Strategic Approaches to Challenging Inpatient-Outpatient Denials at the ALJ Hearing

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1 Strategic Approaches to Challenging Inpatient-Outpatient Denials at the ALJ Hearing Andrew B. Wachler Wachler & Associates, P.C. 210 E. Third St., Ste. 204 Royal Oak, MI (248) SLIDE 1

2 THE NEW AUDIT LANDSCAPE CMS contractors in the current audit landscape Recovery Audit Contractors (RACs) Medicare Administrative Contactors (MACs) Medicaid Integrity Contractors (MICs) Program Safeguard Contractors (PSCs) & Zone Program Integrity Contractors (ZPICs) Quality Improvement Organizations (QIOs) SLIDE 2

3 THE NEW AUDIT LANDSCAPE Recovery Audit Contractors Who are the RACs? Region A: Diversified Collection Services, Inc. Working in CT, DE, D.C., MA, MD, MA, NH, NJ, NY, PA, RI and VT Region B: CGI Technologies and Solutions, Inc. Working in KY, IL, IN, MI, MN, OH and WI Region C: Connolly Consulting, Inc. Working in AL, AR, CO, FL, GA, LA, MS, NC, NM, OK, SC, TN, TX, VA and WV Region D: HealthDataInsights, Inc. Working in AK, AZ, CA, IA, KS, MO, MT, ND, NE, NV, OR, SD, UT, WA, WY, Guam, American Samoa and Northern Marianas SLIDE 3

4 THE FOCUS OF CURRENT AUDITS RAC Approved Issues One area of concern revealed in the Demonstration Project was whether the RACs properly interpreted Medicare criteria and made inaccurate overpayment determinations In response, CMS created the new issue review process and contracted with an independent entity to serve as the RAC Validation Contractor SLIDE 4

5 THE FOCUS OF CURRENT AUDITS Recovery Audit Contractors Once approved, new issues are posted online on the RAC s website prior to the start of any reviews Approved medical necessity reviews implicate inpatient-outpatient issue For example: Acute Inpatient Admission Respiratory Conditions (MS-DRG: 180, , ) Acute Inpatient Admission Neurological Disorders (MS-DRG: 068, 069, 070, 071, 072, 073, 074, 103, 312) Renal and Urinary Tract Disorders (MS-DRG: 657, 658, 660, 661, 663, 664, 666, , , , ) Issue description includes: Medicare only pays for inpatient hospital services that are medically necessary for the setting billed and that are correctly coded. SLIDE 5

6 THE FOCUS OF CURRENT AUDITS Recovery Audit Contractors Top Issue Per Region (through June 17, 2011): Region A: Renal and Urinary Tract Disorders (medical necessity). Region B: Extensive operating room procedure unrelated to principal diagnosis (DRG validation). Region C: DMEPOS provided during an inpatient stay (DMEPOS automated review). Region D: Minor Surgery and other treatment billed as inpatient (medical necessity). See Medicare Fee for Service, National Recovery Audit Program, 3 rd Quarter, FY 2011 Quarterly Newsletter SLIDE 6

7 THE FOCUS OF CURRENT AUDITS Recovery Audit Contractors RAC Activity is Increasing: Medicare Fee-for-Service Recovery Audit Program As of June 2011 FY 2010 FY 2011 Q1 FY 2011 Q2 FY 2011 Q3 Total National Program Overpayments Collected Underpayments Returned Total Corrections $75.4 M $81.2 M $185.2 M $233.4 M $575.2 M $16.9 M $13.1 M $23.7 M $55.9 M $109.6 M $92.3 M $94.3 M $208.9 M $289.3 M $684.8 M SLIDE 7

8 CURRENT LEGAL ISSUES Inpatient hospital short stay cases Many of these claims were denied for the reason that care could have been provided at the observation level of care, rather than the inpatient level of care Medicare rules do not adequately distinguish between inpatient services (Part A) and observation services (Part B). Decision to admit: complex medical judgment SLIDE 8

9 CURRENT LEGAL ISSUES Inpatient hospital short stay cases These claims were denied outright, and were not re-coded to the observation level of care by the RACs During the demonstration program, providers were permitted to re-bill denied claims at the observation level. Providers are barred from doing so under the permanent RAC program. SLIDE 9

10 CURRENT LEGAL ISSUES Inpatient hospital short stay cases Current developments regarding obtaining reimbursement for outpatient services when inpatient services are denied: FAQ 9462 December 2, 2008 Meeting with CMS July 28, 2009 Meeting with CMS March 29, 2011 Meeting with CMS July 29, 2011 MAC decisions O Connor Hospital, issued February 1, 2010 UMDNJ University Hospital v. Riverbend GBA, issued March 14, 2005 ALJ decisions SLIDE 10

