Within the last few years, long-term care providers, specifically skilled nursing facilities (SNFs), have become an area of focus for audits conducted by Medicare contractors. Due to the U.S. Department of Health and Human Services (HHS) Office of Inspector General’s (OIG) work plan, SNFs may experience an even higher level of attention this year. This is because the 2012 OIG work plan listed SNF billing practices[1] on a list of potential problem areas commonly referred to as the OIG “hit list.”

At least one Recovery Audit Contractor (RAC) region already has an approved issue of which SNFs should be cognizant: a current approved issue for RAC Region B is SNF consolidated billing. RACs in Region B audit SNFs to determine if services being billed separately should be billed in compliance with the SNF consolidated billing requirements. Consolidated billing requires services provided during a resident’s stay in a SNF to be bundled when billed to Medicare by the SNF.  Under the consolidated billing requirement, a SNF must bundle all Medicare claims for services its residents receive (except for specifically excluded services) .[1] Excluded services are the professional components of physician services and some non-physician providers, items outlined in the Medicare Claims Processing Manual, Chapter 6, Section 20.1.1. SNF providers are advised to check the approved issues list for their RAC region regularly to determine if and when new audit issues are approved.

The OIG has identified another SNF area of focus for Centers for Medicare & Medicaid (CMS) contractors to evaluate: ultra-high therapy resource utilization groups (RUGs). Ultra-high RUGs are under greater scrutiny after a 2010 OIG report, “Questionable Billing by Skilled Nursing Facilities” found that ultra-high therapy billing increased from 17 percent of all RUGs in 2006 to 28 percent in 2008.  The report also found that payments for ultra-high therapy RUGs increased from $5.7 billion in 2006 to $10.7 billion in 2008, a 90 percent increase. As a result of these findings, the OIG recommended that CMS increase the monitoring of SNFs. And for 2012, as mentioned, SNFs showed up on the OIG “hit list.”

At present, ultra-high therapy RUGs are not on the RAC lists of approved audit issues, but this doesn’t necessarily mean that the RACs will not be paying closer attention to SNFs in general. Again, SNFs, with an emphasis on ultra-high therapy RUGs, are an area of focus in the 2012 OIG work plan, meaning that RACs likely will start paying closer attention to claims featuring RUGs. Notably, CMS permits RACs to request records and audit up to 10 “test claims” to determine whether to focus on this particular type of claim in future audits. CMS has granted the RAC for Region B, CGI Federal, approval to conduct test claims of ultra-high therapy RUGs to determine whether this issue should be added to CGI’s approved issues list. Providers are required to respond to “test claims” audits in the same manner they would respond to an audit of an issue already on approved issues lists. The 2010 OIG report found that SNFs generally are billing for an increased number of higher-paying RUGs although the patient population has not changed, raising red flags and resulting in the aforementioned increased scrutiny. This concern is heightened by the fact that Medicare payments for therapy RUGs cost nearly twice as much as payments for non-therapy RUGs. The recent attention on ultra-high therapy RUGs may suggest that new approved issues aimed at SNF providers are on the horizon.

SNF providers also are advised to take note of existing audit risk areas that continue to be targets of audits conducted by Medicare contractors, including Medicare Administrative Contractors (MACs) and Zone Program Integrity Contractors (ZPICs). For example, documentation of patients’ qualifying three-day hospital stays and physician certification are potential sources of audit denials.  Similarly, adequate documentation of therapy services and time is imperative in order to substantiate the RUG codes billed.

With an ever-increasing focus on long-term care, SNF providers are advised to implement compliance measures addressing these issues and other potential risk areas in an effort to prevent future audit scrutiny and strengthen audit defenses.

About the Authors

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.

Jessica Lange is an associate at Wachler & Associates, P.C.  Ms. Lange dedicates a considerable portion of her practice to defending healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.  Her practice also includes the representation of clients in Stark, anti-kickback, and fraud and abuse matters.

Contact the Authors




[1] http://racb.cgi.com/Issues.aspx

LINK #1: http://oig.hhs.gov/reports-and-publications/archives/workplan/2012/WP01-Mcare_A+B.pdf

LINK #2:  http://oig.hhs.gov/oei/reports/oei-02-09-00202.pdf 

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