg. 27978–28384 for more specific information.)
In last week’s note, we focused on proposed FY 2015 adjustments to the HRRP. This week, we will focus on proposed FY 2015 adjustments to the HVBPP. Next week, we will conclude this series with a discussion of adjustments under the proposed HACRP.
Application of HVBPP adjustments to “base operating portion of the DRG payment”
The HVBPP, which applies to most hospitals subject to inpatient reimbursement under the IPPS, became effective for inpatient discharges that occur on and after October 1, 2013. As with the HRRP adjustment, for hospitals subject to adjustments under the HVBPP, the adjustments are made to what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or COLA-adjusted applicable standardized amount for that hospital, plus any applicable new technology add-on payments. In addition, if applicable, the base operating amount used is based on the acute or post-acute transfer amount.
The base operating amount does not include, however, disproportionate share hospital, indirect medical education, or low-volume hospital adjustments or any applicable inpatient operating outlier payment. In addition, for purposes of the HVBPP adjustment, the base operating amount does not include any otherwise applicable HRRP adjustment, and vice versa.
The Protecting Access to Medicare Act of 2014 extended the program for Medicare-dependent small rural hospitals (MDH) through March 31, 2015. For FY 2015 and subsequent years, CMS is proposing that the base-operating DRG payment amount for MDHs will include the difference between the hospital specific payment rate and the Federal payment rate (as applicable).
Hospitals subject to HVBPP adjustments
Most short-term, acute care hospitals are subject to HVBPP adjustments for covered inpatient discharges on and after October 1, 2012 (the beginning of FY 2013), with the following exceptions:
- Hospitals that are subject to the reduced update (a 2% reduction to their standardized amount) for that FY for failing to meet CMS’ quality reporting requirements under the Hospital Inpatient Quality Reporting Program;
- Hospitals for which, during the performance period for that FY, HHS has cited deficiencies that pose immediate jeopardy to the health or safety of patients; and
- Hospitals for which there are not a minimum number of cases and/or measures that apply to that hospital for the applicable performance period for that FY. To be eligible for incentive payments for a FY, hospitals must meet the minimum requirements set out below:
- With respect to the Clinical Process of Care Domain, hospitals must have at least 10 cases in each of four measures;
- With respect to the Patient Experience of Care Domain, hospitals must have at least 100 Hospital Consumer Assessment of Healthcare Providers (HCAHPs) surveys returned;
- With respect to the Outcomes Domain, hospitals must report at least 10 cases in each of two of the 30-day mortality measures for FY 2014. For FY 2015, hospitals must report at least 25 cases in each of two of the 30-day mortality measures.
- For FY 2015, with respect to the Efficiency Domain, hospitals must report at least 25 cases.
In addition, CMS has exempted Maryland waiver hospitals from the HVBPP for FYs 2013 and 2014 and proposes to exempt these hospitals during the duration of CMS’ new Maryland All-Payer Model, a 5-year hospital payment model, pursuant to an agreement entered into effective January 1, 2014.
Determination and application of HVBPP adjustments
Under the HVBPP, value-based incentive payments are to be made in each FY (beginning with FY 2013) to otherwise qualified hospitals that meet or exceed certain performance standards established for the performance period for that FY. As noted above, these value-based incentive payments are to be made in the form of certain adjustments to the hospital’s “base operating portion of the DRG payment”. HHS is responsible for determining both the performance standards and the performance period for each FY. Each hospital’s value-based payment percentage, which is converted to a per-discharge value-based payment amount, is based on that hospital’s Total Performance Score (TPS) for the performance periods for the applicable FY.
For each applicable FY, these value-based incentive payments are to be funded by a prescribed percentage reduction (the “applicable percent”) to the total base-operating DRG payments of all participating hospitals for that FY, as determined by HHS. The total amount available for value-based incentive payments for a FY will be equal to the total amount of the payment reductions for all participating hospitals for that FY. For FY 2013, the available funding pool is equal to 1% of the base-operating DRG payments to all participating hospitals for FY 2013 discharges. For FY 2014, the applicable percentage is 1.25%. For subsequent years, CMS has proposed that the size of the applicable percentage will increase, as follows: 1.5% for FY 2015, 1.75% for FY 2016, and 2% percent for FY 2017 and successive FYs.
