CMS Part B Inpatient Rebilling Rules

1. CMS Part B Inpatient Rebilling Rules Appeal Academy’s Special Report on CMS-1455-R, posted 03/13/2013

2. Background • Hospitals currently allowed to "rebill" denied Part A claim for IP admission • But only for a limited set of "ancillary" services via a subsequent Part B inpatient claim • The difference between the inpatient claim reimbursement and the ancillary only reimbursement is huge • When there was no Part A coverage for other reasons, such as when the patient was not entitled to coverage under Part A, CMS also allows hospitals to rebill for the ancillary services.

3. Background • All are subject to a requirement called "Timely Filing” • Requires that the rebill be filed within 12 months of the original date of service • Occurs frequently when contractor decides it was not “medically necessary.” • Always results in a 100% recoupment of the reimbursement from the provider • Despite the fact that language and mechanisms exist for "partial" denials.

4. Background • “Partial Denials” • Instruct the contractor to only recover the difference between the "correct" and "incorrect" payment amount. • The use of "partial denials" is even called out and detailed more than ever before, in the most recent draft Statement of Work for Recovery Auditors

5. Background • FY2011 & FY2012: • The number of ALJ appeal requests overwhelmed CMS • Sometimes reaching well over 5,000 new requests per week • More concerning to CMS -- "Partially Favorable" decisions: • ALJs required payment regardless of whether the subsequent Part B inpatient claim was submitted within the "Timely Filing" time limit for any claim.

6. Background • Early 2013: • CMS / OMHA have been scrambling to deal with “tidal wave” of appeals • Several different attempts made by OMHA to handle the backlog: • Some very strange decisions that did not follow the CMS processes • Decisions often contradict CMS’ narrow interpretation

7. Background • Many Industry Observers Feared: • CMS would find a way to remove the troublesome decisions being made by the Judges • CMS didn’t wait too long to act • CMS wins by simple promulgation • Proving that even Judges can be silenced

8. CMS Responds • New Rules posted March 13, 2013: • CMS posts -- Administrator's Ruling & Proposed Rule

9. CMS Responds • The Administrator's Ruling aka "the Interim Rule" • Covers all claims with pending denials and appeals in process • Hospitals concerned that the current CMS policy to allow rebilling for the very limited list of so-called "ancillary services" does not adequately cover the resources • Hospitals also complain of the difficulty of confirming a physician’s decision to admit and the possible need to change the status before said patient is discharged. 

10. CMS Responds • CMS Concerns • A trend of hospitals to furnish observation services to Medicare patients for more than 48 hours, specifically noting that in 2011, approximately eight percent (8%) of Medicare beneficiaries received observation services in excess of 48 hours. • May be in response “to the financial risk of admitting Medicare beneficiaries for inpatient stays that may later be determined not reasonable and necessary and denied upon contractor review.” • There could be “significant financial implications” for those receiving hospital care as an outpatient rather than an inpatient

11. CMS Responds • The Interim Rule • Notes that ALJ/MAC decisions upholding the Part A denial, but ordering Part B defy current Medicare regulations and guidance • For now, CMS will submit to approach taken by the ALJs and MACs • Exception: any Part B services that specifically require outpatient status, such as outpatient visits, emergency department (ED) visits, and observation (OBS) services • Makes absolutely no mention of "partial denials“

12. CMS Responds • The Interim Rule • Meant to alleviate operational difficulties caused by the ALJ and MAC decisions, pending the Final Rule • The Interim Rule also allows hospitals to bill separately for certain outpatient services, including OBS, on Part B outpatient claim • Must have been provided during 3-day PRIOR payment window

13. CMS Responds • The Interim Rule • DOES APPLY to Part A hospital inpatient claims denied by review contractors as not “reasonable and necessary,” so long as the denial was made: (1) while the Interim Rule was in effect; (2) prior to the Interim Rule’s effective date, but while the timeframe to file an appeal remains open or an appeal is currently pending. 

14. CMS Responds • The Interim Rule • DOES NOT APPLY to inpatient admissions that the hospital, itself, has deemed to be not “reasonable and necessary” through, for example, a self-audit.

15. CMS Responds • The Interim Rule • Hospitals may choose to withdraw pending appeals and submit Part B inpatient claims instead • To withdraw: hospital must submit its request for withdrawal of a pending Part A appeal to the adjudicator with whom the appeal is pending (e.g., ALJ or MAC). • MAY NOT USE BOTH procedures simultaneously, and once a hospital decides to submit a Part B claim, it will be barred from appealing the Part A denial.

16. CMS Responds • The Interim Rule • Hospitals will have 180 days to submit a Part B claim following: * The date of receipt of a final or binding unfavorable review decision, where the hospital does not appeal* The date of receipt of an appeal dismissal, where the hospital withdraws* The date of receipt of an unfavorable appeal decision where the hospital does not withdraw.

