September 18, 2014

MACs, ZPICs Given Discretion to Deny “Related” Claims – But Beware of the Recovery Auditors

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On Feb. 5, 2014, the Centers for Medicare & Medicaid Services (CMS) issued Transmittal 505 and associated Change Request 8425. Transmittal 505 provided contractors with “the discretion to deny other related claims submitted before or after the claim in question.” It also allowed contractors to take action on claims that are not currently being reviewed and does not require the contractor to request additional documentation for the related claims prior to denying them.

A very short time later, on March 19, 2014, CMS rescinded Transmittal 505 “due to the need to clarify CMS’s policy.” CMS indicated that it did not intend to replace Transmittal 505 at the time it was rescinded.

On Aug. 8, 2014, CMS issued Transmittal 534 and associated Change Request 8802. Transmittal 534 is a modified version of Transmittal 505 and has an effective date of Sept. 8, 2014. The purpose of this change request, as set forth in the transmittal, “is to allow the Medicare Administrative Contractor (MAC) and Zone Program Integrity Contractor (ZPIC) to have the discretion to deny other ‘related’ claims submitted before or after the claim in question.

“If documentation associated with one claim can be used to validate another claim,” the transmittal went on, “those claims may be considered ‘related.’”

Historically, MACs, Recovery Auditors (RACs), and ZPICs were instructed not to deny claims unless appropriate consideration was given to the actual claims and associated documentation. Like its predecessor, Transmittal 534 allows contractors to take action on claims that are not currently being reviewed and does not require the contractor to request additional documentation for the related claims prior to denying such claims.

In Transmittal 534, CMS provided the following as an example of a “related” claim that may be denied as such:

The MAC performs post-payment review/recoupment of the admitting physician's and/or surgeon's Part B services. For services related to inpatient admissions that are denied because they are not appropriate for Part A payment (i.e., services could have been provided as outpatient or observation), the MAC reviews the hospital record, and if the physician service was reasonable and necessary the service will be recoded to the appropriate outpatient evaluation and management service. For services where the patient’s history and physical (H&P), physician progress notes or other hospital record documentation does not support the medical necessity for performing the procedure, postpayment recoupment will occur for the performing physician’s Part B service.

Not long after CMS released Transmittal 534, it was also rescinded in favor of Transmittal 540 with associated Change Request 8802, which were issued on Sept. 4, 2014 with an effective date of Sept. 8, 2014. Transmittal 540 offers the same basic parameters of Transmittal 534, with one major change – the approved example in Transmittal 534 is completely replaced. As noted below in the “new” example, Transmittal 540 is clearly focused at this point on addressing physician claims relating to denied surgeries and not admissions. The new example listed reads as follows:

When the Part A Inpatient surgical claim is denied as not reasonable and necessary, the MAC may recoup the surgeon's Part B services. For services where the patient’s history and physical (H&P), physician progress notes or other hospital record documentation does not support the medical necessity for performing the procedure, postpayment recoupment may occur for the performing physician’s Part B service.

The example above should not be considered exhaustive, as it is anticipated that there will be “future approved ‘related’ claim review situations.”

Once again, on September 12, 2014, CMS rescinded Transmittal 540, this time replacing it with Transmittal 541 to correct an error in the Policy section of the Transmittal, which was now inconsistent with language in the Manual section.  Specifically, while the Policy section still had language that was included within Transmittal 534 allowing an automatic review of admitting physicians and surgeons, and subsequent recoding, the Manual section had been updated with information contained within Transmittal 540 which removed the admitting physicians from review and also removing the automatic recoding of claims.  Everything else remains the same as under Transmittal 540.

Key Considerations

  • While some commentators have understood Transmittal 534 and its ultimate successor Transmittal 541 to prevent Recovery Auditors from exercising discretion to deny “related” claims, RACs actually are free to do so; they simply must utilize the New Issues Review Board approval process as outlined in their Statement of Work to approve such reviews.
  • STransmittal 541 makes these changes applicable to the Medicare Program Integrity Manual (CMS Publication 100-08), Chapter 3, Section 3.2.3 - Requesting Additional Documentation During Prepayment and Postpayment Review.
  • CMS may issue additional guidance to help Medicare participants understand how the implementation of Transmittal 541 influences provider appeals of denied “related” claims and the anticipated recoupment impact on providers and beneficiaries.

What Does This Mean For Healthcare Providers?

In recent years, hospitals have suffered hundreds of thousands of claim denials by MACs and Recovery Auditors. Once denied, many of these claims have languished in appeals processes for years awaiting adjudication. This regulatory change now allows CMS to review contractors to deny “related” claims (such as physician claims) when issuing a denial on a hospital claim. I predict a significant impact on physician claims as MACs and other auditors implement this policy. Surgeons providing care to patients in the hospital may now have their claims denied if contractors deny the hospital claims. Attending physicians may be next. Radiologists, pathologists, and other groups also may be impacted by denials of diagnostic studies.

Transmittal 541, much like its predecessors (Transmittals 505, 534, and 540), is both good news and bad news for hospitals.

The good news is that physicians will now be acutely interested in your hospital utilization management process. The programs that hospitals have in place to ensure the validity of claims should prevent denials of hospital claims that could lead to denials of related physician claims.

The bad news is that physicians will now be acutely interested in your hospital utilization management process. Be prepared to answer the question: “What measures have you taken as a hospital to ensure that your claims and, by association, my physician claims will withstand the intense scrutiny of the current audit environment?”

An Opportunity to Engage Your Physicians

Transmittal 541 opens the door for a conversation with your physicians about the importance and significance of their chart documentation. Specifically, documentation that supports a valid inpatient admission, including a reasonable expectation of a two-midnight stay, coupled with documentation that supports the hospital stay as medically reasonable and necessary, will go a long way in helping to ensure the integrity of not just the hospital Part A claim, but the physician claim as well.

About the Author

Steven Greenspan, JD, LLM, serves as vice president of regulatory affairs at Executive Health Resources (EHR) and is responsible for overseeing EHR’s regulatory research and hospital advocacy efforts, and collaborates closely with the EHR’s appeals management teams to offer support on complex Medicare, Medicaid, and Commercial Appeals matters. Prior to this role, Mr. Greenspan led the day-to-day operations of EHR’s governmental appeals management team.

Contact the Author

sgreenspan@ehrdocs.com

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Steven Greenspan, JD, LLM

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