Category Archives: Inpatient Hospital Stays
On January 25, 2022, the U.S. Court of Appeals for the Second Circuit issued an important opinion in Barrows v. Becerra that will have a significant impact on hospitals, skilled nursing facilities and, potentially, other Medicare providers. The Second Circuit affirmed a ruling from the United States District Court for the District of Connecticut that the U.S. Secretary of Health and Human Services (HHS) violated the due process rights of a certified nationwide class of Medicare patients that were reclassified from “inpatient” to “observation” by a hospital’s utilization review committee (URC) without being provided an administrative review process to challenge that determination.
Although hospitals (and other Medicare providers and suppliers) are not typically considered to be governmental actors, the Second Circuit affirmed the district court’s conclusion that the Centers for Medicare and Medicaid Services (CMS) requirements surrounding hospital URCs made those determinations “state action” and thus subject to due process requirements under the Fifth Amendment of the U.S. Constitution.
The classification from “inpatient” to “observation” can have significant financial repercussions to the Medicare beneficiary. Hospital inpatient services are generally covered under Medicare Part A. Outpatient or observation services are generally covered under Medicare Part B. Medicare beneficiaries pay monthly premiums for Part B coverage and also are subject to copayment obligations under Part B that may be higher than the inpatient deductible under Part A.
The Second Circuit’s opinion has huge ramifications on providers, especially hospitals. This opinion says a hospital stands in the shoes of the government when deciding to charge this person’s hospital stay under Part B. But what if the hospital itself argues that Part A should pay and it disagrees with the patient being deemed outpatient? Well, this ruling gives hospitals a lot more leeway in its finances. A hospital can sue on behalf of its consumer or itself in getting higher or any reimbursements.
The threshold question presented in Barrows was whether CMS’s oversight and control over hospital URC’s reclassification determinations transform those URCs into state action and thus subject to constitutional due process. The Second Circuit affirmed the district court’s decision, which also included a permanent injunction, requiring the HHS Secretary to create some sort of due process if a Medicare beneficiary disagrees with a hospital URC’s reclassification determination.
This decision may also favorably impact skilled nursing facilities. Generally, a Medicare beneficiary must have a three-day inpatient stay at a hospital in order for Medicare to pay for a subsequent stay in a skilled nursing facility. This three-day requirement is currently waived during the COVID-19 public health emergency. Once the three-day-stay requirement returns, this decision may positively impact skilled nursing facilities by discouraging hospitals from reclassifying patients from inpatient to observation.
Although the district court decision was issued in 2020, the Second Circuit had granted a temporary stay to allow the HHS Secretary to appeal. In the Second Circuit’s opinion, the Court affirmed the district court and denied the HHS Secretary’s motion for stay as moot.
At this stage, HHS has not signaled what due process hospital URCs will have to provide a Medicare beneficiary who disagrees with a reclassification determination. There are also open questions about how to handle potential claims for various members of the class. The class includes Medicare beneficiaries who have been hospitalized since January 1, 2009, had their status changed from inpatient to hospital, received a notice from the hospital or Medicare, and either have Part A-coverage only or had Part A and B and were (or still could be) admitted to a skilled nursing facility within 30 days of hospital discharge.
The HHS Secretary has until late April 2022 to file a petition for writ of certiorari in the U.S. Supreme Court. At the time of this publication, HHS has not indicated whether it intends to appeal.
HEAR YE, HEAR YE: Medicare reimbursement rate increase!!
On April 27th, CMS proposed a rule to increase Medicare fee-for-service payment rates and policies for inpatient hospitals and long-term care hospitals for fiscal year (FY) 2022. The proposed rule will update Medicare payment policies and rates for operating and capital‑related costs of acute care hospitals and for certain hospitals. The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (“IQR”) Program and are meaningful electronic health record (“EHR”) users is approximately 2.8%. This reflects the projected hospital market basket update of 2.5% reduced by a 0.2 percentage point productivity adjustment and increased by a 0.5 percentage point adjustment required by legislation.
Secondly, a sample audit of nursing homes conducted by CMS will lead to more scrutiny of nursing homes and long-term care facilities. The sample audit showed that two-thirds of Massachusetts’s nursing homes that receive federal Medicaid and Medicare funding are lagging in required annual inspections — and MA is demonstrative of the country.
237 nursing homes and long-term care facilities in the state, or 63.7% of the total, are behind on their federal health and safety inspections by at least 18 months. The national average is 51.3%.
We cannot blame COVID for everything. Those inspections lagged even before the pandemic, the data shows, but ground to a halt last year when the federal agency discontinued in-person visits to nursing homes as they were closed off to the public to help prevent spread of the COVID.
