Recently in Recovery Audit Contractors (RACs) Category

October 2, 2014

CMS Open Door Forum Clarifies Key Points of 68% Settlement Offer to Hospitals

On September 30, the Centers for Medicare & Medicaid Services (CMS) held a Hospital & Hospital Quality Open Door Forum on a variety of topics pertinent to hospitals. CMS opened the forum with an unexpected update on CMS' recently announced 68% settlement offer for patient status claim denials. As many providers are already aware, CMS has offered to pay 68% of the net payable value of eligible patient status claim denials in exchange for hospitals' withdrawal of all pending eligible appeals.

While the September 30 Open Door Forum covered a variety of topics unrelated to the settlement offer, CMS clarified key points regarding the settlement offer and providers should take note.

First and foremost, CMS clarified that Part A patient status denials submitted for re-billing under Part B are eligible for inclusion in the settlement so long as the hospital has not received payment on the rebilled claim. In response to a question, CMS specified that as long as the hospital has not received Part B payment on a rebilled claim on the date that the settlement request is submitted, the claim is eligible for inclusion in the settlement process. CMS indicated that this issue will be discussed in greater detail during the October 9 Open Door Forum. Additionally, CMS indicated that it is not contemplating an extension to the October 31, 2014 filing deadline.

CMS announced that it will post additional Frequently Asked Questions on its Inpatient Hospital Reviews website later this week.

Wachler & Associates healthcare attorneys will continue to monitor the ongoing developments regarding CMS' 68% settlement offer. If you have any questions regarding the settlement offer, its potential implications on your pending appeals, or if you need assistance in submitting a settlement request, please contact an experienced healthcare attorney at (248) 544-0888 or at wapc@wachler.com.

September 15, 2014

CMS Holds Conference Call on 68% Settlement Offer

On Tuesday, September 9, the Medicare Learning Network (MLN) hosted a Conference Call regarding the newly revealed 68% settlement offer from the Centers for Medicare & Medicaid Services (CMS) for short-stay inpatient status claims. In an effort to 'more quickly reduce the volume of inpatient status claims' pending in the appeals process, CMS offered an administrative agreement to any hospital willing to withdraw all of their pending short-stay inpatient status claim denial appeals in exchange for partial payment of 68% of the net allowable amount as long as the date of admission was prior to October 1, 2013 and the claim is either pending appeal or the appeal has been filed and is pending review. In its release, CMS further noted that only acute care hospitals and critical access hospitals are eligible to submit a settlement request; psychiatric hospitals, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals, and children's hospitals are not permitted to submit a settlement request.

The purpose of the Conference Call was to provide interested stakeholders an opportunity to speak with CMS representatives in order to ask questions and obtain a better understanding of how this settlement process will work. Wachler & Associates healthcare attorneys participated in the Conference Call and came away with a deeper understanding of how this process works, but there are still unanswered questions. First and foremost, submissions for settlement are due by October 31, 2014. If your entity cannot meet this deadline, you may ask CMS for an extension. Additionally, short-stay inpatient status claims pending at any level of the appeals process are eligible to be submitted for settlement.

In sum, eligible claims must also meet four requirements: (1) they must be pending in the appeals process or within the timeframe to appeal; (2) the date of admission for the claim must have been prior to October 1, 2013; (3) the denial must be based on a patient status review; and (4) the claim must not have been previously withdrawn or re-billed for payment under Part B. During the Conference Call participants requested clarification of whether the rebill for Part B must not have been submitted or whether it must not have been paid. CMS indicated that it would provider further clarification on this issue through the Frequently Asked Question (FAQ) page on CMS' website for hospitals. In agreeing to settle all claims for the 68%, the entity agrees to the dismissal of all associated claims (the entity may not pick and choose which ones to settle) and agrees that the settlement will serve as the final administrative and legal resolution of all eligible claims. However, this resolution does not resolve any potential False Claims Act reviews by the Department of Justice. Additionally, eligible claims include claims from any Medicare contractor so long as the denial was based on a patient status review.

A final point of emphasis pertains to whether interest will be paid under Section 935 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) upon such claims if they are settled. Representatives from CMS indicated that Paragraph 3 of the settlement agreement indicates that payment in full by CMS would not include 935 interest on the claims. If a hospital paid interest on an overpayment (i.e. the hospital prevented recoupment at the earlier stages of appeal, but interested in favor of CMS accrued on the alleged overpayment) during subsequent recoupment of an alleged overpayment, that interest will be included in the net allowable amount that is used to calculate the settlement. If this same interest accrued on the alleged overpayment, but the hospital has not begun to repay any of that interest, then that interest balance will be waived. Finally, if CMS does not make payment on the settlement within 60 days of finalization, interest will accrue and be paid to the entity.