17. CMS Responds • The Interim Rule • Even where hospitals choose to submit Part B claims, the beneficiary’s status would remain as an inpatient as of the time of the inpatient admission, and would not be changed to outpatient.

18. CMS Responds • The Interim Rule • Subsequent Part B rebilling is achieved using adjustment billing, meaning Part B claims filed later than one calendar year after the date of services will not be rejected as untimely, so long as the corresponding Part A inpatient claim was timely filed. • The Interim Rule limits ALJ and MAC review of Part A inpatient claim denials to the claims at issue, barring them from ordering payment of Part B services that have not yet been billed. • Appeals of Part A claim denials that were remanded from the ALJ level to the qualified independent contractor (QIC) level will be returned to the ALJ for adjudication of the Part A claim appeal consistent with this scope of review.

19. CMS Responds • The Proposed Rule • The Proposed Rule would expand the services that hospitals could rebill as Part B inpatient services when Part A coverage is denied as not “reasonable and necessary” • Also supports when a hospital determines, through a self-audit, that a beneficiary should have received outpatient services rather than inpatient services • The rebilling option would not apply when Part A coverage is denied for reasons other than the claim is not “reasonable and necessary

20. CMS Responds • The Proposed Rule • The Proposed Rule would allow hospital rebilling and payment of reasonable and necessary services that CMS pays for under the Hospital Outpatient Prospective Payment System (OPPS), but would exclude any such services that specifically require an outpatient status. Such services include the following: outpatient physical therapy services, outpatient speech-language pathology services, emergency department visits, and observation services. Part B payment for any reasonable and necessary Part B services would be made based upon the appropriate Part B fee schedules, or, for certain services, other appropriate payment schedules/methods. • Services for which payment is made under other payment methodologies include: ambulance services and clinical diagnostic services.

21. CMS Responds • The Proposed Rule • The Proposed Rule clarifies that it would permit hospitals to bill separately for certain outpatient services provided during the three-day payment window prior to the denied admission.  • Unlike the Interim Rule, the Proposed Rule would impose the established timely filing deadline, one year from date of service. • The Proposed Rule’s preamble includes the reminder that no provider can appeal a determination that the provider failed to submit a claim within timely filing limits.

22. CMS Responds • The Proposed Rule • Ultimately, according to the Proposed Rule, when a contractor denies a Part A claim, hospitals would be able to either: (1) appeal the denied Part A claim; or (2) resubmit Part B claims. However, there are some details that need to be watched, having to do with the beneficiary.

23. CMS Responds • The Proposed Rule • Before submitting a Part B claim, a hospital must ensure that there is no appeal pending related to the associated/denied Part A claim, including any appeal filed by the beneficiary. • Any Part B claim submitted while there is a Part A appeal pending will be denied as a duplicate by the payment contractor. • A beneficiary would be liable for the applicable deductible and co-payment amounts for any Part B services that a hospital rebills under the Proposed Rule. (Consequently, beneficiaries might receive unexpected hospital bills for up to a year after a hospital stay.)

24. CMS Responds • The Proposed Rule • The Proposed Rule does not specifically address whether services rebilled as Part B inpatient services could satisfy the three-day hospital inpatient stay requirement for Part A coverage of a post-hospital SNF stay • HOWEVER: since those claims would be rebilled as "inpatient" services, a three-day or longer hospital stay *might* still fulfill that requirement.

25. CMS Responds • The Proposed Rule • Applies to all hospitals billing Part A services, including short-term acute care hospitals, hospitals paid under the OPPS, long-term acute care hospitals, inpatient psychiatric facilities, inpatient rehabilitation facilities, critical access hospitals, children’s hospitals, cancer hospitals, and Maryland waiver hospitals. • CMS also wants comments from hospitals that do not submit claims for outpatient services under Medicare Part B regarding what types of Part B inpatient services such hospitals potentially would bill under CMS’ proposal to expand the Part B inpatient services hospitals may rebill.

26. CMS Responds • The Proposed Rule Comments to the Proposed Rule must be submitted not later than May 17, 2013

27. Implications of the Proposed Rule • The Proposed Rule’s Short Timeframe for Submitting Part B Claims Will Substantially Reduce the Utility of the Rule for Providers • Hospital will be able to submit a Part B claim following a Part A inpatient admission denial, but must do so within the established timely filing limitation • Also, hospitals must choose to either appeal the Part A denial – and potentially obtain the full Part A payment – or forego the Part A appeal and simply rebill for a lower Part B payment • However, a hospital's ability to take advantage of the expansion of Part B services eligible for payment after a Part A denial is directly dependent upon the timing of any review conducted by a Medicare contractor • CMS admits Timely Filing will reduce the number of Part B claims that could be rebilled by hospitals, but insists that this will offset the cost of the prior ALJ and MAC decisions and the Interim Rule

