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.
When you have a Medicare appeal, it is not uncommon for the appeal process to last years and years – up to 3-6 years in some cases. There has been a backlog of approximately 800,000+ Medicare appeals (almost 1 million), which, with no change, would take 11 years to vet.
A Federal Court Judge says – that is not good enough!
Judge James Boasburg Ordered that the Medicare appeal backlog be eliminated in the following stages:
- 30% reduction from the current backlog by Dec. 31, 2017 (approximately a 300,000 case reduction within 1 year);
- 60% reduction from the current backlog by Dec. 31, 2018;
- 90% reduction from the current backlog by Dec. 31, 2019; and
- Elimination of the backlog of cases by Dec. 31, 2020;
A Medicare appeal has 5 steps. See blog. The backlog is at the Administrative Law Judge (ALJ) level – or, Level 3.
This backlog is largely attributable to the Medicare Recovery Audit Contractor (RAC) programs. In 2010, the federal government implemented the RAC program to recoup allegedly improper Medicare reimbursement payments. The RAC program (for both Medicare and Medicaid) has been criticized for being overly broad and burdensome and “nit picking,” insignificant paperwork errors. See blog.
While the RAC program has recovered a substantial sum of alleged overpayments, concurrently, it has cost health care providers an infinite amount of money to defend the allegations and has left Health and Human Services (HHS) with little funds to adjudicate the number of Medicare appeals, which increase every year. The number of Medicare appeals filed in fiscal year 2011 was 59,600. In fiscal year 2013, that number boomed to more than 384,000. Today, close to 1 million Medicare appeals stand in wait. The statutory adjudication deadline for appeals at the ALJ level is 90 days, yet the average Medicare appeal can last over 546 days.
The American Hospital Association (AHA) said – enough is enough!
AHA sued HHS’ Secretary Sylvia Burwell in 2014, but the case was dismissed. AHA appealed the District Court’s Decision to the Court of Appeals, which reversed the dismissal and gave the District Court guidance on how the backlog could be remedied.
Finally, last week, on December 5, 2016, the District Court published its Opinion and set forth the above referenced mandated dates for eliminating the Medicare appeal backlog.
While, administratively, the case was dismissed, the District Court retained “jurisdiction in order to review the required status reports and rule on any challenges to unmet deadlines.”
In non-legalese, the Court said “The case is over, but we will be watching you and can enforce this Decision should it be violated.”
This is a win for all health care providers that accept Medicare.
Another Win for the Good Guys! RAC Auditors Cannot Look Back Over 3 Years!!! (BTW: We Already Knew This -Shhhhh!)
I love being right – just ask my husband.
I have argued for years that government auditors cannot go back over three years when conducting a Medicaid/Care audit of a health care provider’s records, unless there are credible allegations of fraud. See blog.
42 CFR 455.508 states that “[a]n entity that wishes to perform the functions of a Medicaid RAC must enter into a contract with a State to carry out any of the activities described in § 455.506 under the following conditions:…(f) The entity must not review clams that are older than 3 years from the date of the claim, unless it receives approval from the State.”
Medicaid RAC is defined as “Medicaid RAC program means a recovery audit contractor program administered by a State to identify overpayments and underpayments and recoup overpayments.” 42 CFR 455. 504.
From the definition of a Medicaid RAC (Medicare RAC is similarly defined), albeit vague, entities hired by the state to identify over and underpayments are RACs. And RACs are prohibited from auditing claims that are older than 3 years from the date of the claim.
In one of our recent cases, our client, Edmond Dantes, received a Tentative Notice of Overpayment from Public Consulting Group (PCG) on May 13, 2015. In a Motion for Summary Judgment, we argued that PCG was disallowed to review claims prior to May 13, 2012. Of the 8 claims reviewed, 7 claims were older than May 13, 2012 – one even went back to 2009!
The Administrative Law Judge (ALJ) at the Office of Administrative Hearings (OAH) agreed. In the Order Granting Partial Summary Judgment, the ALJ opined that “[s]tatutes of limitation serve an important purpose: to afford security against stale demands.”
Accordingly, the ALJ threw out 7 of the 8 claims for violating the statute of limitation. With one claim left, the amount in controversy was nominal.
A note as to the precedential value of this ruling:
Generally, an ALJ decision is not binding on other ALJs. The decisions are persuasive. Had DHHS appealed the decision and the decision was upheld by Superior Court, then the case would have been precedent; it would have been law.
Regardless, this is a fantastic ruling , which only bolsters my argument that Medicaid/care auditors cannot review claims over 3 years old from the date of the claim.
