This week’s note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro, Inc.
General Guidelines
In the April 2, 2013 issue of the Medicare Insider, Debbie Mackaman discussed the provisions of the American Taxpayer Relief Act (the “ATRA”) related to outpatient therapy services furnished in various outpatient settings (including outpatient hospital departments) on and after January 1 through December 31, 2013 (CY 2013). In particular, she noted the following individual beneficiary therapy payment caps and manual medical review thresholds applicable to outpatient therapy services provided during CY 2013:
Therapy payment caps:
- Physical therapy (PT) and speech language pathology (SLP) combined — $1900
- Occupational therapy (OT) — $1900
Manual review thresholds:
- PT and SLP combined — $3700
- OT — $3700
In the event that providers furnish what they believe to be medically necessary therapy services in excess of the applicable therapy caps for a specific beneficiary, they are to report those services with the –KX modifier. If providers furnish therapy services in excess of the manual review thresholds for a specific beneficiary, those services are to be manually reviewed by the Recovery Auditors (RAs), effective April 1, 2013. The RA reviews will be either pre- or post-payment, depending upon the state in which the provider is located.
Special Rules for CAH Outpatient Therapy Services
Under the ATRA, critical access hospitals (CAHs) will not be subject to the payment caps and review thresholds for the outpatient therapy services they furnish to Medicare beneficiaries. The outpatient therapy services provided by a CAH, however, will count toward all other providers’ therapy payment caps for those specific beneficiaries. For example, if a patient is seen at a CAH and receives physical therapy services payable by Medicare, the payment for those services will count toward another hospital’s payment cap and review threshold for that beneficiary if the patient transfers care or starts a new episode of care at that facility during CY 2013.
Initially, CMS indicated that the amount that should be applied against a specific beneficiary’s payment cap and review threshold for services provided by a CAH should be the amount that would be payable for those services under the Medicare Physician Fee Schedule (MPFS). In a recent Transmittal (R1216OTN) and related MLN Matters Article (MM8278), CMS clarified that Medicare payments for outpatient hospital therapy services should include a multiple procedure payment reduction when more than one unit or procedure is provided to the same patient on the same day by the same provider. Therefore, when multiple outpatient hospital therapy services are provided to the same patient on the same day by the same provider, the payment amounts applied against payment caps and review thresholds should reflect applicable multiple procedure payment reductions, rather than the full MPFS amount that would otherwise apply.
Potential Payment Adjustment
In those instances where a CAH furnished outpatient therapy services to a beneficiary to whom a hospital has also provided outpatient therapy services, the hospital should check to see
- Whether multiple outpatient hospital therapy services were provided to the same patient on the same day by that same CAH; and
- If so, whether full MPFS payment amounts for the CAH outpatient therapy services were applied against that specific beneficiary’s payment caps or review thresholds, resulting in denial of claims that would have been payable if the multiple reduction rules had been appropriately applied.
If the answer to both queries above is “yes,” the hospital will need to request that its FI or AB MAC adjust such claims.
HDI posted one issue for DME/non-physician to its CMS approved list for providers in Region D. (See link for individual state applicability.)
According to the HDI website, the issue is:
For DME/non-physician:
- Excessive Units of Spring Powered Device. More than one spring powered device (A4258) per 6 months is not reasonable and necessary.
Connelly posted one issue for Skilled Nursing Facilities (SNF) to its CMS approved list for providers in Region C. (See link for individual state applicability.)
According to the Connolly website, the issue is:
For SNF:
- Units in Excess of PPS Assessment Maximum – C002842013. Medicare assigns standard scheduled payment periods for SNF assessments. Overpayment occurs when additional units in excess of assessment maximums are billed.
Connolly posted nine new issues in one category to its CMS approved list for providers in Region C. (See link for individual state applicability.
