Medicare, Legislative And Regulatory Update For Clinical Laboratories

1. Medicare, Legislative And Regulatory Update For Clinical Laboratories What Does Washington Have in Store For Clinical Laboratories? Legislative and Regulatory Updates For Clinical Laboratories Kansas City CLMA Conference 2012 Presented by: Christopher P Young, CHC : cpyoung@cox.net

2. Objectives • Understand what the government intends to do in the area of regulatory and Medicare and Medicaid compliance and how it will affect clinical laboratories • Plan for upcoming regulatory and billing changes that may be imposed by the government by hearing specific “best practices” for these changes • Get specific information about questions participants may have concerning their own laboratory problems and issues during the question and answer portion of the program

3. Current Issues • Medicare fee schedules for laboratory services will be reduced in 2013 • Molecular testing and coding will go into effect this year with pricing still uncertain • Election year will bring more intensive scrutiny of Medicare and Medicaid fraud and billing issues • New compliance challenges will begin to emerge in 2013 • The spread of electronic health records will introduce new opportunities for fraud and abuse by some providers • Payment increases for meeting quality measures will also add compliance risks for laboratories

4. Current Issues • Increased activity by Medicare audit and fraud subcontractors • RACs, ZPICs, CERT and MICs likely to increase number and kind of audits • Contractor’s knowledge and skill in conducting audits, in target selection and data analysis will improve • Young government attorneys trying to “make their bones” by prosecuting big health care cases

5. Current Issues • Changing of the guard at the OIG’s office • Long time chief counsel Lew Morris retires from the OIG • CLIA Proficiency Testing (PT) issues puts additional pressure on labs to be more diligent in their compliance efforts beyond billing and coding • New effort to find HIPAA violations • Shift from waiting for reports to auditing • ICD-10 delayed until October 1, 2014

6. The Fee Schedule • Best case for 2013 – a negative 2.95% update to the fee schedule • Based on the current update formula of CPI-U (1.7%)-productivity adjustment (0.9%)-1.75% from competitive bidding negotiations = 0.95% • Then take additional 2.0% cut to help pay for physician fee schedule fix • Total is 2.95% cut no matter what • Worst case so far – negative 4.95% update • In addition, potential -2.0% from the deficit reduction deal cut in 2011 = Total = -4.95%

7. Budget Cuts • The additional -2.0% is the sequestration for across-the-board cuts to obtain at least $1.2 trillion in savings over the next 10 years • Cuts are split equally between defense spending and non-defense spending • Already raising controversy, particularly in defense spending, and may change • Even if changed, the money will have to be saved and providers will fight over who gets cut the most • Other potential loss of revenue could come as a result of the the medical device tax if it doesn’t get repealed

8. Compliance Perspective • When revenue gets tight, competition gets ruthless and cost cutting occurs • Labs may cut compliance budgets • Take bigger risks in the marketplace as competition gets fierce • Compliance officers must meet this challenge • Find ways to reap revenue benefits from compliance program activities like auditing • Closely monitor “deals” to find ways to make them work while remaining compliant • Requires compliance officers to step up and be true experts in rules and regulations

9. Coding and Billing Still High Risk With Some Areas of Focus More Important • Make sure that test ordering and claims processing are without error • Requires automated editing systems • Toxicology and billing for pain management clinics is a high risk area in 2013 • Date of service where the 14 day rule for complex genetic tests is involved • Molecular and genetic testing with the new codes and pricing scenarios • Skilled Nursing Facilities (SNF) billing, ESRD testing and Hospice

10. Errors vs Fraud • Simply, errors are unintentional violations of Government or Medicare billing and/or coding rules and regulations • Fraud is intentional violations of Government or Medicare billing and coding rules and regulations • Both “errors” and “fraud” can result in improper payments • Improper payments was defined in the ‘‘Improper Payments Information Act of 2002” as: • (A) means any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements; and • (B) includes any payment to an ineligible recipient, any payment for an ineligible service, any duplicate payment, payments for services not received, and any payment that does not account for credit for applicable discounts