Lastly, on April 29, 2021, CMS issued a final rule to extend and make changes to the Comprehensive Care for Joint Replacement (“CJR”) model. You’ve probably heard Dr. Ron Hirsch reporting on the joint replacement model on RACMonitor. The CJR model aims to pay providers based on total episodes of care for hip and knee replacements to curb costs and improve quality. Hospitals in the model that meet spending and quality thresholds can get an additional Medicare payment. But hospitals that don’t meet targets must repay Medicare for a portion of their spending.
This final rule revises the episode definition, payment methodology, and makes other modifications to the model to adapt the CJR model to changes in practice and fee-for-service payment occurring over the past several years. The changes in practice and payment are expected to limit or reverse early evaluation results demonstrating the CJR model’s ability to achieve savings while sustaining quality. This rule provides the time needed to test modifications to the model by extending the CJR model for an additional three performance years through December 31, 2024 for certain participant hospitals.
The CJR model has proven successful according to CMS. It began in 2016. Hospitals had a “statistically significant decrease” in average payments for all hip and knee replacements relative to a control group. $61.6 million (a savings of 2% of the baseline)
Since 2012, Medicare has penalized hospitals for having too many patients end up back in their care within a month. Mind you, these re-admissions are not the hospitals’ fault. Many of the re-admissions are uninsured patients and who are without primary care. Without an alternative, they present back at the hospitals within 30 days. This penalty on hospitals is called the Hospital Readmissions Reduction Program (HRRP) and is not without controversy.
For example, if hospitals are not allowed to turn away patients for their lack of ability to pay, then penalizing the hospital for a readmission (who the hospital cannot turn away) seems fundamentally unfair. Imagine someone at the Center for Medicare and Medicaid Services (CMS) yelling at you: “You cannot turn away any patients by law! But if you accept a patient for readmission, then you will be penalized!!” The logic is incongruous. The hospital is found in a Catch-22. Damned if they do; damned if they don’t.
The Emergency Medical and Treatment Labor Act (EMTLA) passed by Congress in 1986 explicitly forbids the denial of care to indigent or uninsured patients based on a lack of ability to pay. It also prohibits “patient dumping” a practice in which a hospital orders unnecessary transfers while care is being administered and prohibits the suspension of care once it is initiated.
Even non-emergent care is generally required, depending on the hospital. Public hospitals may not deny patient care based on ability to pay (or lack thereof). Private hospitals may, in non-emergency situations, deny or discontinue care.
The most recent HRRP report, which concentrated on Connecticut hospitals, which will penalize CT hospitals for too many readmissions starting October 1, 2018, shows: 27 of the 29 hospitals evaluated — or 93% — will be penalized in the 2019 fiscal year (Oct. 1, 2018 – Oct. 1, 2019) that began Oct. 1, according to a Kaiser Health News analysis of CMS data. $566 million in total penalties will be required, depending on the severity of the violations.
Here is the formula used to determine penalties for readmission within 30 days to a hospital:
No hospital that was audited received the maximum penalty of 3%, but 9 CT hospitals will have their Medicare reimbursements reduced by 1% or more. They are: Waterbury Hospital at 2.19%, Bridgeport Hospital at 2.01%, Bristol Hospital at 1.91%, Manchester Memorial Hospital at 1.74%, Johnson Memorial Hospital in Stafford Springs at 1.71%, Midstate Medical Center in Meriden at 1.37%, St. Vincent’s Medical Center in Bridgeport at 1.21%, Griffin Hospital in Derby at 1.17%, and Yale New Haven Hospital at 1.03%.
There is controversy over the HRRP.
Observation status does not count.
Interestingly, what is not evaluated in the Hospital Readmission Reduction Program may be just as important, or more so, than what it is evaluated. -And what is not evaluated in the HRRP has morphed our health care system into a plethora of observation only admissions.
Patients who are admitted under observation status are excluded from the readmission measure. What, pray tell, do you think the result has been because of the observation status being excluded??
- More in-patient admissions?
- More observation status admissions?
- No change?
If you guessed more observation status admissions, then you would be correct.
Most hospitals have developed clinical decision units, which are typically short-stay observation areas designed to care for patients in less than 24-hours. The difference between inpatient and observation status is important because Medicare pays different rates according to each status. Patients admitted under observation status are considered outpatients, even though they may stay in the hospital for several days and receive treatment in a hospital bed. Medicare requires a three-day hospital inpatient stay minimum before it will cover the cost of rehabilitative care in a skilled nursing care center. However, observation stays, regardless of length, do not count toward Medicare’s requirement.
30-Day readmission period is arbitrary.
Why 30-days? If a patient is readmitted on the 30th day, the hospital is penalized. But if the patient is readmitted on Day 31, the hospital is not penalized. There just isn’t a lucid, common sense reason except that 30 is a nice, round number.
The HRRP disproportionately discriminates against hospitals that have high volume of uninsured.
HRRP does not adjust for socioeconomic status. This means that the HRRP may be penalizing hospitals, such as safety-net hospitals, that care for disadvantaged populations.