According to the Connolly website, the new issues are:
For inpatient claims:
- CMS Pre-Pay Demonstration: MS-DRG 639- Diabetes without CC/MCC – C002812013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG 639- Diabetes without CC/MCC – C002802013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG 639- Diabetes without CC/MCC -C002792013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG 638- Diabetes with CC – C002782013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG 638- Diabetes with CC – C002772013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG 638- Diabetes with CC – C002762013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG-637- Diabetes with MCC – C002752013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG-637- Diabetes with MCC – C002742013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
- CMS Pre-Pay Demonstration: MS-DRG-637- Diabetes with MCC – C002732013. The Recovery Audit Prepayment Review Demonstration will allow Medicare Recovery Auditors to review claims before they are paid to ensure that the provider complied with all Medicare payment rules, with limitations.
This week’s note from the instructor is written by Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc.
A number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program. Sequestration, as enacted under the Budget Control Act of 2011 (the “Budget Control Act”) and subsequently amended by the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief Act”), calls for mandatory across-the-board reductions in Federal spending. These reductions specifically include a two percent reduction in payments for Medicare Fee-for-Service (FFS) claims with dates of service or dates of discharge on or after April 1, 2013.
Historical Background
As all of us are aware, Congress has been kicking the can down the road with respect to addressing a number of financial challenges, including growing national deficits (among them deficits arising from the growing cost of health care services). Presumably, in an effort to force itself to do so, Congress enacted the Budget Control Act. Under the Budget Control Act, a Joint Select Committee on Deficit Reduction (the “Joint Committee”) was established and specifically tasked with developing recommendations to reduce the deficit significantly over a period of ten years. They were to report back to Congress with their recommendations by November 23, 2011. Congress was then required to consider the Joint Committee’s recommendations by December 23, 2011.
If the Joint Committee failed to refer agreed upon legislation to Congress or did not meet the required savings threshold set out in the Budget Control Act, a sequestration process would be put into effect, government-wide, to reduce Federal outlays by the proposed amount. Instead of blanket across-the-board cuts to all programs, the Budget Control Act imposed exemptions from the sequestration process. Certain programs, such as Social Security and Medicaid, were to be exempt altogether. Any cuts to Medicare were to be limited to no greater than 2% of the program’s costs, and any such cuts were to come primarily from payments to providers.
Unfortunately, the Joint Committee failed to report the requisite recommendations for deficit reduction. Under the Budget Control Act as originally enacted, this failure would have resulted in the sequestration process starting automatically, effective February 1, 2013 through January 31, 2022. Congress, however, subsequently passed The Taxpayer Relief Act in 2012, which postponed the start of sequestration from February 1, 2013 to April 1, 2013, and the President issued a sequestration order to that effect on March 1, 2013. Nevertheless, the current Administration continues to urge Congress to take prompt action to address the current budget uncertainty and the economic hardships imposed by sequestration.
Practical Guidance on Implementing Sequestration
As noted above, a number of hospitals and other providers have been asking CMS for additional guidance on the practical aspects of implementing “sequestration” under the Medicare program. After researching CMS’ responses to various inquiries, it appears that CMS is primarily referring them to the various Medicare Administrative Contractors (MACs) for more specific answers to their questions. The MACs, including Noridian Administrative Services, LLC (Noridian), which is currently the MAC for Jurisdictions 3 and 6, have been providing this guidance in the form of multiple pronouncements under the title “Mandatory Payment Reduction in the Fee-for-Service Program–‘Sequestration’.” These publications generally follow a user-friendly Q&A format and are available on the indvidual MAC Websites. A prime example is an update issued by Noridian on April 22, 2013, which can be found at the following Website: https://www.noridianmedicare.com/p-meda/mandatory_payment_reductions_in_the_in_the_medicare_fee_for_service_program_sequestration.html.
The remainder of this Note will provide a summary of general and specific guidance from various MACs on implementation of sequestration under the Medicare FFS Program.
Timing/Effective Dates of Current Sequestration Order
The current sequestration order signed by the President on March 1, 2013, covers all Medicare FFS payments for services with dates of service or dates of discharge (or a start date for rental equipment or multi-day supplies) April 1, 2013, through March 31, 2014.
