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The Centers for Medicare and Medicaid Services (CMS) published a proposed rule on November 5 regarding RAC activities for Medicaid programs.  Section 6411 of the Patient Protection and Affordable Care Act (PPACA) requires states to contract with one or more Medicaid RACs by December 31, 2010.  By that date, states are also required to submit to CMS a State Plan Amendment (SPA) which documents the initiation of the Medicaid RAC program.  The proposed rule stated April 1, 2011 as a goal for Medicaid RAC implementation.

The proposed rule addresses four main points including contingency fees, reporting, appeals and coordination of audit efforts.  Comments are requested on the current methodologies for determining the maximum contingency fees allowed under the Medicaid RAC program.  According to the proposed rule, no state will pay a contingency fee higher than the maximum allowed under the Medicare RAC program, unless it provides ample justification for an exception based on the existing state law.  States must also provide incentives for the identification of underpayments to the Medicaid payments.

In addition, under the proposed rule states will report to the federal government only the net amount of collected overpayments after contingency fees that were paid to the contractor have been subtracted from the total.  Each state will be required to refund the federal share of the net overpayment amount to the federal government.  States will also have to issue reports describing the effectiveness of their Medicaid RAC programs.

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Cardiac Pacemaker Implantations and Cardiac Defibrillator Implantations were two of the most targeted services from an overpayment standpoint during the RAC demonstration period.  This makes them potential prime targets for the permanent RACs in the future.  As such, sufficient documentation of the need for services provided at the inpatient level of care are paramount when providing these services, due to increased scrutiny they will undoubtedly receive from the permanent RACs once approved.  CMS recently noted the high probability of overpayment in connection with these claims in an MLN Matters article.

To date, neither pacemaker implants nor defibrillator implants have been approved for medical necessity reviews by the RACs.  But the potential for recoupment suggests these procedures will be approved for medical necessity review in the future.  Currently, the permanent RACs are reviewing percutaneous cardiovascular procedures and other vascular procedures for medical necessity in all four regions.

Providers need to be prepared to show the medical necessity of the inpatient stay for cardiac implantations in the medical record.  If you would like additional information regarding preparing for RAC reviews or would like to have your current procedures reviewed for compliance, please contact a Wachler & Associates attorney at 248-544-0888.

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The U.S. Justice Department filed a lawsuit against Blue Cross Blue Shield of Michigan (BCBSM) on Monday, October 18.  The Justice Department alleges that BCBSM violated antitrust laws by using its strong presence in the market to increase prices for its competitors, which resulted in Michigan residents paying higher health care and health insurance costs.  Specifically, the Justice Department says that BCBSM required hospitals to charge competitors more.  The Detroit Free Press reported that the Michigan attorney general’s office stated, “the investigation showed that Blue Cross increased its payouts to many hospitals to guarantee the hospitals would in turn charge all other insurers up to 40 percent more, pricing them out of the market and raising prices on all Michigan consumers.” 

The Detroit Free Press reported that BCBSM adamantly refuted the allegations.  BCBSM stated that the lawsuit was without merit and that its responsibility in contracting with hospitals is to negotiate on behalf of its members and costumers, not to negotiate against other health care insurers.

For more information on Michigan health care news, please visit the Michigan Healthcare News section on the Wachler Blog. 

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In September the Joint Commission announced that it will begin to accredit patient-centered medical home models for physicians by July 2011.  A medical home model is a method to deliver care that is based on the ability to demonstrate evidence-based protocols, self-management education and care coordination with specialists and other facilities.  The Joint Commission’s final standards will be available in March 2011 and on-site surveys will begin in July 2011. 

The American Medical Association supports patient-centered medical homes, but stated to American Medical News that it will continue to work with the Joint Commission to ensure that proposed accreditation standards will focus on patient safety and access to physician care.  Currently, some of these practices follow the standards published by a Washington D.C.-based organization, National Committee for Quality Assurance (NCQA).  NCQA argues that more accreditation or recognition bodies will complicate the accrediting landscape and will cause confusion among providers.

For more information on patient centered medical homes or other health care reform concepts, please contact a Wachler & Associates attorney at 248-544-0888.

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The Office of the Inspector General recently released the Work Plan for fiscal year (FY) 2011. The Work Plan describes areas the OIG will focus on in the upcoming year; something all practitioners concerned with compliance should pay attention to.  Medical devices, radiation therapy quality and safety, and an expanded focus on the three and one day payment windows are all covered.

Part of the focus for FY 2011 is on quality and billing concerns.  In particular, brachytherapy reimbursement, replacement of devices received at no cost or reduced cost, safety and quality of intensity-modulated radiation therapy (IMRT) and the safety and quality of image guided radiation (IGRT) are areas receving increased scrutiny.  When it comes to billing issues, particularly for a difficult billing area such as medical devices, providers need to be aware of the correct procedure.  Conducting a thorough and in depth compliance audit of a provider’s billing procedures is a smart and effective way to make sure that office practices do not run afoul of proper procedures.

With respect to the payment window rules, the Work Plan has added a one day payment window for non-IPPS facilities.  This rule is akin to the three day payment window available to IPPS facilities and it requires payments to non-IPPS facilities for diagnostic services provided the day before an inpatient claim to be included, along with other services related to admission on the day before admission, as part of the inpatient claim.

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The RACs for Regions A, B and C recently added new approved issues for review.  The RAC for Region A, DCS Healthcare, added two issues, DRG validation claims and outpatient claims, to its list for providers in Region A states.  CGI, the RAC for Region B, added two new issues for professional services claims and the RAC for Region C, Connolly Healthcare, added a new issue for outpatient hospital claims and physician (carrier) claims.

