Knowledge Base Category -

Hospitals have struggled with the 2-Midnight Rule since it was implemented on October 1, 2013. Since then the Centers for Medicare and Medicare Services (CMS) has held numerous National Provider Calls, released sub-regulatory guidance, implemented a Probe and Educate Process conducting by Medicare Administrative Contractors (MACs) and requested public comment for an alternative short stay payment policy from health care providers. On July 1st, the CMS released the CY 2016 Outpatient Prospective Payment System (OPPS) Proposed Rule. Tucked way back on page 150 of the 177 page document, not only does CMS propose a change to the 2-Midnight Rule but they provide detail regarding a new medical review strategy that CMS will adopt on October 1, 2015 “regardless of whether the 2-midnight rule remains unchanged or is modified.”

Two-Midnight Rule Background

• The Two-Midnight Rule was implemented for admissions on or after October 1, 2013 in response to the concerning trend of extended “observation” services as these days do not count towards the three-day inpatient hospital stay required before a beneficiary becomes eligible for treatment in a skilled nursing facility and patient status can have a significant implications for provider reimbursement and beneficiary cost sharing.

• In general, the 2-Midnight Rule specified that an Inpatient stay is appropriate and payable under Medicare Part A when:
• The admitting physician has an expectation that a hospitalization will cross two midnights and the medical record documentation supports that expectation, or
• The beneficiary is being admitted for a Medicare designated Inpatient Only Procedure.

• Through sub-regulatory guidance, CMS has indicated “review contactors’ expectations for sufficient documentation will be rooted in good medical practice. Expected length of stay and the determination of the underlying need for medical or surgical care at the hospital must be supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which Medicare review contractors will expect to be documented in the physician assessment and plan of care. CMS does not anticipate that physicians will include a separate attestation of the expected length of stay, but rather that this information may be inferred from the physician’s standard medical documentation, such as his or her plan of care, treatment orders, and physician’s notes.”

• With the implementation of the Two-Midnight Rule, CMS initiated a Probe and Educate Process where Medicare Administrative Contractors (MACs) have been conducting prepayment patient status probe reviews of Medicare Part A inpatient hospital claims spanning 0 or 1 midnight after the formal inpatient admission to determine the medical necessity of the inpatient status in accordance with the 2 midnight benchmark.

• The Medicare Access and CHIP Reauthorization Act of 2015 extended the Probe and Educate Process through September 30, 2015. This Act also continues to prohibit Recovery Auditor from conducting post-payment medical reviews of inpatient hospital patient status claims with dates of admission between October 1, 2013 and September 30, 2015.

• Since the implementation of the Two-Midnight Rule, CMS has indicated that “other circumstances where an inpatient admission would be reasonable in the absence of an expectation of a 2 midnight stay should be rare and unusual. To date, CMS has identified “Mechanical Ventilation Initiated during Present Visit” as the only rare and unusual circumstance in which the 2-midnight benchmark would not apply.”

Proposed Policy Change for Medical Review of Inpatient Hospital Admissions under Medicare Part A

The proposed policy change for medical review of inpatient hospital admissions is aimed at changing “the standard by which inpatient admissions generally qualify for Part A payment based on feedback from hospitals and physicians to reiterate and emphasize the role of physician judgement.”

CMS is “proposing to modify our existing “rare and unusual” exceptions policy to allow for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not satisfy the 2-midnight benchmark, if the documentation in the medical record supports the admitting physician’s determination that the patient requires inpatient hospital care despite an expected length of stay that is less than 2 midnights. For payment purposes, the following factors, among others, would be relevant to determining whether an inpatient admission where the patient stay is expected to be less than 2 midnights is nonetheless appropriate for Part A payment:

• The severity of the signs and symptoms exhibited by the patient;
• The medical predictability of something adverse happening to the patient; and
• The need for diagnostic studies that appropriately are outpatient services (that is, their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more).

We note that, under the existing rare and unusual policy, only one exception—prolonged mechanical ventilation—has been identified to date. Upon further consideration and based on feedback from stakeholders, we believe there may be other patient-specific circumstances where certain cases may nonetheless be appropriate for Part A payment, absent an expected stay of at least 2 midnights. Such circumstances would be determined on a case-by-case basis. Under the proposed revised policy, for

purposes of Medicare payment, an inpatient admission will be payable under Part A if the documentation in the medical record supports either the admitting physician’s reasonable expectation that the patient will require hospital care spanning at least 2 midnights, or the physician’s determination based on factors such as those identified above, that the patient requires formal admission to the hospital on an inpatient basis”…”We are proposing to revise § 412.3(d) to state that when the admitting physician expects a hospital patient to require hospital care for only a limited period of time that does not cross 2 midnights, the services may be appropriate for payment under Medicare Part A if the physician determines and documents in the patient’s medical record that the patient requires a reasonable and necessary admission to the hospital as an inpatient. In general, we would expect that with most inpatient admissions where the stay is expected to last less than the 2-midnight benchmark, the patient will remain in the hospital at least overnight but acknowledge that the patient can be unexpectedly discharged or transferred to another hospital and not actually use a hospital bed overnight. Cases for which the physician determines that an inpatient admission is necessary, but that do not span at least 1 midnight, will be prioritized for medical review.”

“Under the proposed policy change, for stays for which the physician expects the patient to need less than 2 midnights of hospital care and the procedure is not on the inpatient only list or on the national exception list, an inpatient admission would be payable on a case-by-case basis under Medicare Part A in those circumstances under which the physician determines that an inpatient stay is warranted and the documentation in the medical record supports that an inpatient admission is necessary.”

The proposed rule makes a point to note that CMS is “not proposing any changes for hospitals stays that are expected to be greater than two midnights; that is, if the physician expects the patient to require hospital care that spans at least 2 midnights and admits the patient based on that expectation, the services are generally appropriate for Medicare Part A payment.”

