Medicare Compliance & Reimbursement

Tip: Concise documentation will be critical in 2021.

Medicare hasn’t released all the annual improper payment rate details yet — but it’s clear documentation woes continue to plague providers.

The Centers for Medicare & Medicaid Services (CMS) recently announced the fiscal year (FY) 2020 estimated improper payment rate statistics (see Medicare Compliance & Reimbursement, Vol. 46, No. 23).

CMS estimates there were $25.74 billion in improper payments, which is a decrease from FY 2019. Last year, the improper payments reached $28.91 billion. For Medicare Part A and B claims, the agency anticipates a 6.27 percent improper payment rate. This is a decline from the FY 2019 improper payment percent of 7.25.

A Department of Health and Human Services (HHS) FY 2020 Agency Financial Report (AFR) reveals more details.

Check Out the Top Error Rate Issues

Despite the improvements, problems still persist. “Improper payments for hospital outpatient, IRF, SNF, and home health claims were major contributing factors to the FY 2020 Medicare [fee-for-service] FFS improper payment rate, comprising 34.22 percent of the overall estimated improper payment rate,” according to the report.

For FY 2020, there were several “primary causes” that affected the estimated Medicare FFS improper payment rate. Take a look at the percentages from Figure 7 in the report:

• Insufficient documentation: The agency highlights the perennial problems that insufficient documentation creates each year. Billing snafus arise when the documentation doesn’t support a higher-level code, the medical necessity of the higher code, or even the condition for the payment of the code. The overall impact of insufficient documen­tation was significant at a whopping 56.62 percent.
• Medical necessity: At 8.37 percent, medical necessity ranked as the second-biggest factor adding to this year’s FFS improper payment rate. “These errors occur when submitted medical records contain adequate documentation to make an informed decision that services billed were not medically necessary based upon Medicare coverage and payment policies,” explains the agency.
• Noncompliance: According to the estimates, 6.4 percent of the total improper payments are attributed to noncompliance problems. “If the documentation noncompliance errors were corrected, the government would have made the payment in the assigned amount,” the report says. “Therefore, it represents a ‘non-monetary loss’ to the government.”
• Incorrect coding: Annually on CMS’ naughty list, incorrect coding remains a major contributor with a 5.25 percent FFS error rate. When claims are submitted with the wrong code or a provider listed who didn’t perform the service, this ratchets up the incorrect coding rates. In addition, unbundling services, putting the wrong site for a code, downcoding to a lower-level code, and upcoding to a higher-level code also increase this category’s numbers.
• No documentation: When Medicare providers ignore medical records requests or lack the necessary documentation to back up claims, this rate goes up. Approximately 4.42 percent of the FFS improper payment rate was impacted by this issue.

Other: Some claims quandaries blur the lines between groups and accounted for 16.17 percent of the estimated Medicare FFS numbers. “These errors do not fit into the previous categories (e.g., duplicate payment error, non-covered or unallowable service, ineligible Medicare beneficiary, etc.),” the report maintains.

‘Corrective Actions’ Impacted the Rates

CMS’ Targeted Probe and Educate (TPE) program was a major factor in the improper payment rate’s decline. According to the report, “MACs reviewed approximately 1,124 hospital outpatient providers under the TPE program.” Additionally, 92 inpatient rehabilitation facilities, 22 SNFs, 582 home health agencies, 754 hospice providers, and 2,463 Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers were reviewed by the MACs, the report indicates.

Supplemental Medical Review Contractor (SMRC) investigations, Recovery Audit Contractor (RAC) reviews, physician evaluations, and policy reforms were also attributed as corrective actions that helped lower the improper payment rate.

Resources: Find the CMS fact sheet at www.cms.gov/newsroom/fact-sheets/2020-estimated-improper-payment-rates-centers-medicare-medicaid-services-cms-programs and the HHS report at www.hhs.gov/sites/default/files/fy-2020-hhs-agency-financial-report.pdf.