Under sequestration, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by 2 percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013. Any claims for rental payments with a “FROM” date of service on or after April 1, 2013, will be subject to the 2% reduction, regardless of when the rental period began. On the other hand, the initial and subsequent monthly rental payments billed with a “FROM” date of service beginning on or prior to March 31, 2013 would not be affected by the 2% reduction.
To prevent making overpayments, CMS has also recently directed the MACs to reduce interim and pass-through payments related to the Medicare cost report by 2 percent. Beginning April 1, 2013, the 2 percent reduction will be applied to Periodic Interim Payments (PIP), Critical Access Hospital (CAH) and Cancer Hospital interim payments, and pass-through payments for Graduate Medical Education, Organ Acquisition, and Medicare Bad Debts.
Scope of FFS Items and Services Subject to Sequestration
According to the MACs, all FFS Medicare claims payments are subject to the 2% reduction. There are no exemptions provided in the law for drugs or any other health care item or service provided under the FFS program. As noted above, the 2% reduction also applies to certain interim payments payable under the FFS program.
Calculation of Sequestration Reduction
Payment adjustments required under sequestration are applied to all claims after determining the Medicare payment amount, including application of the current fee schedule, coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. All fee schedules, Pricers, etc., are unchanged by sequestration. It is only the final payment amount that is reduced by 2%.
Calculation for Assigned Claims
The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an assigned claim:
A provider bills a service with an approved amount of $100.00, and $50.00 is applied to the deductible. A balance of $50.00 remains. Medicare normally would pay 80% of the approved amount after the deductible is met, which is $40.00 ($50.00 x 80% = $40.00). The patient is responsible for the remaining 20% coinsurance amount of $10.00 ($50.00 – $40.00 = $10.00). However, due to the sequestration reduction, 2% of the $40.00 calculated payment amount is not paid, resulting in a payment of $39.20, instead of $40.00 ($40.00 x 2% = $0.80). Please note that the beneficiary’s deductible and coinsurance liability for this assigned claim is not affected by sequestration.
Calculation for Unassigned Claims
Medicare’s payment to beneficiaries for unassigned claims, however, is subject to the 2% sequestration reduction. The non-participating physician who bills on an unassigned basis collects his/her full payment from the beneficiary, and Medicare reimburses the beneficiary the Medicare portion (e.g., 80% of the reduced fee schedule amount. [NOTE: The "reduced fee schedule" refers to the fact that Medicare’s approved amount for claims from non-participating physicians/practitioners is 95% of the full fee schedule amount]). This reimbursed amount to the beneficiary would be subject to the 2% sequestration reduction, just like payments to physicians on assigned claims. Both are claims payments, but to different parties. If the Limiting Charge applies to the service rendered, physicians/practitioners cannot collect more than the Limiting Charge amount from the beneficiary.
The following example illustrates application of the sequestration reduction to the approved Medicare payment amount for an unassigned claim:
A non-participating provider bills an unassigned claim for a service with a Limiting Charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95.00 (assuming that the otherwise approved Medicare amount is $100), and $50.00 is applied to the deductible. A balance of $45.00 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which would be $36.00 ($45.00 x 80% = $36.00). However, due to the sequestration reduction, the $36.00 calculated payment amount is reduced by 2%, resulting in a payment of $35.28, instead of $36.00 ($36.00 x 2% = $0.72), to the beneficiary.
CMS encourages physicians, practitioners, and suppliers who bill unassigned claims to discuss with their Medicare patients the impact of the sequestration reductions to Medicare payments.
Reporting the Sequestration Reduction
Claim adjustment reason code (CARC) 223 is used to report the sequestration reduction on the Remittance Advice (RA). CARC 223 is defined as “Adjustment code for mandated Federal, State or local law/regulation that is not already covered by another code and is mandated before a new code can be created.”
For institutional Part A claims, the adjustment is reported on the RA at the claim level. For Part B physician/practitioner claims and institutional provider outpatient claims, the adjustment is reported at the line level.
Continuing Guidance
Hospitals and other providers are encouraged to check with their local contractors for new updates, as well as additional guidance and clarification on the practical application of sequestration to the Medicare Program
Connolly posted twelve new issues across six categories to its CMS approved list for providers in Region C. (See link for individual state applicability.)
