A Look Back at 2014

on Tuesday, 06 January 2015. All News Items | Case Management | Patient Status | Medicare Coverage

Out With the Old and In with Some Old and Some New

As we look forward to 2015, let’s take one last look backward to review some of the highlights in healthcare for Hospitals in 2014.

Medicare Administrative Contractors (MACs)

MAC Consolidation

In March of 2014 CMS made an announcement to postpone any further MAC Jurisdiction consolidation for up to five years. Reasons for the delay cited by CMS were uncertain cost benefits, potential performance issues, Home Health and Hospice workload and the evolving business environment.

Prior to 2014 First Coast Services Options, Inc. (“First Coast”) was the MAC for Florida, Puerto Rica and the U.S. Virgin Islands. Likewise, Cahaba, GBA (“Cahaba”) was the MAC for Alabama, Georgia and Tennessee. In 2014 both MACs were again awarded the contract for the next contracting cycle in their respective Jurisdiction. With the new contract came a new Jurisdiction (J) name meaning that First Coast went from J9 to JN and Cahaba went from J10 to JJ.

Of note, there was a protest filed on October 6, 2014 with the U.S. Government Accountability Office (GAO) against the JJ contract awarded to Cahaba. At the time of this article the GAO is reviewing the procurement record and during what could be several months “Cahaba will continue to perform A/B MAC claims processing-related work for Medicare providers and beneficiaries…under its existing A/B MAC Jurisdiction 10 contract.”

MAC Probe and Educate Program

Program Timeline

CMS Announced program during September 26, 2013 Open Door Forum
Program Dates: Admissions on or after October 1, 2013 thru December 31, 2013
November 1, 2013:
CMS extended program thru March 31, 2014
February 2014, CMS extends program for entire 2014 Fiscal year
Program extended to September 30, 2014
April 1, 2014: Protecting Access to Medicare Act of 2014 signed into law
Program extended to March 31, 2015

Program Update as of November 5, 2014

CMS will continue the Probe & Educate process through March 31, 2015, and will continue to prohibit Recovery Auditor inpatient hospital patient status reviews for dates of admission occurring between October 1, 2013 and March 31, 2015.

All MACs have completed the first probe reviews and associated education. ALL MACs have begun their second probe reviews with some providers having already completed the second probe.

CMS recently instructed MACs that, time permitting and prior to the March 31, 2015 end of the Probe and Educate period, any provider who has completed the second probe and is identified as being of major concern may be subject to an additional follow up probe. The follow up probe will include a claim sample of the same size (10 or 25 claims) as probe 1 and probe 2.

Office of Inspector General (OIG)

2014 proved to be another busy year for the OIG’s Hospital Medicare Compliance Reviews. To date, the OIG has:

  • Posted review findings for hospitals in 39 states.
  • Massachusetts, Florida and California continue to see the most overall OIG Hospital Medicare Compliance Review activity.
  • Fifteen hospitals have had the dubious distinction of having their review findings extrapolated. Collectively, extrapolation has taken the amount that these 15 hospitals were overpaid from around $5.4 million to just over $39 million.
  • States with hospitals that have been impacted by extrapolation include FL, TN, AL, TX, NJ, KY, OH, NC and LA.

Recovery Auditors (a.k.a. RACs) 2014 Timeline of Key Events

June 1, 2014: Current RAC Contractors were to do no additional reviews beyond this date.

June 2, 2014: CMS Announces a Provider Relations Coordinator to improve communication between providers and CMS

August 4, 2014: Due to the ongoing delay in awarding new contracts, CMS began initiating contract modifications to allow the current RACs to restart some reviews.

August 28, 2014: Contract modifications now made for all RAC contracts to restart some reviews with most being on an automated basis and only a limited number of complex reviews based on topics selected by CMS.

December 11, 2014: CMS posted that they will be extending “the active recovery auditing period for the existing four Medicare fee for service Recovery Audit Program contracts through December 31, 2015.” CMS went on to indicate in the announcement that “this will allow CMS to fulfill its congressional mandate to correct improper payments in efforts to protect the Medicare Trust Funds while the procurement process is temporarily halted due to a pending protest decision.”

Source: https://www.fbo.gov/index?s=opportunity&mode=form&id=cac9c23ade75b85963796cdea17f5fdf&tab=core&tabmode=list&=

December 30, 2014: CMS announced that the Region 5 Recovery Audit Contract had been awarded to Connolly, LLC. This contract will include the identification and correcting of improper payments for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), and home health/hospice (HH/H) claims. CMS indicated that “this award marks the beginning of the new Recovery Audit contracts and is the start date of the implementation of many improvements to reduce provider burden and increase transparency in the program.” Specific RAC Program Improvements can be found on the CMS Recovery Audit Program webpage.

