Recovery Audit Contractors (RACs)

Published on: 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:

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.
The claim was not provided to a Medicare Part C (i.e., Medicare Advantage) enrollee.
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)).
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.
The first day of the inpatient admission was before October 1, 2013.
The claim denial was timely appealed, or the provider has not yet exhausted their appeal rights.
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.

Published on: July 14, 2014

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

by Wachler & Associates, P.C.

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.

Published on: July 9, 2014

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

by Wachler & Associates, P.C.

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.

Published on: July 3, 2014

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

by Wachler & Associates, P.C.

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;

Published on: June 16, 2014

OIG Recommends Increased Audits of E/M Services by CMS

by Wachler & Associates, P.C.

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.

Published on: May 15, 2014

CGI Federal Sues HHS over New Contracts and Payment Terms

by Wachler & Associates, P.C.

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.

Published on: April 25, 2014

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

by Wachler & Associates, P.C.

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.

Published on: April 17, 2014

AHA Files Lawsuit Contesting the Two-Midnight Rule

by Wachler & Associates, P.C.

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.

Published on: April 14, 2014

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

by Wachler & Associates, P.C.

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.

Published on: April 8, 2014

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

by Wachler & Associates, P.C.

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.