For more information on Recovery Audit Contractors, or for assistance with a Medicare audit, please contact a Wachler & Associates attorney at 248-544-0888. 

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On October 4, 2010 the Centers for Medicare and Medicaid Services (CMS) published a letter that was sent to state Medicaid directors as part of a series of letters that will provide guidance for the implementation of provisions of the Patient Protection and Affordable Care Act (PPACA), including the expansion of the Recovery Audit Contractor (RAC) program to Medicaid.  States are required to contract with Medicaid RACs consistent with state law and the RACs will be paid through contingency fees.  States will submit a State Plan Amendment (SPA) to CMS through which the State will either attest that it will establish a Medicaid RAC program by December 31, 2010 or indicate that it is seeking an exemption from the requirements.  CMS will permit states to maintain flexibility in the design of the state’s Medicaid RAC program and the number of entities the state will enter into contracts with, so long as the states act within the parameters of the statutory requirements. 

States that seeks to request variances or exceptions from the Medicaid RAC program must submit to CMS a written request from the state’s Medicaid Director to the CMS/Medicaid Integrity Group.  CMS has expressed that it will grant complete Medicaid RAC program exceptions rarely and only under the most compelling of circumstances.

Another important component of the Medicaid RAC program is the contingency fee payment to the contractors.  PPACA requires that Medicaid RACs be paid only from amounts “recovered” on a contingent basis for collecting overpayments and in amounts specified by the State for identifying underpayments.  Although CMS will not dictate the contingency fee rates, the maximum rate will be established.  CMS will publish a notice in the Federal Register, no later than December 31, 2010, to announce the highest Medicare RAC contingency fee rate and this rate will apply to Medicaid RAC contracts with a performance period beginning on or after July 1, 2014.  The contingency fee rates should be reasonable and take into account several factors, including: the level of the effort performed by the RAC, the size of the state’s Medicaid population, the nature of the state’s Medicaid health care delivery system and the number of Medicaid RACs engaged.  The fees paid to Medicaid RACs must include amounts associated with (1) identifying and recovering overpayments and (2) identifying underpayments.  States must maintain an accounting of amounts recovered and paid, and ensure that the total Medicaid RAC fees paid are not more than the total amount of overpayments collected.

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The Office of the Inspector General recently released Advisory Opinions 10-20 and 10-21.  Advisory Opinion 10-20 deals with a radiology group seeking to pre-authorize insurers free of charge for referring physician groups.  These requests for pre-authorization would be handled before the requestor would be providing the services.  Additionally the radiology group would bear the financial risk if they were not able to obtain preauthorization from the insurers.

Although the situation where services are provided free of charge to a referring source does have a potential for risk, the OIG mentioned several mitigating factors present in the proposed arrangement to limit the risk of influencing referrals.  One factor that limits the risk of influencing a referral is that the proposed arrangement would not target any specific physicians and since there are a large number of insurers the requestor would be unlikely to know the specific obligations of a physician with respect to any particular patient.  To help reduce the risk of fraud and abuse, no payment would be made to physicians, no assurance of preauthorization approval would be made and all private laws would be followed.  The arrangement would be operated transparently, where the insurers would know that the call center was operated by the requestor.  Finally, the OIG noted that the requestor’s insurance reimbursement is at stake, which is a legitimate business purpose.

For all the aforementioned reasons, the OIG determined that the risk of inducing referrals under the proposed arrangement was minimal given the safeguards and legitimate business purpose.

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On October 8, U.S. District Judge George Steeh refused to grant an injunction that would prevent the implementation of the federal health reforms enacted through the Affordable Care Act.  Judge Steeh also dismissed several substantive portions of the suit, determining that Congress did not exceed its constitutional authority by requiring most people to buy health insurance.  The lawsuit was brought by the Thomas More Law Center, an Ann Arbor-based Christian legal center and four plaintiffs.  The Detroit Free Press reported that an attorney for the law center, Robert Muise, stated that the plaintiffs will appeal the decision.

The Michigan lawsuit is one of several lawsuits filed challenging provisions of the Affordable Care Act.  Another lawsuit filed by several attorney generals, including Michigan Attorney General Mike Cox, is in the appeals process with oral arguments scheduled for December 16.

For more information on federal healthcare reform, please visit www.wachler.com or contact a Wachler & Associates attorney at 248-544-0888. 

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In September the American Hospital Association (AHA) released its RACTrac for the second quarter of 2010.  RACTrac is a nationwide survey conducted by the AHA which documents the ongoing Recovery Audit Contractor (RAC) activity.  The purpose of the survey is to fill the void of information provided by the Centers for Medicare & Medicaid Services (CMS) on the RAC program’s impact on hospitals. 

RACTrac reported that 1,389 hospitals participated in the survey from all of the RAC regions.  During the first quarter of 2010, more than two thirds of these hospitals experienced RAC activity.  The survey results indicated that the RACs primarily engaged in complex reviews.  For instance, during the first quarter of 2010, 88 percent (over $15.5 million) of the reported RAC activity by hospitals participating in the survey was involved in complex reviews, while 20 percent was involved in automated reviews.  Complex reviews require human review of the medical records and a determination of whether or not an improper payment was made.  If an improper payment is identified, the hospital will receive a letter stating that the associated claim has been “denied.”  Automated reviews, however, involve a claim determination without human review of the medical records.  Instead, the RACs utilize software to detect certain types of errors.  The RAC will send a demand letter to the hospital, providing notice that an overpayment has been detected. 
Participating hospitals also reported appealing 16 percent of the RAC denials available for appeal.  Of the claims that had completed the appeals process at the time of the survey, 13 percent were overturned in favor of the provider.  However, 1,571 of the claims are still in the appeals process and the overturned rate may increase once the appeals process is complete. 
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