CMS goes on to reiterate that it would “be rare and unusual for a beneficiary to require inpatient hospital admission after having a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for only a few hours and not at least overnight” and CMS “will monitor the number of these admissions and plan to prioritize these types of cases for medical review.”

What does this mean for a Hospital?

When I was first introduced to the concept of Clinical Documentation one key concept different in the inpatient setting versus the outpatient setting was that diagnoses still documented as possible, probable or likely at the time of discharge could be coded as if the condition existed.

Here is a breakdown of the possible, probable and likely of this 2-Midnight Proposal.

• It would now be possible that a physician can admit a patient as an inpatient without having a 2-Midnight Expectation, but
• It is also probable without excellent physician documentation in the record a medical reviewer would disagree with the inpatient status, and
• It is likely moving forward all of your 1 day Inpatient Hospital reviews will be prioritized for medical review. The question now is who will be doing that review. The answer leads us to the change being made for the 2016 IPPS fiscal year to the CMS medical review strategy.

CMS Changing the Medical Review Strategy

As mentioned earlier in this article, the MACs have had the responsibility of performing the Probe & Educate audits that have been ongoing since October 1, 2013. This is about to change. CMS has indicated even if the 2-Midnight Proposal is not finalized “that, no later than October 1, 2015, we are changing the medical review strategy plan to have Quality Improvement Organization (QIO) contractors conduct these reviews of short inpatient stays rather than the MACs.”

Key Facts about QIOs

• A statutory duty of the QIO’s is to review “some or all of the professional activities of providers and practitioners in the QIO’s service area.” These reviews are aimed at determining if services being delivered are reasonable and medically necessary, if the quality of services meet professional recognized standards of care, and for inpatient services, if the services could have been appropriately and effectively furnished in a different setting (i.e. outpatient). Further, section 1154(a)(2) of the Act provides for payment determinations to be made based on these QIO reviews.”

• Additional QIO Review Functions:
• Addressing beneficiary complaints,
• Provider-based notice appeals,
• Violations of the Emergency Medical Treatment and Labor Act (EMTALA),
• Peer review; and
• Higher Weighted Diagnosis Related-Group (HWDRG) coding reviews. When this “involves a service provided during a short inpatient stay, QIOs also perform a corresponding medial review to validate adherence to the current 2-midnight policy.”

• The Secretary has broad authority to “direct additional activities by QIOs to improve the effectiveness, efficiency, economy, and quality of services under the Medicare program. These reviews are integral to the determination of whether items and services should be payable under the Medicare program.”
• “QIOs routinely collaborate and interact with State survey agencies, MACs, recovery auditors, and qualified independent contractors (QICs).”

• “To mitigate the perception of a potential conflict of interest between medical review and quality improvement functions of the QIOs, on August 1, 2014, the QIO program separated medical case review from its quality improvement activities in each State under two types of regional contracts. These include Beneficiary and Family Centered Care QIOs (BFCC-QIOs) contractors who perform medical case review, and Quality Innovation Network QIOs (QIN-QIOs) contractors who perform quality improvement activities and provide technical assistance to providers and practitioners. In addition, the restructured QIO program uses a non-QIO contractor to assist CMS in the monitoring and oversight of the BFCC-QIO case review activities.”

New QIO Short Inpatient Medical Review Process to be adopted by October 1, 2015

• “QIOs will review a sample of post-payment claims and make a determination of the medical appropriateness of the admission as an inpatient.”

• The number of admissions for a “minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for only a few hours (less than 24 hours)” will be monitored and these types of cases will be prioritized for medical review.

• Claim denials will be referred to the MAC for payment adjustments. “Providers’ appeals of denied claims will be addressed under the provisions of section 1869 of the Act.”

• “QIOs will educate hospitals about claims denied under the 2-midnight policy and collaborate with these hospitals in their development of a quality improvement framework to improve organizational processes and/or systems.”

• “Hospitals that are found to exhibit a pattern of practices, including, but not limited to: having high denial rates and consistently failing to adhere to the 2-midnight rule (including having frequent inpatient hospital admissions for stays that do not span one midnight), or failing to improve their performance after QIO educational intervention, will be referred to the recovery auditors for further payment audit.”

• Under current law, Recovery Auditors may resume patient status reviews for dates of admission on or after October 1, 2015. “The number of claims that a recovery auditor will be allowed to review for patient status will be based on the claim volume of the hospital and the denial rate identified by the QIO.”

2-Midnight Rules’ Impact on the Trend of Long Outpatient Hospital Stays

CMS notes that “preliminary data suggest that the 2-midnight rule as it relates to hospital stays spanning at least 2 midnights has been effective in reducing long outpatient hospital stays. Specifically, our data show that the proportion of outpatient long-stay encounters (more than 2 days) involving observation services decreased by 11 percent in FY 2014 compared to FY 2013. The trend in these data is consistent with our adoption of the 2-midnight rule on October 1, 2013.”

Public Comments Requested

CMS noted that is has been argued by members of the hospital community that Medicare should adopt specific criteria for medical review entities to use when reviewing short stay claims. CMS is inviting public comments on whether specific criteria should be adopted for inpatient hospital admissions not expected to span at least 2 midnights and, if so, what should that criteria be.

CMS also noted that “MedPAC recently recommend repealing the 2-midnight rule in its entirety, in Chapter 7 of its June Report to Congress. MedPAC has not recommended a short-stay payment policy. We have requested public comment on three different occasions on issues related to when a patient is appropriately admitted as an inpatient or when the patient is appropriately treated as an outpatient, including potential payment policy options to address this issue” which has not resulted in a consensus on a recommended policy. In a letter earlier this year, the American Hospital Association provided us with its analysis for several payment policy alternatives and their potential impact. The association did not recommend adoption of a particular payment policy in this area. We continue to be open to considering potential payment policy options that have the potential to address this issue.”

