Home Health & Hospice Week

CMS answers a nagging question about sequencing denied episodes.

One M0110 mystery is solved, but the solution may not make your PPS billing much easier.

"Any Medicare fee-for-service covered episode for a beneficiary is considered in determining adjacent covered episodes," the Centers for Medicare & Medicaid Services says in May 16 Transmittal No. 1505 (CR 6027).

The keyword is "covered," experts point out. Episodes that Medicare denies don't count toward "later" episode designations.

Background: Under the prospective payment system refinements that took place Jan. 1, Medicare pays more for a later (third or later) episode than an early (first or second) episode.

"The Common Working File [will] exclude episodes that were fully denied by medical review from determinations of whether an episode should be paid as 'early' or 'later,'" the transmittal explains.

Good: "This memo will help correct some of the M0110 errors that have been occurring since the beginning of the year," cheers consultant Judy Adams with LarsonAllen in Charlotte, NC. "No longer counting a denied episode ... for calculating the sequence will stop errors by the intermediaries."

Before this clarification, home health agencies were unsure whether to count denied episodes or not. One HHA asked regional home health intermediary Cahaba GBA the same question earlier this year and the RHHI said it didn't know either (see Eli's HCW, Vol. XVII, No. 11).

Not so good: This clarification will make checking the Common Working File for previous episodes even more confusing, predicts consultant M. Aaron Little with BKD in Springfield, MO. Currently, any episode listed in the CWF counts toward M0110. The CWF doesn't distinguish between paid or denied episodes. But under the clarification, denied episodes will show up in the CWF but won't count toward M0110.

How it will work: Denied episodes will have a "2" indicator when they're fully denied under medical review. Otherwise episodes will have a "0" indicator, CMS says. That indicator will show up in the RAP cancellation field of the CWF, a CMS official tells Eli.

HHAs will have to know enough to recognize a denied episode and realize it doesn't count toward the episode sequence, Little points out. "It will certainly take some educating to get people used to understanding what the indicator means," he says.  "I wouldn't say it's currently intuitive."

Not understanding the new indicator may lead to inaccurate billing, experts fear.

Looming: Billers already have their hands full with adjustments under PPS refinements. Adjust-ments for episode sequence and therapy visit numbers can entirely change which of the four equations an episode falls into, and thus its reimbursement level.

Often, medical reviewers won't deny claims for episodes until subsequent episodes already have been billed, Adams expects. This will mean an agency may bill a later episode based on CWF information that's current at the time of billing, then the system will later adjust the episode based on the medical review denial that takes place after billing.

The clarification "will result in late adjustments to some claims that have already been paid," Adams tells Eli.

"This new processing issue could pose a challenge for providers to get their data correct," Little warns.

Don't forget: That's not providers' only M0110 problem. The claims system is still failing to mark later episodes when one of the patient's early episodes occurred in 2007. CMS plans to fix that problem in July and make retroactive adjustments (see Eli's HCW, Vol. XVII, No. 18).

Don't Count Medicare Advantage Episodes

The new memo also reminds providers not to count Medicare Advantage episodes toward the early/later designation. "Episodes covered by Medicare Advantage plans are not considered in determining adjacent episodes," CMS instructs.

Not everyone realizes this M0110 wrinkle, says consultant Melinda Gaboury with Healthcare Provider Solutions in Nashville, TN.

Little is glad to see the MA guidance in a formal memo, he says.

Resource: Providers might find the memo's case scenario examples and instructions about counting episodes helpful, Gaboury suggests.

Another thing: The memo, which contains various PPS billing corrections and clarifications, also notes that nonroutine supplies (NRS) payments are prorated for episodes with partial episode payment (PEP) adjustments.

Note: The memo is online at www.cms.hhs.gov/Transmittals/downloads/R1505CP.pdf.