The CMS settlement offer is an enticing offer for hospitals. By accepting the settlement, hospitals will receive reimbursement from the settlement in a much timelier manner than waiting for final adjudication of the appeals. Furthermore, hospitals will be able to conserve the resources required to challenge these denials. However, before choosing to settle, a hospital should weigh the costs and benefits, including calculating the amount of 935 interest the hospital could forego if it accepts CMS' settlement offer. For further information on this new settlement process please see our past blog post in addition to the CMS' FAQ Document on the topic and the PowerPoint presentation provided by CMS that accompanied the Conference Call.

If you have any questions regarding this process, or require assistance in pursuing a settlement, do not hesitate to contact the healthcare attorneys at Wachler & Associates, P.C. at (248) 544-0888 or at wapc@wachler.com.

September 8, 2014

CMS Announces Settlement Offer to Hospitals

In an effort to reduce the amount of cases currently pending appeal, specifically the backlog at the Administrative Law Judge (ALJ) level of appeal, the Centers for Medicare & Medicaid Services (CMS) announced an offer to hospital appellants to settle their patient status claim denials currently pending appeal. In exchange for hospitals' withdrawal of their pending appeals, CMS has offered to pay hospitals 68% of the net payable amount of the claims.

In its announcement, CMS lists a number of conditions that must be met for a hospital to be eligible for settlement, including:

  1. The provider must be either (1) an Acute Care Hospital, including those paid via Prospective Payment System, Periodic Interim Payments, and Maryland waiver, or (2) Critical Access Hospitals (CAH). Those entities which are not eligible for the settlement include: psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System, Inpatient Rehabilitation Facilities (IRFs), long-term care hospitals (LTCHs), cancer hospitals and children's hospitals.
  2. The claim was not provided to a Medicare Part C (i.e., Medicare Advantage) enrollee.
  3. The claim was denied upon review by a CMS audit contractor (e.g., Recovery Audit Contractor (RAC), Medicare Administrative Contractor (MAC), Zone Program Integrity Contractor (ZPIC) or Comprehensive Error Rate Testing Contractor (CERT)).
  4. The claim was denied was based on the CMS contractor's finding that the patient was inappropriately treated as an inpatient as opposed to outpatient.
  5. The first day of the inpatient admission was before October 1, 2013.
  6. The claim denial was timely appealed, or the provider has not yet exhausted their appeal rights.
  7. The provider did not subsequently rebill and receive payment for the claim under Medicare Part B.

For those hospitals with eligible claims, CMS has provided instructions on its website detailing the process for hospitals to participate in the settlement offer. In order to take advantage of the settlement offer, hospitals must submit their settlement requests by October 31, 2014.

According to the Administrative Agreement (i.e., settlement agreement), CMS will pay the agreed amount to the hospital within 60 days from the date in which the binding settlement agreement is executed. Once the binding settlement agreement is entered into, the pending appeals associated with the settled claims will be dismissed and the settlement will serve as the final administrative and legal resolution of those claims.

This past July, the Department of Health and Human Services (HHS) introduced two new pilot programs - Settlement Conference Facilitation Pilot and Statistical Sampling Pilot - as alternative methods for eligible providers to resolve their appealed claim denials currently pending at the ALJ level of appeal. The recently announced settlement offer to hospitals is an added initiative implemented by HHS in an effort to reduce the ALJ backlog. CMS will be holding a national provider call on September 9, 2014, to further discuss the announced settlement offer. Wachler & Associates will be participating in that call. If you have any questions regarding the CMS settlement offer or pilot programs, or if you need assistance in the pursuing a settlement, please contact an experienced healthcare attorney at (248) 544-0888 or wapc@wachler.com.

July 14, 2014

Senate Report Finds the RAC Program to be Ineffective in Reducing Improper Payment Rates and Burdensome on Providers

In a report released on July 9, 2014, the Senate Special Committee on Aging criticized the Centers for Medicare and Medicaid Services (CMS) for the increase in improper payments in the Medicare program, despite the increasing amount of audit activity and the resulting burden on Medicare providers.

The report noted that despite an increase in the number of contractors conducting pre and post-payment audits and in audits themselves, there has not been a reduction in the total rate of improper payments made to providers. In 2013, the rate jumped to 10.1%, from 8.5% in 2012. This was the highest rate in the last five years, despite significant efforts to combat improper payments.
The report also found numerous inefficiencies in the Recovery Audit Contractor (RAC) program and with other contractors more generally. For instance, the report noted that often times different audit contractors audit the same provider for claims that have been previously reviewed. This results in duplicative document requests that burden providers. The report recognized that providers often times providers must respond to documentation requests from contractors with their own unique timelines and specifications for proper documentation submission. The inconsistencies among contractors lead to significant confusion and, in some cases, denial of properly billed claims. Also noted was a problem well-recognized by the provider community, the withholding of Medicare funds during the later stages of the appeals process, despite the often the two, three even four year delay before providers receive an administrative law judge (ALJ) hearing decision. According to the report, one large hospital system has over $200 million withheld until its matters are adjudicated. The report recognized that for many providers, the ALJ level of appeal is successful. As an example, the report noted that for another health system, there was a 97% success rate for appeals at the ALJ level. The withholding of funds, especially when they have been properly billed, presents an enormous burden on all healthcare providers, even potentially forcing smaller providers to close their doors because they are unable to absorb the loss in revenue.

