Hospitals have had a reprieve from record requests, denials, and appeals, but that’s about to change as CMS ramps up its auditing programs.

  • The two Beneficiary and Family-Centered Care Quality Improvement Organizations (QIOs) are restarting their audits of stays of less than two midnights, but are concentrating on hospitals that have had a lot of errors.
  • CMS has given Medicare Administrative Contractors (MACs) permission to resume “probe and educate” audits that also will focus on hospitals that are significant outliers.
  • Recovery Auditors have new contracts and have submitted lists of issues to cover but, under the new contracts, they are limited in how many requests for additional information they may issue to a hospital and must audit hospitals for a variety of issues.

It has been a while since hospitals were inundated with requests for records from CMS auditors, but that may be about to change.

“After a quiet period, government audits are beginning to ratchet up,” says Kurt Hopfensperger, MD, JD, vice president of compliance and education at Optum Executive Health Resources in Philadelphia.

Quality Improvement Organizations (QIOs) are reviewing short stays, and Medicare Administrative Contractors are scheduled to reinstitute “probe and educate” audits. In addition, CMS has issued new contracts with Recovery Auditors (RAs).

That’s the bad news. The good news is that most of the audits target hospitals that have significant error rates in their claims. That makes case managers even more essential than in the past.

“The key to reducing a hospital’s audits is to ensure that case managers assess every patient at the point of entry, and review the status of observation patients to make sure they are in the right status,” says Teresa Marshall, RN, MS, CCM, senior managing consultant for Berkeley Research Group.

The audits aren’t likely to go away, regardless of what the new CMS leadership does, Hopfensperger says.

If the Affordable Care Act is repealed, many initiatives, including value-based purchasing and bundled payments, will be eliminated and Medicare will return to a fee-for-service program.

“In that case, my guess is that the only way CMS could control costs would be to ramp up the auditing process even more,” Hopfensperger says.

Meanwhile, here’s a look at who is reviewing what:

  • The two Beneficiary and Family-Centered Care Quality Improvement Organizations (QIOs) are resuming audits of medical necessity of short stays, focusing on hospitals that submitted claims with a lot of errors. CMS had suspended the audits in 2016 in order to retrain QIOs and ensure consistency in the audit process.
  • QIOs no longer are sampling every hospital twice a year. They are focusing on the top 175 providers based on the number of one-day inpatient stays or an increasing number of inpatient stays, as well as hospitals that have an error rate of 20% or more, says Edward Hu, MD, CHCQM-PHYADV, president of the American College of Physician Advisors.
  •  CMS is providing the QIOs, Kepro and Livanta, with monthly samples of claims of eligible stays of less than two midnights. The QIOs identify between 10 and 25 cases for review, depending on the size of the hospital, and can repeat the audit every six months.

“The auditors will review the records for medical necessity and look for technical issues, such as a valid, signed inpatient order and the physician’s expectation that the patient will stay two midnights,” Hopfensperger says.

  • CMS has given the Medicare Administrative Contractors (MACs) permission to conduct Targeted Probe and Educate audits of hospitals identified as significant outliers, Hopfensperger says.

The MACs use data analysis to identify the top hospitals out of compliance for billing and “use of certain services.” CMS has not given details on exactly how the hospitals will be identified or what “certain services” will be targeted, he says.

The Targeted Probe and Educate process is expected to start in late 2017 and can continue for three rounds, during which the MACs can request 20-40 charts, depending on the size of the hospital. Hospitals chosen for audits are those that the MACs have identified as having a high error rate, Hopfensperger says.

  • CMS signed contracts with the five Recovery Auditors (RAs) in the fall of 2016, and they’re beginning the audit process. Recovery Auditors in Regions 1-4 will review Medicare Part A and Part B for improper payments. The RA in Region 5, which encompasses the entire U.S., will review durable medical equipment and home health/hospice claims.

Each of the auditors in Regions 1-4 has a lengthy list of issues that CMS has approved for review, Hopfensperger says. Some issues include inpatient DRG coding, inpatient psychiatry bills, medical necessity for some procedures, and admissions not through the ED.

“All the RAs have similar lists. What is not yet on the list is traditional inpatient versus outpatient medical necessity, but there’s no reason CMS can’t add that,” Hopfensperger says. He recommends that case managers frequently visit their RA’s website to stay current on the approved issues for review.

Recovery Auditors are issuing record requests, but so far they are mainly for DRG validation and other limited inpatient issues, as well as automated reviews that can add up to big dollars quickly, reports Elizabeth Lamkin, MHA, chief executive officer and partner in PACE Healthcare Consulting, based in Bluffton, SC. “And the RAs can use extrapolation, based on denials,” she says.

CMS has reined in RAs somewhat with changes in the auditor’s scope of work. For instance, RAs are required to sample all types of cases, which means they no longer can focus on one issue or cases that have charges, Hu adds.

“Level of care became the bread and butter for the RACs [recovery audit contractors] in 2010, but now they’re off limits to the RAs, and the QIOs are conducting the short stay reviews,” Hu says.

Under the new contract, additional documentation requests (ADRs) from RAs are restricted to 0.5% of a provider’s total number of paid bills for all types of claims in the previous year.

CMS can adjust the number of ADRs hospitals can receive depending on the hospital’s denial rates, Lamkin says. As the denial rates decrease, so will the number of files RAs can request. On the other hand, if a hospital has a high rate of denials, RAs may request more records to review, she adds.

Hospital appeals of denials issued by RACs in earlier years continue to back up at the administrative law judge level, Hopfensperger reports. Some hospitals took CMS up on its offer to settle appeals for a partial payment of 66% of the disputed amount, but there still is a significant number of cases pending appeal, he adds.

To help with the backlog, CMS is hiring attorneys as adjudicators to help the judges decide cases that don’t need formal hearing, he says.

“The adjudicators don’t have all the power of judges, but they can take care of the more routine and administrative issues and free the judges up to deal with the significant backlog of appeals,” he says. For example, they can dismiss a request when one party withdraws, or send cases back to the auditors for more details.