11 CURRENT LEGAL ISSUES Inpatient hospital short stay cases Standards Medicare Benefit Policy Manual (CMS Pub ), Chapter 1, 10 RAC s inappropriate use of InterQual criteria as a basis for denial The Medicare Program Integrity Manual (CMS Pub ), Ch. 6, Medical necessity criteria in 42 C.F.R (e), HCFA Ruling 95-1 Arguing the merits Importance of expert involvement SLIDE 11

12 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Medicare Benefit Policy Manual (CMS Pub ), Chapter 1, 10 Inpatient hospital services - An inpatient is a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. Generally, a patient is considered an inpatient if formally admitted as an inpatient with the expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight. SLIDE 12

13 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Medicare Benefit Policy Manual (CMS Pub ), Chapter 1, 10 Inpatient hospital services cont d: The physician or other practitioner responsible for a patient s care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. Physicians should use a 24-hour period as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis. However, the decision to admit a patient is a complex medical judgment which can be made only after the physician has considered a number of factors, including the patient s medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital s by-laws and admissions policies, and the relative appropriateness of treatment in each setting. SLIDE 13

14 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Medicare Benefit Policy Manual (CMS Pub ), Chapter 1, 10 Inpatient hospital services cont d: Factors to be considered when making the decision to admit include such things as: The severity of the signs and symptoms exhibited by the patient; The medical predictability of something adverse happening to the patient; The need for diagnostic studies that appropriately are outpatient services (i.e., their performance does not ordinarily require the patient to remain at the hospital for 24 hours of more) to assist in assessing whether the patient should be admitted; and The availability of diagnostic procedures at the time when and at the location where the patient presents. Admissions of particular patients are not covered or non-covered solely on the basis of the length of time the patient actually spends in the hospital SLIDE 14

15 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Medicare Benefit Policy Manual (CMS Pub ), Chapter 6, 20.6 Outpatient observation services Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation status is commonly assigned to patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge. SLIDE 15

16 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials The Medicare Program Integrity Manual (CMS Pub ), Ch. 6, Details the factors that contractors consider as part of their medical review process for inpatient claims. Pursuant to this manual section, the beneficiary must demonstrate signs and/or symptoms severe enough to warrant the need for medical care and must receive services of such intensity that they can be furnished safely and effectively only on an inpatient basis. SLIDE 16

17 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Chapter 6, Section 6.5.2(A), of the Medicare Program Integrity Manual reminds reviewing contractors that: Inpatient care rather than outpatient care is required only if the beneficiary s medical condition, safety, or health would be significantly and directly threatened if care was provided in a less intensive setting. Is this a heightened standard? SLIDE 17

18 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials The language in Section 6.5.2(A), of the Medicare Program Integrity Manual should be viewed in conjunction with the Medical Benefit Policy Manual. The Medical Benefit Policy Manual discusses factors to be considered by the attending physician when making the decision to admit while the Medicare Program Integrity Manual discusses factors to be considered when contractors review the medical necessity of an inpatient admission. In both instances, the factors to be considered relate to the severity of the illness and intensity of the service and whether the patient s health or safety would suffer if the care was provided in a less intensive setting. SLIDE 18

19 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials This language should also be viewed in its proper context within the Medicare Program Integrity Manual. It is found directly between the following instructions: Factors that may result in an inconvenience to a beneficiary or family do not, by themselves, justify inpatient admission. Without accompanying medical conditions, factors that would only cause the beneficiary inconvenience in terms of time and money needed to care for the beneficiary at home or for travel to a physician's office, or that may cause the beneficiary to worry, do not justify a continued hospital stay. Instead of a heightened standard, this language should more properly be viewed as an instruction to reviewing contractors to focus on the medical reasons for inpatient admission as opposed to reasons of convenience. SLIDE 19

20 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Hospital Condition of Participation: Utilization Review Pursuant to 42 C.F.R , all hospitals must have in place a utilization review ( UR ) plan, which ensures that the requirements of the regulation are fulfilled. These requirements may be filled either by the hospital directly through its policies, procedures, and UR committee or through a QIO that has assumed binding review for performing such tasks. Condition Code 44 Medicare FAQ Implications on, structure of UR Committee SLIDE 20

21 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Hospital Condition of Participation: Utilization Review Cont d: If the UR committee maintains the responsibility to fulfill the required UR functions: A UR committee consisting of two or more practitioners carry out the UR function. At least two members of a hospital s UR committee must be doctors of medicine or osteopathy, and the other members may be any of the other types of practitioners specified in the regulation. The determination that an admission or continued stay is not medically necessary must be made either by (i) one member of the UR committee if the practitioner(s) responsible for the care of the patient either concurs with the determination or fails to present their views when afforded the opportunity, or (ii) two members of the UR committee in all other cases. SLIDE 21

