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.
Happy New Year, readers!!! A whole new year means a whole new investigation plan for the government…
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) publishes what is called a “Work Plan” every year, usually around November of each year. 2017 was no different. These Work Plans offer rare insight into the upcoming plans of Medicare investigations, which is important to all health care providers who accept Medicare and Medicaid.
For those of you who do not know, OIG is an agency of the federal government that is charged with protecting the integrity of HHS, basically, investigating Medicare and Medicaid fraud, waste, and abuse.
So let me look into my crystal ball and let you know which health care professionals may be audited by the federal government…
The 2017 Work Plan contains a multitude of new and revised topics related to durable medical equipment (DME), hospitals, nursing homes, hospice, laboratories.
For providers who accept Medicare Parts A and B, the following are areas of interest for 2017:
- Hyperbaric oxygen therapy services: provider reimbursement
- Inpatient psychiatric facilities: outlier payments
- Skilled nursing facilities: reimbursements
- Inpatient rehabilitation hospital patients not suited for intensive therapy
- Skilled nursing facilities: adverse event planning
- Skilled nursing facilities: unreported incidents of abuse and neglect
- Hospice: Medicare compliance
- DME at nursing facilities
- Hospice home care: frequency of on-site nurse visits to assess quality of care and services
- Clinical Diagnostic Laboratories: Medicare payments
- Chronic pain management: Medicare payments
- Ambulance services: Compliance with Medicare
For providers who accept Medicare Parts C and D, the following are areas of interest for 2017:
- Medicare Part C payments for individuals after the date of death
- Denied care in Medicare Advantage
- Compounded topical drugs: questionable billing
- Rebates related to drugs dispensed by 340B pharmacies
For providers who accept Medicaid, the following are areas of interest for 2017:
- States’ MCO Medicaid drug claims
- Personal Care Services: compliance with Medicaid
- Medicaid managed care organizations (MCO): compliance with hold harmless requirement
- Hospice: compliance with Medicaid
- Medicaid overpayment reporting and collections: all providers
- Medicaid-only provider types: states’ risk assignments
- Accountable care
Caveat: The above-referenced areas of interest represent the published list. Do not think that if your service type is not included on the list that you are safe from government audits. If we have learned nothing else over the past years, we do know that the government can audit anyone anytime.
If you are audited, contact an attorney as soon as you receive notice of the audit. Because regardless the outcome of an audit – you have appeal rights!!! And remember, government auditors are more wrong than right (in my experience).
Have you ever watched athletes compete in the high jump? Each time an athlete is successful in pole vaulting over the bar, the bar gets raised…again…and again…until the athlete can no longer vault over the bar. Similarly, the Center for Medicare and Medicaid Services (CMS) continue to raise the bar on health care providers who accept Medicare and Medicaid.
In February, CMS finalized the rule requiring providers to proactively investigate themselves and report any overpayments to CMS for Medicare Part A and B. (The Rule for Medicare Parts C and D were finalized in 2014, and the Rule for Medicaid has not yet been promulgated). The Rule makes it very clear that CMS expects providers and suppliers to enact robust self auditing policies.
We all know that the Affordable Care Act (ACA) was intended to be self-funding. Who is funding it? Doctors, psychiatrists, home care agencies, hospitals, long term care facilities, dentists…anyone who accepts Medicare and Medicaid. The self-funding portion of the ACA is strict; it is infallible, and its fraud, waste, and abuse (FWA) detection tools…oh, how wide that net is cast!
Subsection 1128J(d) was added to Section 6402 of the ACA, which requires that providers report overpayments to CMS “by the later of – (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable.”
Identification of an overpayment is when the person has, or reasonably should have through the exercise of reasonable diligence, determined that the person received an overpayment. Overpayment includes referrals or those referrals that violate the Anti-Kickback statute.
CMS allows providers to extrapolate their findings, but what provider in their right mind would do so?
There is a six-year look back period, so you don’t have to report overpayments for claims older than six years.
You can get an extension of the 60-day deadline if:
• Office of Inspector General (OIG) acknowledges receipt of a submission to the OIG Self-Disclosure Protocol
• OIG acknowledges receipt of a submission to the OIG Voluntary Self-Referral Protocol
• Provider requests an extension under 42 CFR §401.603
My recommendation? Strap on your pole vaulting shoes and get to jumping!
By now, however unwanted, health care providers are intimately acquainted with RAC audits. If you are one of the lucky providers who has not had the pleasure of undergoing a RAC audit and accept Medicare/caid, then you should go buy lottery tickets.
For Medicare providers, the RAC audits have been targeted to only Parts A and B. However, the Center for Medicare and Medicaid Services (CMS) proposes to expand the RAC audits to Medicare Advantage. CMS has published the proposal and seeks comments by February 1, 2016.
I am reminded of the Bubonic Plague from the 14th century.
As these Medicare audits continue to spread nationwide, to more CPT codes, and to more health care services, providers are warned to wash your hands. It is the best way to prevent acquiring a Medicare audit.
So far, there is no indication when the RAC audits for Medicare Advantage will begin. However, remember that RAC auditors are financially incentivized to audit and find errors. Thus, those RAC auditors will be chomping at the bit to get going.
Wouldn’t you if you were compensated 9-13% of amount found to be owed back to the state?
More to come…
Medicare is the largest payor of clinical lab services in the nation. Clinical lab services include everything from blood counts to urinalyses, and every letter of the alphabet in between. Lab services are performed by hospitals, independent labs, physicians, or other institutions.