11. Errors vs Fraud • Prevention of making improper payments is the duty of the payer • Usually accomplished by using computer edits to identify and deny improper claims • Educating providers and suppliers about billing errors and claims submittal problems • Prevention of submitting claims that result in improper payments is the duty of the provider or supplier • Usually accomplished by using computer edits to prevent improper claims from being sent to the payer • Educating employees and clients about billing errors and claims submittal problems • Improper payments can result in the appearance of fraud when there is no fraud

12. Causes of Improper Payments • Medically Unnecessary Services • Claims are placed into the medically unnecessary category when claim review staff identifies enough documentation to make an informed decision that the services billed were not medically necessary based on Medicare coverage policies or other medical necessity criteria.  • Insufficient documentation errors • An insufficient documentation error occurs when the provider does not submit sufficient documentation to determine whether the claim should have been paid 

13. Claims Review Programs • The overall goal of CMS’ claims review programs is to reduce payment errors by: • “identifying and addressing billing errors concerning coverage and coding made by providers” and suppliers • 10% of all Medicare fee for service claims payments are improper • CMS employs various contractors to process and audit claims submitted by providers and suppliers

14. Contractors and Responsibilities

15. Prepayment and Postpayment

17. AC/MAC Medical Review • Tracks and monitors error rates produced by the CERT program, the Recovery Audit (RA), analysis of claims data and other information and sources • Identifies suspected billing problem • Targets Medical Review (MR) activities at the identified problem and reviews a sample of claims • Verifies an error exists and classifies the error for severity as minor, moderate or significant • Imposes corrective action appropriate for the severity of the problem

18. Corrective Actions • Informs the provider of proper billing procedures • Imposes a prepayment review process that may include MR of a sample of claims, or all claims, depending on severity which requires review BEFORE claims are paid • Results in delays in payment for the claims under MR • Imposes postpayment review which involves an MR of a sample of claims without requesting all records from the provider • Sometimes none are requested

19. Review of Records • Either prepayment or postpayment reviews may require providers or suppliers to provide medical records or other documentation in support of the claim • Providers should supply all documentation requested or provide a reason for not providing a document • Providers should supply the information within the time frame required or the claims will be denied

20. Demands, Appeals and Voluntary Refunds • Becomes important as auditing activity increases on both sides • There are risks associated with each demand for a refund • Paying the refund without challenge could be seen as an admission of inaccurate billing • The 60 day refund time frame does not leave a lot of room for review and internal audit • Your own audits may result in your laboratory making “voluntary refunds” • Risks associated with voluntary refunds include exposure to wider audits by contractors • Challenges of your auditing result especially when the refund is based on a sampling and not a 100% population review • Could expose your lab to prepayment reviews or even payment suspensions if seen as egregious

21. Recovery Audit Program (RA) • Recent RA statistics (1/1/12 - 3/31/12) published by CMS show: • National totals are $588.4 million in overpayments collected and $61.5 million in underpayments returned to providers • None of the top issues, per region, directly involved laboratories however many laboratories are reporting RA audits occurring in their laboratories • Some of the issues they are seeing include audits related to SNF billing, Hospice and ESRD billing errors, still seeing some physician signature issues, Auditors asking the lab to get records from the provider

22. Recovery Audit Program (RA) • For the 1st time CMS has published a new report on the RA program which is titled “Recovery Audit Program Appeals Update” • The update was published June 2012 • The report is important because RAs are paid on a contingency basis and CMS retracts any contractor payment that are later overturned on appeal • The report includes aggregate data for Fiscal Year 2011

23. Recovery Audit Program (RA) • The report provides information as overall numbers, claims by the type of review (automated, complex, unknown) and appeals by the type of claim whether they were Part A, Part B Or DME • The report shows that providers have had some success in overturning overpayment determinations on appeal

24. Recovery Audit Program (RA) • Findings of the report: • There were 903,372 claims with overpayment determinations • Of these providers appealed 56,620 and were successful in overturning 24,548 (43.4% of appealed claims were overturned) • Unfortunately, many providers chose not to appeal overpayment determinations so the overall percentage of claims overturned is just 2.7%

