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At this time of year, do you try to get your children or grandchildren to behave better by telling them “Santa Claus is watching?” Santa is watching the kids, but for medical coders, Medicare is watching and not just at Christmas time.

Medicare medical review activity is often the subject of the articles in this newsletter. A lot of the audits and their associated denials focus on the medical necessity of services and documentation to support that. But coders and Medicare reviewers also know that inaccurate coding can often result in improper payments for Medicare services. In November, the Office of Inspector General (OIG) added a new topic to their Work Plan that will examine hospital inpatient coding - Assessing Inpatient Hospital Billing for Medicare Beneficiaries.  Here is the OIG’s description of the new Work Plan item:

“In 2016, hospitals billed Medicare $114 billion for inpatient hospital stays, accounting for 17 percent of all Medicare payments. The Centers for Medicare & Medicaid Services and the Office of Inspector General have identified problems with upcoding in hospital billing: the practice of mis- or over-coding to increase payment. We will conduct a two-part study to assess inpatient hospital billing. The first part will analyze Medicare claims data to provide landscape information about hospital billing. We will determine how inpatient hospital billing has changed over time and describe how inpatient billing varied among hospitals. We will then use the results of this analysis to target certain hospitals or codes for a medical review to determine the extent to which the hospitals billed incorrect codes.”

Although this description uses the phrase “the practice of mis- or over-coding to increase payment,” healthcare providers and coders know that usually increased payment from coding errors is just that – an error, without intent to defraud anyone. That is why hospitals need to make sure their coders are knowledgeable, well-trained, and receive appropriate on-going education. They also need to have processes in place for over-sight such as routine internal and/or external audits of coding.

The OIG is not the only Medicare reviewer currently looking at hospital inpatient coding accuracy. All four of the Recovery Auditors (RACs) have an approved issue for MS-DRG Validation audits:

“MS-DRG Coding requires that diagnostic and procedural information and the discharge status of the beneficiary, as coded and reported by the hospital on its claim, matches both the attending physician description and the information contained in the beneficiary's medical record. Reviewers will validate MS-DRGs for principal and secondary diagnosis and procedures affecting or potentially affecting the MS-DRG assignment.”

Medicare Administrative Contractors (MACs) Novitas (Jurisdictions H and L) and WPS (J5 and J8) also have DRG Validation listed as one of their Targeted Probe and Educate (TPE) medical review topics. Palmetto JJ and JM have TPE DRG Validation (coding) reviews for Heart Failure and Shock with MCC or CC (MS-DRGs 291 and 292). The guidelines for inpatient diagnosis coding are found in the ICD-10-CM Official Guidelines for Coding and Reporting and for procedure coding in the ICD-10-PCS Official Guidelines for Coding and Reporting. On-going guidance is provided through updates in the American Hospital Association (AHA)’s Coding Clinic.

Medicare reviewers also examine coding accuracy for outpatient claims. For outpatient diagnosis coding, coders follow the guidance of Diagnostic Coding and Reporting Guidelines for Outpatient Services. Since outpatient claims are paid based on procedure codes, this area is also ripe for audit. Specifically, all four RACs have APC Validation approved audits – “APC coding requires that procedural information, as coded and reported by the hospital on its claim, match both the attending physician description and the information contained in the beneficiary's medical record. Reviewers will validate the APC by reviewing the procedures affecting or potentially affecting the APC assignment.”

Outpatient procedures are reported with CPT and HCPCS codes. The American Medical Association (AMA) CPT Manual, CPT Assistant and the AHA’s Coding Clinic for HCPCS provide guidance on appropriate CPT coding. CMS creates and maintains alpha-numeric HCPCS codes and often provides guidance on their usage through transmittals and manual instructions. In addition, CMS follows the guidance of the National Correct Coding Initiative (NCCI) so coders also have to be aware of these instructions. NCCI instructions may or may not be consistent with CPT instructions making the coder’s job even harder. There are numerous audit issues that look at individual coding requirements from CPT and/or NCCI as evidenced by these RAC issues:

• Shoulder arthroscopy procedures include a limited debridement (e.g., CPT code 29822).
• Reporting multiple cataract removal codes for the same eye.
• Coding right heart catheterization with an endomyocardial biopsy.
• Add-on codes reported without primary code.
• A diagnostic endoscopy HCPCS/CPT code shall not be reported with a surgical endoscopy code. (recently added RAC issue)

As you can see, coders have a lot to keep up with to ensure accurate coding. Santa may be watching all the children to see if they are naughty or nice, but Medicare is watching coders to see if they are coding correctly.

If you are a frequent reader of our newsletter, you often see the acronyms “OPPS” and “IPPS.” These refer respectively to the outpatient and inpatient prospective payment systems. Medicare describes a Prospective Payment System (PPS) as “a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups (DRGs) for inpatient hospital services).” This means for a particular DRG, a hospital always receives the same payment. Well, that is, until they don’t. Under Medicare’s transfer policies, DRG payments are prorated (reduced) when a patient transfers to another hospital or to select post-acute care settings. The specific regulations regarding transfer policies can be found in Chapter 4 of the Medicare Claims Processing Manual, Section 40.2.4.

The transfer policies bring in yet another acronym - the post-acute care transfer (PACT) policy. In recent weeks, two issues have come up related to the PACT policy. Before discussing these issues, let’s do a quick review of the policy.