The Senate report also criticized the RAC program on some fundamental issues. The report was highly critical of what is termed the "pay and chase" model of reducing improper payments to providers. Although CMS announced its move away from this model to a more preventative model, the report concluded that the structure of the audit programs still encourages "pay and chase." Under this model, most of the audit contractors seek to recoup improper payments after they have been made to providers. This is problematic for numerous reasons, one of which is that under this model the RACs are paid on a contingency fee basis that is dependent upon the amount of improper claims that they identify. Thus, there is a potential incentive for RACs to keep improper payment rates high in an effort to increase RAC productivity. The report and members of the Senate Special Committee suggested that the RACs should be compensated by how effective they are at reducing the improper payment rate over a designated period of time or by how they prevent improper payments from occurring in the first place.

In order to lower the improper payment rate, the report recommends that:

  • CMS consolidate post-payment review programs to the extent possible;
  • CMS consider financial incentives aimed at reducing the improper payment rate, rather than at the amount of improper rates identified;
  • CMS assess the reliability of data within the RAC Data Warehouse and correct any data errors or omissions;
  • Pre-payment review programs should have defined objectives and scopes of operation related to reducing the improper payment rate, including how to achieve this goal through collaboration of the auditors;
  • CMS more stringently review contractor error rate reduction plans to ensure that Comprehensive Error Rate Testing (CERT)-identified problem areas are in accordance with the Office of Inspector General's recommendations;
  • CMS ensure that local coverage decisions target high cost, highly utilized services or items and do not create inconsistent access to care;
  • CMS should review the effectiveness of pre-payment review processes in terms of reducing improper payments; and
  • CMS place a greater emphasis on provider education as a means of reducing improper payments.
If you or your entity are currently being audited by CMS and need assistance with the Medicare appeals process or Medicare compliance to proactively prepare for an audit, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or at wapc@wachler.com.

July 9, 2014

HHS Launches Pilot Program for Providers to Settle Medicare Overpayment Demands with CMS

Recently, the Department of Health and Human Services (HHS) announced its new pilot program - Settlement Conference Facilitation (SCF) Pilot - to provide an alternative dispute resolution process for settling appealed Medicare claims denials. Through the SCF program, providers have the opportunity to discuss with the Centers for Medicare and Medicaid Services (CMS) the potential of a mutually agreeable resolution to the claims appealed to an Administrative Law Judge (ALJ) hearing. According to HHS, the settlement conference facilitator, who is an employee of the Office of Medicare Hearings and Appeals (OMHA), will use mediation principles to assist the appellant and CMS in reaching a mutual settlement agreement. If a settlement is reached between the appellant and CMS, the facilitator will draft the settlement document to be signed at the settlement conference by both parties. Once a binding settlement agreement has been executed, any pending ALJ hearing requests for the claims covered by the settlement agreement will be dismissed and no further appeal rights will be attached to those claims. On the other hand, if the parties are unable to reach a settlement agreement and the facilitator believes further efforts to reach an agreement will be unsuccessful, the SCF process will be concluded and the appealed claims will return to the ALJ level of appeal in the order the hearing request was originally received by OMHA.

Initially, HHS is limiting eligibility for the SCF pilot program to claims by Medicare Part B providers who have filed requests for ALJ hearing in 2013 and are not currently assigned to an ALJ. For those eligible providers, the request for SCF must include all of the provider's pending ALJ appeals for the same item or service (i.e., all claims for the same item or service in which ALJ hearing requests were submitted in 2013). Appellants must include all appeals included in the applicable ALJ hearing requests, and may not request an SCF for some claims and proceed to the ALJ hearing for the remaining claims. Additional SCF eligibility requirements include that at least 20 claims must be at issue or, if fewer than 20 claims are at issue, at least $10,000 must be in controversy. Also, the amount of each individual claim must be less than $100,000. For claims subject to statistical sampling, the extrapolated overpayment amount at issue must be less than $100,000; however, HHS states that it will continue to explore expanding the SCF pilot program for larger extrapolated overpayment cases.

Although the SCF process is only available for a limited group of claims at this time, those providers whose appeals are currently ineligible (e.g., Part A providers) for the SCF pilot program may nonetheless view these developments as a silver lining as countless appealed claims are currently awaiting ALJ hearings to be scheduled - claims in which CMS has likely recouped all of the alleged overpayment amount. With the substantial volume of claims currently backlogged at OMHA causing two to three year delays before the appealed claims are finally adjudicated, appellants may soon be provided a forum to reach mutually agreeable resolutions with CMS and receive the timely payment in which the provider is entitled.