For hospitals subject to the HVBPP during a FY, CMS is required to make two distinct payment adjustments to the base operating DRG payment amounts for each inpatient discharge: the applicable percent reduction (based upon the applicable percent for that FY) and the value-based incentive payment adjustment for that hospital for that FY. These adjustments are made by applying that hospital’s “value-based incentive payment adjustment factor” for the FY to each inpatient discharge during the FY. The hospital’s value-based incentive payment adjustment factor is determined by subtracting the applicable percent for the FY from the value-based incentive payment percentage for that hospital (if any) for the FY, and then adding that difference to one.
Depending upon its TPS, a hospital may receive adjustments under the HVBPP that result in base operating DRG payments that are less than, equal to, or greater than it would otherwise have received. Even if a hospital that is subject to the HVBPP is not eligible for a value-based incentive payment, it will be subject to the applicable reduction for that FY, which will be applied to each discharge during the FY.
Determining an eligible hospital’s TPS during FY 2014
As noted above, under the HVBPP, a hospital’s base operating DRG payment for each discharge may be adjusted to account for its TPS during the applicable “Performance Period.” For FY 2014, CMS established three quality domains that identify the measures/dimensions eligible for inclusion in a hospital’s TPS:
- A Clinical Process of Care Domain, composed of 13 specific clinical measures, adding one new measure to the original 12 from FY 2013;
- A Patient Experience of Care Domain, composed of 8 HCAHPS dimensions, which remain the same as for FY 2013; and
- An Outcomes Domain, composed of three 30-day mortality measures. (See 78 Fed. Reg. 50678-50679 for a specific description of these measures/dimensions.)
For FY 2014, hospitals’ domain scores are weighted at 45% for Clinical Process of Care, 30% for Patient Experience of Care, and 25% for Outcomes.
For those hospitals eligible to participate in the HVBPP, CMS calculates both an achievement and an improvement score for each of the respective measures and dimensions. The domain score is generally determined based upon whichever is the higher for each measure and dimension. The achievement score is based upon the hospital’s performance during the Performance Period compared to all hospitals’ performance. The improvement score is based upon the hospital’s performance during the Performance Period compared to the hospital’s performance during the Baseline Period.
For FY 2014, CMS established the following Performance and Baseline Periods:
- For the Clinical Process of Care and the Patient Experience of Care Domains, a 9-month Performance Period from April 1, 2012, through December 31, 2012, and a 9-month Baseline Period from April 1, 2010, through December 31, 2010.
- For the Outcomes Domain, a 12-month Performance Period from July 1, 2011, through June 30, 2012, and a 12-month Baseline Period from July 1, 2009, through June 30, 2010.
Proposed changes for FY 2015
For FY 2015, there will be four quality domains:
- A Clinical Process of Care Domain, composed of 12 specific clinical measures, deleting one measure (SCIP-VTE-1) from FY 2014;
- A Patient Experience of Care Domain, composed of the same eight HCAHPS dimensions measured during FY 2014;
- An Outcomes Domain, continuing the three 30-day mortality measures from FY 2014, and adding two additional measures (an AHRQ PSI composite [PSI-90] and CLABSI); and
- An Efficiency Domain, composed of a single Medicare Spending per Beneficiary measure (MSBP-1). (See 78 Fed. Reg. 50679-50680 for a specific description of these measures/dimensions.)