When other laws, unintentionally or intentionally, discriminate between socioeconomic status, often an association or group brings a class action lawsuit in federal court asking the judge to declare the law unconstitutional due to discrimination. Discrimination can be proven in court by how the law of supply or how the law is written.
Here, the 27 hospitals, which will be receiving penalties for fiscal year 2019, serve a high population of low income patients. The result of which hospitals are getting penalized is an indication of a discriminatory practice, even if it is unintentional.
The Upshot from Knicole:
These hospitals should challenge the HRRP legally. Reimbursements for services render constitute a property right. Usurping this property right without due process may be a violation of our Constitution. For $566 million…there should be a fair fight.
Class Action Lawsuit Alleges Right to Inpatient Hospital Stays: Hospitals Are Damned If They Do…and Don’t!
Hospitals – “Lend me your ears; I come to warn you, not to praise RACs. The evil that RACs do lives after them; The good is oft interred with their appeals; So let it be with lawsuits.” – Julius Caesar, with modifications by me.
A class action lawsuit is pending against U.S. Health and Human Services (HHS) alleging that the Center for Medicare and Medicaid Services (CMS) encourages (or bullies) hospitals to place patients in observation status (covered by Medicare Part B), rather than admitting them as patients (covered by Medicare Part A). The Complaint alleges that the treatments while in observation status are consistent with the treatments if the patients were admitted as inpatients; however, Medicare Part B reimbursements are lower, forcing the patient to pay more out-of-pocket expenses without recourse.
The United States District Court for the District of Connecticut refused to dismiss the class action case on February 8, 2017, giving the legal arguments within the Complaint some legal standing, at least, holding that the material facts alleged warrant investigation.
The issue of admitting patients versus keeping them in observation has been a hot topic for hospitals for years. If you recall, Recovery Audit Contractors (RACs) specifically target patient admissions. See blog and blog. RAC audits of hospital short-stays is now one of the most RAC-reviewed issues. In fiscal year 2014, RACs “recouped” from hospitals $1.2 billion in allegedly improper inpatient claims. RACs do not, however, review outpatient claims to determine whether they should have been paid as inpatient.
On May 4, 2016, CMS paused its reviews of inpatient stays to determine the appropriateness of Medicare Part A payment. On September 12, 2016, CMS resumed them, but with more stringent rules on the auditors’ part. For example, auditors cannot audit claims more than the six-month look-back period from the date of admission.
Prior to September 2016, hospitals would often have no recourse when a claim is denied because the timely filing limits will have passed. The exception was if the hospital joined the Medicare Part A/Part B rebilling demonstration project. But to join the program, hospitals would forfeit their right to appeal – leaving them with no option but to re-file the claim as an outpatient claim.
With increased scrutiny, including RAC audits, on hospital inpatient stays, the class action lawsuit, Alexander et al. v. Cochran, alleges that HHS pressures hospitals to place patients in observation rather than admitting them. The decision states that “Identical services provided to patients on observation status are covered under Medicare Part B, instead of Part A, and are therefore reimbursed at a lower rate. Allegedly, the plaintiffs lost thousands of dollars in coverage—of both hospital services and subsequent skilled nursing care—as a result of being placed on observation status during their hospital stays.” In other words, the decision to place on observation status rather than admit as an inpatient has significant financial consequences for the patient. But that decision does not affect what treatment or medical services the hospital can provide.
While official Medicare policy allows the physicians to determine the inpatient v. observation status, RAC audits come behind and question that discretion. The Medicare Policy states that “the decision to admit a patient is a complex medical judgment.” Ch. 1 § 10. By contrast, CMS considers the determination as to whether services are properly billed and paid as inpatient or outpatient to be a regulatory matter. In an effort to avoid claim denials and recoupments, plaintiffs allege that hospitals automatically place the patients in observation and rely on computer algorithms or “commercial screening tools.”
In a deposition, a RAC official admitted that if the claim being reviewed meets the “commercial screening tool” requirements, then the RAC would find the inpatient status is appropriate, as long as there is a technically valid order. No wonder hospitals are relying on these commercial screening tools more and more! It is only logical and self-preserving!
This case was originally filed in 2011, and the Court of Appeals overturned the district court’s dismissal and remanded it back to the district court for consideration of the due process claims. In this case, the Court of Appeals held that the plaintiffs could establish a protected property interest if they proved their allegation “that the Secretary—acting through CMS—has effectively established fixed and objective criteria for when to admit Medicare beneficiaries as ‘inpatients,’ and that, notwithstanding the Medicare Policy Manual’s guidance, hospitals apply these criteria when making admissions decisions, rather than relying on the judgment of their treating physicians.”
HHS argues that that the undisputed fact that a physician makes the initial patient status determination on the basis of clinical judgment is enough to demonstrate that there is no due process property interest at stake.
The court disagreed and found too many material facts in dispute to dismiss the case.
Significant discovery will be explored as to the extent to which hospitals rely on commercial screening tools. Also whether the commercial screening tools are applied equally to private insureds versus Medicare patients.