For those who wish to comment, CMS is accepting comments on the Two Midnight portion of the proposed rule until August 30, 2015 and will respond to comments in a final rule to be issued on or around November 1, 2015.

Resources

• Link to the CY 2016 OPPS Proposed Rule – Display Copy (see pages 585-606 of the pdf): https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-16577.pdf
• Link to CY 2016 OPPS Proposed Rule in the July 8, 2015 Federal Register (see pages 150-155 of ): http://www.gpo.gov/fdsys/pkg/FR-2015-07-08/pdf/2015-16577.pdf

• Link to the July 1, 2015 CMS Fact Sheet: Two-Midnight Rule: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-01-2.html

• Link to the July 1, 2015 CMS Fact Sheet: CMS Proposes Hospital Outpatient and Ambulatory Surgical Center Policy and Payment Changes, Including Proposed Changes to the Two-Midnight Rule, and Quality Reporting Changes for 2016: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-01.html

• Link to CMS Document: Questions and Answers Relating to Patient Status Reviews 3/12/14: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Downloads/Questions_andAnswersRelatingtoPatientStatusReviewsforPosting_31214.pdf

• June 2015 Medicare Payment Advisory Commission Report to Congress Fact Sheet: http://www.medpac.gov/documents/fact-sheets/fact-sheet-on-medpac%27s-june-2015-report-to-the-congress-medicare-and-the-health-care-delivery-system.pdf?sfvrsn=0

Medicare can be fastidious – picky, particular, specific, precise, even downright finicky in their coding, billing, and documentation requirements. By now, most of us are used to their demands for precision. For example, we are all aware that the units billed must match the dosage, amount, or time specified in the physician’s order. But in the July 2015 OPPS Update, CMS points out an instance related to hyperbaric oxygen treatments (HBO) where this does not hold true.

When a physician orders a 90-minute HBO treatment, he or she expects that the patient will be placed at 100% oxygen for 90 minutes. In billing for HBO treatments, providers are allowed to include not only the time at 100% oxygen but also the time for descent, air breaks, and ascent. In that case, the units billed for HBO will be greater than the units equivalent to the 90 minutes specified in the order.

Effective January 1, 2015, CMS discontinued the old code that had been used to report HBO for years (C1300) and replaced it with new HCPCS code G0277 which has the same description as the old code - Hyperbaric oxygen under pressure, full body chamber, per 30 minute interval. Here are the key points to keep in mind when billing G0277 for HBO services:

• The total number of billable 30-minute intervals would not be based solely on the amount of time noted on the physician order.
• The total number of 30-minute intervals billable under G0277 should be calculated by including:
• Time spent by the patient under 100% oxygen,
• Time for descent,
• Time for air breaks, and
• Time for ascent.
• You must go at least 16 minutes into the next 30-minute interval in order to bill an additional unit. For example:
• 46-75 minutes = 2 units
• 76-105 minutes = 3 units
• 106-135 minutes = 4 units
• HBO is typically prescribed for an average of 90 minutes (at 100% oxygen)
• A common scenario to fulfill an HBO order for 90 minutes of treatment would be 90 minutes of therapeutic HBO, 10 minutes descent, 10 minutes air breaks and 10 minutes ascent for a total of 120 minutes which would equal 4 units of G0277.
• In general, CMS does not expect that a physician order for 90 minutes of HBO therapy would exceed 4 billed units of HCPCS code G0277.

And one more thing Medicare is picky about is their coverage requirements. In addition to getting the correct units on the claim, providers need to be sure the patient qualifies for HBO services in accordance with Medicare’s National Coverage Determination and any Local Coverage Determinations or Articles. The NCD for Hyperbaric Oxygen Therapy (20.29) includes a long list of covered conditions and an even longer list of non-covered indications. HBO is used as an adjunctive treatment and /or after conventional therapy has failed for a number of the covered conditions so review the policy carefully. Be sure that documentation in your medical record provides the details of any conservative or standard treatments in order to support the use of HBO as an adjunctive therapy.

HBO covered conditions include:

1. Acute carbon monoxide intoxication,
2. Decompression illness,
3. Gas embolism,
4. Gas gangrene,
5. Acute traumatic peripheral ischemia. HBO therapy is a valuable adjunctive treatment to be used in combination with accepted standard therapeutic measures when loss of function, limb, or life is threatened.
6. Crush injuries and suturing of severed limbs. As in the previous conditions, HBO therapy would be an adjunctive treatment when loss of function, limb, or life is threatened.
7. Progressive necrotizing infections (necrotizing fasciitis),
8. Acute peripheral arterial insufficiency,
9. Preparation and preservation of compromised skin grafts (not for primary management of wounds),
10. Chronic refractory osteomyelitis, unresponsive to conventional medical and surgical management,
11. Osteoradionecrosis as an adjunct to conventional treatment,
12. Soft tissue radionecrosis as an adjunct to conventional treatment,
13. Cyanide poisoning,
14. Actinomycosis, only as an adjunct to conventional therapy when the disease process is refractory to antibiotics and surgical treatment,
15. Diabetic wounds of the lower extremities in patients who meet the following three criteria:
16. Patient has type I or type II diabetes and has a lower extremity wound that is due to diabetes;
17. Patient has a wound classified as Wagner grade III or higher; and
18. Patient has failed an adequate course of standard wound therapy.

A 2014 review of HBO claims by Medicare’s Supplemental Medical Review Contractor revealed an error rate of 58%. Although over half of the denials were for lack of response to the document request, other medically reviewed claims lacked documentation in the submitted medical records to support the HBO services as medically reasonable and necessary. The documentation did not include:

• Specific timelines and goals for therapy. For example, the documentation simply stated “continue HBO” or “until healed”
• Radiology and pathology reports confirming diagnosis such as osteomyelitis or gas gangrene
• Monitoring for improvement or lack of improvement

In addition, when documentation was provided, descriptions of diabetic wounds did not meet Wagner Criteria for Grade three (III) or four (IV) wounds and therapy was provided beyond the 30 days allowed under Medicare coverage guidelines.