25. Recovery Audit Program (RA) • Findings of the report (continued): • There were 31,297 automated claims appealed with 17,893 (57%) of those overturned resulting in $5.94 million provider saved by appealing • There were 22,188 complex claims appealed resulting in 4,426 overturned and $29.95 million saved by providers • In the unknown category there were 3,135 claims appealed, 2,229 of those overturned resulting in $1.98 million saved by providers • Many laboratory claims fall into the automated category and because they often come to the laboratory in small batches or refund amounts are relatively small, laboratories tend to not appeal them

26. Recovery Audit Program (RA) • Findings of the report (continued): • Looking at the appeals by the type of claim, there were 197,739 Part A claims and 410,208 Part B claims (607,947 total) with overpayment determinations • Of these, 47,564 were appealed with 20,618 decided in the provider’s favor (43.3% as noted previously) • The report has a comment on this section that says “Often times Part B and DME claims are corrected through the appeals process which means the reasons for denial is upheld but the provider is allowed to correct the claim and rebill using the appropriate code(s)” • Most laboratory claims are likely Part B for the purposes of this report

27. Recovery Auditor Program (RA) • In my experience, working with laboratories who are dealing with RA audits, the supporting documents for the audits and the interpretations made by the auditors often contain inaccuracies and inconsistencies in terms of the overpayment determination • Laboratories need to make a decision concerning RA audits and the information provided in those audits of whether they will appeal or not • In many cases, laboratories do not appeal because the cost of the appeal process often is financially not beneficial, in other words, it’s cheaper to write them off then to appeal them, in the minds of the laboratory’s administrators • There may be unintended consequences of taking this course of action and the laboratory should carefully consider how they respond to demands for overpayments by RAC contractors and other fraud subcontractors

28. Potential Consequences • Generally speaking, the audits are conducted on a sample of claims representing a specific time frame • Auditors may extrapolate over payment amounts based on the sample resulting in larger refund determinations then may actually exist • If the laboratory agrees that the overpayments are justified and repays them, it must consider how to deal with similar cases that are outside of the timeframe used by the auditors • In other words, the laboratory may find itself deciding on self reporting additional refunds it suspects exist based on the findings of this particular audit • The results of these audits are reported to the Office of the Inspector General (OIG) and eventually could lead to other investigations • Prepayment review and medical review scrutiny is increasing

29. The 60 Day Rule • A Medicare provider or supplier has 60 days to return an identified overpayment to the program or it faces potential liability under the False Clams Act (FCA) • Proposed rule published in February 16th Federal register, final rule pending • According to ALL sources I reviewed or talked to, the refund requirement has been in effect since March 23rd, 2010, the day PPACA became law because there is no provision deferral until regulations are finalized

30. Reporting and Returning • If a person has received an overpayment, the person “shall” • Report and return the overpayment • Report means a written statement of the reason for the overpayment • Report shall be to the “Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address” • The deadline for returning and reporting is 60 days from the date the overpayment is identified or the date a cost report (if applicable) is due • Failure to report and refund by the 60 day deadline constitutes an actionable violation of law (an obligation) so, missing the deadline turns a simple error and refund into a potential FCA violation

31. Various Provisions • An overpayment is anything that results in the provider or supplier receiving more than they are entitled to under the Medicare program • The “60 day clock” starts when overpayments are identified • According to the rule, when a person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment, the overpayment is considered “identified”

32. Various Provisions • Providers must make a reasonable inquiry with all deliberate speed however, the rule does not specify what evidence triggers an inquiry • When in doubt, investigate, document and act on the results • 10 year “look back” period in the proposed rule requires providers to report and refund overpayments during the past 10 years • Extraordinarily long period of time • Reflects outer limit of FCA • Unclear if this applies to overpayments prior to the March 23rd, 2010 effective date • CMS expects ALL providers will report some overpayments every year