According to the Connolly website, the new issues are:
For Comprehensive Outpatient Rehab Facility (CORF) claims:
- Postpayment Review – Manual Medical Review of Therapy Claims Above the $3,700 Threshold (CORF) – C002592013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on Comprehensive Rehabilitation Facility claims (CORF) reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
For Outpatient Rehab Facility (ORF) claims:
- Postpayment Review – Manual Medical Review of Therapy Claims Above the $3,700 Threshold (ORF) -C002582013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on Outpatient Rehabilitation Facility claims reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
For home health:
- Postpayment Review – Manual Medical Review of Therapy Claims Above the $3,700 Threshold (HH) – C002572013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on Home Health claims reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
For SNF claims:
- Postpayment Review – Manual Medical Review of Therapy Claims Above the $3,700 Threshold (SNF) -C002562013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on Skilled Nursing Facility claims reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
- SNF Level of Care Review – C000982013. While a 3-day stay in a psychiatric hospital satisfies the prior hospital stay requirement, institutions that primarily provide psychiatric treatment cannot participate in the program as SNFs. Therefore, a patient with only a psychiatric condition who is transferred from a psychiatric hospital to a participating SNF is likely to receive only non-covered care. In the SNF, the term “non-covered care” refers to any level of care, which is less intensive than the SNF level of care, which is covered under the program.
- SNF Level of Care Review – C000972013. While a 3-day stay in a psychiatric hospital satisfies the prior hospital stay requirement, institutions that primarily provide psychiatric treatment cannot participate in the program as SNFs. Therefore, a patient with only a psychiatric condition who is transferred from a psychiatric hospital to a participating SNF is likely to receive only non-covered care. In the SNF, the term “non-covered care” refers to any level of care, which is less intensive than the SNF level of care, which is covered under the program.
- SNF Coding Validation – C000422013. We will review claims submitted by SNFs to determine the extent to which the Minimim Data Set (MDS) is accurate and supported by the resident’s medical records. Upon receipt of the requested documentation, the entire benefit period will be reviewed to determine the appropriate level of care. (Medical Necessity will not be included in this review)
- SNF Coding Validation – C000412013. We will review claims submitted by SNFs to determine the extent to which the Minimim Data Set (MDS) is accurate and supported by the resident’s medical records. Upon receipt of the requested documentation, the entire benefit period will be reviewed to determine the appropriate level of care. (Medical Necessity will not be included in this review)
For outpatient hospital claims:
- Postpayment Review – Manual Medical Review of Therapy Claims Above the $3,700 Threshold (OP) -C002492013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on outpatient hospitals claims reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
- Non-Covered use of Arpetitant (J8501) – Outpatient Hospital – C001212013. Coverage for aprepitant (J8501) is predicated by its use as the three drug combination of aprepitant, a 5-HT3 antagonist and dexamethasone, and must be used in conjunction with one or more specified chemotherapuetic agents.
For carrier claims:
- Postpayment Part B Review – Manual Medical Review of Therapy Claims Above the Threshold (Carrier) – C002512013. In accordance with The American Taxpayer Relief Act of 2012 (ATRA) signed into law by President Obama on January 2, 2013, postpayment reviews will be conducted on outpatient hospitals claims reaching the $3,700 threshold for PT and SLP services combined and/or $3,700 for OT services.
- Mohs Surgery with Pathology billed by different provider – C003122012. Mohs micrographic surgery used for removal of complex or ill-defined skin cancer requires physicians to act in two integrated but separate capacities: surgeon & pathologist. If either surgery or pathology is delegated to another physician who reports services separately, Mohs codes should not be reported since they include both the excision and the pathology services.
Performant Recovery posted four new issues across three categories to its CMS approved list for providers in Region A. (See link for individual state applicability.)
According to the Performant website, the new issues are:
For outpatient hospital claims:
- Zoledronic Acid (Zometa®) Excessive Daily Units – J13. Potential incorrect billing occurred when Zoledronic Acid (Zometa®), HCPCS code J3487, is reported in excess of the standard intravenous infusion dosage of four units (4 mg), per day, per patient.
