Knowledge Base Article

The holiday season is behind us and the cold days of winter are upon us so now is the perfect time to settle down to a good read with that new book you received for Christmas. While I won’t go so far as to call it a good read, the Office of Inspector General (OIG) Work Plan is at best interesting and definitely always an essential read for those in healthcare.  

One particularly interesting read is the December 2018 Work Plan Item titled Assessing Inpatient Hospital Billing for Medicare Beneficiaries. The announcement begins with CMS noting that hospitals billed Medicare $114 billion for inpatient hospital stays in 2016, accounting for 17 percent of all Medicare payments. They go on to note that both CMS and the OIG have “identified problems with upcoding in hospital billing: the practice of mis- or over-coding to increase payment.” The OIG will be conducting a two-part study to assess inpatient hospital billing. OIG Steps to be undertaken for carrying out this Work Plan Item include the following:

Step 1: Analyze Medicare Claims Data to provide Landscape information about Hospital Billing

• Use data analysis to answer two key questions about inpatient hospital billing:
• How has it changed over time, and
• Describe how inpatient billing varied among hospitals.

Step 2: Medical Record Review

The OIG will use the results of data analysis to target certain hospitals or codes for a medical review to determine the extent to which the hospitals billed incorrect codes.

Component of the OIG to Complete this Work Plan Item

The Office of Evaluations and Inspections (OEI) has been tasked with completing this work plan item. The OEI “conducts national evaluations to provide HHS, Congress, and the public with timely, useful, and reliable information on significant issues. These evaluations focus on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI reports also present practical recommendations for improving program operations.”

Expected Issue Date

The OIG has an expected issue date of their findings in FY 2020. Even though we are in the first days of 2019, and 2020 seems far off, the beginning of the CMS FY 2020 is just nine months away on October 1, 2019.

While I am not the type to skip to the end of a good book, with a Medicare paid claims database available through our sister company RealTime Medicare Data (RTMD), I could not pass up the opportunity to perform my own preemptive analysis of the hospital billing landscape and how it has changed over time.  

MMP Data Analysis Process

With most of our clients residing within the Medicare Administrative Contractor (MAC) Jurisdiction J (JJ), I decided to use this jurisdiction as my “landscape” for hospital billing by state. JJ includes Alabama, Georgia and Tennessee.

• RTMD Reports Utilized: Case Mix Index (CMI) by Provider
• Metrics included in Analysis:
• Patient Volume,
• Average Charges per claim,
• Average Payment per claim,
• Case Mix Index (CMI),
• Average Length of Stay (ALOS)
• Time Frame for Compare: Review claims volumes by CMS IPPS Fiscal Year (FY) (October 1st – September 30th following year) for dates of service pre- and post- ICD-10-CM/PCS implementation
• Pre-ICD-10-CM/PCS FY 2014 and 2015
• Post ICD-10-CM/PCS FY 2016 and 2017

Events Potentially Impacting Inpatient Volume, CMI and Payment

With a plan in place, the section of this Work Plan Item where CMS and the OIG “identified problems with up-coding in hospital billing” did not sit well with me so my first step was to look back in time to see if there were any instances where changes in Medicare Rules, Regulations or Guidelines could potentially impact inpatient volume, Case Mix Index (CMI) and payment.

Affordable Care Act (ACA) Mandated Hospital Quality Programs

The Hospital Readmission Reduction Program (HRRP), Value Based Purchasing (VBP) Program, and Hospital Acquired Condition (HAC) Reduction Program potential “penalties” were rolled out over the course of five fiscal years as highlighted in Table 1. A hospitals performance in these programs can have a positive or negative impact on payment received for Medicare beneficiaries.

Table 1: Affordable Care Act (ACA) Mandated Hospital Quality Programs

‍Documentation and Coding Adjustment

In FY 2008, CMS replaced the 538 DRGs with 745 new Medicare Severity DRGs (MS-DRGs) that reflected not just the patient’s diagnosis, but also the severity of the patient’s illness. As explained in the final IPPS rule for FY 2008, CMS anticipated that the transition to MS-DRGs would lead to documentation and coding practices that resulted in higher payments, without any underlying increase in patient severity.

Section 631 of the American Taxpayer Relief Act (ATRA) of 2012 required CMS to recover $11 billion by FY 2017 to recoup documentation and coding overpayments related to the transition to MS-DRGs. In the final year, 2017, CMS increased the reduction percentage from the predicted 0.8 percent to 1.5% to obtain the full $11 billion impact required by law.

Association of Clinical Documentation Improvement Specialists (ACDIS)

ACDIS started on October 1, 2007 which coincided with the go-live date for the new MS-DRG system. As of 2017 ACDIS had more than 5,600 members with approximately 40 local chapters. Per the ACDIS Code of Ethics, Clinical documentation improvement specialists shall “Facilitate accurate, complete, and consistent clinical documentation within the health record to support coding and reporting of high-quality healthcare data.”

Speaking only for myself, I believe this group of dedicated professionals collaborating with and educating physicians has resulted in more accurate and complete medical record documentation. The end result being an increase in CMI and reimbursement that is not due to up-coding. Only time will tell if CMS and the OIG agree with me. 