Supplemental Medical Review Contractor (SMRC)

Strategic Health Solutions, LLC is the SMRC contractor and even though they are the latest in a long list of Review Contractors, they were extremely active in 2014. As an example, below are the results from their most recent Medicare Part A Inpatient Services Project.

SMRC Project: Y1P15 – Medicare Part A Inpatient Services: Chronic Obstructive Pulmonary Disease

Number of claims



Error Rate



599 denied for no response


736 denied after review

Total: 1,335

Denial Reasons cited by Strategic Health Solutions included providers not responding to an ADR within the 45 day time frame and when records were submitted they lacked documentation to support that inpatient services were medically reasonable and necessary.

SMRC Hot Topics

The SMRC website includes a "Hot Topics" webpage created “as a means for the SMRC to address general topics identified during the course of completing projects.” The list of Hot Topics currently includes:

  • Appeal Rights
  • Home Health Agencies Outcome and Assessment Information Set (OASIS) for six New England States
  • No Reimbursement for Medical Records
  • Physician Signature Attestation
  • Previously Reviewed Claims
  • Submitting Imaged Records on Compact Disc

CERT A/B MAC Outreach & Education Task Force

In November 2014 the CERT A/B MAC Task Force posted to their CMS web page the Education Resource, Complying with Medical Record Documentation Requirements Fact Sheet.

Quality Improvement Organizations (QIOs)

QIO’s began their 11th Scope of Work (SOW) on August 1st, 2014. Significant changes were made to the program with this new SOW. Examples of key changes made includes:

  • Case Review and Quality Improvement activities being separated into two new types of QIOs (Beneficiary and Family Centered Care (BFCC) QIOs and Quality Innovation Network (QIN) QIOs,
  • The contract period being extended from three (3) to five (5) years,
  • The requirement to restrict QIO activity to a single entity in each state/territory was removed, and
  • Contractor consideration was opened up to a broader range of entities to perform the work.

CMS has provided a 2014 QIO Program Transition Fact Sheet for Providers and Suppliers. In this fact sheet CMS instructs Providers that a list of current BFCC-QIOs as well as the Quality Innovation Network (QIN) QIOs can be found at http://www.qioprogram.org under Locate Your QIO.

Affordable Care Act Mandated Hospital Quality Programs

The Readmission Reduction Program, Hospital Value Based Purchasing Program and Hospital Acquired Condition (HAC) Reduction Program are the three Quality Programs that were mandated by the Affordable Care Act. As of October 1, 2014 all three have been implemented.

As each year passes and penalties increase, these programs have the potential to significantly impact a hospital’s finances. The following table is a progression of the maximum potential reduction in payment a hospital could face through fiscal year 2017.

Affordable Care Act (ACA) Mandated Hospital Quality Programs

Maximum Potential Reduction in Payment
FY Readmission Reduction Program VBP Program Hospital Acquired Condition (HAC) Reduction Program Overall
2013 1% 1.00% N/A 2%
2014 2% 1.25% N/A 3.25%
2015 3% 1.50% 1% 5.5%
2016 3% 1.75% 1% 5.75%
2017 3% 2% 1% 6%

Readmission Reduction Program

The Readmission Reduction Program entered its third year on October 1, 2014 and the maximum penalty a hospital could face for excessive readmissions rose to 3%. Also new for 2014 was the addition of COPD and Elective Hip & Knee Replacement as 30 Day Readmission targets.

On October 2, 2014, Kaiser Health News released the article A Guide to Medicare's Readmissions Penalties and Data. This article includes a downloadable Readmission Penalties by Hospital for years one, two and three of this program.

Hospital Value Based Purchasing Program

The Hospital Value Based Purchasing Program also entered its third year on October 1, 2014 and the percent reduction required to pay out incentive payments to hospitals increased to 1.5%.

A new Efficiency Domain was added with the October 1, 2014 start of Fiscal Year 2015. The first measure in this domain is the Medicare Spending per Beneficiary (MSPB) measure. The QualityNet MSPB web page indicates that “by measuring cost of care through this measure, CMS hopes to increase the transparency of care for consumers and recognize hospitals that are involved in the provision of high-quality care at lower cost to Medicare.”

Hospital Acquired Condition (HAC) Reduction Program

The last of the three mandated quality programs is the HAC Reduction Program that began on October 1, 2014. This program is a penalty program that will reduce payments to hospitals with excessive HACs by 1% for ALL Medicare discharges.

In the FY 2014 IPPS Final Rule CMS indicated that “the HAC Reduction Program aligns with our national strategy to improve health care quality by promoting the prevention of HACs, such as “never events” and HAIs. Our goal for the HAC Reduction Program is to heighten the awareness of HACs and reduce the number of incidences that occur.” They went on to state that “we believe that our efforts in using payment adjustments and our measurement authority will encourage hospitals to eliminate the incidence of HACs that could be reasonably prevented by applying evidenced based guidelines.”