- Nerve Conduction Studies (NCS) – Maximum Units- J12. Potential incorrect billing occurred for claims reporting CPT codes 95900, 95903 and 95904 for units in excess of what is medically necessary, based on information found in Novitas Local Coverage Determination (LCD) L29547. Payment will be recouped when no additional, supporting documentation is received from the provider for complex review within the 45-day response period.
For outpatient rehab facility claims:
- Nerve Conduction Studies (NCS) – Maximum Units- J12. Potential incorrect billing occurred for claims reporting CPT codes 95900, 95903 and 95904 for units in excess of what is medically necessary, based on information found in Novitas Local Coverage Determination (LCD) L29547. Payment will be recouped when no additional, supporting documentation is received from the provider for complex review within the 45-day response period.
For physician/non-physician practitioner claims:
- Panretinal (Scatter) Laser Photocoagulation Excess Frequency – J13. Potential incorrect billing occurred for Panretinal Laser Photocoagulation services (CPT code 67228) paid more than once, per eye, within a 90 day global period.
Connolly Healthcare added eight new issues across two categories—three for inpatient hospital claims and five for SNF claims— to its CMS-approved list for providers in Region C states. (See link for individual state applicability.)
According to the Connolly website, the new issues are as follows:
For inpatient hospital claims:
- Medical Necessity: Diseases And Disorders Of The Musculoskeletal System And Connective Tissue, MS-DRG’S, 534, 535 AND 536, W/MCC, W/O MCC -C002182013. RACs will review documentation to validate the medical necessity of short stay, uncomplicated admissions. Medicare only pays for inpatient hospital services that are medically necessary for the setting billed and that are coded correctly.
- Medical Necessity: MAJOR MALE PELVIC PROCEDURES, MS-DRG’S 707 AND 708 W CC/MCC, W/O CC/MCC – C002172013. RACs will review documentation to validate the medical necessity of short stay, uncomplicated admissions. Medicare only pays for inpatient hospital services that are medically necessary for the setting billed and that are coded correctly.
- Medical Necessity: IP Psych – C002422011. Medical records will undergo clinical review by a psychiatric nurse, with direct supervision from the contract medical director. The documentation will be reviewed to validate if true psychiatric conditions exist or currently being evaluated for an acute psychiatric condition. The medical record will then be evaluated to ensure that the patient is not in an inpatient psychiatric facility, to further continue treatment for urinary tract infection and pneumonia.
For SNF claims:
- Units in Excess of PPS Assessment Maximum – c001132013. Medicare assigns standard scheduled payment periods for SNF assessments. Overpayment occurs when additional units in excess of assessment maximums are billed.
- SNF Level of Care Review – C000962013. While a 3-day stay in a psychiatric hospital satisfies the prior hospital stay requirement, institutions that primarily provide psychiatric treatment cannot participate in the program as SNFs. Therefore, a patient with only a psychiatric condition who is transferred from a psychiatric hospital to a participating SNF is likely to receive only non-covered care. In the SNF, the term “non-covered care” refers to any level of care, which is less intensive than the SNF level of care, which is covered under the program.
- SNF Level of Care Review – C000952013. While a 3-day stay in a psychiatric hospital satisfies the prior hospital stay requirement, institutions that primarily provide psychiatric treatment cannot participate in the program as SNFs. Therefore, a patient with only a psychiatric condition who is transferred from a psychiatric hospital to a participating SNF is likely to receive only non-covered care. In the SNF, the term “non-covered care” refers to any level of care, which is less intensive than the SNF level of care, which is covered under the program.
- SNF Coding Validation – C000402013. We will review claims submitted by SNFs to determine the extent to which the Minimim Data Set (MDS) is accurate and supported by the resident’s medical records. Upon receipt of the requested documentation, the entire benefit period will be reviewed to determine the appropriate level of care.
- SNF Coding Validation – C000392013
Get blog updates in your e-mail
Subscribe to our free Medicare Insider e-zine