Wachler & Associates Health Law Blog

Published on: January 5, 2012

CMS Announces Interim Final Rule Creating New Standards for EFTs

Today, the Centers for Medicare and Medicaid Services (CMS) announced an interim final rule with comment period which creates new standards for electronic funds transfers (EFT) and remittance advice transaction (RA) under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). According to the U.S. Department of Health and Human Services (HHS), the new standards will save physician practices and hospitals between $3 and $4.5 billion over the next ten years, as well as result in an estimated savings of 800,000 pounds of paper due to the elimination of paper checks.

HHS will require health plans to comply with two standards when transmitting EFT payments to providers: (1) a standard format for when a health plan orders, authorizes, or initiates an EFT with its financial institution, and (2) specification of the data content to be contained within the EFT. Currently, when a provider submits a claim for payment electronically, the RA is often sent separately from the EFT payment, making it difficult for the provider to match the bill with the corresponding payment. The new rule seeks to eliminate these errors by requiring the use of a trace number that automatically connects the RA to the EFT.

Today’s regulation is the second in the series of regulations that CMS is required to design by Section 1104 of the Patient Protection and Affordable Care Act of 2010. The first regulation was announced last July. It implemented operating rules for two electronic health care transactions that give providers a simpler method to determine whether a patient is eligible for coverage and the status of a health claim submitted.

Published on: January 3, 2012

CMS has Delayed the Recovery Auditor Pre-Payment Review Demonstration Program

by Wachler & Associates, P.C.

Last week, CMS announced its decision to delay the Recovery Auditor Pre-Payment Review Demonstration Program until further notice. On its website CMS indicated that the delay was due to comments/suggestions received regarding the program and CMS’ commitment to consider the comments carefully. Although it is unclear at this time whether CMS will eventually implement the demonstration program as it was initially announced or make significant changes to the program, CMS confirmed that it will provide at least 30 days notice before the demonstration program begins.

For more information on pre-payment review and strategies to utilize if on pre-payment review, please contact Wachler & Associates attorney at 248-544-0888 or visit www.racattorneys.com.

Published on: December 30, 2011

CMS Announces Delay of Power Mobility Device Demonstration Program

by Wachler & Associates, P.C.

On December 29, the Centers for Medicare and Medicaid Services (CMS) announced that it would delay the start of the Prepayment Review and Prior Authorization of Power Mobility Devices (PMDs) Demonstration Program. CMS originally announced the demonstration program on November 15 and followed the announcement with special Open Door Forums explaining the program’s implications for providers and suppliers. During the Open Door Forums suppliers expressed their concerns that the program would have dire consequences for suppliers of power mobility devices. Some suppliers also questioned CMS’ failure to consult with industry leaders prior to announcing the demonstration program.

The industry’s pressure was effective. CMS’ decision to delay the start of the program was a result of “intensive collaboration” between CMS and AAHomecare. Industry leaders also obtained support from a number of members of Congress who wrote a letter to Marilyn Tavenner, the Acting Administrator of CMS, to delay the implementation of the program and work with industry leaders. In a press release, AAHomecare’s Vice President of Government Affairs, Walt Gorski stated, “we are pleased that CMS has taken a deep breath to understand the power mobility sector and the impact that any widespread prepayment review would have on Medicare beneficiaries and homecare providers.”

It is unclear at this time how long the start of the program will be delayed. CMS stated that it will review the comments and suggestions provided by industry stakeholders and will provide at least 30 days’ notice prior to the demonstration program implementation date.

Published on: December 29, 2011

CMS Implements 3-day Payment Window Policy for Wholly Owned or Wholly Operated Physician Practices

by Wachler & Associates, P.C.

Recently, the Centers for Medicare and Medicaid Services (CMS) released Change Request 7502 relating to the 3-day payment window policy. For services on or after January 1, 2012, the 3-day payment window will apply when a patient is seen in a physician practice that is wholly owned or wholly operated by a hospital and is admitted as an inpatient within 3-days (or, in the case of non-IPPS hospitals, one day). The window will apply to diagnostic and nondiagnostic services that are clinically related to the reason for the patient’s inpatient admission, regardless of whether the inpatient diagnosis is the same as the outpatient diagnosis.