If you or your entity have questions related to the SCF pilot program, or would like assistance from experienced health care attorneys in representing you or your entity in the SCF process, please contact Wachler & Associates at 248-544-0888 or wapc@wachler.com.

July 3, 2014

CMS Proposes to Eliminate the Narrative Requirement for Documented Face-to-Face Encounters for Home Health Agencies

In a recently released proposed rule, the Centers for Medicare & Medicaid Services (CMS) proposes to eliminate the narrative requirement from the home health face-to-face encounter documentation requirement. Under the Patient Protection and Affordable Care Act (ACA) and implementing regulations, the certifying physician must document that the physician himself or herself or an allowed nonphysician practitioner conducted a face-to-face encounter with the beneficiary no more than 90 days prior to the home health start of care date or within 30 days of the start of home health care. As part of the home health certification requirements, the documented face-to-face encounter must include a brief narrative of why the clinical findings of the encounter support that the patient is homebound and in need of intermittent skilled nursing services or therapy services.

According to CMS, the narrative requirement was adopted in an effort to achieve greater physician accountability in certifying a patient's eligibility to receive home health care as well as establishing the patient's plan of care. However, as CMS noted in the proposed rule, the home health industry is experiencing numerous problems meeting the narrative requirement. Accordingly, since the effective implementation of the face-to-face encounter requirement in April 2011, many home health agencies have seen an increased number of claims denied by Medicare audit contractors due to inadequate narratives supporting the services. In its proposed rule, CMS acknowledges some of the challenges faced by home health agencies in meeting the face-to-face narrative requirement, including:

• A perceived lack established standards for compliance that can be understood and applied by physicians and home health agencies;
• Frustration in the industry of having to rely on physicians to satisfy the face-to-face requirement without incentives to encourage physician compliance;
• Concerns that the narrative requirement is redundant when detailed evidence to support the need for homebound status and medical necessity is available in clinical records; and
• The narrative requirement was not explicitly codified in the Affordable Care Act.


In agreeing with the industry's complaints, CMS now proposes to eliminate the narrative requirement for the documented face-to-face encounter. However, CMS noted that there should be sufficient evidence in the patient's medical record to demonstrate that the patient meets Medicare eligibility criteria for home health services. Also, CMS reaffirms in its proposed rule that the certifying physician would still be required to certify that a face-to-face encounter occurred no more than 90 days prior to the start of care date for home health services or within 30 days of the start of the home health services, and that the face-to-face encounter was related to the primary reason the patient requires home health services.

Finally, in situations where skilled nursing visits for management and evaluation of the patient's plan of care are ordered by the physician, the proposed rule provides that the physician must still include a brief narrative that describes the clinical justification for the management and evaluation service as part of the certification/recertification process.

If finalized in its current form, the provisions in the proposed rule would eliminate the brief narrative requirement for documented face-to-face encounters. However, home health providers should implement the necessary compliance protocols to ensure the medical documentation contains sufficient information to support the patient's need for home health services. Failure to meet this standard or any of the other certification requirements could result in an increased risk of claims being denied by Medicare audit contractors. If you or your entity has any questions related to the face-to-face encounter or certification/recertification requirements, or need assistance in defending against or proactively preparing for a Medicare audit, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com.

June 16, 2014

OIG Recommends Increased Audits of E/M Services by CMS

In May of 2014, the Office of the Inspector General (OIG) released a report detailing its findings regarding Medicare payments for evaluation and management (E/M) services. E/M services are performed by physicians in order to assess and manage a beneficiary's health. The OIG found that coding errors in documents for routine patient E/M services have resulted in the Medicare program paying out billions of dollars in improper payments each year. Earlier in 2014, the OIG reported that the overall Medicare program lost about $50 billion during 2013. In conducting this study, 63 percent of the claims sampled by the OIG were for established patient office/outpatient visits. Only 4 percent of the visits the OIG analyzed were for initial or subsequent skilled nursing care.

The OIG reports that for the 2010 fiscal year, Medicare payments for E/M services totaled $32.3 billion, which accounted for almost 30 percent of all Part B payments. The OIG also noted that in 2012, physicians began to increase their billing of higher level codes, which resulted in higher payment amounts. In its report, the OIG found that 55 percent of E/M services were incorrectly coded and/or lacked sufficient documentation, including: 26 percent of E/M claims were up-coded; 15 percent of E/M claims were down-coded; 12 percent of E/M claims were insufficiently documented; and 7 percent of E/M claims were undocumented altogether. In order to ensure that payments for E/M services are properly coded and supported by sufficient documentation, the OIG made the following recommendations to CMS: (1) educate physicians on coding and documentation requirements for E/M services; (2) continue to encourage contractors to review E/M services billed for by high-coding physicians; and (3) follow up on claims for E/M services that were paid for in error.