• PACT policy only applies to certain MS-DRGs. The list of DRGs to which the policy applies is updated annually as Table 5 of the IPPS Final Rule.
• PACT policy only applies when the patient is transferred to certain post-acute care settings:
• Inpatient rehab facilities and units (discharge status code 62)
• Long term care hospitals (code 63)
• Psychiatric hospitals and units (code 65)
• Children’s and Cancer hospitals (code 05)
• Skilled nursing facilities (code 03)
• Home with a home health plan of care that begins within 3 days (code 06)
• Medicare identifies transfers to the affected settings by the discharge status code on the claim. If Medicare receives a claim from a post-acute care provider for days immediately after discharge, they will ask the transferring hospital to adjust their discharge status code as needed.
• Payment is only reduced if a patient stays fewer days than expected in the first (transferring) hospital for a particular DRG (the geometric mean length of stay or GMLOS).
• Payment is reduced to the transferring hospital. A per diem rate is calculated by dividing the MS-DRG rate by the GMLOS. The transferring hospital is paid 2 x the per diem rate for the first day and the per diem rate for subsequent days up to the full MS-DRG payment.
• There are special pay MS-DRGs (also noted in Table 5) that are paid differently, with a higher payment percentage for the first day of hospitalization.
• Transfer cases are eligible for outlier payments

Also see MLN Matters Article SE1411 for more information about discharge status and Medicare transfer policies.

The first new PACT issue is that the 2019 IPPS Final Rule added discharges to hospice to the PACT policy. This change was made in accordance with amendments to the Social Security Act by the Bipartisan Budget Act of 2018. The new law requires a discharge to hospice care provided by a hospice program to be a qualified discharge under PACT. This means qualifying DRGs with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) are subject to the post-acute care transfer policy effective for discharges occurring on or after October 1, 2018.

The second issue related to the PACT policy is a new item added to the August update of the Office of Inspector General (OIG) Work Plan:

“Hospitals' Compliance with Medicare's Transfer Policy With the Resumption of Home Health Services and the Use of Condition Codes

Medicare payments to acute care hospitals for inpatient stays under Medicare Part A are made on the basis of prospectively set rates. Normally, Medicare pays a hospital discharging a beneficiary the full amount for the corresponding diagnosis-related group (DRG). In contrast, a hospital that transfers a beneficiary to another facility or to home health services is paid a graduated per diem rate, not to exceed the full DRG payment. When transferring a patient to home health services, the hospital can apply specific condition codes to the claim and receive the full DRG payment. The hospital is responsible for coding the bill on the basis of its discharge plan for the patient or adjusting the claim if it finds out that the patient received postacute care after the discharge. We will determine whether Medicare appropriately paid hospitals' inpatient claims subject to the postacute care transfer policy when (1) patients resumed home health services after discharge or (2) hospitals applied condition codes to claims to receive a full DRG payment.”

The PACT policy applies when patients are discharged to “home under a written plan of care for the provision of home health services from a home health agency and those services occur within 3 days after the date of discharge - Patient Discharge Status Code 06 (or 86 when an Acute Care Hospital Inpatient Readmission is planned)” with some exceptions. One exception is when the home health services are not related to the reason for the inpatient admission hospital stay. In this case, condition code 42 is reported on the claim with a discharge status code 06, and the hospital will receive full payment based on the MS-DRG and not a per diem payment. This may occur when there is a resumption of home care services the patient was receiving before hospital admission, if the reason for the home health services is not related to the reason for hospital care.

A hospital can also receive full payment if the home health services do not begin within 3 days of the inpatient discharge. If home care was started more than three days after discharge from the hospital, the hospital would report condition code 43 on the claim. Again, in this case, the hospital will receive full payment based on the MS-DRG and not a per diem payment.

Hospitals should definitely be reporting these condition codes when applicable so as to receive appropriate Medicare payments. But they also need to be sure they are using the codes correctly and only when the required conditions apply. The tricky part about discharge status coding is that the hospital staff may not always know what actually happens when the patient leaves the hospital. It is a good practice to have someone verify with the patient if and exactly what and when post-discharge care occurred. For example, if home health services were planned to begin on day 4 after discharge, but actually began on day 3, it would not be appropriate to report condition code 43. Or the reverse could happen – home health planned for day 2 but does not begin until day 4 after discharge, in which case reporting condition code 43 could result in a higher, appropriate payment.

Another key is communication between case management/discharge planners, coders, and the billing office. Case management documentation is usually the most reliable source for post-discharge plans. If something changes after discharge, and the case managers have followed up to know that, they need to amend documentation and inform the coders and billers if the account has already been coded and/or billed. One last recommendation is a compliance review of discharge status every now and then. This was a huge issue when I started in hospital compliance many years ago and as you can see by the new OIG Work Plan item, it continues to be so. Here is a list of the tips noted above plus a few more to ensure accurate discharge status coding, billing, and appropriate payments:

• Make sure coders know and understand correct use of the discharge status code,
• Make sure coders know where in the record to find the most accurate information concerning discharge status and whom to ask if they have questions,
• Have a system in place to follow up after discharge to verify what post-discharge care the patient actually received,
• Have processes for clear and timely communication between case management, coders and billers concerning discharge status,
• Have a procedure to handle Medicare requests to change discharge status (this can occur when Medicare receives claims from other hospitals or post-acute care providers for services immediately following a hospital discharge), and
• Perform periodic audits of discharge status.

Following these recommendations may prevent the OIG from NYTTW (nailing you to the wall) should your claims be audited.