22 CURRENT LEGAL ISSUES Inpatient Hospital Short Stay Denials Hospital Condition of Participation: Utilization Review Cont d: The UR committee must consult with the practitioner(s) responsible for the care of the patient and allow them to present their views before making a determination. If the UR committee determines that an admission is not medically necessary, the committee must give written notification, no later than 2 days after the determination, to the hospital, the patient, and the practitioner responsible for the care of the patient. A review of an inpatient admission may be performed before, at or after an admission SLIDE 22

23 CURRENT LEGAL ISSUES Inpatient hospital short stay cases O Connor Hospital MAC decision issued February 1, 2010 The hospital appealed claim and the Administrative Law Judge (ALJ) found that this claim was partially favorable. Denied Part A claim inpatient hospitalization services were not reasonable and necessary Approved Part B claim covered because the observation and underlying care are warranted. SLIDE 23

24 CURRENT LEGAL ISSUES Inpatient hospital short stay cases O Connor Hospital CMS Referral for Own Motion Review by DAB/MAC - CMS s main argument was that the observation and underlying care payment could not be made because the inpatient admission was not reasonable and necessary. The Medicare Appeals Council concluded that it would not review the Administrative Law Judge s (ALJ s) decision Medicare Benefits Policy Manual, CMS Pub Medicare Claims Processing Manual, CMS Pub C.F.R (a)(2) SLIDE 24

25 EMERGING ISSUES IN AUDITS Use of Data Mining Use of data mining by all major Medicare and Medicaid recovery program RACs, MICs, ZPICs Data mining and analysis use of techniques and technology (databases, statistics, computer analysis, research) to derive or predict patterns from data Moving away from claim-focused reviews Key Considerations: Providers: use of data mining internally; incorporating results/techniques used by government auditors SLIDE 25

26 SUCCESSFUL APPEAL STRATEGIES The Medicare Appeals Process OVERVIEW Rebuttal Discussion period Redetermination Reconsideration Administrative Law Judge Hearing Medicare Appeals Council (MAC) Federal District Court SLIDE 26

27 SUCCESSFUL APPEAL STRATEGIES The Medicare Appeals Process Redetermination & Reconsideration Levels Evaluate supporting documentation Important to comply with early presentation of evidence rule Internal or external expert medical necessity review Utilization Review Physician advisors Independent experts SLIDE 27

28 SUCCESSFUL APPEAL STRATEGIES The Medicare Appeals Process Administrative Law Judge Hearing ISSUE: Scope of participation by CMS or its contractors at an ALJ hearing 42 CFR Participate in ALJ Hearing Filing position papers or providing testimony to clarify factual or policy issues Does not include calling witnesses or cross-examining the witnesses of a party to the hearing Agency or its contractors may not be called a a witness 42 CFR Party to a Hearing In addition, if participating as a party, CMS or its contractors may call witnesses or cross-examine the witnesses of other parties. SLIDE 28

29 SUCCESSFUL APPEAL STRATEGIES The Medicare Appeals Process Administrative Law Judge Hearing Request copy of Medicare audit file Request pre-hearing conference to outline issues, address procedural considerations Work with ALJ s clerk File pre-hearing brief SLIDE 29

30 SUCCESSFUL APPEAL STRATEGIES The Medicare Appeals Process Medicare Appeals Council (MAC) A provider dissatisfied with the ALJ decision has 60 days to file an appeal to the Medicare Appeals Council (MAC) Use of past Medicare Appeals Council cases macdecisions/mac_decisions.html Key Considerations: Criteria for review inpatient medical necessity determination Impact of MAC decisions; federal and state court decisions as providers challenging the process SLIDE 30

31 SUCCESSFUL APPEALS STRATEGIES Audit Defenses Provider Without Fault Waiver of Liability Treating Physician s Rule Challenges to Statistics Regulatory & Constitutional Challenges SLIDE 31

32 SUCCESSFUL APPEALS STRATEGIES Provider Without Fault Section 1870 of the Social Security Act Once an overpayment is identified, payment will be made to a provider if the provider was without fault with regard to billing for and accepting payment for disputed services Definition of fault 3 Year Rule MAC cases: In the case of Comprehensive Decubitus Therapy; In the case of Whidbey General Hospital SLIDE 32

33 SUCCESSFUL APPEALS STRATEGIES Waiver of Liability Section 1879(a) of the Social Security Act Under waiver of liability, even if a service is determined not to be reasonable and necessary, payment may be rendered if the provider or supplier did not know, and could not reasonably have been expected to know, that payment would not be made. MAC case: In the case of Baptist Healthcare SLIDE 33

