Corporate Compliance

Note from the instructor: CMS Introduces Review and Denial of Related Claims

Medicare Insider, September 9, 2014

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This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  
Note from the instructor: CMS Introduces Review and Denial of Related Claims
Earlier this year CMS published and then rescinded a transmittal (Medicare Program Integrity Manual, Transmittal 505) allowing denial of related claims. At the time it was rescinded, CMS indicated it was being rescinded “due to the need to clarify CMS’ policy and will not be replaced at this time”. On August 8, CMS issued Medicare Program Integrity Manual Transmittal 534, effective this week, which appears to replace Transmittal 505, although it was not issued as a replacement.
The transmittal puts in place a policy to allow MACs and ZPICs to deny physician professional claims related to hospital denied claims, with or without manual review depending on the situation. The transmittal specifies that contractors must wait for CMS approval prior to implementing related claims reviews and must post their intention on their website one month prior to starting such reviews. The rescinded Transmittal 505 included Recovery Auditors in this policy. However, in the new Transmittal 534, they must request approval from CMS as provided under their Scope of Work.
The transmittal defines claims as related if the documentation from one claim can be used to validate another claim. The transmittal provides one specific example for denial of physician claims related to denied inpatient admissions. For admissions denied because they are not appropriate for Part A payment, but would have been appropriate for Part B, the contractor can recode the claim to the appropriate outpatient evaluation and management (E/M) code. However, if documentation does not support medical necessity for the procedure, the contractor can recoup the Part B payment for the performing physician’s claim.
New Transmittal 534 leaves out an example that was included in Transmittal 505. It included an example of a diagnostic test deemed not reasonable and necessary, allowing the denial of the professional claim for that test.  
The transmittal specifically states contractors are not required to request additional documentation for the related claims before denying them and states that these related claims can be denied automatically or after manual review. The transmittal further specifies that appeals of these related claims will be processed separately.
This new policy, if implemented by contractors, may align hospital and physician incentives to ensure complete documentation of the medical necessity of procedures performed at hospitals. Hospital surgical claims have come under greater and greater scrutiny. Many hospitals have been concerned that if only their claims were reviewed and denied, physicians did not have incentives to provide them with the documentation they needed to withstand these reviews. Under the new policy, a physician’s claim can be automatically denied if the hospital’s claim is denied, meaning the physician’s claim is essentially denied based on the documentation in the hospital’s record. This should provide physician’s with a greater incentive to provide documentation from their files to the hospital to ensure the hospital’s claim is supported by documentation of medical necessity in the event of an audit. 
However, because of the ability of contractors to simply change the E/M code from inpatient to outpatient if inpatient status is not supported, this policy does not provide incentives to physicians for the documentation of general appropriateness of inpatient status. If a physician fails to document their expectation of two midnights of care or support that expectation with documentation in the medical record, the hospital’s claim is still subject to denial but the physician’s claim can simply be recoded. Of course, if the hospital discovers this deficit of documentation through utilization review prior to the expiration of timely filing, they can submit a claim and also get Part B payment similar to if the case had been outpatient. Nevertheless, it seems to leave the hospital holding the bag if the physician fails to properly document the medical necessity and general appropriateness of inpatient care.
It is also important to note that some Recovery Auditors had obtained approval for parallel review of physician and hospital claims for some surgeries with high numbers of denials. However, the Recovery Auditors had been instructed to wrap up their reviews by June 1. The latest information on the CMS website indicates CMS has made modifications to the Recovery Auditor’s contracts to allow them to continue reviews on a limited basis due to delays in the re-contracting process. The limited reviews are supposed to be primarily automated, but may include some complex reviews like those of hospital surgical claims.

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