As indicated by this report, providers can expect greater scrutiny of their E/M claims by CMS audit contractors. In our experience, CMS audit contractors routinely down-code the level of E/M service billed by providers. Often times, these services are down-coded because CMS determined that the level of E/M service billed is not supported by the accompanying medical records (e.g., the visit note did not support the level of medical decision making component required by the code that was billed). With the increased audit attention relating to E/M services, providers must ensure that they are thoroughly documenting the services provided, and that each component of the E/M service is supported by the medical record. Failure to do so could leave providers vulnerable to audit contractors.

If you are currently undergoing an audit by CMS and need assistance defending claim denials, or have questions about how to proactively prepare for an audit or mitigate audit risk, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

May 15, 2014

CGI Federal Sues HHS over New Contracts and Payment Terms

On May 1, Recovery Audit Contractor ("RAC") for Region B, CGI Federal, Inc., ("CGI") filed a lawsuit against the United States Department Health and Human Services ("HHS") in the United States Court for Federal Claims.

In the lawsuit, CGI seeks an injunction against the HHS's award of new RAC contracts and to eliminate the new payment terms that prohibit RACs from being paid until after the second level of appeal. The lawsuit comes after CGI's pre-award bid protests, where CGI asked for a change to the new payment terms, were denied by the Government Accountability Office ("GAO").

Towards the end of 2013 and the beginning of 2014, CMS sent out a request for quotes (RFQ) for new RAC contracts. The Statement of Work, which accompanied the RFQ, contained most of the changes to which CGI objects. CGI's main objection is to the changes in the payment terms. Under the current system, RACs bill and receive their contingency fees after the first level of appeal of a claim determination, which takes roughly 120 days. Under the new model, RACs would not receive their contingency fees until after the second level of appeal, which could span anywhere from 120 to over 400 days.

In the lawsuit, CGI claims that the new payment terms violate federal procurement laws because they restrict competition for contracts and are inconsistent with customary commercial practices. On the basis of such allegations, CGI refused to submit an RFQ for the contract as they believe that the new payment terms makes it commercially impracticable for CGI to submit a quote as the new payment terms do not provide it with a tolerable revenue flow model.

It is not expected that the lawsuit will cause a significant delay in CMS awarding the RAC contracts. CMS would like to award the DME/HH RAC contract in May and the A/B RAC contract is expected to be awarded sometime in May or June. The first hearing in the case, scheduled for June 6, will more than likely be centered on the issue of whether the judge should grant injunctive relief. A court may only grant injunctive relief if the court finds that the moving party will suffer irreparable harm if the injunction is not granted. The court must consider and balance the extent of the irreparable harm to the moving party, each party's likelihood of prevailing at trial, and any other public or private interests implicated by the injunction. Out of respect for the proceedings, there is speculation that CMS may wait to award the A/B region contract until after the court renders its decision on the June 6 hearing.

Wachler & Associates health law attorneys will continue to monitor any further developments regarding the RAC contract awarding and payment processes. If you have any questions pertaining to how the new RAC processes will impact you or your entity, or if you are the subject of a RAC audit, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 25, 2014

CMS Releases Physician Payment Data - Should E/M Providers Be Concerned?

Earlier this month, CMS released its first set of Medicare Provider Utilization and Payment Data for physicians and physician practices. As part of the Obama Administration's efforts to make Medicare more transparent, CMS has prepared a public data set providing information on services and procedures provided to Medicare beneficiaries under Medicare Part B. This information includes the types and number of services and procedures provided by physicians, as well as the amount of payments each physician received from the Medicare program in calendar year 2012.

According the data, office/outpatient evaluation and management services (e.g., CPT codes 99213 and 99214) were the most frequently billed services by physicians and accounted for nearly $11 billion of the $77 billion in Medicare payments to physicians in 2012.

Physician evaluation and management (E/M) services have been an increasing focus of audits by CMS contractors - typically, Medicare Administrative Contractors (MACs) and Zone Program Integrity Contractors (ZPICs). Furthermore, with the moratorium on Recover Audit Contractors (RACs) ability to audit Part A hospital claims being extended to March 2015, we expect the RACs to shift their audit focus from Part A to Part B claims. Based on the changing audit landscape and the utilization and payment data recently released by CMS, physicians can only expect to be an even greater target of Medicare audits.

Wachler & Associates has extensive experience defending physicians against Medicare audits of E/M services. During reviews of E/M services, CMS contractors often determine that the level of E/M service billed by the physician is not supported by the corresponding medical records, which results in the contractor down-coding the level of E/M service (e.g., 99214 is down-coded to 99213). Although the difference in reimbursement between the original and down-coded E/M service is not substantial, we often see CMS contractors review hundreds of E/M services during a single audit and/or use statistical extrapolation to audit all of the E/M services provided by the physician during a two-year time frame. Thus, when hundreds, or even thousands, of E/M claims are included in an audit, a negative determination by the contractor can be financially devastating to a physician's practice. Furthermore, contractors will often review a small sample of E/M claims only to come back at a later time to audit a much larger sample or place a physician on prepayment review.

