Audit and Compliance



In this month's article we focus on the Medicare Recovery Audit (RA) Contractor Program, providing you an update on recently approved issues for RAs to review and an update to the institutional provider Additional Documentation Request (ADR) formula.

As previously reported, The Centers for Medicare & Medicaid Services (CMS) has regularly posted to its website approved audit issues. They do this so providers are aware of issues RAs may review and to alert providers to check on internal billing and compliance adherence with current Medicare requirements. Please note that the comments offered in italics are our thoughts on these issues and are intended to provide our readers additional information.

The most recent addition to the CMS posting includes the following issues:

Lab Services Rendered During an Inpatient Stay - Laboratory services are covered under Part A, excluding anatomic pathology services and certain clinical pathology services; therefore, if billed separately under Medicare Part B claims, these should be denied as unbundled services.

Clinical Social Workers (CSW) during Inpatient Stay - Services of Clinical Social Workers (CSW) rendered during inpatient hospital stay are included in the facility's PPS payment and are not separately payable under Part B. CSW providers are expected to seek reimbursement from the facility if they are NOT employed by the hospital. Note: This is usually a rare situation but providers should remind CSW's of this rule. Providers should also remind billing staff that CSWs should not submit an encounter form for billing in any situations if they are employed by the hospital.

Observation Evaluation & Management (E&M) Services Billed Same Day as Inpatient Admission - Inpatient hospital E&M codes cannot be billed on the same date of service as an E&M observation code for a patient on the same date of service for the same provider. Note: This issue pertains to physician billing but it is important for hospitals to understand the rules when they have employed physicians on staff. If the physician submits a Part B claim for observation services and then sees the patient on the same day as an inpatient, they are also precluded from including E&M codes for the inpatient visit. E&M CPT codes that are affected are: 99217, 99218, 99219, 99220, 99224, 99225, and 99226.

Changes to ADR Institutional Limits for 2018

The basic guidelines for additional documentation request (ADR) have not changed since implementation in November 2015. At that time, CMS modified the ADR limits for the Medicare Fee-for-Service Recovery Audit Program for institutional providers, which became effective January 1, 2016. However, in January of this year CMS added the following for institutional providers:

Risk-Based, Adjusted ADR Limits (Updated 1/29/2018)

After three (3) 45-day ADR cycles, CMS will calculate a provider's Denial Rate, which reflects compliance with Medicare rules. The Denial Rate will be calculated using the number of claims containing improper payments that resulted in overpayments (less any determinations that are fully overturned during appeal) divided by the total number of reviewed claims, expressed as a percentage, on a cumulative basis. The Denial Rate will then be used to identify a provider's corresponding "Adjusted" ADR Limit, based on Table 1 below. The Adjusted ADR Limit will be used for the next three (3) 45-day ADR cycles.

Table 1: Denial Rate (Range)Adjusted ADR Limit (% of Total Paid Claims)
91 - 100%5.0%
71 - 90%4.0%
51 - 70%3.0%
36 - 50%1.5%
21 - 35%1.0%
10 - 20%0.5%
4 - 9%0.25%
0 - 3%No reviews for 3 (45-day) review cycles

Note: CMS is rewarding providers that have a 0% to 3% denial rate with a reprieve from RA audits for (3) 45-day review cycles. This is the first time CMS has implemented such a change. We also point out that CMS will take into account overturned denials on appeal, but they do not indicate the timeframe for including overturned denials. So the question remains: will denials from prior periods be included, considering the huge backlog of appeals. We would think that CMS will not include claims that were settled under the 62% low volume settlement. We will continue to monitor this question and provide updates accordingly.

You can read the entire CMS ADR update on their website by clicking here.