For FY 2015, CMS will establish the following Performance and Baseline Periods:
- For the Clinical Process of Care and the Patient Experience of Care Domains, a 12-month Performance Period from January 1, 2013 through December 31, 2013 and a 12-month Baseline Period from January 1, 2011 through December 31, 2011;
- For the Outcomes Domain
- For the three 30-day mortality measures, a nine-month Performance Period from October 1, 2012, through June 30, 2013, and a nine-month Baseline Period from October 1, 2010, through June 30, 2011;
- For the AHRQ PSI composite measure, a Performance Period from October 15, 2012, through June 30, 2013, and a Baseline Period from October 15, 2010, through June 30, 2011;
- For the CLABSI measure, a Performance Period from February 1, 2013, through December 31, 2013, and a Baseline Period from January 1, 2011, through December 31, 2011;
- For the Efficiency Domain, an eight-month Performance Period from May 1, 2013, through December 31, 2013, and an eight-month Baseline Period from May 1, 2011, through December 31, 2011.
For FY 2015, hospitals’ domain scores will be weighted at 20% for Clinical Process of Care, 30% for Patient Experience of Care, 30% for Outcomes, and 20% for Efficiency.
As noted in last week’s note, hospitals are encouraged to review these changes in the FY 2015 IPPS proposed rule to determine the potential impact on their operations if CMS were to finalize them. Additional resources that provide more specific details on the proposed measures/dimensions for FY 2015 can be found at the following web sites:
In next week’s note, we will continue our review of adjustments to IPPS payment, focusing on the proposed HACRP.
CMS published the proposed Inpatient Prospective Payment System (IPPS) rule for FY 2015 in the Federal Register. For those of you who have not had an opportunity to review the previously released display copy, the proposed FY 2015 IPPS rule (the “Proposed Rule”) can be found at 79 Fed. Reg. 27978–28384. I encourage all of you to take advantage of the opportunity to review it carefully and provide your comments and concerns to CMS by June 30.
During this and the next two issues of the Medicare Insider, we are going to review certain proposed adjustments to hospital inpatient reimbursement for inpatient admissions covered under Part A. All three of the adjustments to be discussed are part of CMS’ movement toward “pay for performance,” as part of its overall Hospital Quality Improvement Program.
Two of these adjustments were initially introduced at the beginning of FY 2013 and continue in effect during the present FY. These adjustments arise under the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBPP). CMS has proposed that these two programs continue for most IPPS hospital discharges during FY 2015, with certain changes. The proposed changes to the HRRP will be the focus of this week’s Note, and the proposed changes to the HVBPP will be the focus of next week’s Note. The third adjustment will become effective for certain IPPS hospital discharges occurring on and after October 1, 2014 (the beginning of FY 2015) under the yet to be finalized Hospital-acquired Condition Reduction Program (HACRP). This new program will be the focus of the June 3 edition of the Medicare Insider.
On the way to pay for performance
Under its overall Hospital Quality Improvement Program, CMS has been moving toward pay for performance for several years, beginning with a (2%) reduction in payment for inpatient services when hospitals fail to meet certain quality indicator reporting requirements. This action was followed by CMS’ decision to deliberately ignore the presence of certain conditions that were not documented as being present at the time of admission for purposes of DRG assignment when these conditions have been identified by CMS as Hospital Acquired Conditions (HACs). CMS has determined HACs would not arise after admission if the hospital were providing an acceptable quality of care. CMS then introduced the HRRP and the HVBPP in FY 2013.
Application of HRRP and HVBPP adjustments to “base operating portion of the DRG payment”
For hospitals subject to adjustments under the HRRP and HVBPP, the adjustments are made to what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or COLA-adjusted applicable standardized amount for that hospital, plus any applicable new technology add-on payment. In addition, if applicable, the base operating amount used is based on the acute or post-acute transfer amount.
The base operating amount does not include, however, disproportionate share hospital, indirect medical education, or low volume 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, and vice versa.