Significant discovery will be explored on whether the hospital’s physicians challenge changing a patient from inpatient to observation.
Significant discovery will be explored as to the extent that CMS policy influences hospital decision-making.
Hospitals need to follow this case closely. If, in fact, RAC audits and CMS policy is influencing hospitals to issue patients as observation status instead of inpatient, expect changes to come – regardless the outcome of the case.
As for inpatient hospital stays, could this lawsuit give Medicare patients the right to appeal a hospital’s decision to place the patient in observation status? A possible, future scenario is a physician places a patient in observation. The patient appeals and gets admitted. Then hospital’s claim is denied because the RAC determines that the patient should have been in observation, not inpatient. Will the hospitals be damned if they do, damned if they don’t?
In the meantime:
Hospitals and physicians at hospitals: Review your policy regarding determining inpatient versus observation status. Review specific patient files that were admitted as inpatient. Was a commercial screening tool used? Is there adequate documentation that the physician made an independent decision to admit the patient? Hold educational seminars for your physicians. Educate! And have an attorney on retainer – this issue will be litigated.
The Yates memo? Sadly, we aren’t talking about William Butler Yates, who is one of my favorite poets:
TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand…Part of The Second Coming
Ok, so maybe it is a little melodramatic to compare the Yates memo from the Office of the Deputy Attorney General to the end of the world, the drowning of innocence, and The Second Coming, but I made analogies in past blogs that had stretched and, dare I say, hyberbolized the situation.
What is the Yates memo?
The Yates memo is a memorandum written by Sally Quillian Yates, Deputy Attorney General for the U.S. Dept. of Justice, dated September 9, 2015.
It basically outlines how federal investigations for corporate fraud or misconduct should be conducted and what will be expected from the corporation getting investigated. It was not written specifically about health care providers; it is a general memo outlining the investigations of corporate wrongdoing across the board. But it is germane to health care providers.
By far the most scary and daunting item discussed within the Yates memo is the DOJ’s interest in indicting individuals within corporations as well as the corporate entities itself, i.e., the executives…the management. Individual accountability.
No more Lehman Brothers fallout with former CEO Dick Fuld leaving the catastrophe with a mansion in Greenwich, Conn., a 40+ acre ranch in Sun Valley, Idaho, as well as a five-bedroom home in Jupiter Island, Fla. Fuld may have or may not have been a player in the downfall of Lehman Brothers. But the Yates Memo was not published back in 2008.
The Yates Memo outlines 6 steps to strengthen audits for corporate compliance:
- To be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about individuals involved in corporate misconduct.
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
So why write about now – over 6 months after it was disseminated?
First, since its dissemination, a few points have been clarified that were otherwise in question.
About a month after its publication, U.S. Assistant Attorney General Leslie Caldwell emphasized the Yates memo’s requirement that corporations must disclose all relevant facts regarding misconduct to receive cooperation credit. Caldwell went so far to say that companies must affirmatively seek relevant facts regarding misconduct.
For example, Hospital X is accused of Medicare fraud, waste, and abuse (FWA) in the amount of $15 million. The Yates memo dictates that management at the hospital proactively investigate the allegations and report its findings to the federal government. The memo mandates that the hospital “show all its cards” and turn itself in prior to making any defense.
The problem here is that FWA is such a subjective determination.
What if a hospital bills Medicare for inplantable cardioverter defibrillator, or ICD, for patients that had coronary bypass surgery or angioplasty within 90 days or a heart attack within 40 days? What if the heart attack was never documented? What if the heart attack was so minor that it lasted under 100 milliseconds?
The Medicare National Coverage Determinations are so esoteric that your average Medicare auditor could very well cite a hospital for billing for an ICD even when the patient’s heart attack lasted under 100 milliseconds.
Yet, according to the Yates memo, the hospital is required to present all relevant facts before any defense. What if the hospital’s billing person is over zealous in detecting mis-billings? The hospital could very well have a legal defense as to why the alleged mis-billing is actually compliant. What about a company’s right to seek counsel and defend itself? The Yates memo may require the company to turn over attorney-client privilege.
The second point that has been clarified since the Yates’ memo’s publication came from Yates herself.
Yates remarks that there will be a presumption that the company has access to identify culpable individuals unless they can make an affirmative showing that the company does not have access to it or are legally prohibited from producing it.
Why should this matter? It’s only a memo, right?
Since its publication, the DOJ codified it into the revised U.S. Attorneys’ Manual, including the two clarifying remarks. Since its inception, the heads of companies have been targeted.
A case was brought against David Bostwick, the founder, owner and chief executive officer of Bostwick Laboratories for allegedly provided incentives to treating physicians in exchange for referrals of patients who would then be subjected to these tests.
When the pharmaceutical company Warner Chilcott was investigated for health care fraud prosecutors also went after W. Carl Reichel, the former president, for his alleged involvement in the company’s kickback scheme.