33. Example Refund vs FCA • Example: Overpayment caused by computer error discovered in a routine audit – Test X @ overpayment of $10.00 per test. Test X volume is 15 tests/day • Refund example: Example – Test X @ $10.00/test – volume of 15/day for 3 months (21 days x 3=63 days) = 945 tests with a refund of $9,450.00 • If not refunded in 60 days it becomes an “obligation” and is an FCA violation. Here is what happens under FCA • Treble Damages - 3x amount of the overpayment or $28,350.00 (refund part) • Penalties - $5,500 - $11,000 per false claim filed • @ minimum penalty = $5,500/claim x 945 claims = $ 5,197,500 • @ maximum penalty = $11,500/claim x 945 = $10,867,500.00 • For a $9,450.00 refund problem not paid back in 60 days, FCA sanctions could go as high as $10.8 million

34. Auditing And Being Audited • One of the best defenses for coding and billing risks is an effective auditing plan focused on high risk areas • Routine auditing to catch problems • Defensive audits when demands for refunds are received • Government auditors have not been very good so far and a fairly high percentage of refund demands are overturned if challenged with an appeal • Problem is many providers do not appeal • Cost of appeal outweighs refund amount • Fear of contractor retaliation • Unsure or coding and billing regulations

35. Appeals • There are 5 levels to the appeals process • Redetermination • Reconsideration (QIC) • Administrative Law Judge Hearing (ALJ) • Appeals Council Review • Judicial Review in US District Court • Beginning with the Administrative Law Judge Hearing, there is a minimum monetary amount that must remain in contention after the first two levels of appeal

36. Know What You Are Doing and/or Get Expert Help • Develop auditing skills through education, conferences and self study • Practice your skills by conducting mock audits or real audits of your own billing and coding • Make sure you thoroughly understand the rules and regulations and the appeals process or hire an expert that does • Read all government documentation that accompanies a demand for a refund carefully and critically, looking for errors and misquotes etc. • Make certain you supply the appropriate documents requested and make note or comment on anything that is missing or cannot be provided • Conduct your own review of the requested records and documents

37. New Codes for 2013 • No code by code analysis for the changes in 2013 as reported by CMS in its “Preliminary Payment Determinations” document published on their website • http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/Downloads/CLFS-CY2013-Preliminary-Payment-Determinations.pdf • Or, Google “2013 CMS laboratory cpt payment determinations” without the quotes and click on the appropriate link

38. Main Focus – Molecular and Genetic Tests • AMA is deleting the molecular stacking codes from the CPT book for 2013 • All entities submitting claims for these tests must use the new molecular codes for which pricing has not yet been set • CMS has decided that many of these tests, but not all, are clinical laboratory tests and should be paid under the clinical lab fee schedule • Some of these tests require physician work and should be placed on the physician fee schedule • They will publish that information simultaneously with the release of the final physician fee schedule rule in November

39. Gap Fill, Crosswalk or RUC Valuation for Pricing • For those tests on the lab fee schedule, CMS has decided that they should be gapfilled rather than crosswalked to set the prices • Most laboratory associations recommended crosswalking the tests to the existing stacking codes • Gapfill has been used infrequently in the past as crosswalk is easier and well understood • Their rationale: • Industry did not provide sufficient information for crosswalk determinations • Laboratories often use different code stacks for the same test and stacks change over time • Some of these tests are currently coded with miscellaneous codes

40. Gap Fill, Crosswalk or RUC Valuation for Pricing • Gap Fill: A process used when no comparable existing test is available • Local Medicare Administrative Contractors (MAC) determine a MAC specific amount for use in the first year the new code is effective • MACs should examine: • Charges and routine discounts for the test • Resources required to perform the test • Payment amounts from by other payers • Charges, payment amounts and resources required for comparable tests • After the first year, the MAC specific amounts are used to calculate the National Limitation Amount (NLA) for subsequent years

41. Gap Fill, Crosswalk or RUC Valuation for Pricing • Crosswalk: a process used if a new test is comparable to an existing test or its description • One test may be crossed walked to multiple other tests if appropriate • The new test is given the local fee schedule amount and the NLA • Sometimes results in inappropriate pricing because it is based on the local fee schedule amount

42. Gap Fill, Crosswalk or RUC Valuation for Pricing • RUC Valuation: RUC means “Relative Value Scale Update Committee” and is a AMA committee that develops relative value recommendations for CMS for new or revised CPT codes • Only applies to test paid under the physician fee schedule • The RUC is made up of physicians who represent most medical specialties • There is a representative from pathology on the RUC • Payments for services are determined by dividing the resources used to provide this service into three components, physician work, practice expense and liability insurance • Payments are also adjusted for geographical differences in the resource costs