So before you bill for HBO make sure your patients meet the criteria for coverage and that you correctly calculate the number of units to report. If not, picky Medicare may decide to “pick” on you!

Coming In and Going Out

At the National Spelling Bee, spellers can ask for the definition of the word they are trying to spell.  Words can sound similar in pronunciation but be spelled differently based on definition.  For example, do you know the difference in the words “emigrate” and “immigrate”?  Emigrate means to leave a country (he emigrated from Ireland) and immigrate means to move into a country (he immigrated to America).  The comings in and going out of laboratory tests also have rules – well Medicare billing rules at least.

It is not unusual these days for a hospital to have an outpatient and outreach laboratory where patients may present with their physician orders for lab tests or where physician offices, clinics, or other healthcare entities may send specimens to be tested.  Hospital laboratories perform a wide array of laboratory tests, but there are some esoteric tests that a hospital lab may not perform and these tests are sent to a specialized reference laboratory for testing.  So with lab tests coming in and going out, who bills Medicare for the tests?  Actually, there are rules about that…

Outpatient Lab Testing

Only the hospital can bill Medicare for laboratory testing provided to hospital inpatients and outpatients.  This includes lab tests performed by an outside reference laboratory on specimens from hospital inpatients and outpatients.  Section 40.3 of the Medicare Claims Processing Manual, Chapter16, states: “When the hospital obtains laboratory tests for outpatients under arrangements with clinical laboratories or other hospital laboratories, only the hospital can bill for the arranged services.”  In such cases, the hospital would bill Medicare for the lab services on an outpatient claim (13x type of bill) and the hospital would pay the reference laboratory for the testing.

Section 40.3 referenced above also defines who is and is not an outpatient.  The section that defines “outpatient” refers to critical access hospitals, but the manual goes on to say the same rules apply in determining whether clinical laboratory services are furnished as part of outpatient services of a hospital.  The patient is considered a hospital “outpatient” when one of the following occurs:

• He or she is present in the hospital when the specimen is collected,
• Other outpatient services are received on the same day the specimen is collected,
• The specimen is collected by an employee of the hospital or a hospital provider-based-department.

Non-Patient Lab Testing

When the patient’s specimen is not collected at the hospital or by a hospital employee and the patient is not receiving other hospital outpatient services on that day, the patient is considered a non-patient.  For tests performed in the hospital’s own laboratory, the hospital bills Medicare on a 14x type of bill.  If the tests are sent to a reference laboratory for testing, either the hospital or the reference lab may bill Medicare for the testing.  Only one laboratory may bill for a referred laboratory service.  It is the responsibility of the referring laboratory (hospital in this case) to ensure that the reference laboratory does not bill Medicare for the referred service when the hospital bills Medicare.

Exceptions

There are some special rules for specimens received from certain types of healthcare entities.

Skilled Nursing Facilities

• For Part A SNF inpatients, the SNF must bill Medicare directly.
• For Part B SNF inpatients or outpatients, either the SNF or the performing laboratory may bill Medicare.

End-Stage Renal Disease Lab Tests

• All ESRD-related laboratory services are included in the ESRD PPS base rate and must be reported by the ESRD facility.  A list of lab tests that are routinely performed for the treatment of ESRD can be found at ESRD Consolidated Billing webpage.
• Laboratory services that are not related to the treatment of ESRD are separately billable under the ESRD PPS.  Hospital outpatients with unrelated ESRD tests must be billed by the hospital.  Non-patient unrelated lab testing may be billed by either the ESRD facility or the hospital laboratory.
• If the ESRD facility or testing laboratory bills a laboratory service that was not related to the treatment of ESRD, the bill must include the modifier AY.  The AY modifier serves as an attestation that the item or service is medically necessary for the dialysis patient but is not being used for the treatment of ESRD.

Hospice Patients

• Hospice nurses often collect specimens and bring them to a hospital laboratory for testing.  All services related to the patient’s terminal or co-morbid conditions are covered under the hospice benefit.  The hospital laboratory would bill the Hospice provider for these laboratory services.

Separate Payment for Lab Tests under OPPS

In 2014, Medicare packaged most laboratory tests under the Outpatient Prospective Payment System as ancillary services with a revised Status Indicator (SI) of “N”.  This means there is no separate payment for laboratory services.  There are some exceptions when lab services will be paid separately by Medicare.  These exceptions include:

• Lab tests on non-patient specimens billed on a 14x type of bill
• When laboratory tests are the only outpatient service the patient receives for that day.  These are billed on a 13x type of bill and an L1 modifier is appended to the lab services.
• Unrelated laboratory tests that are ordered by a different physician for a different diagnosis than other outpatient services received that day.  These are also billed on a 13x type of bill with the L1 modifier.

Other Payer Rules for Lab Tests

To keep life interesting and providers on their toes, not all payers follow Medicare rules.  You will have to check with individual payers to determine how laboratory tests should be billed.  Some payers may require the testing lab to bill and others may have specific criteria for when the referring lab can bill.  For example Alabama Medicaid states the following concerning charges for referred testing.

 Hospital labs may bill Medicaid on behalf of the reference lab that a specimen is sent to for analysis. Payment may be made to the referring laboratory but only if one of the following conditions is met:

• The referring laboratory is located in, or is part of, a rural hospital;
• The referring laboratory is wholly owned by the entity performing such test, the referring laboratory wholly owns the entity performing such test, or both the referring laboratory and the entity performing such test are wholly-owned by a third entity; or
• The referring laboratory does not refer more than 30 percent of the clinical laboratory tests for which it receives requests for testing during the year (not counting referrals made under the wholly-owned condition described above).

