Medicare Compliance & Reimbursement

The feds continue to see benefits from threatening providers with False Claims Act lawsuits, and that could mean more trouble for you down the road. Seven hospitals in six states have agreed to pay $6.3 million to settle allegations of overbilling for kyphoplasty procedures, according to a Department of Justice release. The procedures should have been performed outpatient instead of inpatient in many cases, the DOJ contends.

The government has been using the FCA to strong-arm providers into fraud settlements when they were merely guilty of billing mistakes, the American Hospital Association recently protested (see "AHA to Federal Officials: Play Fair With the FCA" in Medicare Compliance & Reimbursement Vol. 36, No. 20).

• Non-contract durable medical equipment suppliers in competitive bidding areas who decided to continue furnishing bid items under the grandfathering exemption may have trouble securing their Medicare reimbursement.

The problem: CMS has identified a claims system problem for bid item claims coming from grandfathered suppliers, the agency says in a message to providers.

The solution: Such non-contract suppliers must use the "KY" modifier on their bid item claims to secure payment, CMS instructs. "Grandfathered suppliers must use the KY modifier on claims with dates of service on or after Sat. Jan 1, 2011, for purchased, covered accessories or supplies furnished for use with grandfathered equipment," the agency says.

The problem applies to 24 HCPCS codes for CPAPs, RADs, hospital beds, and walkers, plus their accessories. Be careful how you use the modifier, though. "Purchase-claims submitted for these codes without the KY modifier will be denied," CMS says.

But claims submitted with the KY modifier for HCPCS codes other than those listed above also will be denied, the agency warns.

The KY billing solution is only temporary and contains one big flaw -- the system won't pay you the correct amount for the item. "The correct payment for covered accessories and supplies used in conjunction with a grandfathered item under a competitive bidding program is 80 percent of the single payment amount calculated for the item for the Competitive Bidding Area," CMS reminds suppliers. "However, payments made under this temporary solution will result in payment on a fee schedule basis rather than payment using the single payment amounts." CMS hasn't issued information on how -- or whether -- payment will be reconciled when the problem is resolved.

Tip: Suppliers can appeal their denied claims to their DME MAC, CMS says.