Regardless of the type of audit at issue, physicians and physician practices should fully understand the implications of a Medicare audit and must not take an audit lightly. If you or your practice needs assistance in defending against a Medicare audit, or have questions about how you can start preparing for an audit in an effort to mitigate potential risks, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

April 17, 2014

AHA Files Lawsuit Contesting the Two-Midnight Rule

With the "doc-fix" bill extending the enforcement delay of the two-midnight rule to March 31, 2015, the American Hospital Association (AHA) has decided to use that time challenging the new inpatient admission rules. Earlier this week, AHA filed a lawsuit in the United States District Court for the District of Columbia challenging the "arbitrary standards and documentations requirements" of the new inpatient admission rules which "deprive hospitals of Medicare reimbursement to which they are entitled."

Specifically, AHA is challenging the definition of "inpatient" under the two-midnight rule, alleging that CMS's "inpatient" definition requiring a patient to spend two nights in the hospital is arbitrary and capricious because it bears no resemblance to the actual definition of "inpatient" and CMS has made no attempt to explain its reasoning for adopting such a meaning. Additionally, AHA is challenging the Final Rule's application of the one year time limit to file a Part B claim when a Part A inpatient claim is denied as not being medically necessary and reasonable. Recovery audit contractors (RACs) typically conduct post-payment reviews of inpatient hospital admissions with dates of admission in which the one year rebilling deadline has already elapsed. Finally, AHA asserts that CMS's new requirement that all short-stay inpatient admissions include a physician order for admission as a condition of Part A payment is unlawful. Through its lawsuit, AHA seeks for the court to vacate and set aside the two-midnight rule, the one year time limit, and the physician order policy.

Wachler & Associates will continue to monitor the current AHA lawsuit, as well as any further developments regarding CMS's new inpatient admission policies. If you have any questions pertaining to the two-midnight rule or the physician certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 14, 2014

OIG Finds Limited Compliance with Face-to-Face Home Health Requirements

In a report released on Thursday, April 10, the Office of the Inspector General ("OIG") found that, thus far, there has been limited compliance with the face-to-face documentation requirement for home health providers. As a result, the OIG determined that Medicare paid $2 billion to home health providers that should not have been paid. In an effort to increase compliance with the face-to-face requirement, the OIG has outlined specific recommendations that CMS could implement which would impact home health providers. The OIG's findings and recommendations should serve as an alert to home health providers to carefully review their compliance with face-to-face encounter documentation requirements.

The Patient Protection and Affordable Care Act ("ACA") included language that established the face-to-face encounter requirement. Although initially scheduled to be effective January 1, 2011, the Centers for Medicare and Medicaid Services (CMS) delayed implementation until April 1, 2011.

The face-to-face encounter documentation requirement provides that for initial certification periods only, a home health agency must obtain documentation from the certifying physician that the physician had a face-to-face encounter with the patient. The face-to-face documentation must be signed and dated by the physician. It must include the date the encounter occurred, and include a brief narrative that describes why the patient is homebound and why the skilled services are medically necessary to treat the patient's illness or injury. A home health agency's reimbursement for the home health services for an initial certification period is dependent upon the certifying physician's proper documentation of the face-to-face encounter.

The study conducted by the OIG examined Part A home health claims from January 1, 2011 through December 31, 2012 in an effort to determine the extent to which certifying physicians documented face-to-face encounters with beneficiaries. Based on the study, the OIG concluded that compliance with the face-to-face requirement has been limited and inconsistent. Specifically, the OIG concluded that mandated documentation did not meet Medicare requirements for 32% of home health claims that required face-to-face encounters which, according to the OIG, resulted in $2 billion in payments that should not have been made. The OIG further noted that face-to-face documentation was missing in 10% of claims, which totaled $605 million in payments that should not have been made. Lastly, the OIG found that of the face-to-face documents that were submitted, 25% of the documents were missing one of the required elements, usually the signature of the certifying physician.

The OIG also noted that physicians inconsistently completed the narrative content portion of the face-to-face documentation and that CMS oversight over the face-to-face documentation requirement was minimal because CMS does not have a specific program to oversee compliance with the requirement.

In an effort to increase compliance with the face-to-face documentation requirement, the OIG recommended the following policies be implemented:

  • CMS should consider requiring the use of a standardized form that includes all elements required for face-to-face documentation to serve as a default. The OIG notes that this should not be an onerous mandate.
  • CMS should develop a strategy that encompasses formal training and outreach to providers about the importance of compliance with face-to-face documentation.
  • Lastly, the OIG recommends that CMS work with the payment contractors to develop new review procedures to ensure compliance with the requirement of face-to-face documentation. The OIG notes that this is especially important given CMS's plans to implement the face-to-face requirement for durable medical equipment.