So when you receive a Tentative Notice of Overpayment, after contacting an attorney, look at the reviewed claims. Are those reviewed claims over 3 years old? If so, you too may win on summary judgment.
Recently, hundreds of dentists across North Carolina received Tentative Notices of Overpayment (TNOs) from Public Consulting Group (PCG) demanding recoupment for reimbursements made to dentists who rendered services on Medicaid for Pregnant Women (MPW) eligible recipients. There was no dispute at this hearing that these women were eligible for MPW according to the Department of Health and Human Services’ (DHHS) portal. There was also no dispute that these woman had delivered their babies prior to the date of dental service. So the question becomes: If DHHS informs a dentist that a woman is MPW eligible on the date of the service, does that dentist have an individual and separate burden to determine whether these women are pregnant. And if so, what is it? Have them pee in a cup prior to dental services? See blog, and blog, and blog.
We do not have a definitive answer to the above-posed question, as the Judge has not rendered his decision. However, he did substantially limit these “nameless audits” or “non-RAC” audits to the RAC program limitations. In an Order on our Motion for Partial Summary Judgment, the Administrative Law Judge (ALJ) found that, even if the State does not agree that an audit is a RAC audit, if the audit conducted falls within the definition of a RAC audit, then the audit is a RAC audit.
The reason this is important is because RAC auditors yield such powerful and overwhelming tools against health care providers, the Affordable Care Act (ACA) limits the RAC auditors’ ability to look-back on older claims. For example, even though a provider is, generally, required to maintain records for six (6) years, the federal regulations only allow RAC auditors to look-back three (3) years, unless credible allegations of fraud exist.
Thus, when an auditor reviews documents over three-years-old, I always argue that the review of claims over 3-years-old violates the statute of limitations and federal law.
During hearings, inevitably, the state argues that this particular audit…the one at issue here…is not a RAC audit. The opposing side could no more identify which acronym this audit happens to be, but this audit is not a RAC. “I don’t know what it is, but I know what it’s not!”
Well, an ALJ looked past the rhetoric and pleas by the State that “this is not a RAC” and held that if it walks like a duck and quacks like a duck, then it is a RAC audit and, subsequently, the RAC audit limitations do apply.
In the case for this dentist, Public Consulting Group (PCG) audited claims going back as far as six years! The Department of Health and Human Services’ argument was that this audit is not a RAC audit. So what is it? What makes it NOT a RAC? Because you say so? We all know that PCG has a contract with DHHS to perform RAC audits. Is this audit somehow outside its contractual purview?
So I filed a Motion for Summary Judgment requesting the Judge to throw out all claims outside the three-year look-back period per the RAC limitations.
Lo, and behold, I was right!! (The good guys win again!)
To understand this fully, it is important to first understand what the RAC program is and its intention. (“It depends on what the definition of “is” is”).
Under 42 U.S.C. § 1396a(a)(42):
the State shall—(i) establish a program under which the State contracts (consistent with State law and in the same manner as the Secretary enters into contracts with recovery audit contractors under section 1893(h), subject to such exceptions or requirements as the Secretary may require for purposes of this title or a particular State) with 1 or more recovery audit contractors for the purpose of identifying underpayments and overpayments and recouping overpayments under the State plan and under any waiver of the State plan with respect to all services for which payment is made to any entity under such plan or waiver.
RAC is defined as an entity that “…will review claims submitted by providers of items and services or other individuals furnishing items and services for which payment has been made under section 1902(a) of the Act or under any waiver of the State Plan to identify underpayments and overpayment and recoup overpayments for the States.” 42 CFR § 455.506(a).
Under this definition, PCG is clearly a recovery audit contractor. And the Judge agreed. If it walks like a duck and quacks like a duck, just because the duck protests it is a donkey, it is still a duck. (Hmmmm..wonder how this logic would carry over to the whole transgender bathroom issue…another topic for another blogger…)
RACs must follow certain limitations as outlined in the Code of Federal Regulations. For example, pursuant to 42 C.F.R. § 455.508(f), a Medicaid RAC “must not review claims that are older than 3 years from the date of the claim, unless it receives approval from the State.”
In this particular case, there were 15 claims at issue. Eleven (11) of those claims were outside the three-year look-back period!! With one fell swoop of an ALJ’s signature, we reduced the claims at issue from 15 to 4. Nice!
