Dis­pute over claims de­nials

In­ter­pre­ta­tion of pay­ment rules leads to law­suits

Modern Healthcare - - FRONT PAGE - Joe Carl­son

Some fed­eral of­fi­cials say Medi­care au­di­tors are rou­tinely mis­ap­ply­ing CMS pay­ment rules on de­nials that short hos­pi­tals hun­dreds of mil­lions of dol­lars in rev­enue for le­git­i­mate ser­vices. The Amer­i­can Hospi­tal As­so­ci­a­tion sued the fed­eral government over the is­sue in Novem­ber. And it re­cently amended its case to add new al­le­ga­tions from the 37hos­pi­tal sys­tem Dig­nity Health, ac­cus­ing the government of break­ing its own rules guar­an­tee­ing that hos­pi­tals are paid when reg­u­la­tions are un­clear.

The CMS says that hos­pi­tals are, for the most part, not en­ti­tled to a dime when they pro­vide le­git­i­mate emer­gency or sur­gi­cal care to a pa­tient but then wrongly file a claim for an ex­pen­sive in­pa­tient stay. Medi­care’s con­tro­ver­sial re­cov­ery au­dit con­trac­tors have been push­ing hos­pi­tals to bill for less-ex­pen- sive out­pa­tient or “ob­ser­va­tion” care.

Pa­tients say hospi­tal de­ci­sions to push them to lower lev­els of care sub­ject them to greater costs and elim­i­nate Medi­care re­im­burse­ment for re­ha­bil­i­ta­tion ser­vices af­ter they’re dis­charged, ac­cord­ing to a class-ac­tion fed­eral law­suit filed in Con­necti­cut that is sep­a­rate from the AHA case.

Mean­while, ex­pe­ri­ence is show­ing that when hos­pi­tals fight back against ef­forts to deny pay­ments in th­ese “wrong set­ting” cases, they of­ten win—even though it may take years to reach a fi­nal an­swer on a sin­gle case in­volv­ing $10,000 or less.

The high­est level of ad­min­is­tra­tive ap­peal for the CMS is an en­tity known as the De­part­men­tal Ap­peals Board’s Medi­care Ap­peals Coun­cil. That agency has been rou­tinely over­turn­ing CMS con­trac­tors’ de­ci­sions, say­ing that the CMS is mis­read­ing its own rules and deny­ing hos­pi­tals pay­ments for ser­vices that were med­i­cally nec­es­sary.

In one case last June, Ad­min­is­tra­tive Ap­peals Judge Gilde Mor­ris­son ren­dered a de­ci­sion for the coun­cil or­der­ing the CMS to pay 306-bed Prov­i­dence Health Cen­ter in Waco, Texas, out­pa­tient fees af­ter the hospi­tal ad­mit­ted a 67-year-old man with chest pains for car­diac catheter­i­za­tion and an­gio­plasty and im­planted a drug-elut­ing stent to prop open a fail­ing artery.

Prov­i­dence rea­soned that since the man was at im­me­di­ate risk for heart at­tack, his care jus­ti­fied ex­pen­sive Medi­care Part A in­pa­tient care. Medi­care con­trac­tors dis­agreed, and so did Mor­ris­son, who ruled that in­pa­tient care should have been used only if more se­ri­ous com­pli­ca­tions ap­peared. But rather than pro­vide $0 for care the man needed, she or­dered the hospi­tal re­ceive the less-lu­cra­tive Medi­care Part B out­pa­tient rate for the surgery.

Hos­pi­tals have won at least 15 such out­pa­tient-pay­ment vic­to­ries since 2010. In fact, health­care providers have racked up so many vic­to­ries be­fore the ap­peals coun­cil and lower-rank­ing ad­min­is­tra­tive law judges—known as ALJs—that the CMS qui­etly sent a memo to its con­trac­tors last July

in­struct­ing them how to pay hos­pi­tals for out­pa­tient care while mak­ing it clear the agency dis­agrees with the le­gal rul­ings.

“We note that while th­ese un­usual steps are nec­es­sary to com­ply with the ALJ de­ci­sions, they are not con­sis­tent” with the Medi­care ben­e­fits man­ual, ac­cord­ing to the July 15 memo to CMS con­trac­tors, which was ob­tained by Mod­ern Health­care. “We are in­struct­ing con­trac­tors to take ac­tion that is in­con­sis­tent with CMS pol­icy solely to ef­fec­tu­ate th­ese spe­cific ALJ or­ders.”

Mean­while, the ad­min­is­tra­tive law judges and ap­peals coun­cil of­fi­cials who work for HHS—the same fed­eral bu­reau­cracy that in­cludes the CMS—read the Medi­care man­ual dif­fer­ently.

Mor­ris­son, for ex­am­ple, con­sid­ered the same sec­tion of the Medi­care man­ual that the CMS cited in its let­ter to con­trac­tors, but the judge came to the op­po­site con­clu­sion as the Medi­care agency in the Prov­i­dence Health Cen­ter case.

“This man­ual sec­tion clearly in­di­cates that pay­ment be made for cov­ered hospi­tal ser­vices un­der Medi­care Part B if a Part A claim is de­nied,” she wrote. The rul­ing by Mor­ris­son, who de­clined an in­ter­view re­quest, went on to cite sev­eral other sec­tions of the Medi­care rules that in her opin­ion would jus­tify paying the hospi­tal lower rates rather than noth­ing for wrong-set­ting claims.

An­drew Wach­ler, the man­ag­ing part­ner at Wach­ler & As­so­ci­ates in Royal Oak, Mich., who has closely fol­lowed the is­sue, said he of­fers one piece of ad­vice to all hos­pi­tals that are de­nied pay­ments for billing in the wrong set­ting:

“Ap­peal it. And you should get your Part B money,” he said. “And in my opin­ion, it is only by all hos­pi­tals rec­og­niz­ing this, and do­ing it, and un­for­tu­nately clog­ging the sys­tem, that some res­o­lu­tion will be pro­vided.”

That ex­treme level of con­flict and un­cer­tainty is the ba­sis for ar­gu­ments by Dig­nity Health—which were added to the AHA’s law­suit Dec. 13—that hos­pi­tals are en­ti­tled to Part B out­pa­tient money.

Sec­tion 1879 of the Medi­care Act says hos­pi­tals that pro­vide non­cov­ered ser­vices can still be paid if the hospi­tal “could not rea­son­ably have been ex­pected to know” that the claim would be de­nied. Of­fi­cials for the CMS and Dig­nity de­clined to com­ment.

The CMS launched an on­go­ing demon­stra­tion project at the start of 2012 al­low­ing 380 hos­pi­tals to re­sub­mit Part B bills, but the pro­gram has failed to con­vince crit­ics that the agency is se­ri­ous about over­turn­ing its pol­icy of not paying bills submitted for the wrong set­ting.

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