The OIG's report and recommendations reaffirm our experience that Medicare contractors are focusing more intently on home health agencies' compliance with the face-to-face encounter documentation requirements. Although compliance is dependent upon the certifying physician's documentation, it is vital that home health agencies review records for initial certification periods for face-to-face encounter documentation that meets the requirements. Specifically, home health agencies should review the narrative portion of the face-to-face encounter documentation to confirm that it sufficiently describes the beneficiary's homebound status and the reasons supporting the medical necessity of the skilled services. The brief narrative section of the face-to-face encounter documentation is the most subjective component to the documentation requirement and, therefore, many contractors deny payment for entire episodes of care based on the fact that the brief narratives are insufficient. In order to try to prevent these initial denials and/or have success challenging the denials during the Medicare appeals process, it is very important that the face-to-face encounter's brief narrative meets the stated objectives.

Wachler & Associates will continue to monitor any further developments regarding the face-to-face documentation requirement. If you have any compliance questions pertaining to the face-to-face encounter or other home health audit risk areas, or need assistance in defending claim denials during any stage of the Medicare appeals process, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 8, 2014

Moody's Report: Two-Midnight Rule to Weaken Hospital Profitability

On Wednesday, March 12, Moody's Investor Services released a report predicting that Medicare's new inpatient admissions policy, the "Two-Midnight rule", will negatively affect hospitals' bottom lines. The Two-Midnight rule instructs physicians and hospitals to use a two-midnight benchmark and order admission for patients expected to require hospital care crossing at least two midnights.

The Moody's report stated that "on average, the [Two-Midnight] rule could cause revenue reduction averaging $3,000 to $4,000 per case." The report suggests that these reduced reimbursement rates will be especially devastating since the cost of treating patients will remain the same. The report also suggests that the Two-Midnight rule will expedite the already increasing trend of more outpatient observation stays, which will put more pressure on hospital revenues. The impetus for this increasing trend of outpatient care observation stays has been the frequent challenges by RACs to the medical necessity requirement of short-stay admissions.

The report also concludes that under the Two-Midnight rule, hospitals with shorter lengths of stay will be most affected. The hospitals that are expected to be most affected are classified as 'low acuity' community hospitals. While these types of hospitals tend to have a larger number of cases resulting in shorter hospital stays, these stays typically still consume a large of amount of resources, such as diagnostic testing.

The report also concludes that smaller hospitals with less integrated medical staffs and less resources can expect to struggle in adapting to the new rule. The decision to hospitalize a beneficiary is a complex medical decision made by the physician in consideration of various risk factors, including the beneficiary's age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical decision of whether length of stay for medically necessary hospitalization is expected to surpass two-midnights and the physician should explain in detail in a beneficiary's medical records why the expectation of the need for care spanning at least two-midnights was appropriate in the context of that beneficiary's acute condition. Patients that are expected to be in the hospital for more than two-midnights, but are subsequently discharged early will qualify for inpatient reimbursement so long as the admitting physician properly documents that the admission was initially warranted. Smaller hospitals that are already stretched thin on physicians and support staff may find it much more difficult to satisfy these documentation requirements.

CMS, however, does not agree with the conclusions of the Moody's report. In its 2014 Hospital Inpatient Prospective Payment System (IPPS) Final Rule, CMS estimated that there will be about $220 million in additional expenditures from the net increase in hospital inpatient encounters.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

April 4, 2014

Two-Midnight Rule Enforcement Delay Extended to March 31, 2015

On April 1, 2014, President Barack Obama signed into law a bill (H.R. 4302) extending the enforcement delay of the two-midnight rule. Under the newly adopted law, Recovery Audit Contractors (RACs) will not conduct patient status reviews of inpatient hospital admissions on a post-payment basis until March 31, 2015. The two-midnight rule, which took effect October 1, 2013, provides that inpatient hospital admissions are generally appropriate when the physician expects the beneficiary will require medically necessary hospital services for 2 or more midnights. Since taking effect, hospitals' inpatient admission claims under the two-midnight rule have been free from review by the RACs.

Prior to the extended enforcement delay to March 31, 2015, the enforcement of the two-midnight rule was previously delayed by CMS to March 31, 2014, and again to September 30, 2014. Also extended to March 31, 2015 under the new law is the Medicare Administrative Contactors' (MACs) ability to conduct "Probe and Educate" reviews of a limited set - 10-25 claims depending on the size of the hospital - of inpatient admission claims for each hospital, which are conducted on a prepayment basis. When conducting "Probe and Educate" reviews, CMS has instructed the MACs to review hospital's compliance with the admission order requirements, the certification requirements, and the two-midnight benchmark.

Until March 31, 2015, hospital inpatient admissions under the two-midnight rule will be subjected only to a limited number of prepayment claim reviews by the MACs. Thus, for inpatient claims with dates of admission October 1, 2013 through March 31, 2015, the RACs will not conduct prepayment reviews, and both the RACs and the MACs will not conduct post-payment reviews.