Basis of HRRP reductions for FYs 2013, 2014 and 2015
For discharges during FY 2013 and 2014, 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. CMS has proposed the addition of two applicable conditions for FY 2015: chronic obstructive pulmonary disease and total hip arthroplasty and total knee arthroplasty. CMS does not propose to make any additions in FY 2016, but does plan to add coronary artery bypass graft surgery as a sixth condition for FY 2017. CMS has listed the ICD-9-CM Diagnosis Codes that identify the proposed conditions for FY 2015 in the Proposed Rule. (See 79 Fed. Reg. 28115-28116.)
For purposes of the HRRP, a “readmission” is a readmission occurring 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 from the date of discharge from the initial hospitalization. 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. In addition, certain readmissions, including planned readmissions, are not counted for these purposes. In the FY 2014 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, nor will certain patients (e.g., those who leave against medical advice (AMA) and those under 65) be factored into the calculation.
Finally, although most short-term, acute care hospitals, particularly those paid under the IPPS, are subject to the HRRP, there are some exceptions. Puerto Rico hospitals are generally exempt, and Maryland waiver hospitals are exempt for services provided during FYs 2013, 2014 and during the duration of CMS’ new Maryland All-Payer Model, a 5-year hospital payment model, pursuant to an agreement entered into effective January 1, 2014.
Determining a hospital’s HRRP adjustment factor and impact on reimbursement to hospitals subject to an HRRP reduction
For FY 2014, an applicable hospital’s HRRP adjustment factor is the higher of a hospital-specific ratio or a floor adjustment factor of .98, resulting in a maximum reduction in base operating DRG payments of 2%. For FY 2015, CMS proposes that an applicable hospital’s HRRP adjustment factor will increase to the higher of a hospital-specific ratio or a floor adjustment factor of .97, resulting in a maximum reduction in base operating DRG payments of 3%.
For FY 2015, CMS is proposing that the ‘‘applicable period’’ for the HRRP be the 3-year period from July 1, 2010 to June 30, 2013. In other words, CMS is proposing that the excess readmissions ratios and the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2015 would be calculated based on data from the 3-year time period of July 1, 2010 to June 30, 2013.
As noted above, hospitals are encouraged to review these changes in the proposed FY 2015 IPPS rule to determine the potential impact on their operations if CMS were to finalize them.
Note from the instructor: Devices and Anesthesiologist/CRNA Payments – Clarification of Two CMS Transmittals
This week’s note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.
In the Medicare Claims Processing Transmittal 2903, April 2014 Update of the Hospital Outpatient Prospective Payment System (OPPS), CMS discusses the current policy regarding billing for certain devices that are received by facilities at no cost, full credit, or partial credit. As of January 1, 2014, the modifiers “FB” or “FC” that were previously used to identify these devices are no longer accepted by Medicare Administrative Contractors (MAC), and providers should now be reporting value code “FD” with the amount of the credit. This is not anything new, but I wanted to point out a percentage that was used in the transmittal that may be confusing to facilities.
In the transmittal, CMS states:
Also effective January 1, 2014, for claims with APCs that require implantable devices and have significant device offsets (greater than 40%), the amount of the device credit will be specified in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) and will be deducted from the APC payment from the applicable procedure. The OPPS payment deduction for the applicable APCs referenced above will be limited to the total amount of the device offset when the FD value code appears on a claim. The offset amounts for the above referenced APCs are available on the CMS Web site.
The “greater than 40%” referenced above is actually a threshold used to identify ambulatory payment classifications (APC) that will be affected by the policy. CMS uses this percentage to identify an APC where at least 40% of the payment rate is determined by the cost of the device itself. In theory, if the APC does not meet that device cost threshold, a facility would not have to report a credit regardless of the amount. A list of the affected APCs can be found in Table 30 of the 2014 OPPS Final Rule.
The actual reporting policy for facilities is still based on at least a 50% credit of the cost of the device. Specifically, page 75006 of the Federal Register states that hospitals are required to report the amount of the credit with value code ‘‘FD’’ (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device listed in Table 31 that is 50% or greater than the cost of the device. Although MLN Matters article MM8653 somewhat clarifies the confusion that Transmittal 2903 created, hospitals will continue to use the 50% credit as their reporting threshold for complying with this CMS policy.