Prior to the Yates’ memo, it was uncommon for health care fraud investigations to involve criminal charges or civil resolutions against individual executives.
The Second Coming?
It may feel that way to executives of health care companies accused of fraud, waste, and abuse.
Proposed Federal Legislation Will Provide Relief to Hospitals and Medicare Patients in Need of Post-Acute Care
The Center for Medicare and Medicaid (CMS) announced that the new RAC contracts in North Carolina should be ready by the end of the year. This means that, next year, RAC audits on hospitals and other providers will significantly increase in number. Get prepared, providers!!
However, there is proposed federal legislation that could protect hospitals and Medicare patients if passed.
Hypothetical: You present yourself to a hospital. The hospital keeps you in observation for 1 day. You are then formally admitted to the hospital as an inpatient for 2 more days. Under Medicare rules, will Medicare now cover your post-acute care in a skilled nursing facility (SNF)?
Answer: No. Observation days in hospitals do not count toward the Medicare 3-day requirement.
On November 19, 2014, Congressman Kevin Brady introduced draft legislation that would allow hospital observation stays to count toward establishing Medicare eligibility for post-acute services, as well as improve and supervise the RAC program.
You are probably wondering…Why would a hospital keep me in observation for a full day without admitting me as an inpatient when hospitals are reimbursed at a significantly higher rate for inpatient versus outpatient?
Answer: To avoid RAC recoupments.
In recent years, recovery audit contractors (RACs) have been exceedingly aggressive in post payment review audits in challenging hospital claims for short, inpatient stays. The RACs are motivated by money, and all of the RACs are compensated on a contingency basis, which leads to overzealous, sometimes, inaccurate audits. Here in North Carolina, Public Consulting Group (PCG) retains 11.5% of collected audits, and Health Management Systems (HMS) retains 9.75%. See my blog: “NC Medicaid Extrapolation Audits: How Does $100 Become $100,000? Check for Clusters!”
Why have RACs targeted short-stay admissions in hospitals? As mentioned, one-day inpatient stays are paid significantly more than similar outpatient stays. Because of the financial incentives, RACs often focus audits on whether the short-stay is appropriate because this focus will yield a larger overpayment. As a result, hospitals become hesitant to admit patients as an “inpatient” status and, instead, keep the patient in outpatient observation for longer periods of time.
Keeping a person in observation status rather than admitting the person could impact the person’s health and well-being, but it will also impact whether a Medicare patient can receive post-acute care in a SNF (or, rather, whether Medicare will pay for it).
In order for a Medicare patient to receive covered, skilled nursing care after a hospital stay, Medicare requires a 3-day inpatient stay. With the onslaught of RAC audits, hospitals become leery to admit a person as an inpatient. When hospitals are tentative about admitting people, it can adversely affect a person’s post-acute care services.
To give you an idea of how overzealous these RACs are when it comes to auditing Medicare providers, there are over 800,000 pending Medicare appeals. That means that, across the country, RACs and other auditing companies have determined that over 800,000 providers and hospitals that accept Medicare were improperly overpaid for services rendered due to billing errors, etc. Over 800,000 providers and hospitals disagree with the audit results and are appealing. Now, obviously, all 800,000 appeals are hospitals appealing audits findings short-stay admissions not meeting criteria, but enough of them exist to warrant Congressman Brady’s proposed bill.
The proposed bill will significantly impact RAC audits of short-stay admissions in hospitals. But the proposed bill will also extend the current short moratorium on RAC audits on short-stay admissions in hospitals. Basically, the RACs became so overzealous and the Medicare appeals backlog became so large that Congress placed a short moratorium on RACs auditing short-stay admissions under the two-midnight rule through the end of March 2015. The proposed bill will lengthen the moratorium just in time for NC’s new RACs to begin additional hospital audits.
The moral of the story is…you get too greedy, you get nothing…
Remember “The Goose That Laid the Golden Eggs?”
A man and his wife owned a very special goose. Every day the goose would lay a golden egg, which made the couple very rich. “Just think,” said the man’s wife, “If we could have all the golden eggs that are inside the goose, we could be richer much faster.” “You’re right,” said her husband, “We wouldn’t have to wait for the goose to lay her egg every day.” So, the couple killed the goose and cut her open, only to find that she was just like every other goose. She had no golden eggs inside of her at all, and they had no more golden eggs.
Too much greed results in nothing.
Similar to the husband and wife who killed the goose who laid the golden eggs, overzealous and inaccurate audits cause Congress to propose a temporary moratorium on RACs conducting audits on short-term hospital stays until the reimbursement rates are implemented within the same proposed bill (which, in essence will lengthen the moratorium until the rates within the bill are implemented, which also includes additional methods to settle RAC disputes).