The delay in the two-midnight enforcement does not mean hospitals should delay in implementing their revised admission policies to comply with the new inpatient admission rules. Failure to comply with the two-midnight rule, as well as the inpatient certification and order requirements, could result in the MACs conducting further "Probe and Educate" prepayment reviews with an increased claim volume (100-250 claims depending on the size of the hospital). Furthermore, the extended enforcement delay will not shield hospitals from CMS contractors where there is evidence of systematic gaming, fraud, abuse, or delays in the provision of care in an attempt to qualify for the two-midnight presumption.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or the inpatient certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

March 11, 2014

Legislation Unveiled to Clarify Two-Midnight Rule

On Thursday, in a bipartisan effort, two senators unveiled a proposed bill that attempts to clarify the infamous two-midnight rule. Senator Robert Menendez, a Democrat from New Jersey and Senator Deb Fischer, a Republican from Nebraska are co-sponsors of the bill. Titled as Two-Midnight Rule Coordination and Improvement Act of 2014, the bill mirrors a similar one currently working its way through the House of Representatives and has the support of numerous hospital and doctor associations.

Most notably, the bill would require the Secretary of the Department of Health and Human Services to consult with interested stakeholders - such as hospitals, physicians, Medicare administrative contractors, recovery audit contractors, and other parties determined appropriate by the Secretary - to determine the criteria for short inpatient stays. Additionally, the bill would require CMS to develop a payment methodology for the shorter inpatient stays. Although, in developing the payment methodology, the bill does not require consultation with the same stakeholders used in developing the criteria for shorter inpatient stays, the bill strongly encourages CMS to consider the criteria that the stakeholders developed.

Equally important in the bill are the timing provisions relating to the implementation of the criteria for shorter inpatient stays. Most importantly, the proposed bill keeps the current enforcement delay in place. The bill would also provide an additional year long delay in the enforcement of the two-midnight rule if the criteria for shorter inpatient stays are not implemented during the IPPS annual notice and comment rulemaking process for fiscal year 2015. If the criteria are in place during the fiscal year 2015 rulemaking process (i.e., regulations are finalized in 2014), the bill authorizes RACs to begin their work at the time of implementation, but not prior to October, 1, 2014. This measure ensures that hospitals are not subject to audits until the criteria are made final.

The proposed bill should come as welcome news to hospitals and other affected providers who have been perplexed by the complexities of the ill-devised two-midnight rule. These complexities have resulted in delays of the rule's enforcement on several occasions. Menendez and Fischer hope that the bill provides doctors with the flexibility and ability to provide patients with the care their medical conditions require. Both Senators noted that in its current form the two-midnight rule fails to recognize that a hospital stay for less than two nights is medically necessary and the most prudent approach.

Wachler & Associates will continue to monitor any further developments regarding CMS's new inpatient admission rule. If you have any questions pertaining to the two-midnight rule or certification and order requirements, please contact an experienced health care attorney at Wachler & Associates via phone at 248-544-0888 or via email at wapc@wachler.com.

February 26, 2014

Medicare Therapy Cap Exception Extended

On December 18, 2013, Congress enacted legislation extending the Medicare therapy cap until March 31, 2014. The 2014 outpatient therapy cap limits are $1,920 for physical therapy and speech-language pathology services combined, and $1,920 for occupational therapy services. In order to qualify for an exception to the therapy cap limits and continue to receive Medicare reimbursement, therapists must first document the need for medically reasonable and necessary services in the beneficiary's medical record and, separately, the therapist must indicate on the Medicare claim for services that the outpatient therapy services above the therapy cap are medically reasonable and necessary. Further, starting January 1, 2014, the Medicare outpatient therapy cap limits will also apply to therapy services performed in critical access hospitals.

Providers that meet or exceed the $3,700 threshold in therapy expenditures will be subject to a manual review. The manual review process for 2013 is not expected to change in 2014. Under the manual medical review process, Recovery Audit Contractors (RACs) will conduct either prepayment or postpayment review for claims exceeding $3,700 depending on the state. Currently, only Florida, California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina and Missouri are subject to prepayment review, while the rest of the nation is subject to postpayment review.

A bill that is currently working its way through Congress seeks to permanently repeal the therapy caps. The Medicare Access to Rehabilitation Act has bipartisan support and its sponsors argue that an arbitrary cap on outpatient services without regard to clinical need discriminates against some of the most vulnerable and needy Medicare recipients.

Wachler & Associates will continue to monitor the situation and provide guidance on developments in Medicare therapy cap policy. If you or your health care entity need help developing compliance plans or reviewing and refining existing audit defense strategies, please contact an experienced healthcare attorney at 248-544-0888 or at wapc@wachler.com. If you would like to subscribe to the Wachler & Associates Health Law Blog, please add your email address and click subscribe in the window on the top right of this page.