For claims with dates of service on or after January 1, 2012, a new modifier PD is available and must be appended to the entity’s preadmission diagnostic services, as well as nondiagnostic services related to the admission. When a related inpatient admission has occurred, the wholly owned or wholly operated entity will need to manage their billing processes to ensure that they bill for their physician services appropriately. The hospital is responsible for notifying the wholly owned or wholly operated entity that a patient has been admitted as an inpatient when the entity provided services to the patient within the 3-day window.

When the modifier is present on claims for services, CMS shall pay:

Published on: December 23, 2011

Ten Highlights from the Proposed Physician Payment Sunshine Act Rule

by Wachler & Associates, P.C.

In the December 19, 2011 Federal Register, CMS published a Proposed Rule to implement the “Physician Payment Sunshine Act” portion of Patient Protection and Affordable Care Act (PPACA), or health care reform, which requires drug, medical device, biological and medical supply manufacturers to track and report payments made to physicians and teaching hospitals. The Proposed Rule clarifies several components of the Physician Payment Sunshine Act, including the following:

1. Applicable manufacturers must report the required information to CMS in an electronic format by March 31, 2013 and on the 90^th day of each calendar year thereafter.

2. The Physician Payment Sunshine Act will apply to any manufacturer whose products are sold or distributed in the United States regardless of where they are manufactured.

Published on: December 22, 2011

CMS’ Special Open Door Forum on Recovery Auditor Pre-Payment Review Demonstration Program

by Wachler & Associates, P.C.

On December 21, the Centers for Medicare & Medicaid Services (“CMS”) held a special Open Door Forum (“ODF”) for the Recovery Auditor Pre-Payment Review Demonstration Program announced on November 15 along with two other demonstration programs, all of which will become effective on January 1, 2012.

The ODF, in which 1600 callers participated, addressed the purposes and the operational aspects of the program. CMS explained that they developed the program in an effort to reduce the error rate for improper payments, prevent improper payments before they are made and to focus on claims with high improper payment rates.

The demonstration program will begin with the pre-payment review of short-stay inpatient hospital claims (two days or less) for hospitals located in the eleven states affected by the demonstration program. Specifically, one MS-DRG, 312 Syncope & Collapse, will be reviewed beginning January 1. In March and then again in May CMS will add two more MS-DRGs and in July CMS will add three more. Thus, by July there will be eight DRGs subject to pre-payment review under the demonstration program:

Published on: December 20, 2011

CMS to Reopen Home Health Claims Denied Based on Face-to-Face Requirements

by Wachler & Associates, P.C.

CMS has announced that it is requiring Medicare to reopen claims that contractors denied because Home Health Agencies (“HHA”) allegedly did not comply with “Face-to-Face” encounter requirements put in place by the Patient Protection and Affordable Care Act (“ACA”), or Health Reform legislation.

The Face-to-Face encounter rules require that the physician certifying the patient’s need for home health care must have seen the patient “face-to-face” in order for Medicare to pay for a home healthcare episode. This encounter must take place either 90 days before the home health episode, or within 30 days of the beginning of home health care.

Providers brought to CMS’ attention that contractors were inappropriately denying claims based on the face-to-face requirement in two situations following an acute or post-acute stay:

Published on: December 19, 2011

CMS Announces Special Open Door Forum for the Recovery Auditor Pre-Payment Review Demonstration Program

by Wachler & Associates, P.C.

On Wednesday, December 21, the Centers for Medicare and Medicaid Services (CMS) will hold a Special Open Door Forum on the Recovery Auditor Pre-Payment Review Demonstration Program. The Demonstration Program is a mandatory program for providers in 11 states, including: CA, FL, IL, LA, MI, MO, NC, NY, OH, PA and TX. The program will involve Recovery Auditors’ (RACs’) pre-payment review of certain claims, beginning with hospital short-stay inpatient claims. After the November 15 announcement of the program, CMS has released very little details about the program. We encourage all Medicare providers in the 11 states, especially hospitals, to participate in the Open Door Forum. The details of the forum and call-in information are listed below.

For more information on CMS’ recent demonstration projects or for assistance with appealing a Recovery Auditor’s determination, please contact a Wachler & Associates attorney at 248-544-0888 or visit www.racattorneys.com.