In an August 5th MLN Connects™ Provider eNews CMS indicated that “this new program builds on the progress in this area achieved through the existing HAC program, which is currently saving approximately $30 million annually.”

On December 18, 2014 Kaiser Health News released the article Medicare Cuts Payments to 721 Hospitals with Highest Rates of Infections, Injuries. This article includes a downloadable HAC Penalty Chart showing hospital scores and which hospitals nationwide were penalized.

Physician Certification Requirements 2015 OPPS Change

The 2014 IPPS Final Rule placed a significant burden on hospitals by requiring that a Physician Certification be completed on ALL Medicare inpatient admissions. In their effort to achieve “policy goals with the minimum administrative requirement necessary,” CMS finalized the 2015 OPPS proposed changes to the physician certification process that only requires physician certification for long-stay and outlier cases.

Implications for Hospitals


  • The physician certification change does not change the fact that there must be a signed inpatient order prior to a beneficiary being discharged as a hospital Condition of Participation (CoP) & a requirement for payment for Medicare Part A Services.
  • Physician documentation in the medical record (e.g., History & Physical, MD Progress Notes and Physician Orders) still must support the medical necessity for hospital care that is expected to span at least two midnights.
  • For Medicare beneficiaries that reach a 20 day length of stay it will be important to make sure that the “physician certifies or recertifies the following:
  1. (1)The reasons for either –
    1. (i)Continued hospitalization of the patient for medical treatment or medically required diagnostic study; or
    2. (ii)Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F or part 412 of this chapter).
    3. (2)The estimated time the patient will need to remain in the hospital.
    4. (3)The plans for posthospital care, if appropriate.’
  • The physician certification continues to be a requirement until January 1, 2015 and must include the following:
    • Authentication of the Practitioner order prior to the beneficiary being discharged,
    • The reason for inpatient services,
    • The estimated time that the patient will require as an inpatient; and
    • The plans for hospital care.

ICD-10 Compliance Date Timeline

ICD-10 was delayed yet again in 2014 pushing the compliance date to October 1, 2015.

2009 ICD-10 Final Rule:
Established Compliance Date for ICD-10 of October 1, 2013
2012 ICD-10 Delay Final Rule:
Compliance Date dalayed to October 1, 2014
April 1, 2014 Protecting Access to Medicare Act of 2014:
"Secretary [of HHS] may not adopt ICD-10 under HIPAA prior to October 1, 2015"
July 31, 2014 HHS Finalizes NEW RULE
Compliance Date for ICD-10 now October 1, 2015

No further delay should definitely be a New Year’s Resolution for Congress.

This article briefly touched on several Hot Topics of 2014. For those interested in learning more we are providing you with a list of Quick Links. From all at MMP, happy reading in the New Year!

Quick Links:

CMS Medicare Administrative Contractor Web page: http://www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-Contractors/MedicareAdministrativeContractors.html

CMS Inpatient Hospital Reviews Web page: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html

OIG Website: https://oig.hhs.gov/

CMS Recovery Audit Program Web page: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/Recent_Updates.html

Supplemental Medical Review Contractor Website: http://www.strategichs.com/wpcms/about-smrc/

CMS CERT A/B MAC Outreach & Education Task Force Web page: http://www.cms.gov/Medicare/Medicare-Contracting/FFSProvCustSvcGen/CERT-A-B-MAC-Outreach-Education-Task-Force-.html

QIO Program Website: http://www.qioprogram.org/

CMS Readmissions Reduction Program Web Page: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Readmissions-Reduction-Program.html

CMS Hospital Value Based Purchasing Program Web page: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html?redirect=/Hospital-Value-Based-Purchasing/

Link to Medicare Spending Per Beneficiary Breakdown by Claim Type – Webpage Description: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/Downloads/Fact-Sheet-MSPB-Spending-Breakdowns-by-Claim-Type-Dec-2014.pdf

Link to CMS FY 2015 CMS HAC Reduction Program & Hospital VBP Program Fact Sheets: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2014-Fact-sheets-items/2014-12-18-2.html?DLPage=1&DLSort=0&DLSortDir=descending

Quality Net Hospital Acquired Condition Reduction Program Web page: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228774189166

CMS ICD-10 Web page: http://www.cms.gov/Medicare/Coding/ICD10/index.html?redirect=/icd10

Article by Beth Cobb

Beth Cobb, RN, BSN, ACM, CCDS, is the Manager of Clinical Services at Medical Management Plus, Inc. Beth has over twenty-three years of experience in healthcare including eleven years in Case Management at a large multi-facility health system. In her current position, Beth monitors, interprets and communicates current and upcoming Case Management / Clinical Documentation issues as they relate to specific entities concerning Medicare. You may contact Beth at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information. MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.


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