Some bundles are great – a bundle may refer to a “bundle” of money; you can have bundles of fun; or expecting parents look forward to their little bundle of joy. Other bundles – not so great. One such bundle that is not a bundle of fun is the bundled payment Medicare makes for Intensity-Modulated Radiation Therapy (IMRT) planning services. Payment bundles are fairly common in the Medicare world, but the onus is on providers to understand appropriate billing rules so they are not overpaid for bundled services. A recent Office of Inspector General (OIG) report found errors in IMRT planning billing that resulted in over $25 million in Medicare overpayments for the audit period (2013-2015). The report recommended education for providers on billing IMRT planning services correctly, and edits in Medicare’s billing system to prevent overpayments.

IMRT uses advanced computer programs to plan and deliver radiation to difficult-to-reach tumors with high precision while reducing exposure to surrounding healthy tissue. IMRT includes planning and delivery services. IMRT planning is a multistep process in which imaging, calculations, and simulations are performed to develop an IMRT treatment plan. Radiation is then delivered to a patient’s tumor at the various intensity levels prescribed in the IMRT treatment plan.

The basic rule for the bundling of IMRT planning services is found in section 200.3.1 of Chapter 4 of the Medicare Claims Processing:

• “Payment for the services identified by CPT codes 77014, 77280, 77285, 77290, 77295, 77306 through 77321, 77331, and 77370 are included in the APC payment for CPT code 77301 (IMRT planning). These codes should not be reported in addition to CPT code 77301 when provided prior to or as part of the development of the IMRT plan. In addition, CPT codes 77280-77290 (simulation-aided field settings) should not be reported for verification of the treatment field during a course of IMRT.”

As evidenced by the OIG’s recommendations, the primary reasons for overpayments were that hospitals were unfamiliar with or misinterpreted CMS guidance and claim processing edits did not prevent overpayments. One of the biggest challenges for both hospitals and CMS is the bundling applies even to services billed on a different date of service than the comprehensive IMRT planning code (CPT 77301). CMS’s NCCI procedure-to-procedure edits applicable to IMRT planning services only applied to planning services billed on the same date of service as the billing of CPT code 77301 for the bundled payment. This application of bundling to different dates of service may also have caused some confusion for hospitals. The services in the OIG sample were billed on a different date of service from the IMRT planning CPT code 77301.

In analyzing payment data, the OIG noted that complex simulations billed using CPT code 77290 made up approximately 84% of the potential overpayments so that is the code they reviewed. They found that “In each case, a complex simulation was billed with CPT code 77290 on a different date of service from the IMRT planning code (i.e., up to 14 days before CPT code 77301 was billed). However, both services were performed for the same treatment site (e.g., the prostate). According to the independent medical review contractor, for each sampled line item, the complex simulation was performed as a part of the beneficiary’s overall IMRT treatment planning and therefore should not have been billed separately.”

The Claims Processing Manual guidance quoted above was updated after the OIG audit period to clarify that complex simulations are included in the APC payment for IMRT planning services “when provided prior to or as part of the development of the IMRT plan” (emphasis added). That was a step in the right direction but the OIG further recommended that CMS:

• Implement an edit to prevent improper payments for IMRT planning services that are billed before (e.g., up to 14 days before) IMRT planning CPT code 77301 is billed, and
• Work with the Medicare contractors to educate hospitals on properly billing Medicare for IMRT planning services.

Hospitals need to evaluate their billing practices for IMRT services now and verify they are not inappropriately billing separately for services included in IMRT planning. After all, a little OIG audit would not be a bundle of joy.

The relationship between physicians and hospitals could be described as a symbiotic partnership, that is, a mutually beneficial relationship between different groups. Physicians need hospitals to provide the resources and personnel to care for their patients and hospitals need physicians to refer patients to the hospitals for such care when medically necessary. Physicians direct a patient’s care and decide when and what services are necessary. It also often falls on the physicians’ documentation to support that services and care provided and paid for by Medicare meet the requirements of being medically necessary. Unfortunately for hospitals, it is often their payment at risk if a physician provides a service in the hospital setting that is not medically necessary or fails to document sufficiently to support the medical necessity of the service. Because directing the patient’s care is the physician’s responsibility, many Medicare education resources about compliance are directed to the physicians. Likewise, hospitals must work with physicians to ensure services are appropriately provided and documented. Such is the case for ophthalmology services.

Though a number of ophthalmology services determined by the Office of Inspector General (OIG) to be at risk of “questionable billing” are more likely to be performed in a physician office setting, there are also services that could be performed in a hospital setting. Hospitals need to be aware of the concerns and requirements for these types of ophthalmology services.

A December 2014 OIG audit found that Medicare paid $22 million for ophthalmology claims in 2012 that were potentially inappropriate, according to national and local coverage requirements. The three eye conditions for which Medicare pays the most each year are cataracts, wet age-related macular degeneration (wet AMD), and glaucoma. The concerns for inappropriate payments related to these conditions are:

• Cataracts
• Medicare has a national requirement stating that it will not routinely cover more than one comprehensive eye examination and scan for beneficiaries whose only diagnosis was cataracts.
• It is medically impossible to perform more than one cataract surgery on the same eye because an eye’s natural lens will never grow back.
• Submitting disproportionately more claims for complex than standard cataract surgery.
• Wet AMD
• Some Medicare Administrative Contractors (MACs) have local coverage determinations (LCDs) limiting the number of wet AMD diagnostic or evaluation services for which a provider may bill annually.
• Medicare paid providers substantially more for treating wet AMD with the expensive biologic Lucentis instead of other biologic treatments that are similarly effective.
• Some MACs have LCDs specifying that Lucentis injections are not covered more frequently than once per month per eye. These guidelines are in keeping with the Food and Drug Administration (FDA)-approved dosing guidelines that Lucentis injections should be administered between once monthly and once every 3 months.
• Medicare has a national requirement that it covers each step of ocular photodynamic therapy only when both steps are performed on the same date. These steps are billed separately, but they must be performed within 30 minutes of one another.
• Glaucoma
• A national requirement states that Medicare covers either of two types of screening services once every 12 months for beneficiaries at high risk for glaucoma.