In DHHS’ Response to our Motion for Partial Summary Judgment, DHHS argued that, in this case, PCG was not acting as a RAC; therefore, the limitations do not apply. In support of such decision, DHHS supplied an affidavit of a DMA employee. She averred that the audit of this particular dentist was not per the RAC program. No rules were cited. No contract in support of her position was provided. Nothing except an affidavit of a DMA employee.
Obviously, it is my opinion that the ALJ was 100% accurate in ruling that this audit was a RAC audit and was limited in scope to a 3-year look-back period.
If it walks like a duck, quacks like a duck, it is not a donkey. No matter how much it pleads that it is, in fact, a donkey!
Remember the Super Bowl Ad of the Puppy, Baby, Monkey?:
That is so NOT ok!
In a groundbreaking decision published today by the Court of Appeals (COA), the Court smacked down Public Consulting Group’s (PCG), as well as any other contracted entity’s, authority to wield an “adverse decision” against a health care provider. This solidifies my legal argument that I have been arguing on this blog and in court for years!
The Department of Health and Human Services (DHHS) is the “single state agency” charged with managing Medicaid. Federal law requires that that one agency manage Medicaid with no ability to delegate discretionary decisions. Case law in K.C. v. Shipman upheld the federal law. See blog.
Yet, despite K.C. v. Shipman, decided in 2013, in Court, DHHS continued to argue that it should be dismissed from cases in which a contracted vendor rendered the adverse decision to recoup, terminate, or suspend a health care provider. DHHS would argue that it had no part of the decision to recoup, terminate, or suspend, that K.C. Shipman is irrelevant to health care provider cases, and that K.C. v. Shipman is only pertinent to Medicaid recipient cases, to which I countered until I was “blue in the face” is a pile of horse manure.
DHHS would argue that my interpretation would break down the Medicaid system because DHHS cannot possibly review and discern whether every recoupment, termination, and/or suspension made by a contracted vendor was valid (my words, not theirs). DHHS argued that it simply does not have the manpower, plus if it has the authority to contract with a company, surely that company can determine the amount of an alleged overpayment…WRONG!!
In fact, in DHHS v. Parker Home Care, LLC, the COA delineates the exact process for the State determining an overpayment with its contracted agent PCG.
- DHHS may enter into a contract with a company, such as PCG.
- A private company, like PCG, may perform preliminary and full investigations to collect facts and data.
- PCG must submit its findings to DHHS, and DHHS must exercise its own discretion to reach a tentative decision from six options (enumerated in the NC Administrative Code).
- DHHS, after its decision, will notify the provider of its tentative decision.
- The health care provider may request a reconsideration of the tentative decision within 15 days.
- Failure to do so will transform the tentative decision into a final determination.
- Time to appeal to OAH begins upon notification of the final determination by DHHS (60 days).
Another interesting part of this decision is that the provider, Parker Home Care, received the Tentative Notice of Overpayment (TNO) in 2012 and did nothing. The provider did not appeal the TNO.
However, because PCG’s TNO did not constitute a final adverse decision by DHHS (because PCG does not have the authority to render a final adverse decision), the provider did not miss any appeal deadline. The final adverse decision was determined to be DHHS’ action of suspending funds to collect the recoupment, which did not occur until 2014…and THAT action was timely appealed.
The COA’s message to private vendors contracted with DHHS is crystal clear: “There is only one head chef in the Medicaid kitchen.”
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…
Often we read in the news stories of hospitals or health care providers paying inordinate amounts to settle cases in which credible allegations of fraud or allegations of false claims preside. Many times the providers actually committed fraud, waste, or abuse. Maybe medical records were falsified, or maybe the documents were created for Medicaid/care recipients that do not exist. Maybe the services claimed to have been rendered were not. In these cases, the provider can be held liable criminally (fraud) and/or civilly (false claims). And these providers should be held accountable to the government and the taxpayers.
It appears that this is not the case for an Ohio hospital that settled a False Claims Act case for $4.1 million last month. Do not get me wrong: The False Claims Act is no joke. Possible penalties imposed by the False Claims Act can be up to $10,000 per claim “plus 3 times the amount of damages which the Government sustains because of the act of that person.” 37 USC §3729. See blog for more explanation.
In the Ohio hospital’s case, the penalty derived from Dr. Abubakar Atiq Durrani, a spinal surgeon, performing spinal surgeries that, allegedly, were not medically necessary.
According to what I’ve read, there is no question that Dr. Durrani actually performed these surgeries. He did. On actual people who exist. Instead, the allegation is that the surgeries were not medically necessary.
