By Andrew B. Wachler, Esq. and Jennifer Colagiovanni, Esq.


On Nov. 15 CMS unveiled a demonstration program that may provide some relief to hospitals whose inpatient claims are being denied as not medically necessary because care was not provided in the appropriate setting.


At the same time CMS announced the launch of a demonstration program that allows Recovery Audit Contractors (RACs) to conduct prepayment review on certain types of claims in 11 states – a move that could have significant consequences for many providers.


The Part A-to-Part B Rebilling Demonstration Program will allow participating providers to receive 90 percent of a Part B payment for Part A inpatient claims when an inpatient admission is denied as unreasonable and unnecessary.


Currently, if a Part A inpatient claim is denied on the basis that service could have been provided in an outpatient setting under Medicare Part B, the claim is denied in full and hospitals are not permitted to re-bill for Part B payments. Hospital providers also currently are forced to engage in costly and time-consuming appeals processes in order to obtain an order for full Part B reimbursement for inpatient short-stay claims denied under Medicare Part A.


Under the Part B Rebilling Demonstration Program, providers will be able to obtain 90 percent of the payable Part B amount but will not be permitted to charge beneficiaries for any additional copay or out-of-pocket costs. Hospitals participating in the demonstration project will be able to resubmit claims for outpatient payments when claims are denied during the audit process or when improper payments are self-identified. Those hospitals also will agree to waive their appeal rights to claims re-billed for Part B reimbursement.


Call for Volunteers


The demonstration program will accept 380 volunteer participants on a first-come, first-serve basis. In its recent notice regarding two upcoming Special Open Door Forums, CMS indicated that the pool of hospital participants will be stratified by size into three categories: “small hospitals,” including facilities with fewer than 100 beds, “moderate hospitals,” including facilities with 100 to 299 beds, and “large hospitals,” including facilities with 300 or more beds. CMS has not yet indicated the number of hospitals that will be allotted to each category. CMS’s Q&A regarding the rebilling demonstration indicated that enrollment for the program is scheduled to begin at 2 p.m. EST on Dec. 12. CMS also has specified that it will provide more information regarding enrollment during the two identical Special Open Door Forums currently scheduled for 2 p.m. on Nov. 30 and Dec. 8. Hospital providers can listen to these forums by calling 1-866-501-5502 (reference conference identification #28779067).


Unanswered Questions


The limited information available about the rebilling demonstration has left many unanswered questions. First, it is unclear why CMS has limited the demonstration to only 380 hospitals, or even how that number was determined. Moreover, CMS has not indicated how it will balance the allotment of demonstration participants between differently sized and urban or rural hospitals. It also is unclear at this time whether any additional hospital allotments will be included in the three-year demonstration program – or if hospitals not included will be forced to wait the full three years, utilizing only the Medicare appeals process to obtain orders for outpatient reimbursement.

Waiving Appeal Rights?


One of the biggest questions that remain unanswered involves at what level a participating hospital is required to waive its appeal rights. Does a hospital agree to waive all appeals of Part A claims denied based on care being provided in an inappropriate setting when it agrees to participate in the demonstration, or does a participating hospital have the opportunity to choose which claims to resubmit for the 90 percent payment under Part B?


Furthermore, if the latter option exists, can this choice be made at any stage of the appeals process? While the demonstration is scheduled to begin on Jan. 1, 2012, it is also unclear whether participating hospitals will be able to waive further appeals on claims currently pending in the appeals process in order to re-bill or if the program only will apply to claims identified after the start of the demonstration.


CMS has indicated that it believes the demonstration program will lower appeal rates because participating hospitals will be able to resubmit claims for 90 percent of the Part B payments; again, hospitals currently have to appeal these claims through the Medicare appeals process in order to obtain an order for Part B reimbursement. Hospitals that are not part of the demonstration program will have to continue to utilize this process to obtain full Part B reimbursement.



Pre-Payment Review Demonstration


In addition to the re-billing program, CMS also unveiled the Recovery Audit Pre-Payment Review Demonstration Program. This program will allow RACs to review claims before they are paid to ensure that providers are complying with all Medicare payment rules.


These pre-payment reviews are focused on seven states with high rates of fraud and error-prone providers (Florida, California, Michigan, Texas, New York, Louisiana and Illinois) as well as four states with high numbers of inpatient hospital stays (Pennsylvania, Ohio, North Carolina and Missouri).


This demonstration program will build on the RACs’ existing infrastructure used to review claims and initially will focus on inpatient hospital claims, specifically short stays. CMS will choose more specific types of claim reviews as the program continues and RACs review the claims initially selected.

Potential Problems Seen for Some


This program could create significant problems for some providers. Pre-payment review allows RAC auditors to deny payment up front and force providers to go through the Medicare appeals process to obtain any payment, which can be a significant challenge in terms of restricting cash flow.


Pre-payment review is an aggressive audit method, and there is no substantive criteria for initiating a pre-payment review – nor is there a procedural process in place for providers to seek removal from this form of review. The Pre-Payment Review RAC Demonstration Program reflects the continuing challenge to balance the importance of the Medicare program’s integrity initiatives and the effects pre-payment reviews have on Medicare providers.


The practical impact of these demonstration programs has yet to be seen, but the current audit climate suggests that providers must be prepared. It is imperative for hospitals to stay current on emerging developments related to both the Part B Rebilling Demonstration and the RAC Pre-Payment Review Demonstration, as both implicate key reimbursement considerations.


About the Authors


Andrew B. Wachler is the principal of Wachler & Associates, P.C. He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980. Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters. He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.


Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C. Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School. Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers. She is a member of the State Bar of Michigan Health Care Law Section.


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LINK 2: (Special Open Door Forums)


LINK 3: (AB Rebilling Demonstration)


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