A September 2015 follow up OIG report found Medicare paid $171 million for services associated with the measures on which certain providers demonstrated questionable billing.

Prior to these OIG reports, the Recovery Auditors identified overpayments associated to outpatient hospital providers billing more than one unit of cataract removal for the same eye for the same date of service. CMS published MLN Special Edition Article SE1319 in response to these findings. It reminded providers,

“According to the “National Correct Coding Initiative (NCCI) Policy Manual for Medicare Services,” Chapter 8, Section D #3, cataract removal codes are mutually exclusive of each other and can only be billed once for the same eye. Because CPT codes describing cataract extraction (66830-66984) are mutually exclusive of one another, providers may not report multiple codes for the same eye even if more than one technique is used or more than one code could be applicable. Only one code from this CPT code range may be reported for an eye.”

The NCCI Policy Manual chapter and section noted above addresses 25 other correct coding guidelines for ophthalmology services of which providers should be aware.

For another ophthalmology service, CMS clarified in a 2005 ruling that a Medicare beneficiary may request insertion of a presbyopia-correcting intraocular lenses (IOLs) in place of a conventional IOL following cataract surgery. However, if the Medicare patient selects a presbyopia-correcting IOL, he/she is responsible for payment of that portion of the charge for the presbyopia-correcting IOL and associated services that exceed the charge for insertion of a conventional IOL following cataract surgery. The MLN Article describing this ruling included payment policies for facilities and physicians.  The policy relevant to hospital services states:

• For an IOL inserted following removal of a cataract in a hospital, on either an outpatient or inpatient basis, that is paid under the hospital outpatient prospective payment system (OPPS) or the inpatient prospective payment system (IPPS), respectively;
• Payment for the IOL is packaged into the payment for the surgical cataract extraction/lens replacement procedure. Medicare does not make separate payment to the hospital for an IOL inserted following removal of a cataract.
• For a presbyopia-correcting IOL inserted following removal of a cataract in a hospital, on either an outpatient or inpatient basis, that is paid under the OPPS or the IPPS, respectively;
• The facility will bill for removal of a cataract with insertion of a conventional IOL, regardless of
• whether a conventional or presbyopia-correcting IOL is inserted.
• When a beneficiary receives a presbyopia-correcting IOL following removal of a cataract, hospitals and ASCs shall report the same CPT code that is used to report removal of a cataract with insertion of a conventional IOL.
• There is no Medicare benefit category that allows payment of facility charges for services and supplies required to insert and adjust a presbyopia-correcting IOL following removal of a cataract that exceed the facility charges for services and supplies required for the insertion and adjustment of a conventional IOL.
• There is no Medicare benefit category that allows payment of facility charges for subsequent treatments, services and supplies required to examine and monitor the beneficiary who receives a presbyopia-correcting IOL following removal of a cataract that exceed the facility charges for subsequent treatments, services and supplies required to examine and monitor a beneficiary after cataract surgery followed by insertion of a conventional IOL.

The article also addresses coding requirements, beneficiary liability and notification requirements for these services.

Both hospitals and physicians must be aware of and follow the Medicare requirements for providing and billing ophthalmology services. Working together to “get it right” keeps the relationship between physicians and hospitals mutually beneficial for both parties and for Medicare.  

“No payment may be made under (Medicare) part A or part B for any expenses incurred for items or services — which, …, are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, …”Social Security Act 1862(a)(1)(A)

If your work involves knowledge of Medicare requirements, you are likely very familiar with the above statement that is the basis for the concept of “medical necessity” for covered healthcare services. But do you actually consider the implications of this statement when billing Medicare for services?

It appears a large number of providers did not assess their services against this statement before billing Medicare for specimen validity testing as a recent Office of Inspector General (OIG) report found $66.3 million in overpayments for this type of testing. Specimen validity testing is used to analyze urine specimens prior to drug testing to determine whether the specimens have been adulterated or tampered with. Although necessary to assure the legitimacy of the drug testing, these tests themselves are not used to provide a diagnosis or treatment to a patient.

As the OIG report explains, the requirements for laboratory testing are that tests meet the requirement for medical necessity as described above and more specifically, to be covered under Medicare Part B, clinical laboratory tests must:

• Be ordered by a physician who is treating a beneficiary for a specific medical problem;
• Be related to the patient’s illness, injury, symptom or complaint; and
• The results must be used in the management of the patient’s problem.

The overpayments occurred because the same tests used for specimen validity testing may be medically necessary if used to diagnose certain conditions. “For example, tests for urinary pH and specific gravity may be performed to diagnose diseases of the kidney and urinary system. If these tests are used for diagnosis, treatment, or management, they may be Medicare-covered services. However, when used for the purpose of determining whether a specimen is adulterated, the test results are not being used to manage a beneficiary’s specific medical problem. In these cases, specimen validity testing is not a separately billable Medicare-covered service.” 

Providers should have known this because, over the years, Medicare and their contractors have addressed this issue numerous times. Almost all the Medicare Administrative Contractors (MACs) have a Local Coverage Determination (LCD) for drug testing that includes direction that tests to validate urine specimens are not separately billable. The first such LCD instruction was in 2010 and in 2015 the Medicare National Correct Coding Initiative (NCCI) manual included the statement, “Providers performing validity testing on urine specimens utilized for drug testing should not separately bill the validity testing.” Beginning in 2016, new HCPCS codes for urine drug testing include specimen validity testing in their code descriptions and payments, regardless of whether specimen validity testing is performed or not. And in April 2016, NCCI edits were created to prevent payment for the type of lab tests performed for validity testing when billed on the same date of service as a urine drug test unless modified by the provider to indicate a “separate and distinct” service.