34 SUCCESSFUL APPEALS STRATEGIES Treating Physician Rule Treating Physician Rule The treating physician rule, as adopted by some courts, reflects that the treating physician s determination that a service is medically necessary is binding unless contradicted by substantial evidence, and is entitled to some extra weight, even if contradicted by substantial evidence, because the treating physician is inherently more familiar with the patient s medical condition than a retrospective reviewer. Authorities that have addressed this issue include: State of N.Y. v. Sullivan, 927 F.2d 57, 60 (2nd Cir. 1991); Klementowski v. Secretary of HHS, 801 F.Supp 1022 (1992); Gartman v. Secretary of HHS, 633 F.Supp. 671, (E.D. NY 1986); Breeden v. Weinberger, 377 F.Supp. 734 (1974); Collins v. Richardson, Medicare/Medicaid Manual, 26,500 (Iowa, 1972); Pillsums v. Harris, CCH, Medicare/Medicaid Manual, 309,080 (CA 1981); Handerson v. Harris, No: , Slip Opinion at 622 (2nd Cir., 12/17/80); and Stearns v. Sullivan, NO Z, CCH Medicare/Medicaid Manual, 38,273 (D.C. Mass 1989). SLIDE 34

35 SUCCESSFUL APPEALS STRATEGIES Treating Physician Rule CMS Ruling 93-1: With respect to Part A Claims CMS Ruling 93-1 states that treating physician opinion is evidence, but not presumptive, so need to make a case specific argument why physician s opinion is the best evidence. 42 C.F.R Conditions of Participation: Utilization Review Providers should always argue that the opinion of the treating physician is the best evidence. MAC case: In the case of BioniCare Medical Technologies, Inc. SLIDE 35

36 SUCCESSFUL APPEALS STRATEGIES Challenges to Statistics Section 935 of the MMA Limitations on Use of Extrapolation A Medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise, unless the Secretary determines that There is a sustained or high level of payment error; or Documented educational intervention has failed to correct the payment error. The guidelines for conducting statistical extrapolations are set forth in the Medicare Program Integrity Manual (CMS Pub ), Chapter 3, through Key Consideration: Statistics and the RACs MAC case: In the case of Transyd Enterprises, LLC SLIDE 36

37 SUCCESSFUL APPEAL STRATEGIES Arguing the Merits Data Mining Integrating government data mining techniques internally Building your own database Real-time, reviews of services (inpatient versus outpatient) Track inconsistent claim reviews: Claims reviewed by contractor, approved Claims reviewed by contractor, denied, approved on appeal Identifying appeals involving successful defenses (provider without fault, waiver of liability) SLIDE 37

38 SUCCESSFUL APPEAL STRATEGIES Arguing the Merits Clinical Arm Involvement of Experts Clinical component Real time, concurrent reviews Expert opinions (affidavits) Integration of high quality literature review College, society standards LCDs locally and nationally SLIDE 38

39 SUCCESSFUL APPEALS STRATEGIES Post-Payment Case Study Denial: Medical necessity of inpatient admission Issues: Signed Order Order for Inpatient Admissions Interqual Local Coverage Decisions (LCDs) Specialty Society Criteria SLIDE 39

40 SUCCESSFUL APPEALS STRATEGIES Post-Payment Case Study Denial: Medical necessity of inpatient admission Issues cont d: Previous Review of Same or Similar Type of Case by Medicare Utilization Review Medicare Benefit Policy Manual (MBPM) 24 Hour Benchmark Severity of Illness and Intensity of Service Expert Opinion SLIDE 40

41 SUCCESSFUL APPEALS STRATEGIES Post-Payment Case Study Denial: Medical necessity of inpatient admission Arguments Inpatient services were reasonable and necessary for the care of the patient Reviewer should grant deference to the medical opinion of the admitting physician Hospital is a Provider without Fault Hospital is entitled to payment under the doctrine of Waiver of Liability SLIDE 41

42 SUCCESSFUL APPEALS STRATEGIES Post-Payment Case Study Denial: Medical necessity of inpatient admission Arguments cont d: If decision maker determines inpatient services were not medically necessary, the hospital is entitled to payment for outpatient services Substantive due process argument o Failure to provide payment for medically necessary treatments based upon the type of claim submitted would violated due process RAC Contractor failed to timely conduct its review of this claim o Palomar Medical Center case o Waiver of Liability 3 years SLIDE 42

43 SUCCESSFUL APPEALS STRATEGIES Post-Payment Case Study Denial: Medical necessity of inpatient admission Arguments cont d: RAC Contractor applied inappropriate standards in reviewing this claim RAC Contractor had a pecuniary interest in the outcome of the claim denial resulting in actual bias, in violation of due process rights Guidance regarding the term inpatient is unconstitutionally vague o Inpatient and outpatient observation defined SLIDE 43

44 QUESTIONS? Andrew B. Wachler, Esq. Wachler & Associates, P.C. 210 E. Third St. Ste. 204 Royal Oak, Michigan (248) SLIDE 44

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