Corporate Compliance

Note from the Instructor: OIG Continues to Audit Hospital E/M Levels

Medicare Insider, January 20, 2015

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This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.  
The OIG recently published a report about overpayments to hospitals for clinic visits in calendar year 2012. While this may sound like old news and may not come as a surprise to hospitals, billing for Evaluation and Management (E/M) services continues to be an audit focus even though the reimbursement rules for PPS hospitals changed in 2014.
It is well known the OIG has been reviewing how Medicare pays for new and established patients for many years, and some healthcare systems have paid back millions of dollars for billing new patients when the visit should have been reported for an established patient instead. Unfortunately, CMS did not have edits in place to identify Medicare payments for patients who were already registered at a facility, so hospitals had to police themselves.
Beginning in CY 2009, CMS clearly established the definitions for hospital outpatients of ‘‘new’’ and ‘‘established’’ based on whether or not the patient had been registered as an inpatient or outpatient of the hospital within the past three years. A patient was considered to be established if they had been treated at the hospital within the three years prior to the current visit and the hospital would report E/M codes 99211-99215. Conversely, a patient who had not been registered as an inpatient or outpatient within the three years prior to the current visit would be considered to be a new patient and the hospital would report E/M codes 99201-99205. CMS reiterated that a payment difference existed between new and established patients and put hospitals on notice regarding the risk of overpayment when assigning a new patient level for an established patient.
Prior to this clarification, the determination of new vs. established was based on the creation of a hospital medical record within the past three years. CMS may not have been aware that from time to time, a medical record is created in anticipation of treatment or for other administrative purposes, and treatment may not have occurred within the three year timeframe.
Although the definitions seemed to be clear, the application of this concept in the hospital setting was always difficult because for every patient who presents to a hospital, the same “administrative burden” is created without regards to whether they have been seen in the last three years, whether the patient was new or established, based on the CMS definition. The patient is treated independent of their last visit. In fact, some hospitals understood the compliance risk based on their volume and internal procedures for billing a new patient when an established patient should have been billed so they chose to bill all visits as established to prevent the overpayment.
Fast forward to calendar year 2014: hospitals paid under the outpatient prospective payment system (OPPS) began to bill all of their clinic encounters using one HCPCS code - G0463 “Hospital outpatient clinic visit for assessment and management of a patient”. This approach appeared to solve the administrative burden of hospital staff having to determine if a new or established E/M code should be reported. However, the payment under new APC 0634 significantly changed the reimbursement from Medicare for clinic visits. CMS decided to leave the various E/M levels for emergency department billing intact.
In the recently released report, the OIG recommends CMS recoup the past improper payments as a way to correct the problem and also to “serve to educate and improve providers’ current billing practices”. CMS responded by saying it takes the recovery of overpayments seriously but “the average overpayment is $24, yet it will cost CMS an average of $90 per claim to review”. CMS also pointed out the audit issue no longer exists with the implementation of G0463 for any clinic visit in the hospital setting. The OIG countered by saying this is essentially an automated review issue and medical record review will not be necessary. Expect to see this recovery issue at a MAC or RAC near you!
So why do we need to care about this old issue going forward? Despite reporting one HCPCS code (G0463) for all clinic visits, CMS continues to permit hospitals to develop their own internal systems for charging purposes based on the intensity of hospital resources using 99201-99215.  Guidance previously issued in 2007 stated hospitals should continue to use their own internal guidelines to determine the appropriate reporting of different levels of clinic and emergency department visits. It’s unclear if CMS’ intent with implementing G0463 was to do away with billing for varying levels of hospital resources.
This means most hospitals are continuing to charge for their clinic visits to all payers based on the prior new and established definitions and 10 E/M levels. Although the risk of an upfront overpayment for clinic visits has been diminished, the risk still exists for hospitals to correctly report their costs via charges for the hospital resources used for the clinic visit. Most hospitals have continued to use their prior E/M leveling and CDM billing processes; however, for Medicare patients, all levels now default to G0463 for billing purposes. Until CMS changes its mind or issues national guidelines, hospitals may best be served to do an internal audit in this area to verify that E/M level assignment and charging procedures are being followed as originally intended.

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