Note also that AL Medicaid only allows venipuncture to be billed if the specimen is tested at a different lab than the lab collecting the specimen – “Hospital labs may bill ‘routine venipuncture’ only for collection of laboratory specimens when sending blood specimens to another site for analysis”

Hospital providers must consider the comings in and goings out of laboratory specimens in order to know who and how to bill.  It’s enough to make one want to immigrate to another career – or would that be emigrate?

Another article in this week’s Wednesday@One newsletter reviews the different definitions of the word “confusion.” There are also numerous definitions for the verb “observe” but let’s concentrate on two of these definitions. One definition of “observe” is “to watch, view, or note for a scientific, official, or other specialpurpose.” This definition fits the services provided to a patient in a hospital stay for “observation services” – the patient is being watched for a special purpose. But observe also means to “obey or comply” as providers of services to Medicare patients must “observe” Medicare rules and regulations. In fact, these providers must “observe the rules of observation services.”

Since there was not a lot of MAC Medical Review activity this month, let’s look beyond the MAC reviews to a finding reported in the OIG compliance review of Northwestern Memorial Hospital released in March 2015. The OIG reported that the hospital incorrectly billed Medicare for observation hours resulting in incorrect outlier payments. In this review, the overpayment amount for observation services was less than $4,000 but findings from this review were extrapolated expanding overpayments of around $272,000 to a refund amount of over $6M. Other OIG compliance reviews over the years have identified cases of over $20,000 in outlier overpayments related to incorrect reporting of observation hours.

The most common reason for over-reporting observation hours is the inclusion of observation time for services that were part of another Part B service including postoperative monitoring or standard recovery care. According to the Medicare Claims Processing Manual, Chapter 4, Section 290.2.2, observation services should not be billed:

• For services that are part of another Part B service, such as postoperative monitoring during a standard recovery period (e.g., 4-6 hours);
• For routine preparation services furnished prior to diagnostic testing and recovery afterwards; or
• Concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure.

Medicare allows hospitals the discretion of determining the most appropriate way to account for concurrent time. Hospitals may deduct the actual time spent in procedures with active monitoring or use an average length of time for the interrupting service.

Another problem identified by this and previous OIG reviews was including inappropriate time before or after observation services.

• Observation time begins at the clock time documented in the patient’s medical record, which coincides with the time that observation care is initiated in accordance with a physician’s order. You cannot bill for observation hours prior to the time of the physician’s order for observation. Keep this in mind especially when using Condition Code 44 to convert an inappropriate inpatient admission to an outpatient stay. The entire stay, from the time of the inpatient admission order, becomes outpatient status, but if the order is to “change to outpatient with observation services”, observation only begins at the time of that order.
• Observation time ends when all medically necessary services related to observation care are completed. This could be before, at the time of, or after the time of the discharge order. The key here is when medically necessary services are complete. Consider if the patient is still receiving medical care related to the observation services. Once medical care/assessment is complete, observation services are complete and the billing of observation hours should stop at that point.

There were also issues with physician’s orders – either missing orders or untimely orders. There must be a signed order for observation services – section 290.1 of Chapter 4 of the Medicare Claims Processing manual states, “Observation services are covered only when provided by the order of a physician or another individual authorized by State licensure law and hospital staff bylaws to admit patients to the hospital or to order outpatient services.” In the OIG review that noted untimely orders, one order was signed after the observation care was no longer necessary and the other order was signed when the observation services were nearly complete. Observation orders must be medically necessary at the time they are written, which leads nicely into the final issue.

The final observation issue noted in the OIG review - the patient’s condition did not warrant observation services. Providers must consider the medical necessity of observation services just like they consider the medical necessity of all procedures and services. This applies to an initial decision for observation services and the continuation of observation services.

“Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge. … In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.”

Observation is short term treatment or assessment while the physician is deciding whether the patient needs to be admitted as an inpatient or is medically stable enough to send home. Once this is decided and short term treatments and assessments are complete, observation services are no longer medically necessary.

To be compliant with the reporting of observation services, providers must consider - is observation reasonable and necessary, is there a physician’s order, and is observation time being counted correctly? As with all things Medicare, there are a lot of details, in this case for observing the rules of observation.

MAC Medical Review Activity for the month included:

Life would be chaos without rules. Driving on the wrong side of the road, lack of education because what child would go to school if it wasn’t a rule, no money for government services without tax payments, and of course, how would we ever bill Medicare without all the regulations? But some rules are just bigger, badder, and uglier than others.

The April 2015 OPPS update allows the inclusion of an inpatient only procedure onto the inpatient claim if it is provided on an outpatient basis prior to an inpatient admission and qualifies under the three-day window rule. This is a significant change in the rules which previously did not allow payment for inpatient only procedures in this situation.

The new rule effective April 1, 2015 states that “inpatient only procedures that are provided to a patient in the outpatient setting on the date of the inpatient admission or during the 3 calendar days (or 1 calendar day for a non-subsection (d) hospital) preceding the date of the inpatient admission that would otherwise be deemed related to the admission, according to the policy for the payment window for outpatient services treated as inpatient services will be covered by CMS and are eligible to be bundled into the billing of the inpatient admission.”

The BIG question is – does this mean that if the physician failed to write an inpatient admission order prior to the IP only procedure, that it is now acceptable to write the inpatient order after the inpatient only procedure when the only reason for inpatient admission is based on the performance of the inpatient only procedure (that is, there is no expectation of a 2-midnight stay after the order)? The BAD news is that the Transmittal does not answer this question which leaves the new rule open to a lot of interpretation. This could get UGLY. I have emailed the pre-implementation CMS contacts for further guidance and will publish any clarification I receive.

This is a good time to review the three-day window rule. I break the three-day window rule into three parts to better remember and understand it. Under the three-day window rule, the following outpatient services must be combined onto the ensuing inpatient claim for IPPS hospitals:

1. All services provided on the day of admission
2. All diagnostic services provided within 3 calendar days* prior to admission
3. All non-diagnostic services related to the reason for admission provided within 3 calendar days prior to admission

Note* - Non-IPPS hospitals (non-subsection (D) hospitals) combine services within 1 calendar day of admission.