43. Pros and Cons Between the CLFS and MPFS • There are no copayments for tests on the CLFS • There is a 20% co-pay for test on the MPFS • There is no standardized process that assures test prices will increase on the CLFS • To date, the MPFS has enjoyed regular annual increases in payments • Physician fee schedule tests are often split into a technical and professional components that may be billed separately • Requires the use of modifiers and sometimes creates additional compliance billing risks

44. MAAAs? What Are These? • Multi-analyte Assays with Algorithmic Analysis (MAAA) • These tests were previously called In-vitro Diagnostic Multivariate Index Assays (IVDMIA) • An MAAA is a numeric score or probability based on the results of laboratory tests, and in some cases, patient information or other clinical data • The AMA’s Molecular Pathology Workgroup has developed a system for coding these assays • CMS has decided that it will not pay for the algorithmic analysis but will only pay for the underlying tests • It considers these to be simple calculations like a creatinine clearance when they are clearly much more complex than that • The true value of the test lies in the algorithmic assessment and the score it provides • This decision has the potential to stifle innovation in this area of personalized medicine

45. CLIA Proficiency Testing Issue • Ohio state University’s Wexner Medical Center has been threatened with revocation of its CLIA certificate for violating proficiency testing standards under CLIA • Wexner referred proficiency testing (PT) samples to another laboratory because of a literal interpretation of the rules • The rule in question says that PT specimens must be tested in the same manner as specimens of regular patients • In the OSU case microbiology samples were referred for confirmation or for testing to another laboratory because that is what it would do with a patient sample

46. Self Reporting No Benefit • Wexner reported its error to the Ohio Department of Health • However, after conducting a survey of the Center’s lab and receiving more than 100 pages of documents in support of its explanation, CMS revoked the lab certificate and its Medicare and Medicaid approval • The lab has since appealed and the sanctions are on hold for now

47. CLIA; 493.801 Enrollment and Testing of Samples • Each laboratory must enroll in an approved program for each specialty or subspecialty in which it is certified • Testing requirements are included in 493.801(b) “Testing of proficiency testing samples” (1-4) • PT samples must be tested with the regular test workload and by the personnel who routinely test patient samples • Samples must be tested the same number of times as patient samples • The laboratory may not discuss proficiency test results with any other laboratory before the reporting date for the PT including other testing sites or locations owned by the same laboratory • The laboratory may not refer its PT samples to another laboratory for testing or reporting • The laboratory must report to CMS if it receives a PT sample from another lab for testing

48. Legislation Required • The existing law does not allow CMS any flexibility in the case of a laboratory inadvertently violating the PT testing rules in CLIA • Errors can be made in high quality labs and samples can be referred or results discussed by mistake for a variety of reasons • Preventing a laboratory from providing critical testing services because of an inadvertent or unintentional error does not serve the purpose or intent of those who wrote CLIA regulation • Drastic action like revoking a lab’s certification can affect patient care goals and may cause harm to a patient because critical testing is not available when the patient’s physician needs it

49. Taking Essential Steps for Testing (TEST) Act • The TEST Act, House bill HR 6118 and S 3391 (Senate Version), would change CLIA to allow the certifying agency an opportunity to make a case-by-case judgment in PT testing violations • Here is the “Official Summary” • Amends the Public Health Service Act to revise sanctions for laboratories that intentionally refer proficiency testing samples required for certification to another laboratory for analysis by: (1) giving the Secretary of Health and Human Services (HHS) discretion to substitute intermediate sanctions for such violations instead of the two-year prohibition against ownership or operation which would otherwise apply, and (2) making the one-year certificate revocation for such a laboratory optional rather than mandatory. • It also changes a word from “shall” to “may” in the context of the action it can take

50. Taking Essential Steps for Testing (TEST) Act • The House version of the Bill (HR 6118) has been passed • The Senate version is still pending but is out of committee and up for floor consideration • Supporters hope it can be passed before Congress recesses for the election