Medicare Part B (which covers lab services) has had increased enrollment over the past few years, but the amount billed to Part B over the past few years has increased at a much higher rate. In other words, the amount of lab services billed to Part B has increased disproportionately to the increase in enrollment. Any number of factors could contribute to this: defensive practice of medicine, more reliance on laboratory testing, more labs…
Regardless, the higher billing amounts in lab services has now won the prestigious award of “Increased CMS Scrutiny!” (sarcasm, people). And the crowd goes wild!!!!
Mid-2014, the U.S. Office of Inspector General (OIG) published a study entitled, “Questionable Billing for Medicare Part B Clinical Laboratory Services.” OIG determined that Medicare allowed $1.5 billion to be paid for claims with questionable billing. It recommended that CMS: (1) review the labs identified with questionable billing and take appropriate action; (2) review program integrity strategies and determine whether such strategies are adequate; and (3) ensure that claims with invalid and ineligible ordering-physician numbers are not being paid.
In normal and expectant government time frames, the “dinosauric beast” has now determined, a little over a year later, that laboratory service claims warrant enhanced scrutiny. And a little over 85 years after its discovery, we finally determine that Pluto isn’t a planet.
CMS zoomed in their lens of scrutiny on lab services multiple times over a decade ago. Each “CMS zoom” resulted in millions and millions of money given to the federal government, which perpetuates the feds to zoom more and more…it’s easy money.
For example, in 2000, OIG issued Project LabScam, which resulted in substantial settlements against Laboratory Corporation of America Holdings, SmithKline Beecham, Met/Path, Damon, Roche, and Allied.
In 2002, OIG found that Medicare incorrectly paid $7.4 million for lab services with invalid ordering UPINs and $15.3 million for lab service claims with inactive ordering UPINs.
What does this mean to providers of lab services today?
It means you need to be prepared for an audit.
When I was young, one of my favorite games was “Red Rover.” Children would grasp arms and form a straight line facing the other team, which was doing the same. I would yell, “Red River, Red Rover, send Holly right over!” At which time, little Holly would be released from her line and prepare to run, full speed, into my line of little kids’ arms. Inevitably, once we saw where Holly was running, we would tighten up our grasps on one another’s arms to prepare for the impact.
Similarly, in preparation for upcoming audits, lab service providers need to tighten up.
The best way to be certain of your risks in a potential audit is to hire a professional consultant or an experienced attorney to review a large sample of your documents. This allows an outsider to provide an unbiased opinion as to your risk. You may have the best billing manager in the world, but, when it comes to a self audit, he or she already believes that his or her documentation is stellar and that the organization of such documents is self evident. Having an outsider audit your records is worth its weight in gold and the best way to tighten up pre-audit.
The second best way to be certain of your risks in a potential audit is to self audit. Even if you hire a consultant or an attorney for a one time, third-party audit, you still want to self-audit multiple times a year. Every now and then you need to kick the old tires.
How do you self audit?
FYI: My general explanation of how to self audit will be appropriate for all health care service provider types. I will describe some more detailed ways to self audit that will be specific to lab services.
In order to self audit, I teach the IAKA method, not to be confused with IKEA.
- Identify common risks
- Audit a sample of your documents
- Keep record of each step of your audit, including findings
- Act on the findings.
What are the common red flags in your industry?
For lab services, common red flags may be high average allowed amounts per ordering physician, high percentage of claims with ineligible ordering-physician numbers, high percentage of claims with compromised beneficiary numbers, and high percentage of duplicate lab tests.
Here’s an area to look into that you may not otherwise consider in a self audit: what percentage of your lab clients live outside 100 miles? This may sound hoaky, but I had a lab service client flagged because 92% of the clients resided over 150 miles away. There was a perfectly reasonable explanation for such anomaly, the lab was located in a large, prestigious hospital in a rural area and people came from miles away to the hospital, but the statistic still flagged it.
Another specific item to review is, on average, how much does each physician bill in the laboratory? Do you have 4 physicians who bill, on average, $60,000+ per ordering physician? Because, for an independent lab, that would be very high.
For the actual self audit, you want to break up the audit into two categories: standards and procedures and document compliance.
For standards and procedures, you are reviewing whether you are properly orienting new hires, the specific training you implement, your criminal background check procedures, HIPAA training, your license renewal processes, your certification renewal processes, etc.
For document compliance, you are reviewing for physician signatures and dates.
NOTE: It is not required, but it is extremely prudent to print the name of the signator underneath all signatures. I have seen auditors ding providers on “physicians not being licensed/credentialed” because the auditor could not read the name of the physician.
You are also reviewing for medical necessity, eligible ordering-physician numbers, distance the client is to the lab, amount prescribed to that particular client, amount prescribed by that particular physician, whether that test prescribed for the same client within a 12 month period, coding compliance, etc.
It is imperative that you keep meticulous records while you conducting the audits. You want to be able to show an auditor that you caught a mistake and that you implemented a plan of correction to remedy the mistake going forward. And that, in actuality, you remedied the mistake going forward. This documentation is essential for possible defenses to alleged potential overpayments, false claims, and, even, alleged criminal actions. Your documentation skills could be the difference between paying millions in penalties, or, in the extreme case, jail.
I got ahead of myself in the prior section by saying that you need to document the way in which you fix the mistake. But I cannot emphasize it enough. Acting on your findings is important, obviously, but documenting the actions is more important. Ever hear the saying, “If it isn’t documented, it didn’t happen?” Take that as gospel.
Be prepared. Be proactive. Be ready. Tighten up!