To further clarify the remainder of the device credit policy, the OPPS payment deduction for the APCs referenced above is limited to the total amount of the device “offset” when the FD value code appears on a claim. The offset amounts are available under the Annual Policy Files link on the on the CMS OPPS website and can help facilities identify the maximum amount by which the APC payment may be reduced.
In an unrelated transmittal, One Time Notification 1379, CMS published a clarification for certified registered nurse anesthetist (CRNA) and anesthesiologist payments made to a Method II Critical Access Hospital (CAH). For those readers that may not be familiar with this cost based reimbursement system, the following is a brief explanation.
- Anesthesiologists and CRNAs may reassign their billing rights to a CAH.
- The CAH may bill under Method II (optional method) by billing the facility outpatient service and the related professional fee on the same outpatient claim by reporting specific revenue codes.
- In most instances, this allows the CAH to receive reimbursement at 115% of what the Medicare Physician Fee Schedule (MPFS) would have paid the physician or CRNA if they had billed independently on the 1500 claim form.
- Under certain qualifying circumstances, a CAH can receive cost based reimbursement for its CRNA services rather be paid under the MPFS. This type of payment is called a pass-through payment.
On June 7, 2013 in previously released Transmittal 2719, CMS announced that effective January 1, 2013, qualifying CAHs and rural hospitals were eligible to receive pass-through payments for services that CRNAs are legally authorized to perform in the state in which the services are furnished (see amended 42 CFR 410.69(b)). The pass-through payments included those procedures outside of the anesthesia HCPCS codes (00100-01999) that were billed using revenue code 964 on the CAH’s outpatient claim (TOB 085X).
Although this information was first released in June 2013, CMS is now clarifying in One Time Notification Transmittal 1379 that the effective date for payment of CRNA service outside of the anesthesia code range is January 1, 2013, and includes payment made under pass-through and Method II reimbursement methodologies. Unfortunately, CAHs have to read the entire transmittal to understand that if they want the proper Method II reimbursement for procedures performed by CRNAs outside of the anesthesia code range, the CAH is responsible to resubmit claims to their MAC. CMS also instructs MACs to bypass timely filing so that facilities can rebill claims back to the January 1, 2013 date of service based on this more recent clarification. This transmittal goes on to announce that effective January 1, 2014, a Method II CAH can also receive reimbursement for anesthesiologist services identified by revenue code 963 on the CAH’s outpatient claim.
Unfortunately, in the current Medicare claims editing and processing systems, the only HCPCS codes 00100–01999 performed by an anesthesiologist (revenue code 963) or CRNA (revenue code 964) that can be reimbursed under Method II. The claims processing system will not be updated until October 6, 2014, as identified by the implementation date on this transmittal. Again, the CAH is responsible to resubmit claims to their MAC once this policy is implemented.
To prevent lost reimbursement, CAHs may want to consider reviewing claims data from January 1, 2013, to the current period that were billed with revenue code 964 and a HCPCS code outside of the anesthesiology code range. These claims may need to be resubmitted to receive proper Method II reimbursement and CAHs should consult their MACs for further guidance.
CAHs may also want to review claims data from January 1, 2014, to the current period that were billed with revenue code 963 and a HCPCS code outside of the anesthesiology code range. If the service was not paid appropriately under Method II reimbursement methodology, hold the claim and resubmit after October 6, 2014. For outpatient claims that have not been billed yet and for which the facility will report revenue code 963 with a HCPCS code outside of the anesthesiology code range, hold the claim and submit after October 6, 2014, keeping in mind that timely filing requirements must be met.
Note from the instructor: CMS reassigns packaged skin substitute products approved for payment in CY 2014 based upon updated payment information
This note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro.
