Medicare Compliance & Reimbursement

What you should do before submitting claims to reduce your risk.

The Centers for Medicare & Medicaid Services (CMS) is changing the way its review contractors investigate hospitals’ short-stay claims. Those changes are in your favor, but that doesn’t mean you can let your guard down.

Beware: New QIO Limitations Don’t Extend to Other Contractors

Medicare’s “Two-Midnight Rule” has postponed the date when quality improvement organizations (QIOs) will take over for recovery audit contractors (RACs) in reviewing short inpatient hospital stay claims until Jan. 1, 2016. This date is more than two months later than previously planned, according to Nancy Perilstein, Advisory Senior Manager for Deloitte & Touche LLP.

Also, QIOs will review far fewer short-stay claims than RACs did under the previous contracts, auditing only 50 records per year from each large hospital and 20 records from medium and smaller hospitals, Perilstein says. RACs reviewed hundreds — and sometimes more than one thousand — records under the prior contracts.

Specifically, the QIOs will review inpatient claims for periods of less than two midnights, which remains a focus for CMS and a specific target of the HHS Office of Inspector General (OIG), Perilstein notes. “Once again, in the Work Plan for fiscal year 2015, the OIG has included a focus on short-stays. That means that QIOs are not the only contracted entities that wield delegated authority from CMS to examine short-stay claims, and some of the others — including Medicare administrative contractors (MACs), Zone Program Integrity Contractors (ZPICs) and Comprehensive Error Rate Testing providers (CERTs) — will not operate under the same constraints.”

Cost: “Every case that any auditing body reclassifies from an inpatient admission to outpatient or observation status can cost the provider approximately 70 percent of the initial claimed reimbursement,” Perilstein warns. “Further, having a large percentage of these claims denied can raise red flags and put a provider ‘on the radar screen.’”

Watch Out for 3 Red Flags

The QIOs will conduct the first line medical reviews for the inpatient admission claims. According to CMS, the QIOs’ patient status reviews will focus on educating clinicians and hospitals on the Medicare Part A payment policy for inpatient admissions.

Next step: After conducting the first line medical reviews, if a QIO finds abusive patterns of submitting ineligible claims for Part A short-stays, the QIO will send the results of those reviews to the RACs for follow-up.

Starting on Jan. 1, 2016, QIOs and RACs will begin conducting patient status reviews in accordance with any policy changes finalized in the Outpatient Prospective Payment System (OPPS) rule and effective in calendar year 2016, according to a recent company blog posting by Dawn Crump, MA, SSBB, CHC, Vice President of Audit Management Solutions for HealthPort.

Red flags: According to Crump, RACs may conduct patient status reviews only for those providers referred by the QIO as exhibiting:

• Persistent noncompliance with Medicare payment policies;
• High denial rates and repeated failure to adhere to the Two-Midnight Rule; and/or
• Failure to improve performance after QIO educational intervention.

Meanwhile, RACs will continue to conduct reviews of claims for other reasons, including CMS-approved claim reviews for medical necessity and correct coding unrelated to patient status, Crump noted. MACs, ZPICs, and CERTs will also continue to review claims for overall errors and conduct other audits for identifying fraudulent billing behaviors.

Best Strategy: Focus on Documentation

With these emerging enforcement initiatives, you should focus on documentation — “this is an area [which] hospitals can and should control,” Perilstein notes. “It’s one thing if the provider and the regulator have a substantial disagreement about the nature of a claim, but the potential for claim denial is even more pronounced if the documentation is scant or contradictory.”

Also, you should strategize to reduce the number of claims at risk by increasing the number of external pre-billing reviews. How? Create or refine your hospital’s “revenue cycle and compliance monitoring and auditing protocols such that zero- or one-day patient stays are flagged and must pass a manual review by a clinician before submitting a claim,” Perilstein advises. “Providers who do not have these internal processes and controls may continue to face significant risk, even with the shift from RACs to QIOs.”

Resource: Back in July, CMS released a helpful fact sheet on the Two-Midnight Rule, specifically to detail the updates included in the 2016 Hospital OPPS proposed rule. To read CMS’s fact sheet on the Two-Midnight Rule, go to www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-01-2.html .