Articles Posted in Audit

On April 26, 2013, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to clarify when a Medicare beneficiary is appropriately admitted to a hospital as an inpatient and what is required for Medicare Part A payment of hospital inpatient services. In this rule, CMS proposes a time-based presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay. More specifically, RACs and other Medicare contractors would presume that hospital inpatient admissions are appropriate for payment under Medicare Part A if the beneficiary is admitted to the hospital pursuant to a physician order and receives care for at least two midnights. Similarly, there would be a presumption that hospital inpatient admissions spanning less than 2 midnights should have been provided on an outpatient basis, unless there is clear documentation in the medical record supporting the physician’s order and expectation that the beneficiary would require care spanning more than 2 midnights or the beneficiary is receiving a service or procedure designated by CMS as inpatient-only. In contrast, CMS’s current manual instructions indicate that physicians should use a 24-hour period and the expectation of a beneficiary’s need for an overnight stay in the hospital as inpatient admission benchmarks. In reviewing inpatient stays that did not reach the 2 midnight threshold, RACS and other Medicare contractors will be instructed to employ factors similar to those currently included in the Medicare Benefit Policy Manual (MBPM) to determine the medical necessity of the inpatient admission. These factors include, for example, the severity of the signs and symptoms exhibited by the patient and the medical predictability of something adverse happening to the patient. Later in the proposed rule, however, CMS indicates that it will codify the general 2 midnight threshold rule at 42 CFR 412.3(c)(1) and that 42 CFR 412.3(c)(2) would include an exception stating that “…if an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A.” This language tends to suggest that a Medicare contractor’s review of an inpatient admission of less than 2 midnights will focus less on the clinical factors listed above, and more on “unforeseen circumstances.” Clarification will likely be sought during the open comment period.

In addition, the proposed rule also clarified the requirement that a patient is admitted as an inpatient only on the recommendation of a physician or licensed practitioner permitted by the State to admit patients to the hospital. The proposed rule explained that this requirement is understood to mean that a patient is admitted through an inpatient admission order given by the practitioner responsible for the care of the patient, provided that the practitioner, either a physician or other licensed practitioner, has been authorized by the State and granted admitting privileges by the hospital. However, CMS clarifies that although the Conditions of Participation (CoPs) do not specifically prohibit the delegation of an inpatient admission to a non-physician practitioner, for payment purposes CMS will clarify in regulation that the authority to admit cannot be delegated to an individual who lacks that authority in his or her own right.

This proposed policy is intended to address longstanding concerns from hospitals that they need more guidance on when a patient is appropriately treated and paid by Medicare as an inpatient. Although CMS’ proposed rule provides some clarity on how a medically necessary inpatient admission would be defined by a Medicare review contractor, it raises other questions, particularly how Medicare review contractors will review inpatient admissions spanning less than 2 midnights. Please note that CMS will accept comments on the proposed rule until 5:00 p.m. EST on June 25, 2013. The comments must be received by that time and date, not postmarked. CMS will respond to comments in a final rule to be issued by August 1, 2013.

The Centers for Medicare & Medicaid Services (CMS) plans to make significant changes to the Recovery Auditor (RAC) program. In doing so, CMS hopes to address providers’ complaints and improve the RAC program through new Recovery Auditor contracts that will be awarded next year.

The most significant change is the creation of a fifth, nationwide Recovery Audit Contractor that is solely responsible for the identification and correction of improper payments for home health and hospice claims and payments for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). The change leaves the existing four regional RACs in place to identify overpayments for all other Medicare A/B claims and provider types.

In the Statement of Work for DME and Home Health Recovery Auditors, CMS claims that the changes will further the Recovery Audit Program’s goal of “efficient detection and correction,” and assist the Agency in “lowering future error rates and identifying improper payments that will have the greatest impact on the [Medicare and Medicaid] Trust Fund.”

On March 13, 2013, the Centers for Medicare & Medicaid Services (“CMS”) released a Proposed Rule and Administrator’s Ruling that provide for significant revisions to Medicare’s Part B payment policy when a Part A hospital inpatient claim is denied as not medically necessary because the care was not provided in the appropriate setting. CMS’s Administrator’s Ruling (CMS-1455-R) was issued to address the significant number of pending appeals of Part A hospital inpatient reasonable and necessary denials while the new Proposed Rule entitled, Medicare Program; Part B Inpatient Billing in Hospitals, (CMS-1455-P), which proposes a permanent policy that would apply on a prospective basis, goes through notice and comment rulemaking. As a result, the Part A to Part B Rebilling Demonstration Program has been terminated.

CMS’s Interim Ruling and Proposed Rule differ in many important aspects from the Medicare Appeals Council’s longstanding position articulated in In re: O’Connor Hosp., that hospitals are entitled to full Part B payment, including observation and underlying services, following a denial of Part A reimbursement and that any Part B payment is subject to the rules governing administrative finality and will not be time-barred. For example, although the Interim Ruling and Proposed Rule would allow a hospital to submit a Part B claim for more services than just the limited number of ancillary medical and other health services listed in Chapter 6, Section 10 of the Medicare Benefit Policy Manual (“MBPM”), services that require an outpatient status, such as observation services, will not be reimbursed for the time period the beneficiary spent in the hospital as an inpatient.

In addition, although the Interim Ruling explicitly waives the potential timeliness of filing requirements with regard to the billing of a Part B claim following the denial of a Part A claim and provides hospitals with 180 days from the denial to bill for an outpatient stay, the Proposed Rule, should it become final it its current form, would deny Part B claims if filed more than 12 months after the date of service. Accordingly, if a RAC waits 12 months to deny a claim or should 12 months elapse from the date of service while a hospital is in the appeals process, the hospital will be left empty-handed.