The proposed bill, entitled, “The Hospitals Improvements for Payment Act of 2014,” (HIP) would revamp the way in which short hospital stays are reimbursed and how observation days are counted toward Medicare’s 3-day rule for post-acute care; thereby alleviating these painful hospital audits for short inpatient stays. Remember my blog: “Medicare Appeals to OMHA Reaches 15,000 Per Week, Yet Decisions Take Years; Hospital Association Sues Over Medicare Backlog.”
HIP would create a new payment model called the Hospital Prospective Payment System (HPPS) that would apply to short-term hospital stays.
What is a “short stay?” According to the proposed bill, a short stay is a: (1) stay that is less than 3 days; (2) stay that has a national average length of stay less than 3 days; or (3) stay that is “among the most highly ranked discharges that have been denied for reasons of medical necessity.”
Proposed HIP would also require the Department of Health and Human Services (HHS) to establish a new base rate of payment, which will be calculated by blending the base operating rate for short stays and an equivalent base operating rate for overnight hospital outpatient services.
The draft bill would also repeal the 0.2 percent ($200 million per year) reduction that CMS implemented with the two-midnight rule, which is the standard that presumes hospital stays are reasonable if the stay covers two midnights.
The proposed bill also mandates more government supervision as to the RACs.
This proposed bill comes on the cusp of an increased amount of RAC audits in NC on hospitals. As previously discussed, our new RAC contracts will be awarded before the end of this year. So our new RACs will come in with the new year…
The moral of the story?
Expect hospital RAC audits to increase dramatically in the next year, unless this bill is passed.
Muhammad Ali said, “Everybody has a plan until they get punched in the face.”
Whew…it’s a new year. While I thoroughly enjoyed 2013, I am excited and hopeful for 2014. Work is so busy that it seems like I’ve barely had time to breathe this January….that’s a good thing, right? Hey, anyone see me on TV? 🙂 Check out WRAL.
Hospitals, on the other hand, may be anxious and doubtful about their 2014s. Hospitals have good reason to wonder about the future. Our NC General Assembly was fairly harsh on hospitals in the last session, passing numerous session laws that directly or indirectly negatively affect hospitals.
But to be fair, the 2013 NC General Assembly didn’t ONLY affect hospitals…see Stephen Kobert’s report on North Carolina legislature. Kobert’s graphic simulation is hilarious!
Senate Bill 4 entitled “No NC Exchange/No Medicaid Expansion,” was one of the first bills out of the gate. While I am not necessary an advocate for expanding Medicaid (see my blog “Medicaid Expansion: Bad for the Poor“), I understand that Medicaid expansion would greatly benefit the hospitals, as well as Medicaid recipients.
Here is an interesting scenario:
Bradford Regional Medical Center and Olean General Hospital sit only 20 miles apart on opposite sides of the Pennsylvania/New York border. (See “Hospitals Facing Big Divide In Pro- and Anti- ACA States” by Beth Kutscher). New York expanded Medicaid and Pennsylvania did not. New York also opted to set up its own health exchange, which is working. Pennsylvania is floundering with healthcare.gov. Olean projects billions in lost revenue due to non-Medicaid expansion. I bet Olean wishes it could move the border of New York! Or its hospital!
House Bill 998 capped the sales tax refund that non-profit organizations, which was largely aimed at non-profit hospitals.
House Bill 834 and Senate Bill 473 require certain hospitals and health care facilities to publicize the costs many health care procedures. So when you need a CAT scan, you can see what UNC’s costs are for a CAT scan versus WakeMed’s and make an individual choice as to which hospital to present yourself. Sounds like a fair and reasonable request, but imagine the administrative cost for the hospitals to abide by the requirements.
Furthermore, the budget reduced hospital outpatient payments from 80% to 70% of costs. The budget further instituted a 3% Medicaid reimbursement “withhold” that the states calls a “shared savings plan.” The budget changed the hospital provider assessment state retention formula. Now the state can collect 25.9% of total assessment, instead of the cap of $43 million.
Not just the NC General Assembly affects hospitals. On the federal level, the Center for Medicare and Medicaid Services CMS) also took a stab. A new CMS rule converts the current Medicare 5-level, intensity-based payment system for clinic visits to one, single outpatient visit code. Prior to this change, a hospital could be reimbursed for a Medicare patient visit anywhere from $56.77 for a level 1 new patient to $175.79 for a level 5 new patient. Now all Medicare clinic visits are reimbursed at $88.31. You can see that some hospitals would not like this change.
But, as Ali said, “Everyone has a plan until they get punched in the nose.”
The possible punch to NC Hospitals?
Medicaid RAC audits…
For two years, we have been required to sign up Medicaid recovery audit contractors (RACs). But we have been slow. HMS, the RAC with contracts in 28 states, including North Carolina says that it has been slow getting started with Medicaid RACs because the state-by-state data have been scant and the procedural hurdles were difficult. But, according to “Report on Medicare Compliance,” Medicaid RAC audits will be in full swing for hospitals this year.
