Some of my predictions for issues connected to RAC activities in 2014 are as follows:

  • Durable medical equipment (DME) will be a focus – per a newly created national contractor for DME and home health/hospice cited in the Centers for Medicare & Medicaid Services (CMS) May 2013 request for quote (RFQ).
  • New audit contracts will be awarded – however, this may not mean any changes for current contractors.
  • Still another change will be made to the RAC program – namely, CMS will start requiring recovery auditors to support the agency throughout the entire appeals process, including at the administrative law judge (ALJ) level, according to the agency’s 2013 statement of ork (SOW).
  • The so-called “two-midnight rule” will affect RAC contractors’ abilities to recover payments.
  • RAC activities will impact patients.

Why will DME remain a continued area of audit focus?  A single DME/HH/H contractor is expected to provide a continuous audit focus. During the RAC demonstration program, many DME claims were denied because items were supplied during a beneficiary’s inpatient admission or skilled nursing facility (SNF) stay. This has remained an area of scrutiny among the permanent RACs and other CMS contractors. In the permanent RAC program, CMS continued to focus on DME, looking at various issues such as multiple DME rentals in a one-month period, billing for DME after a date of death, DME being received while in hospice, and incorrect payments of maintenance and servicing for capped DME rentals.

Other CMS areas of focus for DME suppliers include, but are not limited to, the following:

  • Payments for disposable supplies for beneficiaries receiving home health agency (HHA) services;
  • Medicare Part B payments for home blood glucose testing supplies;
  • Appropriateness of reimbursement for pressure-reducing support surfaces; and
  • Appropriateness of reimbursement for power wheelchairs.

The two-midnight rule may hurt Medicare RAC recoveries

Medicare patients should be admitted as inpatients when they require a stay lasting more than one day, or if they require inpatient-only treatment. Hospital stays that last less than two midnights should be billed and treated as outpatient stays. CMS instructed Medicare RACs not to review claims for stays spanning two midnights after an admission to determine appropriateness had been made. CMS initially suspended reviews of short-stay inpatient hospital claims until Jan. 1, 2014, but the agency extended the suspension until March 31, 2014. These suspended reviews will cost the RACs improper payment recoveries of billions of dollars, while the costs to patients could run up from hundreds to thousands of dollars apiece. 

RAC activities will impact patients

On the Thursday, Jan. 9, 2014 broadcast of Nightly News with Brian Williams, in a segment titled Paying the Price, it was reported that hospitals are now becoming afraid to label patients as inpatients even though they spend the qualifying time in a hospital to merit inpatient status. An American Hospital Association representative stated that hospitals are concerned about being closely scrutinized and audited going years back and having to pay back money to CMS for such stays. Yet patients are now the ones having to pay out of pocket for costly rehab services after a hospital stay that was deemed “observation” only. A patient could spend a day or three in a hospital bed, be assessed, monitored and treated by doctors and nurses, and never be formally admitted to the hospital. More costly is rehab or skilled nursing services, which Medicare will pay for after three days of inpatient care, but patients with the outpatient observation status do not qualify for this and could be stuck paying out of pocket, sometimes for services costing five figures or more. In the Nightly News with Brian Williams segment, it was suggested that Medicare patients check their own hospital status, or they may be left having to cover costly after-care services themselves.

About the Author

Dr. Margaret Klasa is the medical director for Context4 Healthcare. She is responsible for the company’s business knowledge discovery unit for medical context as it relates to the daily development of data products and software for medical claims editing and coding, with an emphasis on clinical and regulatory guidelines for Medicare, Medicaid and commercial payers.

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