But knowing the rule is only part of the challenge. The bigger challenge for hospitals is in implementing the rule.

• Identify the affected claims – Claims that contain services provided within the payment window 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)
• Determine if non-diagnostic services are related - the preadmission non-diagnostic services are considered related unless they are clinically distinct or independent from the reason for the beneficiary’s admission
• Combine the charges
• All charges from the day of admission
• All charges for diagnostic services within 3 days of admission - diagnostic services are defined by the presence on the bill of the specific revenue and/or CPT codes listed in the Medicare Claims Processing Manual, Chapter 3, Section 40.3.B.
• Charges for related non-diagnostic services within 3 days of admission
• Re-code the “combined” claim – include any ICD diagnosis codes and procedure codes from the combined outpatient services (effective April 1, 2015, this will include procedure codes for inpatient only procedures provided during the outpatient time preceding the inpatient admission)
• Bill unrelated non-diagnostic services provided during the payment window on a separate 13x type of bill – add condition code 51 to attest that these services are unrelated to the ensuing inpatient admission

There are a lot of other important details concerning the three-day window rule, such as exempt services, services provided in a physician’s office owned by the hospital, and how to code the present-on-admission (POA) indicators, just to name a few. For complete guidance on the three-day window rule, see the Medicare Claims Processing Manual, Chapter 3, Section 40.3.

As you can see the 3-day rule is not just remembering three little things. It is a really big, bad and ugly rule that unfortunately just seems to have gotten uglier.

Recently a hospital reported to MMP that they were cited for an underpayment by the Recovery Auditor because they had billed for a portion of a drug that is only available in a single-dose vial. The hospital, following the appropriate United States Pharmacopeia (USP) standards for compounding, had split the single-dose vial into incremental portions in syringes. They billed Medicare for the dose administered to a patient and the wastage amount of one of the prepared syringes. The RAC denied this as an underpayment – what should the hospital do?

My research revealed that the splitting of single-dose vials is a huge controversy. The Centers for Disease Control and Prevention (CDC) has released a statement opposing the splitting of single-use vials due to safety concerns, except in times of severe shortages of medicines.   CMS has even weighed in on the issue with a memo to the State Survey Agency Directors requiring adherence to strict standards for repackaging of single use vials.

But often single-use vials contain more medication than the routine dose. Drug wastage raises concerns about the high costs of drugs and the ever increasing number of drug shortages. For these reasons, hospital pharmacies may aliquot a single-dose vial into smaller doses. A patient will then be administered the ordered dose from the prepared syringe and any remaining amount within the syringe will be wasted. The hospital should bill for the amount of the drug given and wasted from the single syringe used. This will result in the billing of an amount less than the amount in the single-use vial. Like the situation above, this may cause a Medicare contractor to question your billed units.

The hospital will have to appeal the denial and provide documentation to the contractor that supports:

• Their process for splitting the single-use vial, including adherence to the required criteria
• The dosage within the syringe that was used
• The amount administered to the patient and the amount wasted

If the denial comes from a Recovery Auditor and your hospital has time, you may be able to resolve the issue during the discussion period.

And you probably never thought you would object to an underpayment finding!!

Wives, do you ever tell your husband how much money you saved him because you bought something on sale? In the medical realm, hospitals sometimes get medical devices “on sale” – well, actually at reduced or no cost for various reasons, such as premature replacements, product recalls, or as part of a clinical trial. Since the device is free or at a reduced cost, Medicare doesn’t want to reimburse the hospital for a full cost device. Therefore, hospitals must communicate the “special price” to Medicare on the claim with specific codes in order not to receive an overpayment.

Last year CMS changed the way hospitals report devices on outpatient claims when the device is provided at no cost, with full credit, or with partial credit that is 50% or greater than the cost of the device. Prior to this change, hospitals used modifiers –FB and –FC to communicate this information on the claim. Effective January 1, 2014, the use of modifiers FB and FC were discontinued, and hospitals were instructed to use Value Code FD and condition codes 49 or 50 to report device credits. However, condition codes 49 and 50 only describe devices that are replaced –

• Condition Code 49 – Product Replacement within Product Lifecycle
• Condition Code 50 – Product Replacement for Known Recall of a Product

Sometimes the original device for initial implantation is provided to the hospital at no cost, such as a free sample or due to a medical device clinical trial. Therefore for claims received on and after July 1, 2015, CMS is adding a new condition code for hospital reporting to identify medical devices for initial device placement provided at no or reduced cost due to a clinical trial or free sample (MLN Matters MM8961). The new condition code is:

• Condition Code 53 – Initial Placement of a Medical Device Provided as Part of a Clinical Trial or Free Sample

To report medical devices for initial device placement provided at no or reduced cost, hospitals will report the:

• Value Code “FD” (Credit Received from the Manufacturer for a Medical Device)
• The amount of the device credit in the amount portion for value code “FD”
• Condition Code 53
• A charge of $0.00 for the device (or a token charge of $1.00 if required by the billing system)

The OPPS payment deduction for device credits for device-dependent APCs is limited to the lesser of the device credit amount reported in the FD value field or the device offset amount for that APC.

If the device is furnished as part of a clinical trial, the claims requirements for institutional billing of clinical trials must also be followed.

Hospital Compliance Audits performed by the Office of Inspector General (OIG) have consistently identified errors with the lack of reporting device credits. From my years working in a hospital, I realize tracking and reporting such credits would be a very detailed process, involving numerous departments. But to prevent overpayments, hospitals must come up with appropriate processes to know when a credit is received or should be received, the credit amount, the reason for the credit, and get the correct data on the claim to report that credit to Medicare. So as with the wife’s “on sale” purchase, “on sale” devices still come with a price!