Although the number of overpayments dramatically decreased from 2014 to 2016, the OIG thinks further actions by CMS could reduce the risk of estimated overpayments of $12,146,760 over a 5-year period. The OIG recommends CMS “strengthen its system edits to prevent improper payments for specimen validity tests and instruct the Medicare contractors to educate providers on properly billing for specimen validity and urine drug tests.” Also, be warned that CMS may be recouping the overpayments identified in the OIG audit.

Now is a good time to investigate your billing practices for specimen validity testing with the understanding that if you have been separately billing these services, you owe the government some money back. Going forward, be sure to first apply the Social Security Act standard in determining whether to bill for services – i.e., to be paid under Medicare, a service must be reasonable and necessary for the diagnosis or treatment of illness or injury. After that, there are a lot more coverage rules that need to be considered, but it is a good place to start.

What comes to mind when you hear the word PEPPER. For me, it takes me back to my childhood and the lyrics from the 1970’s Dr. Pepper commercial that invited you to join the Dr. Pepper “crowd” with the jingle:

“I’m a Pepper, he’s a Pepper,
She’s a Pepper, we’re a Pepper,
Wouldn’t you like to be a Pepper, too?
Be a Pepper. Drink Dr. Pepper.”

Fast forward a few decades to 2002 and PEPPER takes on a whole new meaning. This is when the TMF Health Quality Institute developed the Program for Evaluating Payment Patterns Electronic Report (PEPPPER) for short-term acute care hospitals in support of the Center’s for Medicare and Medicaid Services (CMS) Hospital Payment Monitoring Program (HPMP).

In 2008 HPMP ended but just as the famous Dr. Pepper jingle lives on, TMF was once again contracted by CMS through the Office of Financial Management Provider Compliance Group to develop, produce and distribute PEPPERs to all short- and long-term hospitals in the nation.

This article focuses on the Short-Term Acute Care Hospitals PEPPER. Specifically, the changes in the recently released Fiscal Year (FY) 2017 Q3 Short-Term Acute Care PEPPER and the PEPPER User’s Guide 23rd Edition. But first, for those not familiar with the PEPPER, let’s take a look at what it is and why it is a valuable resource for hospitals.

Background

What is PEPPER?

The PEPPER contains statistics for specific “Target Areas” that have been identified as being “at risk for improper payment due to billing, coding and/or admission necessity issues.” The Centers for Medicare & Medicaid Services (CMS) approves the Short Term PEPPER target areas.

The PEPPER compares you to other hospitals in your state, Medicare Administrative Contractor (MAC) Jurisdiction and to the nation. “Comparisons enable a hospital to determine if it is an outlier, differing from other short-term acute care hospitals.” Reports are delivered to a hospital electronically, are hospital specific, and provide the most recent twelve federal fiscal quarters for each target area.

In addition to your hospital specific report, the PEPPER Resources National-level Data Reports webpage includes a Target Area Analysis that provides claims volume, average length of stay and average Medicare Payment for each of the target areas.

Why is this a Valuable Resource for your Hospital?

The PEPPER User’s Guide notes that the Office of Inspector General (OIG) “encourages hospitals to develop and implement a compliance program to protect operations from fraud and abuse. As part of a compliance program, a hospital should conduct regular audits to ensure charges for Medicare services are correctly documented and billed.”

It is important to understand that “PEPPER does not identify the presence of payment errors, but it can be used as a guide for auditing and monitoring efforts. A hospital can use PEPPER to compare its claims data over time to identify areas of potential concern:

• Significant changes in billing practices,
• Possible over- or under-coding,
• Changes in lengths of stay.”

PEPPER User’s Guide, 23rd Edition, Effective with Q3FY 2017 Release, What’s Changed?

Defibrillator Implant Target Area Discontinued

Defibrillators as a “Target Area” was initially added to the PEPPER with the release of the 3rd Quarter FY 2015 Report Release.

The 20th User’s Guide indicated that the Comprehensive Error Rate Testing (CERT) contractor had identified a high error rate (58%) for defibrillator implants (DGs 226-227) in the Supplementary Appendices for the Medicare Fee-for-Service 2014 Improper Payments Report. This “Target Area” was “structured to compare the number of defibrillator implants performed on an inpatient basis, as compared to all defibrillator implants performed at the hospital (inpatient or outpatient).”

Interestingly, the Department of Justice (DOJ) posted a notice on October 30, 2015 that they had reached settlements with 457 hospitals in 43 states for more than $250 million related to defibrillators being “implanted in Medicare patients in violation of Medicare coverage requirements.” Coincidence? I will leave that up to you to decide.

This target area has been discontinued due to a continued decrease in the number of hospitals with sufficient data to generate statistics.

Septicemia Target Area Denominator Revised

“In general, the target areas are constructed as ratios and expressed as percents, with the numerators representing discharges that have been identified as problematic… and the denominator includes these DRGs as well as DRGs to which the original DRG is frequently changed.”

The Septicemia target area has been revised to include the following DRGs in the denominator:

• DRG 193: Simple Pneumonia and Pleurisy with MCC,
• DRG 194: Simple Pneumonia and Pleurisy with CC,
• DRG 195: Simple Pneumonia and Pleurisy without CC/MCC,
• DRG 207: Respiratory System Diagnosis with Ventilator Support 96+ Hours, and
• DRG 208: Respiratory System Diagnosis with Ventilator Support <96 Hours.