According to the same article, in North Carolina, two targets are tonsillectomies/adenoidectomies and ambulance services. Also, at issue in NC, are the DRGs and the medical necessity of inpatient admissions vs. outpatient services. While RACs are only to audit going back 3 years, the RACs can get permission to go back 5 years.
Medicaid RACs collect contingency fees anywhere between 9.5% to 12.5%, so they have the incentive to find problems.
HMS boasts that in two mid-Atlantic states, the Medicaid RAC recovered over $12.5 million through credit balance audits of inpatient facilities.
Pow!! Right in the kisser!
Hello, 2014! And Hello 3% Decrease in Medicaid Reimbursements (But Call the Decrease “Shared Savings”)
Tomorrow is the first Medicaid checkwrite for 2014 (and its my birthday too). Happy New Year! Happy birthday!! (I’m turning 29 for the 10th year). For New Years, my husband and I had a very quiet evening eating crab legs at home. Yum! I am sure many of you made New Years resolutions…work harder…lose weight…get paid 3% less….WHAT?
With the first Medicaid checkwrite tomorrow, due to Session Law 2013-360, many health care providers will receive 3% less in Medicaid reimbursements. You will receive a 3% cut if you are the following types of providers:
- Inpatient hospital.
- Physician, excluding primary care until January 1, 2015.
- Optical services and supplies.
- Hearing aids.
- Personal care services.
- Nursing homes.
- Adult care homes.
- Dispensing drugs.
(This is the exact list as found in Session Law 2013-360. I am well aware that the list is grammatically-challenged, but I did not write it). Both the federal government and NC are calling this 3% withholding “Shared Savings Plan with Provider.”
How is this “shared savings with providers” when the government is withholding money from providers??? Sure, supposedly, there will be a “pay for performance payment” to some providers, but most providers will just be reimbursed 3% less.
How is this fair? How is this “shared savings?”
Here’s an example:
Say I work at Harris Teeter and my manager comes up to me and says, “Hey, Knicole, Harris Teeter is really concerned with our overhead costs. Salaries seem to be a big cost, and we want to “share the savings” with you. So we are going to cut your pay by 3%. If we, subjectively, determine, at the end of the year, that you are working hard and saving us money, then we will give you a performance reward. It will not be all the money we retained, but it will be some amount. This way Harris Teeter profits off the interest of the 3% we retain all year, plus the amount we never give you.”
Folks, the above example is called a decrease in pay and a swift kick in the bottom. It is not “shared savings.”
In DHHS’ shared savings scheme, the money will go to:
“The Department of Health and Human Services shall use funds withheld from payments for drugs to develop with Community Care of North Carolina (CCNC) a program for Medicaid and Health Choice recipients based on the ChecKmeds NC program. The program shall include the following:
- At least 50 community pharmacies by June 30, 2015.
- At least 500 community pharmacies in at least 70 counties by June 30, 2016.
- A per member per month (PMPM) payment for care coordination and population health services provided in conjunction with CCNC.
- A pay for performance payment.”
According to the Centers for Medicare and Medicaid Services (CMS), “[a] shared savings methodology typically comprises four important concepts: a total cost of care benchmark, provider payment incentives to improve care quality and lower total cost of care, a performance period that tests the changes, and an evaluation to determine the program cost savings during the performance period compared to the benchmark cost of care and to identify the improvements in care quality.”
Employers chop salaries all the time in order to maximize profit. Back in 2011, Sony proposed 11% salary cuts for executives due to such a terrible fiscal year. But guess what is different between Sony’s 11% cut and Medicaid’s 3%? I know…I know…a lot….but what difference am I thinking about?
Sony sought shareholder approval.
I guess you can make the argument that the General Assembly sought voter approval because our citizens voted for all the legislators in the General Assembly. But I think that argument is weak. No legislator ran his or her campaign on: “Vote for Me! If you are a Medicaid provider, I plan to decrease your salary by 3%!”
Better yet, with the Sony salary cut, executives had the option to seek employment elsewhere. What is a Medicaid provider’s option? Move? Not take Medicaid? (Sadly, I see this as a more viable option).
On a legal note, I question the constitutionality of our new shared savings plan. Wouldn’t the decrease of 3% in Medicaid reimbursements be considered an unlawful taking without due process. In essence, could one argue that the decrease of 3% in Medicaid reimbursements is just a way for the State to decrease Medicaid reimbursements without going through the proper lawful process?
Then again, maybe we won’t need to worry about the 3% decrease at all…given NCTracks’ track record, it is plausible that NCTracks will not be able to adjust the Medicaid reimbursements by 3%.