One of the more complex aspects of coding, billing, and payment for covered drugs and biologicals relates to skin substitute products. Under the CY 2014 OPPS/ASC final rule (CY 2014 final rule), CMS is packaging most skin substitute products into the application procedures that utilize them. Per CMS policy, there is no separate payment for packaged items and services; the payment for packaged items and services is included in the payment for the separately payable procedures of which they are an integral part.
Special billing rules for packaged skin substitute products
For packaging purposes, CMS created two groups of application procedures: application procedures that use high-cost skin substitute products (billed using CPT codes 15271–15278) and application procedures that use low-cost skin substitute products (billed using HCPCS codes C5271–C5278).
In making its decision as to whether a skin substitute product will be assigned to the high cost or low cost group, CMS did a comparison of the July 2013 payment rate for the skin substitute product to $32, which is the weighted average payment per unit for all skin substitute products. In doing so, CMS used skin substitute utilization data from CY 2012 claims and the July 2013 payment rate for each product. For CY 2014, skin substitute products with a July 2013 payment rate that was more than $32 per square centimeter are packaged into the payment for the high-cost application procedures, and those with a July 2013 payment rate that was equal to or less than $32 per square centimeter are packaged into the low cost application procedures.
A listing of the respective high- and low-cost skin substitute products, as well as the high- and low-cost skin application procedures into which they will be packaged, is set out in the CY 2014 Final Rule, Tables 13 and 14 respectively. A few skin substitute products (e.g., skin substitute products that are applied as either liquids or powders per milliliter or per milligram and are currently employed in procedures outside of the CPT code range of 15271–15278) are not designated as either high or low cost. They should be billed with the applicable surgical procedures that use them rather than the skin application procedures noted above (that is, they should not be reported with CPT codes15271–15278 or HCPCS codes C5271–C5278). Payment for these skin substitutes will be packaged into payment for the related surgical procedures.
Reassignment of new CY 2014 skin substitute products
Under the CY 2014 final rule, CMS also finalized a policy that for any new packaged skin substitute products approved for payment during CY 2014, CMS will use the $32 per square centimeter threshold to determine mapping to the high- or low-cost skin substitute group, as soon as sufficient pricing information becomes available. Any new packaged skin substitute products without pricing information were assigned originally to the low-cost category. There were nine new packaged skin substitute products that were covered as of January 1, 2014, and that were assigned to the low-cost payment group because pricing information was not available for these products at the time of the January 2014 update.
As reported in CMS’ April quarterly OPPS update (Transmittal R2903CP), there is now pricing information available for three of these nine products. Table 7 below shows the three new products and their updated low/high cost status based on the comparison of the price per square centimeter for each product to the $32 square centimeter threshold for CY 2014.
Table 7—Updated Payment Rates for Certain HCPCS Codes Effective April 1, 2014
Low/High Cost Status
Repriza, Per Square Centimeter
Architect Extracellular Matrix, Per Square Centimeter
Neox 1k, Per Square Centimeter
Billing and payment for pass-through skin substitute products
Although most skin substitute products are packaged, for CY 2014 five skin substitute products have been granted pass-through status and are separately payable. Skin substitutes with pass-through status have a status indicator of “G,” as set out in Table 13. Pass-through skin substitutes should be reported with CPT codes 15271–15278. Payment for pass-through skin substitutes is subject to an offset based on the amount of packaged skin substitute that is already included in the payment for the related skin application procedure. During CY 2014, for those skin application procedures assigned to APC 0328, the offset amount is 56.77%, and for those skin application procedures assigned to APC 0329, the offset amount is 15.93%.
There are several practical implications for hospitals under these complex billing rules. First, for dates of service on and after January 1, the Integrated Outpatient Code Editor will return to provider (Edit 87) any claim with an appropriate skin application procedure that does not also include an appropriate skin substitute product. This applies to both packaged and pass-through skin substitute products. In order to receive payment for the skin application procedure (as well as any pass-through skin substitute product, if applicable), the hospital will need to add the appropriate skin substitute product to the claim.
