Articles Posted in Audit

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.

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.

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.

Recently, the Centers for Medicare and Medicaid Services (CMS) announced that, effective February 22, Recovery Audit Contractors (RACs) may no longer send additional documentation requests (ADRs) to providers for post-payment audits. In addition, February 28 is the last day a Medicare Administrative Contractor (MAC) may send prepayment ADRs for the RAC Prepayment Review Demonstration. According to CMS, this pause in ADRs is being implemented to allow the RACs to complete all outstanding claim reviews by the end of their current contracts. Furthermore, CMS stated that this pause will also allow CMS to continue to refine and improve the RAC program. This announcement was published less than a week after the Office of Medicare Hearings and Appeals (OMHA) Medicare Appellant Forum, which was held to address the current backlog of cases pending at the ALJ level of appeal.

It appears that, as a result of provider input as well as recent legislative participation, CMS is recognizing the challenges to providers of intense RAC scrutiny and withholding of payment without the corresponding appeal rights afforded under the statute. From this notice, we are hopeful that the ADRs will cease virtually immediately from the RACs and that, as of June 1, the MAC will not be able to effectuate offset for initial denials by the RACs. Hopefully, this will provide some needed relief to Medicare providers and give OMHA a chance to reduce its backlog so that, in the future, providers may receive due process in the timely manner that they are entitled to.

Wachler & Associates will continue to keep you updated on CMS’s changes to the RAC program and appeals process. If you need assistance in your defense of a Medicare audit, or have questions pertaining to best practices for appealing to the ALJ, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com

This morning, Andrew Wachler, managing partner of Wachler & Associates, appeared on RACmonitor’s special coverage of the ALJ Appellant Forum taking place today in Washington. Mr. Wachler provided some context for the occasioning of this forum. “When you really look at the event,” Andrew Wachler said, “it starts back in 2005.” This was when the appeal system was changed to align Part A and Part B appeals. The change in legislation provided specialized administrative law judges, in an attempt to curb excessive wait times in the appeals process. The legislation imposed a statutory requirement to issue a response within 90 days of appeal filing. However, Mr. Wachler says, “the brunt of hearing requests have not been acted upon.” In a conversation with Judge Nancy J. Griswold, Chief Administrative Law Judge, Office of Medicare Hearings and Appeals (OMHA), Mr. Wachler had previously suggested the establishment of a committee of stakeholders to meet and discuss inefficiencies in the process. Judge Griswold suggested such a forum would occur, and today’s event appears to be just that.

The main question today is whether the forum represents a meaningful attempt at reform and addressing the backlog, or whether it is merely meant to placate the providers. Mr. Wachler remains skeptically optimistic. However, while the forum today will provide some practical tips on navigating the ALJ appeals process, Mr. Wachler does not expect it to solve what he believes is a significant problem – “the holding of provider’s money while we have these delays is unconscionable….people are being put out of business while they wait.”

Mr. Wachler will be appearing again this afternoon on RACmonitor. Information on their special coverage of the ALJ Appellant Forum can be found here. If you have any questions regarding the information provided at the forum, please contact an experienced healthcare attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.

Recently, the Centers for Medicare and Medicaid Services (CMS) announced that it has decided to extend the Inpatient Hospital Prepayment “Probe and Educate” reviews. The probe reviews, which were previously extended to March 31, 2014, have now been extended for dates of admission through September 30, 2014. During the probe reviews, Medicare Administrative Contractors (MACs) will continue to review and deny claims found not to be in compliance with the 2-midnight rule. These reviews will continue to be conducted on a prepayment basis, and the MACs will continue to provide education to hospitals throughout the “probe and educate” review process. During the probe review process, other Medicare contractors, including Recovery Audit Contractors (RACs), will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission between October 1, 2013 and October 1, 2014.

In an effort to provide updated information and additional clarification, CMS will host a follow-up Special Open Door Forum (ODF) on February 4, 2014 from 1:00 p.m. – 2:00 p.m. Much like the previous ODFs, interested parties will have an opportunity to ask questions regarding inpatient hospital admission, medical review criteria, physician orders and physician certification. You can participate in the ODF via conference call: Participant Dial-In Number: 877-251-0301; Conference ID: 47736519.

If you have any questions regarding the “probe and educate” reviews, physician orders and certification requirements, the 2-midnight rule, or medical review criteria, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or wapc@wachler.com.