Date: Wednesday, December 21, 2011

Published on: December 5, 2011

CMS AB Demonstration Program: Hospitals’ Participation in December 8 Open Door Forum

by Wachler & Associates, P.C.

As discussed in earlier posts, hospitals that participate in CMS’ upcoming Part A to Part B Rebilling Demonstration Program will be required to waive their right to appeal claims denied for lack of medical necessity for services provided in the inpatient setting. CMS’ rationale for this “all or nothing” approach is the concern that a participating hospital could appeal the denial of the Part A inpatient claim and at the same time resubmit the claim for Part B reimbursement. As any participating provider that intentionally engages in that type of billing practice would expose themselves to liability for double-billing, it is unrealistic for CMS to anticipate that participation in the demonstration program would encourage this behavior. During the RAC demonstration programs, in which hospitals were afforded the flexibility denied to them for the AB demonstration program, there was no evidence that hospitals tried to “game” the system.

Further, despite CMS’ overreaching concerns that hospitals will take advantage of a more flexible demonstration program that allowed case-by-case appeals, the agency’s concerns do not extend to the likelihood that RACs will take advantage of the demonstration program’s structure. CMS claims that the RACs will not know the hospitals that participate in the demonstration program, and therefore will not have an incentive to deny more claims from those hospitals knowing that they are immune from appeals. However, RACs will very likely know the participants because those hospitals will not submit appeals for the denied inpatient claims and the RACs will receive smaller contingency fees for those denied claims.

We strongly urge hospitals to participate in the CMS’ December 8 special Open Door Forum (details below). During the Open Door Forum, hospitals should express their dismay with the current structure of the demonstration program, specifically the waiver of any appeal rights for denied inpatient claims. In addition, hospitals must incorporate into their RAC appeals process the effort to obtain Part B payment for inpatient services denied as not medically necessary. Only through a concerted effort by the hospital industry will we convince CMS to modify the current rebilling system.

Published on: November 30, 2011

Open Door Forum for Part A to Part B Rebilling Demonstration Program

by Wachler & Associates, P.C.

This afternoon, CMS conducted the first special Open Door Forum (ODF) on the Part A to Part B Rebilling Demonstration Program. The ODF involved a brief overview of the Demonstration Program followed by many questions by the ODF participants. Although the ODF provided some clarification on the Demonstration Program, CMS’ answers also gave rise to many concerns regarding the fairness of the Demonstration Program.

One of the most serious concerns is a Demonstration Program participant’s right to appeal a denial of an inpatient claim. According to CMS’ answers from callers’ questions, participation in the Demonstration Program is “all-or-nothing”. This means that if a participant’s claim is denied for lack of medical necessity for services provided in the inpatient setting, the participant’s only option is to resubmit the claim for outpatient reimbursement. Even if the participant disagrees with the contractor’s denial of the inpatient claim, the participant will not be allowed to appeal the inpatient denial. Clearly this limitation has very serious consequences for hospitals because it requires participants to waive all of their due process rights for these claims. First, between the RAC Demonstration Program and Permanent Program we have had success in overturning 90% of short-stay inpatient claims denied for services provided in the wrong setting. Accordingly, requiring a hospital to waive the right to challenge these denials appears to be a high price to pay to participate in the AB Demonstration Program. The limitation highlights the inequity of a system where a provider must choose between either appealing the denial of an inpatient claim, but being unable to rebill the claim for outpatient reimbursement or rebilling the claim for 90% reimbursement of the outpatient claim, but waiving all due process rights.

In a program where RACs are paid through a contingency fee based upon the dollar amount of claims they deny, it is concerning that RACs now have an incentive and unbridled discretion to deny inpatient claims where there will be no right to appeal. During the ODF, CMS insisted that the RACs will not be informed of the hospitals participating in the demonstration program and thus, will not have an incentive to deny more inpatient claims. However, RACs will likely be able to deduce the participants because the participants will not appeal any inpatient claim denials and RACs contingency fee for participants will be different from non-participants. Specifically the contingency fees that RACs will receive as a result of denials from participants will not be the contingency fee of the full inpatient claim or the outpatient claim, but of the difference between the full inpatient claim and outpatient claim. This differential will be unique to program participants. Therefore, it is likely that RACs will know the participants of the Demonstration Program and could target them because of the participants’ inability to appeal denied inpatient claims.