“This change was made following an analysis of DRG changes for septicemia claims, which identified a relatively large number were changes to simple pneumonia and respiratory system diagnosis DRGs.”

“One-day Stays for Medical DRGs,” “One-Day Stays for Surgical DRGs,” Two-Day Stays for Medical DRGs” and “Two-Day Stays for Surgical DRGs” Revised

This group of target areas have all been revised to exclude claims with the following patient discharge status codes:

• 02: Discharged/Transferred to a Short-Term General Hospital for Inpatient Care,
• 82: Discharged/Transferred to a Short Term General Hospital for Inpatient Care with a Planned Acute Care Hospital Inpatient Readmission,
• 07: Left Against Medical Advice, and
• 20: Expired.

“This change was made to strengthen the statistics by excluding the same claims from the numerator and denominator, thereby focusing solely on the length of stay in the numerator.”

Short-Term Acute Care hospitals are part of the PEPPER crowd and PEPPER can be a valuable resource for your hospital. I encourage you to spend some time on the PEPPER Resources website where you can find a copy of the most recent User’s Guide, Training and Resources available to you including testimonials and training sessions.

I once illustrated the myriad of Medicare contractors and affiliates that perform pre-payment and/or post-payment medical reviews as a spider’s web – a day late for a Halloween connection. There are at least a couple of reasons supporting an association between the two. First, healthcare providers would never want to be caught in the “web” of reviews (especially if the spider proves to be the cause of their demise).  And secondly, as the filaments of a spider’s web connect together, there are connections between the different Medicare auditors.  Medicare Administrative Contractors (MACs) may review problematic issues identified by the Comprehensive Error Rate Testing program (CERT).  MACs may refer at-risk issues to other reviewers such as the Recovery Auditors (RACs) or the RACs might refer topics back to the MACs.  The MACs or RACs may follow-up on overpayment issues identified by the Office of Inspector General (OIG) or the OIG may further investigate inappropriate payment issues identified by the MACs or RACs. This month’s report on new RAC and OIG review issues are perfect examples of this inter-related web of reviews.

There has not been a lot of new issues approved for Recovery Audit Contractor (RAC) reviews in the last month.  HMS, the Region 4 Recovery Auditor, appears to have reposted some issues such as the complex review of medical necessity of sacral neurostimulation for outpatient hospitals.  HMS also added an automated review for critical access hospital (CAH) and outpatient hospital services on October 6, 2017 – Outpatient Services Overlapping or During an Inpatient Stay.  This review topic may be the result of findings of a recent report from the Office of Inspector General (OIG), which was addressed in detail in a Wednesday@One article from August. This automated issue is not yet listed on either the Cotiviti or Performant websites. There were no other newly approved issues related to hospital services for any of the RACs.

Hospital related issues have also been rare in the new updates to the OIG Work Plan the past few months.  In the October updates, there is one issue that affects hospitals.  The OIG will be reviewing supporting documentation to determine whether bariatric services meet the conditions for coverage and are supported in accordance with Federal requirements (Social Security Act, §§ 1815(a) and 1833(e)) and in keeping with the CMS National Coverage Determination (NCD) 100.1.  Medicare Parts A and B only cover certain bariatric procedures when the patient meets the following criteria:

• a body mass index of 35 or higher,
• at least one comorbidity related to obesity, and
• had previously unsuccessful medical treatment for obesity.

Treatments for obesity alone are not covered. A CERT special study of bariatric surgical procedures found that approximately 98 percent of improper payments lacked sufficient documentation to support the procedures.  This issue was highlighted in the July 2014 Medicare Quarterly Provider Compliance newsletter.

So even though these are new posted issues for these contractors, they are issues we have seen before.

No hospitals want the Office of Inspector General (OIG) to come knocking on their door. If they do, they will likely find at least some billing errors which will likely result in the need to refund payments.  The hospital also has to respond to the OIG findings and give reasons for the errors.  These may often sound like excuses, but if there were improper payments, there was a reason, excuse or not.  Sometimes the dog does eat the homework.  In a recent OIG report concerning outpatient services furnished before or during inpatient stays, hospitals gave the following reasons for incorrect billing.

• They did not understand Medicare requirements,
• Clerical errors, and
• They were not aware the patients were inpatients at other hospitals.

Clerical errors and lack of complete patient information are going to happen.  Your hospital can decrease the likelihood of their occurrence by having well-trained employees and sufficient oversight.  I think CMS will find the lack of understanding of Medicare rules to be the most egregious of the reasons.  It may fall under the “should have known” or “deliberate ignorance” category of excuses.  Lack of understanding of Medicare requirements is shaky ground.  This is why MMP provides this newsletter and our other services – to help educate providers concerning Medicare requirements – so let’s look at outpatient services furnished before or during inpatient stays.

An inpatient admission includes room and board; nursing and social services; diagnostic, therapeutic, and surgical services; drugs, supplies, and equipment; and transportation services.  In fact the only services listed in Chapter One of the Medicare Benefits Manual  as not included in the inpatient admission are post-hospital nursing facility services and the professional services of physicians and other practitioners.  On occasion, inpatients may have to be sent to another facility to receive services not offered at the host (admitting) hospital.  Such services are provided “under arrangements” to the patient – this means:

• the host hospital includes the charges for the services on their inpatient claim to Medicare and
• the host hospital pays the other facility for the services.