Second, effective April 1, based upon the reassignment of two skin substitute products—Q4147 and Q4148—from the low to the high-cost group, hospitals will need to revise their billing policies to ensure that these skin substitute products are billed with the applicable skin application procedures. Hospitals will also need to keep an eye out for potential reassignment of the remaining six new skin application procedures so that appropriate changes in billing policy can be implemented.
Last week, the American Hospital Association (AHA), along with four hospitals/health systems and four hospital associations from New York City, New York State, New Jersey, and Pennsylvania, filed two lawsuits against the relatively controversial 2-midnight rule and some of its accompanying provisions. All this while Congress has recently extended the probe and educate period for the provision, and is considering other changes to the rule. We also expect the FY2015 IPPS proposed rule at any time, which could also make new proposals affecting the rule.
The first AHA lawsuit takes aim at the 2-midnight rule itself as well as the order and certification requirement and the Part B inpatient billing provisions. The complaint asks for the 2-midnight rule to be declared arbitrary and capricious and set aside, presumably returning to the prior guidance on inpatient admissions.
The complaint also asks that the physician order requirement be set aside as invalid, arbitrary and capricious, and contrary to the Medicare Act. While the complaint seems to discuss the new certification requirements, which are more onerous for hospitals than the order requirement, the suit only appears to ask for the order requirement to be set aside.
Finally, they ask that the one year timely filing requirement in the new Part B inpatient billing regulations be set aside as well. As the lawsuit notes, the one year timely filing limit is difficult, if not impossible, to meet for audits by external auditors.
Regardless of how the lawsuit proceeds, however, hospitals can take advantage of the new Part B inpatient billing rules by doing their own internal audits any time up to a year after the patient’s discharge and still get full Part B payment. This represents a big transition from requiring concurrent audits in order to get limited Part B inpatient payment and a big revenue opportunity for hospitals that they can take advantage of now.
The second lawsuit separately challenges the 0.2% cut in inpatient payments made by CMS in order to maintain the budget neutrality of the new inpatient status provisions in light of the additional inpatient admissions they anticipated. The complaint argues that the payment cut did not comply with the notice and comment period as required and violates technical requirements of the Medicare Act.
Meanwhile, earlier this month, the Protecting Access to Medicare Act of 2014 was passed which extended the probe and educate period for MACs to review hospitals’ application of the 2-midnight rule until March 31, 2015. It also prohibited Recovery Auditors from auditing claims until that date. I recently wrote a white paper on this new law and the audits.
In addition to this legislation, there are also proposed laws in both the Senate and House that would restructure the 2-midnight rule or prevent its application, which can be accessed by searching “2 Midnight” at Congress.gov. This month, CMS is also set to release the FY2015 IPPS rule. Based on the multiple clarifications issued related to patient status after last year’s rule, there very well may be new regulatory clarification included in the annual proposed rule.
Hospitals must continue their compliance efforts with all the new rules adopted for FY2014 because for now there is no change in their application and probe and educate audits continue at the MAC level. CMS may continue to issue guidance on their application informally on their website. Please note the CMS’ Inpatient Review site has moved, so if you are monitoring that site for new guidance, please link to the new site here..
But hospitals must also be cognizant of all the potential changes to the rules that could be coming up and be prepared to be flexible to accommodate any new rules. We will make every effort to monitor these developments closely and keep you updated in the Medicare Insider.
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.
Comment: 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.
Comment: 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.
Comment: 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.
Comment: 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.
Comment: 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.
Comment: 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.
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.
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 -IPPSAdmissions@cms.hhs.gov. Registration is necessary prior to the call, and further information can be found at: http://www.eventsvc.com/blhtechnologies.
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: http://www.cms.gov/Outreach-and-Education/Outreach/NPC/National-Provider-Calls-and-Events-Items/2014-01-14-midnight.html?DLPage=1&DLSort=0&DLSortDir=descending
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: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medical-Review/InpatientHospitalReviews.html
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: http://www.opencongress.org/bill/hr3698-113/actions.
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.
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.