I love reading, writing and the English language – I am such a grammar geek that I actually belong to a “grammar” blog. In writing, you want to make sure you are choosing your words wisely and appropriately – in other words, definitions matter. As we see in this quarter’s Medicare Compliance Newsletter, definitions also matter when billing for your services to Medicare, especially the definitions related to procedure and diagnosis codes.

Last week we addressed a couple of CERT issues from the January Medicare Quarterly Provider Compliance Newsletter that affected hospital inpatient claims. This week we will look at some deficiencies with outpatient records identified by the Recovery Auditors.

Extracorporeal Photopheresis – CPT 36522

Medicare covers extracorporeal photopheresis (drug and UVA light treatment of white blood cells) only for certain conditions per National Coverage Determination 110.4. This procedure is covered by Medicare for:

• Palliative treatment of skin manifestations of cutaneous T-cell lymphoma that has not responded to other therapy
• Patients with acute cardiac allograft rejection whose disease is refractory to standard immunosuppressive drug treatment
• Patients with chronic graft versus host disease whose disease is refractory to standard immunosuppressive drug treatment

Medicare claims for CPT 36522 must contain one of the following ICD-9 diagnosis codes for the above covered conditions to support medical necessity and be eligible for Medicare payment: 202.10-202.18 and 202.20-202.28, 996.83, or 996.85. A RAC automated review identified overpayments for claims with this service that did not contain an appropriate diagnosis code.

Facet Joint Injections

According to the newsletter, “Medicare will consider facet joint blocks to be reasonable and necessary for chronic pain (persistent pain for three (3) months or greater) suspected to originate from the facet joint.” Due to findings from RAC reviews, Medicare reminds providers about the following facts of facet joint injections:

• It is expected that facet injections reported with CPT codes 64490-64495 will be performed under fluoroscopic guidance.
• Multiple nerves innervate each facet joint, but injections are to be reported per facet joint level, not per nerve. Facet joint levels refer to the joints that are blocked and not the number of medial branches that innervate them. For example, CPT codes 64490 and 64493 are used to report all of the nerves that innervate the first level paravertebral facet joint and not each nerve; CPT codes 64491, 64492, and 64494, 64495 report all nerves at the second and third additional levels and not each additional nerve.
• Codes 64490-64495 are unilateral procedures.
• Use modifier 50 to report bilateral injections (facet joint injections on both the right and left sides of one level of the spine). If multiple bilateral injections are performed, modifier 50 should accompany each facet CPT joint injection code that was performed on both sides of one level.
• Only one facet injection code should be reported at a specific level and side injected (e.g., right L4-5 facet joint), regardless of the number of needle(s) inserted or number of drug(s) injected at that specific level.

IV Infusion Units

Providers are to report only one “initial” intravenous infusion code for chemotherapy and therapeutic infusions (CPT codes 96413, 96365, and 96369) per day unless the patient has two different infusion sites or more than one visit on the same day. In the case of two infusion sites or multiple encounters, it is appropriate to append a -59 modifier to the second “initial” service. An initial infusion code is defined in MLN Matters Article MM3818 as the code that “best describes the key or primary reason for the encounter and should always be reported irrespective of the order in which the infusions or injections occur." Also be sure to follow the CPT reporting hierarchy for drug administration codes in selecting the initial service.

Hospitals need to bear in mind that for drug administrations, observation services spanning more than one day are considered one encounter as explained in the Medicare Claims Processing Manual, Chapter 4, section 230:

“Drug administration services are to be reported with a line item date of service on the day they are provided. In addition, only one initial drug administration service is to be reported per vascular access site per encounter, including during an encounter where observation services span more than 1 calendar day.”

As always, it benefits providers to pay attention to the details when billing Medicare – such as the definitions of “initial” infusion and facet joint “level” versus nerve. In coding and billing, definitions matter!

We may not know if the testing method for drug screening is classified as moderate or high complexity without looking it up, but I bet everyone will agree that the process of selecting the correct CPT/HCPCS codes for drug screen billing is highly complex.

CPT made a lot of changes to drug assays, specifically drug screening and definitive testing of non-therapeutic drugs, for 2015. And to complicate things even further, Medicare is not accepting the new CPT codes and has established some new HCPCS codes for drug identifications. Medical Management Plus will be covering the drug assay code changes in our coding webinar on December 4, 2014 in more detail, but here is a summary of the major changes.

Instead of classifying drug assays by qualitative versus quantitative, CPT now has three types of drug assays:

1. Presumptive drug assays to detect the possible presence of a drug by simpler testing methods,
2. Definitive drug assays that provide specific identification of individual drugs using complex testing methods, and
3. Therapeutic drug assays to monitor clinical response to a known, prescribed medication.

The assignment of CPT codes for presumptive drug assays are based on the drug classification into one of two drug class lists developed by CPT and the complexity of the testing methods. Drug class list A includes drugs generally considered drugs of abuse and identified by simpler testing methods such as optical observation and chemistry analyzer immunoassay or enzyme assay. Drug class list B includes drugs such as acetaminophen, salicylates, etc. and involves most complex immunoassay analyzer or chromatography methods. The CPT codes for drug screening are:

• CPT 80300 - Drug screen, any number of drug classes from Drug Class List A; any number of non-TLC devices or procedures, (eg immunoassay) capable of being read by direct optical observation, including instrumented-assisted when performed (eg, dipsticks, cups, cards, cartridges), per date of service
• CPT 80301 - Drug screen, any number of drug classes from Drug Class List A; single drug class method, by instrument test systems (eg, discrete multichannel chemistry analyzers utilizing immunoassay or enzyme assay), per date of service
• CPT 80302 - Drug screen, presumptive, single drug class from Drug Class List B, by immunoassay (eg, ELISA) or non-TLC chromatography without mass spectrometry (eg, GC, HPLC), each procedure
• CPT 80303 - Drug screen, any number of drug classes, presumptive, single or multiple drug class method; thin layer chromatography procedure(s) (TLC) (eg, acid, neutral, alkaloid plate), per date of service
• CPT 80304 - Drug screen, any number of drug classes, presumptive, single or multiple drug class method; not otherwise specified presumptive procedure (eg, TOF, MALDI, LDTD, DESI, DART), each procedure