There should be clear communication between the hospital and other facilities for any “under arrangement” services so that inappropriate billing does not occur.  Inpatients may also go to outpatient departments within the host hospital during their inpatient stay to receive services – these services are included in the inpatient hospitalization and are not separately billable as outpatient services to Medicare.

Medicare has rules that certain outpatient services furnished before an inpatient admission also have to be bundled onto the inpatient claim.  This is known as the three-day payment window rule.  In general, outpatient services furnished within 3 days prior to and including the date of the patient’s admission are deemed to be inpatient services and included in the inpatient payment. For Medicare there are always nuances to the rules, and this one is no different.

• The rule applies to outpatient services furnished by the admitting hospital, or by an entity wholly owned or wholly operated by the admitting hospital, or by another entity under arrangements with the admitting hospital. This includes the technical portion of services provided at a hospital-owned or hospital-operated physician clinic or practice.
• The patient must have Part A coverage for the rule to apply.
• Ambulance services, maintenance renal dialysis services, and Part A services furnished by skilled nursing facilities, home health agencies, and hospices are excluded from the payment window provisions.
• The 3-day rule applies to IPPS hospitals (hospitals paid under the inpatient prospective payment system). For hospitals and units excluded from IPPS, this provision applies only to services furnished within one day prior to and including the date of the admission (a 1-day rule).
• It is a 3 day rule and NOT a 72 hour rule. Three days means the 3 calendar days prior to admission – for a patient admitted on a Wednesday, the 3 days would be Sunday, Monday, and Tuesday.
• Outpatient services furnished more than 3 days prior to admission, even if part of a single, continuous outpatient encounter prior to admission, are not included on the inpatient claim and may be billed separately on an outpatient claim.
• The rule does not apply to some differently paid entities, such as CAHs, RHCs, and FQHCs. You should read the regulation in Chapter 3, Medicare Claims Processing Manual, section 40.3 for complete information on exclusions.

The 3-day rule is also affected by the type of services provided and whether they are related to the reason for admission or not.  I like to break the rule down into three parts for easier understanding.

• All outpatient services (diagnostic and non-diagnostic) subject to the rule that are provided on the day of admission must be billed with the inpatient admission.
• All outpatient diagnostic services provided within the 3- day payment window (or 1-day window for non-IPPS hospitals) must be billed with the inpatient admission.
• Non-diagnostic services related to the inpatient admission and provided within the payment window must be billed with the inpatient admission.

The billing hospital determines and attests if non-diagnostic services furnished on the first, second, or third day prior to admission are unrelated to the inpatient admission.  Medicare defines unrelated services as services that are clinically distinct or independent from the reason for the beneficiary’s admission.  These “unrelated” services may be billed on a separate outpatient (Part B) claim with a condition code “51” which is the hospital’s attestation the services are unrelated. Documentation in the patient’s medical record must support that the non-diagnostic services provided within the payment window are unrelated to the patient’s inpatient admission.

The section of the Claims Processing Manual referenced above also includes further explanations and definitions of ownership, non-IPPS hospitals, diagnostic services, and more. Providers need to carefully review the guidance in the manual to have a complete understanding of all the requirements for billing outpatient services provided prior to admission.

This advice applies to all Medicare requirements.  It is the provider’s responsibility to be knowledgeable of Medicare rules, regulations, and guidance. Remember, not “knowing” or not “understanding” are not good excuses.

Back in June when the Office of Inspector General (OIG) changed the process and publication of their Work Plan, they used the word “dynamic” to describe their work planning process.  The Merriam-Webster dictionary defines dynamic as “marked by usually continuous and productive activity or change.”  So far, the OIG is remaining true to this definition by posting numerous new issues each month.  For July, the OIG posted 14 new issues all focused on the CMS agency.  The OIG is responsible for oversight for all agencies of Health and Human Services (HHS), but a review of active issues shows that most of their efforts are related to CMS.

I understand the OIG’s responsibility “to provide independent and objective oversight that promotes economy, efficiency, and effectiveness in the programs and operations of HHS.” But having worked in hospitals for years, I also understand the challenges of complying with all of the Medicare rules. If it were easy we might not need the OIG, but it is definitely not an easy task. 

Since MMP’s focus is hospital Medicare issues, I will only describe the new OIG Work Plan items related to hospitals and Medicare.  For a list of all the new issues, see the OIG’s Recently Added updates.

Nationwide Medicare Electronic Health Record Incentive Payments to Hospitals

Hospital can receive incentive payments for adopting electronic health record (EHR) technology. The OIG is concerned about potential incentive overpayments. Their concerns are based on the following:

• The Government Accountability Office (GAO) identified improper incentive payments as the primary risk to the Medicare EHR incentive program.
• An OIG report found CMS faces obstacles in oversight of the EHR program.
• OIG reviews showed that State agencies have and will continue to overpay hospitals millions of dollars due to inaccuracies in the hospitals’ calculations.

The OIG will be reviewing hospitals’ incentive payment calculations to ensure appropriate payment amounts and prevent future overpayments.  This is a hospital finance issue which is not my area of expertise, but I bet it is not that easy.  Calculations never are.

Review of Medicare Payments for Nonphysician Outpatient Services Provided Under the Inpatient Prospective Payment System

Medicare pays hospitals a prospective payment amount for inpatient services – we know this as the DRG payment.  The DRG payment is payment for all the hospital’s operating costs associated with the inpatient admission. This also includes diagnostic and related therapeutic outpatient services provided the day of admission or within the 3 days prior to admission under Medicare’s 3-day payment window rule.  Identifying those outpatient services that should be bundled with the inpatient claim and then billing correctly in compliance with the 3-day payment window is not an easy task either. Prior OIG reviews have found overpayments where hospitals billed inappropriately and Medicare contractors paid for outpatient services provided during or before the inpatient admission. The OIG will review to determine if outpatient payments during an inpatient admission and under the payment window rule were correct.