28. Implications of the Proposed Rule • The Proposed Rule’s Short Timeframe for Submitting Part B Claims Will Substantially Reduce the Utility of the Rule for Providers • The American Hospital Association (AHA), one of many critics of the timely filing requirement for resubmission of Part B claims, filed a lawsuit in November 2012 challenging Medicare’s current policies for the rebilling of denied hospital inpatient claims. The AHA alleges that CMS’ policy is contrary to 42 U.S.C. Section 1395k(a)(2), which requires coverage of all reasonable and necessary medical services, and argues that Medicare review contractors are not questioning the necessity of the care, but take issue only with the inpatient setting of care. Upon issuance of the Proposed Rule, CMS sought a stay of the lawsuit from the D.C. District Court, but on March 22, 2013, the court granted AHA leave to file an amended complaint. AHA has stated it will continue to pursue the litigation.

29. Implications of the Proposed Rule • High Success Rates on Appeals of Denied Claims Provide Little Incentive to Risk Foregoing Appeal Rights • The most recent RACTrac survey report (for Q4 of 2012) indicates a continuing trend of increasing RAC denials and records requests. The most common reported denial resulting from a complex review was "short-stay medically unnecessary” • Of those denials, almost 70 percent had nothing to do with medicine, but instead were about the amount being billed -- that is, the contractor was arguing that the claim should have been billed as outpatient, as opposed to inpatient. The dollar difference between the two can be anywhere from 20% to 60%. However, as long as the denial is upheld under appeal, the hospital loses 100% of the inpatient claim reimbursement.

30. Implications of the Proposed Rule • High Success Rates on Appeals of Denied Claims Provide Little Incentive to Risk Foregoing Appeal Rights • Many (very many) appeals are currently stuck within the entire administrative appeal process. However, 72 percent of all denials appealed by surveyed hospitals nationwide were overturned in the provider’s favor during Q4 2012.   • Of these, more than 50 percent of reporting hospitals had a RAC denial reversed on appeal after the care was found to be medically necessary. 

31. Implications of the Proposed Rule • CMS Under-Reports True Rate of Appeals Success to Congress • In its FY 2011 report to Congress regarding Recovery Auditing in the Medicare and Medicaid programs, CMS estimated the nationwide rate of overturn for all denied Part A and Part B claims appealed by providers to be less than 44 percent during fiscal year (FY) 2011.   According to CMS, complex reviews only have a 20 percent overturn rate on appeal. • Why is that number so far from the number seen in the RACTrac results? CMS uses numbers from FY 2011 based on providers' appeal of 52,422 claims through at least the first level of the appeal process. On the other hand, more realistically, the RACTrac survey uses the approximately 106,000 appeals filed and reported through 2012. • It is important to note that the 72 percent overturn rate cited by the AHA is based on appeals actually adjudicated, and does not include the undecided mass of nearly 80,000 appeals, which were still pending at the time of the RACTrac report.

32. Implications of the Proposed Rule • Targeting Short-Stay Inpatient Admissions • The Medicare RACs actively reviewed short-stay inpatient hospital admissions for the first time in FY 2011. CMS asserts that this represents a “significant” portion of Medicare’s fee-for-service error rate. There is some question, of the figures, based on an analysis of the CERT report, as seen in another report on the latest IPPS Proposed Rule. 

33. Implications of the Proposed Rule • Lack of Incentive to Forego Appeal Rights • The CMS report is easily shown to be presenting an impression to Congress that is about 18 months behind reality, providing Congressmen with a decidedly biased view, stacked in favor of the decisions being made by the regulators at CMS. • Conversely, the RACTracsurvey seems to indicate that hospitals appealing Part A denials for lack of medical necessity have a fair (and improving, at least until recently) chance of winning their appeals. So, hospitals may have less incentive to forego their appeal rights, as is required under the Proposed Rule, enabling them to resubmit the claims under Part B.

34. Implications of the Proposed Rule • Potential Impact of Recently Proposed Legislation to Cap Audits of Medicare Claims • Congressmen Sam Graves (R-MO) and Adam Schiff (D-CA) reintroduced a bill that would restrict Medicare review contractor audits of hospitals’ Medicare claims. • The legislation would apply to RACs, Medicare administrative contractors (MACs), Zone Program Integrity Contractors (ZPICs), and Comprehensive Error Rate Testing (CERT) contractors. • The legislation would impose these restrictions: • Lower ADR Limits – 500 or lower per 45-day period • Widespread Error Rate required to audit (40%) in any specific jurisdiction • Physician review required for all medical necessity denials • Transparency – RACs to post performance, communicate timely • RAC pays a penalty if denial is overturned

35. Questions? • http://www.appealacademy.com • (800)680-6067 • Ernie de los Santos • erniedls@appealacademy.com