For Medicare, drug screening codes are the same as last year. Although the description for high complexity lists immunoassay and enzyme assay, most immunoassay and enzyme assay methods are actually moderate complexity tests. Test complexity is determined by the FDA and is listed on their website. Laboratory personnel can help in determining the complexity of drug screen tests that your hospital performs. Medicare’s HCPCS code definitions are:

• HCPCS G0431 - Drug screen, qualitative; multiple drug classes by high complexity test method (e.g., immunoassay, enzyme assay), per patient encounter
• HCPCS G0434 - Drug screen, other than chromatographic; any number of drug classes, by CLIA waived test or moderate complexity test, per patient encounter

Both CPT and Medicare developed new codes for individual non-therapeutic drug assays. The new CPT codes are CPT codes 80320 – 80377. CPT clarifies that these codes are to be used for complex definitive methods such as those involving mass spectrometry and specifically excludes immunoassay and enzyme assay testing methods. The new HCPCS codes describing individual drug assays accepted by Medicare for 2015 are HCPCS codes G6030 – G6058. So far Medicare has not provided any guidance on the use of these codes, such as if they are limited to particular testing methodologies.

Because of differences in the basis of the code descriptions, it will not be easy to cross-walk the CPT codes and the Medicare HCPCS codes. We also will have to wait and see if Medicare issues any guidance, particularly for the use of the individual drug codes. The chart below provides some suggestions on cross-walking the drug screening codes.

As high complexity is a determining factor in drug testing, it also appropriately describes the process of determining which codes to use for billing. This year, it just seems to become even more complex and even worse, Medicare is packaging the payment for all drug screening codes. All of this work and brain drain for no reward!!

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.

In billing Medicare, the details are important. And the details are complicated! Is the status inpatient or outpatient? Is there additional reimbursement? Are the services provided on or off campus? And with an inpatient only list, packaging of services, and provider-based vs. satellite vs. remote locations, how is a provider to figure it out? It takes lots of reading, interpreting, head-banging and gnashing of teeth. And as if the sheer complexity isn’t enough, the rules change constantly or at least once a year - as is the case with the 2015 Outpatient Prospective Payment System Final Rule (OPPS FR).

The other two articles in this week’s Wednesday@One address some of the major changes from the 2015 OPPS FR, specifically the new packaging rules including Comprehensive APCs and the changes to the physician certification requirements for inpatient admissions. In keeping with the theme, this article will address some of the other outpatient changes found in the final rule.

Inpatient Only Procedures

CMS did not make a lot of changes to the Inpatient Only list for this year but some of the changes were significant in terms of hospital operation.

They added an Osteotomy code –

• CPT code 22222 (Osteotomy of spine, including discectomy, anterior approach, single vertebral segment; thoracic)

They removed two codes for additional spinal levels of laminotomy –

• CPT code 63044 (Laminotomy … each additional lumbar interspace)
• CPT code 63043 (Laminotomy … each additional cervical interspace)

The removal of these codes seems extremely reasonable since the primary codes (CPT 63040 and 63042) representing the first and single interspace for these additional-level procedures were already not listed as inpatient only procedures. Since these are add-on codes, there will not be additional reimbursement for the additional levels, but at least these can now be performed as outpatient services.

Payment for Drugs and Biologicals

Medicare is continuing to pay for both pass-through drugs and separately payable drugs, biologicals, and therapeutic radiopharmaceuticals without pass-through status at ASP + 6%. The packaging threshold for separately payable drugs for CY2015 increased to $95. The packaging threshold (average per day cost) began at $50 in 2005 and has steadily increased from year to year; for example it was $90 for 2014. Drugs with a per day cost equal to or below this threshold (by Medicare calculations) are not separately paid, but are packaged into other services.

Off-campus Provider-Based Departments

Medicare and other governmental agencies have recently expressed concerns about the trend of hospitals acquiring physician practices. Outpatient hospital services are paid at a higher reimbursement rate than services provided in a physician’s office or free-standing clinic. In order to collect data on the amount and types of services being provided in hospital off-campus provider-based departments (PBDs), CMS will be requiring the addition of a modifier to services furnished in an off-campus provider-based department on facility claims and a new place of service (POS) code on the physician claims. This proposal was finalized in the 2015 OPPS Final Rule with the following details:

• The addition of the modifier for hospital services in an off-campus provider-based department is not required until 2016. The modifier may be voluntarily added beginning in 2015.
• The new HCPCS modifier is “PO” (Services, procedures and/or surgeries furnished at off-campus provider-based outpatient departments) and is to be appended on the hospital claim to all services furnished in the off-campus PBD.
• CMS defines “campus” as the physical area immediately adjacent to the provider’s main buildings, other areas and structures that are not strictly contiguous to the main buildings but are located within 250 yards of the main buildings, and any other areas determined on an individual case basis, by the CMS regional office, to be part of the provider’s campus.
• The modifier is not to be reported for services furnished in:
• Remote locations of a hospital as defined at 42 CFR 412.65,
• Satellite facilities of a hospital as defined at 42 CFR 412.22(h), or
• Services furnished in an emergency department.
• CMS will be deleting POS code 22 (outpatient hospital department) and replacing it with two new codes, one of which will identify services furnished in a hospital off-campus PBD for physician reporting.

CMS indicates that additional instructions and provider education will be forthcoming in sub-regulatory guidance.

These are some more of the most recent changes – until the next changes come along. Hospitals need to adjust their processes to address the above new regulations and watch for any clarifying guidance. Don’t bang your head too hard!