I have blogged about medical necessity in the past. Medical necessity is a subjective standard. Medical necessity is defined as reasonable, necessary, and/or appropriate, based on evidence-based clinical standards of care.
But it is still a subjective standard. When you receive news that you suffer from a debilitating disease, what do you do? You get a second opinion. If one doctor recommends brain surgery, what do you do? You get a second opinion.
After that, you grab a handy, dandy Magic 8 Ball and give it a shake. Kidding. Kinda.
My point is that 2 physicians can recommend two different courses of treatment. One physician may practice more defensive medicine, while another may be more cautious. Surgeons will, generally, recommend surgery, more than non-surgeons; it’s what they do.
Going back to Dr. Durrani, who was arrested in 2013 for allegedly “convinc[ing] [patients] they needed spine and neck surgery. However, other doctors later determined those surgeries as unnecessary and damaging to the patient’s health.”
I find two points striking about this case: (1) The allegation that this physician “convinced” people to undergo spine surgery; and (2) The fact that the hospital settled for $4.1 million when no fraud existed or was alleged, only questions as to medical necessity, which is subjective.
As to the first, I am imagining my doctor. I am imagining that I have horrible, chronic back pain. My doctor recommends spinal surgery. There is no way, at all, ever, in this universe, that any doctor would be able to convince me to undergo surgery if I did not want surgery. Period. Who allows themselves to be peer pressured into surgery? Not to knock on my own profession, but I have a sneaky suspicion that this allegation was concocted by the plaintiffs’ attorney(s) and the plaintiffs responded, “Oh, you are right. I was persuaded.”
As to the second…Why did the hospital settle for such a high amount? Couldn’t the hospital have gone to trial and convinced a jury that Dr. Durrani’s surgeries were, in fact, reasonable and/or appropriate, based on evidence-based clinical standards of care?
According to the Magic 8 Ball, “signs point to yes.” Why cave at such a large number where no fraud was alleged?
Whatever happened to Dr. Durrani because of this whole mess? “Following his arraignment, Durrani allegedly fled the United States and remains a fugitive.”
In sum, based on allegations of questionable medical necessity, not fraud, a hospital paid $4.1 million and a U.S. physician fled into hiding…allegedly.
I question this outcome. I even question whether these types of allegations fall within the False Claims Act.
The False Claims Act holds providers liable for (abridged version):
- knowingly presenting a fraudulent claim to the Government;
- knowingly making a fraudulent record or statement to the Government;
- conspiring to do any of the referenced bullet points;
- having possession of Government money and knowingly delivering less than the amount;
- delivering a certified document intending to defraud the Government without completely knowing whether the information was true;
- knowingly buying or receiving as a pledge of debt, public property from the an employee of the Government who does not have the right to pledge that property;
- knowingly making, using, or causing to be made or used, a false record material to an obligation to pay the Government, or knowingly concealing or decreasing an obligation to pay the Government.
I see nothing in the False Claims Act punishing a provider for rendering services that, perhaps, may not be medically necessary.
I actually find questions of medical necessity to be easily defensible. After all, who do we look to for determinations of what are reasonable and/or appropriate services, based on evidence-based clinical standards of care?
Sure, some physicians may have conflicting views as to what is medically necessary. I see it all the time in court. One expert witness physician testifies that the service was medically necessary and another, equally as qualified, physician testifies to the contrary.
Unless I’m missing something (here, folks, is my “CYA”), I just do not understand why allegations of questionable medical necessity caused an U.S. physician to become a fugitive and a hospital to settle for $4.1 million.
It’s as if the hospital shook the Magic 8 Ball and asked whether it would be able to defend itself and received:
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.
Medicare Appeals to OMHA Reaches 15,000 Per Week, Yet Decisions Take Years; Hospital Association Sues Over Medicare Backlog
When you are a health care provider and make the business determination to accept Medicare or Medicaid, you are agreeing to deal with certain headaches. Low reimbursement rates and more regulations than you can possibly count make accepting Medicare and Medicaid a daunting experience. Throw in some pre- and post-payment review audits, some inept contractors, and dealing with the government, in general, and you have a trifecta of terrible to-dos.
But having to “pay back” (by reimbursement withholding) an alleged overpayment before an appeal decision is rendered is not a headache which hospitals have agreed to take, says the American Hospital Association. And it said so very definitively, in the form of a Complaint in the U. S. District Court for the District of Columbia
In both Medicaid and Medicare audits, if you get audited and are told to pay back XX dollars, you have a right to appeal that determination. Obviously, with Medicare, you appeal on the federal level and with Medicaid, you appeal to the state level. But the two roads to appeal (the state and federal) are not identical. Robert Frost once said, “Two roads diverged in a wood, and I, I took the one less traveled by, And that has made all the difference.” However,the Medicare appeal route is NOT the route less traveled by.