Medicare Payments for Unallowable Overlapping Home Health Claims and Part B Claims

Home Health (HH) agencies are also paid a Medicare prospective payment which covers all of their costs for providing services to the patient.  This includes services furnished by the home health agency and certain items or services provided under arrangement. The home health consolidated billing requirements mandate that certain items, supplies, and services are part of the home health payment and should not be billed separately to Medicare Part B from other entities. The OIG will be looking to see if Part B payments were allowable and followed the consolidated billing requirements.  From my experience, the major area of concern related to HH consolidated billing for hospitals is rehabilitative therapy services.  Medicare patients may present to a hospital’s therapy department for services even though they are receiving HH services. Hospitals should check Medicare eligibility systems and question the patient carefully to determine if they are currently under a home health plan of care.

Medicare Payments for Unallowable Overlapping Hospice Claims and Part B Claims

Once a Medicare beneficiary elects hospice care, all services related to the terminal illness are handled by the hospice.  Hospitals must seek payment for services provided to a hospice patient and related to the terminal illness from the hospice agency and not from Medicare. The OIG is reviewing to make sure any separate Part B payments were appropriate. Hospitals are often caught unaware when a hospice patient shows up in their emergency department. The hospital must determine if the patient has elected hospice and if so, is the medical condition for which they are seeking treatment related to the terminal illness.  If the answer to both is yes, the hospital must coordinate with the hospice agency to determine appropriate treatment and billing.  Not an easy task, especially in an emergency department setting. The same applies to non-emergency hospital services – reference laboratory testing is one example, but your clue here should be that the specimens are brought in by a hospice nurse.  In MMP’s experience, edits in the Medicare claims processing system catch most of these overlaps with hospice agencies and deny the hospital’s payment. It is then up to the hospital to spend extra time and effort to determine the circumstances and obtain payment from the hospice agency.  Not an easy task on the back end either.

One last issue somewhat related to hospitals:

Review of Medicare Payments for Telehealth Services

One of the Medicare requirements for telehealth payment is that the services be between a beneficiary located at a rural originating site and a practitioner located at a distant site.  An eligible originating site must be the practitioner’s office or a specified medical facility, such as a hospital.  The OIG will be looking for telehealth payments where there was not a corresponding claim from the originating site to ensure the payments were correct.  More information on billing telehealth services can be found in the Medicare Telehealth Fact Sheet.

Not much about health care and hospital services is easy, but the OIG work plan gives us some areas on which to focus our scrutiny when it comes to billing Medicare.

How do you go from laboratory technologist to compliance professional? You see it often because the detail oriented mind of laboratorians fits well into the myriad details of compliance requirements. For me, I happened to be the manager of a hospital outpatient laboratory at the time the Office of Inspector General (OIG) released the Compliance Program Guidance for Clinical Laboratories. In short order, it fell upon my shoulders to “do something” about this Compliance Guidance. The OIG guidance was in part a response to recent concerns about laboratory billing practices. A prominent national laboratory had at the time been under scrutiny for adding one more laboratory test to a large, frequently ordered lab profile that consisted of a significant number of different lab tests. According to the government, this caused physicians to unknowingly (or at least without careful consideration of medical need) order “medically unnecessary” lab tests.

I often refer to this as “the original compliance sin” and the issue of medical necessity is still a major concern for compliance, and not only for laboratory tests. Medical necessity now involves various types of medical services – from ambulances, to cardiology procedures, to high-cost drugs, to joint replacements, to many other services and even back to laboratory tests. Two recent enforcement actions posted on the OIG’s website are related to medically unnecessary laboratory pathology services.

The first case involves Poplar Healthcare located in Memphis, Tennessee, which paid nearly $900,000 to resolve False Claims Act allegations. According to the Department of Justice (DOJ) Press Release, “The government alleges that Poplar, directly and through a subsidiary known as GI Pathology, promoted and billed the government for diagnostic tests that the government contends were not medically necessary.” Poplar conducted an extensive, multi-year promotional campaign promoting the use of a special pathology stain they claimed could definitively diagnose “mast cell enterocolitis.” The government contended Poplar’s claims about the stain were not supported by scientific evidence and were not consistent with FDA approval requirements.

A similar case against Piedmont Pathology in Hickory, N.C also involves the medically unnecessary use of pathology stains. In this case, the pathology laboratory was performing and billing for special stains on certain gastric biopsies. The special stains were performed before a pathologist reviewed routinely stained specimens to determine if there was a medical need for the additional special stains. Piedmont Pathology has agreed to pay the United States $601,000 to settle allegations that it violated the False Claims Act by submitting false claims to Medicare and Medicaid for medically unnecessary procedures. The DOJ press release provides further details.

Another similarity between these two cases is that both were “whistleblower” cases where a private citizen can bring suit on behalf of the government for false claims under provisions of the False Claim Act. The government can decide to take over the case and the whistleblower shares in any monetary recovery. In these cases, the relator’s share was $205,841 and approximately $120,200, respectively.

There are important take-aways for all providers from these settlements:

• The government is serious about the medical necessity of services (for all types of healthcare services);
• No service is too big or too small for government attention;
• Be careful what a vendor tries to sell you;
• Verify the medical need for the services you provide; and
• Watch out for the whistleblowers!