Two-Midnight Rule

The 2-midnight rule went into effect October 1, 2013 in response to the following CMS major concerns:

• Increase in observation lengths of stay,
• Increase in Comprehensive Error Rate Testing (CERT) error rate for short inpatient stays,
• Increase in the number of Inpatient appeals, and
• Requests from the hospital industry to clarify the inpatient review policy.

In the FY 2014 Final Rule CMS noted their “actuaries continue to estimate there will be approximately $220 million in additional expenditures resulting from our 2-midnight benchmark and 2-midnight presumption medical review policies…therefore…we are finalizing a reduction to the standardized amount, the hospital specific rates, and the Puerto Rico specific standardized amount of -0.2 percent to offset the addition $220 million in expenditures.”

In FY 2017 CMS made a permanent adjustment to remove the 0.2 percent reduction to the rates put in place in FY 2014 and “made a temporary one-time prospective increase to the FY 2017 standardized amount, the hospital-specific payment rates, and the national capital Federal rate of 0.6 percent by including a temporary one-time factor of 1.006.”

Transition to ICD-10-CM/PCS

On October 1, 2015, hospitals finally made the leap from ICD-9-CM/PCS to ICD-10-CM/PCS coding.

Third Quarter 2016 Coding Clinic advice: COPD and Pneumonia

Effective for hospital inpatient discharges on or after September 23, 2016, based on Third Quarter 2016 Coding Clinic advice, if a patient admitted and treated for Pneumonia, also had a history of COPD even if stable during the admission, COPD would be the Principal Diagnosis.

RTMD analysis of COPD and Pneumonia claims revealed that the resultant increase in COPD claims meant an overall decrease in actual payment to hospitals for COPD and Pneumonia cases combined.

After discussion at the March 7-8, 2017 ICD-10-CM Coordination and Maintenance Committee Meeting the instruction note under code J44.0 Acute Lower Respiratory Infection was deleted and as of October 1, 2017, COPD or pneumonia could again be sequenced as the principal diagnosis.

ICD-10-PCS Code Re-designation from O.R. to Non-O.R.

In the CMS FY 2018 IPPS Final Rule, CMS finalized re-designating 770+ ICD-10-PCS codes from O.R. to Non-O.R. Procedure codes. The following table highlights the volume of claims in AL, GA and TN where the principal procedure code was finalized for re-designation to a Non-O.R. Procedure code.

Table 2: ICD-10-PCS O.R. to Non-O.R. Designation

There are several reasons for surgery volumes to vary over time (i.e. loss of a surgeon at your hospital, procedures no longer being on the Medicare Inpatient Only (IPO) List, etc.). However, it is worthy to note that annualized FY 2018 data analysis revealed a collective decrease in surgery volume for the JJ MAC of 11,447 from FY 2017 to FY 2018. I imagine the ICD-10-PCS code re-designations played a role in the decrease.

Jurisdiction JJ Landscape for Medicare Fee-for-Service Hospital Inpatient Billing

The following tables provide a visual landscape of data analysis for Alabama, Georgia and Tennessee for FY’s 2014 through 2017.

JJ MAC Landscape for Hospital Billing

As depicted in the tables, hospital billing for the JJ MAC revealed a landscape of:

• Decreasing inpatient volumes,
• Increasing average charges per claim,
• Minimal increases in Average Payment per claims from FY 2014 to FY 2017
• Alabama realized an increase from $9,242 to $9,521,
• Georgia realized an increase from $10,723 to $10,984, and
• Tennessee realized an increase from $10,078 to $10,459.
• A steady increase in Case Mix Index from FY 2014 to FY 2017. CMI shifts of even 0.1000 can have a significant impact on hospital finances. You can read more about CMI in a related article at: http://mmplusinc.com/news-articles/item/case-mix-index-pain-points.
• Alabama CMI increased from 1.597 to 1.6638,
• Georgia CMI increased from 1.673 to 1.7444, and
• Tennessee CMI increased from 1.6807 to 1.7601.
• Decreasing ALOS.

Moving Forward

In general, volumes are down, increases in CMI reflect a “sicker” patient population and the patients are being discharged from acute care quicker. This leaves hospitals with less time to adequately prepare for the needs of the patient when transitioning to a post-acute care setting (i.e. home, home with home health services, skilled nursing services). This also leaves hospitals with less time to ensure inpatient was the appropriate setting and when applicable documentation supported the medical services provided.

When possible it is always advisable to be proactive when there is the potential for an outside Contractor to request records for Medical Review or DRG Validation. Steps that can be taken include the following:

Assess Your Risk

• Monitor review activity of Medicare contractors, and
• Develop Compliance Review Plan

Know Where You Stand

• Review your quarterly Program for Evaluating Payment Patterns Electronic Report (PEPPER) for any Target Areas where you are an “outlier,”
• Perform internal record audits
• Arrange external audits as needed
• Evaluate findings of Medicare audits

Implement Actions

• Know the National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs),
• Understand documentation requirements,
• Have processes in place to assure when requested you send a complete medical record, and
• Educate key stakeholders within your facility
  

As mentioned earlier, in general I do not agree with the CMS and OIG opinion that hospitals are over- or mis-coding to increase payments. While we wait for their findings assess your risk, know where you stand and implement actions.