The Numbers

The national paid claims error rate (i.e. improper payment rate) in the Medicare FFS program for the period covered by the report is 7.8 percent. That’s 7.8 percent of the $308.4 billion in paid 2009 Medicare claims, or $24.1 billion. The CERT program considers any claim that was paid when it should not have been to be an improper payment.

Within the 7.8 percent error rate, 4 percent of the overall $308.4 billion in claims can be connected to medically unnecessary errors, 1.9 percent to insufficient documentation and 1.6 percent to incorrect coding. Lack of documentation and other errors come in last, both at 0.1 percent of the gross total.

Claims are placed in the above categories based on the following scenarios:

  • Medically unnecessary service: Review staff identifies evidence from submitted medical record documentation to make an informed declaration that services billed were not medically necessary based on Medicare coverage policies.

  • Insufficient documentation: The submitted medical documentation does not include certain critical patient facts (the patient’s overall condition, diagnosis or extent of services performed).
  • Incorrect coding: Providers submit medical documentation that supports a lower or higher code than the one submitted.
  • No documentation: Providers fail to respond to repeated attempts to obtain medical records.
  • Other: These claims do not fit into any of the other categories (i.e. service not rendered, duplicate payment error, not covered or unallowable service).

Stricter Review Standards Used

In the November 2009 CERT report, CMS explained that for this review it “significantly revised and improved” the way it calculates the Medicare FFS error rate. The improved methodology, it says, provides “a more accurate assessment of unsubstantiated claims.”

In fact, CMS determined that the high percentage (51.9 percent) of erroneous claims submitted to DME Medicare administrative contractors (MACs) was a result of stricter documentation requirements. Specifically, the improved methodology includes a reduction in the flexibility allowed for reviewers to determine medical necessity. Previously, reviewers tried to determine whether services listed on a claim were actually provided and necessary. CMS gave reviewers certain latitude in determining this based on their training, experience and judgment.

However, the new review approach requires that every condition listed in a Medicare policy be met in exactly the way the policy describes it, or else the claim is considered an error. Once CMS clarified that clinical review judgment may not override documentation requirements, more errors were found on DME items.

For example, in the past, reviewers would look at available documentation (including physician orders, supplier documentation, and patient billing history) and apply clinical review judgment. Now, CERT requires receipt of medical records from the treating physician and does not review other available documentation or apply clinical review judgment.

Link to RAC Actions

A review of the issues on the RAC web sites shows that the auditors are in sync with the above findings. Although most of the issues being reviewed focus on inpatient services, project review claims submitted to DME MACs are definitely a presence. Specifically:

Time will tell whether the number of issues involving DME claims increase.

About the Author

Barbara Vandergrift, RN, BSN, MA, is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®) in St. Paul, Minn. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that equip healthcare organizations with their coding, chargemaster, reimbursement management and RAC solutions.

Contact the Author

(bvandegrift@medlearn.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it )

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