As of February 12, 2014, over 480,000 Medicare appeals were pending for assignment to an Administrative Law Judge (ALJ), with 15,000 new appeals filed each week. In December 2013, HHS Office of Medicare Hearings and Appeals (OMHA) announced a moratorium on assignment of provider appeals to ALJs for at least the next two years, and possibly longer. The average wait-time for a hearing is approximately 24 months, but will undoubtedly increase quickly due to the moratorium. A decision would not come until later. And all the while the parties are waiting, the provider’s reimbursements will be withheld until the alleged overpayment amount is met. Literally, a Medicare appeal could take 3-5 years.
The American Hospital Association is fed up. And who can blame them? On May 22, 2014, the American Hospital Association (AHA) filed a Complaint in the United States District Court in the District of Columbia against Kathleen Selebius, in her official capacity as Secretary of Health and Human Services (HHS), complaining that HHS is noncompliant with federal statutory law because of the Medicare appeal backlog. I am not surprised by AHA’s Complaint; I am only surprised that it took this long for a lawsuit. I am also surprised that more providers, other than hospitals, are not taking action.
AHA is requesting relief under the Mandamus Act, 28 U.S.C. § 1361. The Mandamus Act allows a court to compel an officer or employee of the United States or any agency thereof to perform a duty owed. In this case, the AHA is saying that HHS has a statutory duty to resolve Medicare appeals within 90 days. So, AHA is asking the district court to compel HHS to resolve Medicare appeals by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.
And, here, I am obliged to insert a quick, two thumbs-up for our very own Office of Administrative Hearings (OAH) in NC for its handling of Medicaid appeals. If you file a contested case at OAH, it will not take 3-5 years.
AHA’s lawsuit is significant because AHA does not restrict the relief requested to only hospital Medicare appeals. AHA requests that the District Court “enter a declaratory judgment that HHS’s delay in adjudication of Medicare appeals violates federal law.” If granted, I would assume that this declaratory judgment would impact all Medicare providers. The only way to ensure all providers are covered by this decision is for all providers to either (1) file a separate action (to include damages, which is not included in AHA’s action for some reason); or (2) to join AHA’s action (and forego damages), but its impact will be broad. I am not sure why AHA did not seek damages; the time value of money is a real damage…the non-ability for the hospitals to invest in more beds because their money is stuck at HHS is a real damage…the loss of the interest on the withheld money, which is obviously benefiting the feds, is a real damage.
AHA’s request is not dissimilar to an arrested individual’s right to a speedy trial. During a criminal trial, the defendant remains incarcerated. Therefore, because we believe our liberty is so important, the defendant has a right to a speedy trial. That way, if he or she is innocent, the defendant would have spent the least number of days imprisoned.
With a Medicare audit appeal, HHS begins immediately withholding reimbursements until the alleged overpayment amount is met, even though through the appeal, that overpayment will most likely be decreased quite substantially. Apparently, across the nation, the percent of overturned Medicare audits through appeal is around 72%, but I could not find out whether the 72% represents ANY amount overturned or the entire 100% of the audit being overturned. Because, in my personal experience, 99.9% of Medicare appeals have SOME reduction in the alleged amount (I would have said 100%, but we are taught not to use definitive remarks as attorneys).
Because the provider’s Medicare money is withheld based on an allegation of an overpayment, the fact that the cases are backlogged at the ALJ level is financially distressing for any provider.Even without the backlog, Medicare appeals take longer than Medicaid appeals. In Medicare, there is four-step appeal process. Going before the ALJ is the 3rd level.
First, a Medicare appeal begins with the Medicare Administrative Contractor (MAC) for redetermination. The MAC must render a redetermination decision within sixty days.
If unsuccessful, a provider can appeal the MAC’s decision to a Qualified Independent Contractor (“QIC”) for reconsideration. QICs must render a decision within sixty days.
Provided that the amount in controversy is greater than $140 (for calendar year 2014), the next level, and where the backlog begins, is at the level of appeal to an ALJ. The ALJ is required both to hold a hearing and to render a decision within ninety days, which is not happening.
Hence, AHA’s lawsuit. Hopefully AHA will be successful, because a backlog of Medicare appeals at the ALJ level doesn’t help anyone. And audits are not going away.