Extrapolated audits are no fun, unless you work for a recovery audit contractor (RAC). You get a Tentative Notice of Overpayment (TNO) that says the auditor reviewed 100 dates of service (DOS), found an overpayment of $1,000, so you owe $1 million dollars. Oh, and please pay within 30 days or interest will accrue…
North Carolina’s 2nd recovery audit contractor (RAC) is ramping up. HMS had a slower start than Public Consulting Group (PCG); the Division of Medical Assistance originally announced that HMS would be conducting post-payment reviews last October 2012 in its Medicaid Bulletin. NC’s 1st RAC, PCG came charging out the gate. HMS has been a bit slower, but HMS is active now.
HMS is performing post-pay audits on inpatient and outpatient hospital claims, laboratory, specialized outpatient therapy, x-ray and long-term care claims reviews.
According to the December 2013 Medicaid Bulletin, the findings for the first group of automated lab reviews were released in early November 2013. Additional lab reviews are expected to be completed and findings released by late December 2013. The post-payment reviews are targeting excessive drug screening.
And specialized therapy service providers, you are next on the list!
How will the providers know the results of an HMS post-payment review? Same way as with PCG. You will receive a Tentative Notice of Overpayment (TNO) in the mail with some crazy, huge extrapolated amount that you supposedly owe back to the state.
If you receive a TNO, do not panic (too much), take a deep breath and read my blog: “You Received a Tentative Notice of Overpayment, Now What?”
Remember, most of the post-payment reviews that I have seen have numerous auditing mistakes on the part of the auditor, such as the auditor applying the more recent clinical coverage policies rather than the clinical coverage policy that was applicable to dates of services audited.
DMA Clinical Policy 1S-4 “Cytogenetic Studies“, for example, was recently revised February 1, 2013. Obviously, an auditor should not apply the February 1, 2013, policy to a service provided in 2012…but you would not believe how often that happens!
So what can you do to be prepared? Well, realistically, you cannot be prepared for audit ineptness.
But you can be proactive. Contact your insurance policy to determine whether your liability insurance covers attorneys’ fees for regulatory audits. It is important to be proactive and determine whether your insurance company will cover attorneys’ fees prior to undergoing an audit. Because if you find out that your liability insurance does not cover attorneys’ fees, then you can upgrade your insurance to cover attorneys’ fees. I promise, it is way better to pay additional premiums than get hit with $25,000+ bill of attorneys’ fees. Plus, if you wait until you are audited to determine whether your liability insurance covers attorneys’ fees and you realize it does not, then the insurance company may not allow you to upgrade your insurance. The audit may be considered a pre-existing condition.
So…proactiveness is imperative. But you can always move to West Virginia…
In a survey of 18 states conducted by the National Conference of State Legislatures (NCSL) and published August 29, 2013, NCSL determined that 10 states use extrapolations with the RAC audits, 7 do not and 1 intends to use extrapolations in the future. (No idea why NCSL did not survey all 50 states).
Delaware, Maryland, New Hampshire, Pennsylvania, Vermont, West Virginia, and Wisconsin do not use extrapolations in Medicaid RAC audits.
So moving to West Virginia is an option too…
Concurrent with the onslaught of Medicaid audits by North Carolina, Department of Health and Human Service (DHHS), Division of Medical Assistance (DMA), the federal HHS Office of Inspector General (OIG) is conducting its own Medicare audits. While, obviously, Medicare and Medicaid target different populations, many of the federal regulations are analogous. So I thought it would be prudent to point out some common errors HHS is finding in hospital billing as to Medicare.
According to the Report on Medicare Compliance (RMC), (to which, I am sure, everyone reading this blog subscribes), the three most common errors the OIG auditors are finding are as follows:
- Emergency Department (ED) admission source codes for psychiatric admissions
- Lupron (HCPCS code J1950)
- Tooth extractions (HCPCS D7140)
- Lymphocyte donor cell infusions (CPT 38242)
Obviously, the common errors for Medicaid billing may be different. For example, I know that Medicaid auditors are specifically reviewing records for short inpatient stays at hospitals; whereas any issue with records for short stays was not included by the RMC as a common error.
However, that said, I would be willing to bet the ED admission code errors for psychiatric admissions would be just as common in Medicaid as Medicare.
Most of the errors for admissions’ codes relate to inner-transfer of patients within the hospital (such as Patient X came in complaining of A, but gets transferred to be treated for D).
Remember, though, keep this audit stuff in perspective. The amount of documents that an auditor must review is enormous. Some providers are going through multiple audits at the same time. The auditors, generally, give short turnaround times for the providers to gather the documents and send the documents to the auditor, sometimes 10-15 days. (I have seen 5 days a couple of times). So, now imagine the sheer volume of documents, the complexity of the Medicaid policies and rules, and the amount of human error on the part of the auditor…add those together for an unattractive sum.
Just by way of example, RMC stated that a hospital last year received 3,400 medical-records requests (That is not the number of records that were requested; that is the number of records request. Each records request could be many records). This hospital’s records requests were increased last year from 1800 in 2011.
So, while the auditors are looking for document errors in millions of records, make sure the auditor is not making errors in reviewing the millions of documents.