Corporate Compliance

Note from the Instructor: Changes to Audits of Inpatient Admissions

Medicare Insider, July 28, 2015

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In the 2016 OPPS Proposed Rule, CMS announced that October 1, 2015 they will be transitioning the medical review of inpatient admissions from Medicare Administrative Contractors (MAC) to Quality Improvement Organizations (QIO). This policy will limit the future review of inpatient admissions by the Recovery Auditors and may be related to CMS’ withdrawal of the Request for Quotes for new Recovery Auditors announced July 10.

As discussed last week in Judith’s note on the OPPS Proposed Rule, CMS proposed changes to the current regulation that includes the 2-Midnight Benchmark and related provisions. The benchmark will remain unchanged and generally allows Part A payment where the physician expects the patient to require two midnights of medically necessary hospital care. The amendment would also allow case-by-case payment under Part A for admissions the physician expects to be less than two midnights, but nevertheless believes are appropriate for inpatient admission, as supported with appropriate documentation.

CMS indicates this change is an expansion of their “rare and unusual” circumstances exception that currently only includes the clinical case of newly initiated mechanical ventilation. They emphasized the “case-by-case” nature of this new exception, indicating these cases will be subject to the clinical judgment of medical reviewers. Cases with less than a one night stay will be prioritized for review.

In the same section of the rule, CMS discussed changes in how these reviews will take place. Currently, reviews of inpatient admissions are being performed by the MACs as part of a probe-and-educate process initially introduced by CMS during the implementation of the 2-Midnight Rule and later required by Congress. The statutory requirement for the MACs to conduct reviews ends October 1, and at that time, presumably reviews were set to revert back to the Recovery Auditors, with some reviews still conducted by MACs as well. CMS instead announced they will implement a new medical review strategy for inpatient admissions utilizing the QIOs, rather than MACs or Recovery Auditors, effective October 1.

CMS announced they will make this change in review strategy October 1 regardless of whether the proposed change to the 2-Midnight Rule is adopted. Other policies published in the proposed rule, including the proposed 2-Midnight Rule amendment, will be finalized in November with an effective date of January 1, 2016—long after expiration of the current review strategy mandated by Congress. CMS takes great pains to explain the statutory and regulatory appropriateness of the QIOs conducting these reviews under their current scope. Presumably, this is CMS’ explanation for adopting this change in strategy effective October 1 without finalizing it through the comment and response process of the proposed rule. Nevertheless, this new policy is likely to be viewed as a very provider- and beneficiary-friendly change and, in all likelihood, would have faced little opposition through the comment and review process anyway.

Under the new “strategy,” the QIOs will conduct post payment reviews on a sample basis looking for practice patterns that may require additional education or further auditing. The practice patterns CMS highlighted in the rule include high denial rates, consistently failing to adhere to the 2-Midnight Rule, frequent admissions of less than one midnight or failure to improve after education by the QIO. Providers identified as having these practice patterns will be referred to the Recovery Auditors for further focused reviews of their inpatient admissions.

This brings us to the state of the Recovery Audit program and contracts. The current Recovery Audit contracts were set to expire in August 2014. Due to delays in contracting with new Recovery Auditors, the contracts for the current Recovery Auditors were extended at that time.

In November 2014, CMS announced that two of the new contracts would be in place by December of that year and the remaining three by late summer 2015. However, on July 10 CMS announced on the Recovery Audit Program Recent Updates page that they have withdrawn the Requests for Quotes to replace the current contractors and are updating the Statements of Work (SOW) for the new contracts. They indicate the current Recovery Auditors will continue with “active” reviews through December 31, with new contractors not on the horizon until 2016.

Presumably, the new SOW will include the limitation on inpatient admission reviews announced as part of CMS’ new medical review strategy with the QIOs. This new strategy changes the economics of the contracts for the bidders. The Recovery Auditors get a portion of monies recovered and inpatient cases are the highest dollar cases and denials of these admission have been the most lucrative for them. This new strategy is unlikely to change the review of the medical necessity of procedures provided during inpatient admission (i.e., reviews focused on the medical necessity of the procedure rather than the status of the patient), which are a current focus of some Recovery Audits.

The new SOW will undoubtedly also include the improvements to the Recovery Audit program detailed in late 2014. These improvements include many provider-friendly changes such as a limitation on the length of time to review inpatient claims submitted in a timely manner (within three months) and limitations on the number of cases that can be reviewed, which varies based on the rate of denial. In the rule, CMS indicated that under the new strategy for review of inpatient cases, the number of claims reviewed by Recovery Auditors would be based on claim volume and denial rates determined by the QIO, which is consistent with that approach.

If providers have questions about the new medical review strategy, the new QIO audits, or how the process for referral to the Recovery Auditors will work, they may wish to submit comments to the OPPS Proposed Rule by the deadline of August 31. Although the discussion of the new medical review strategy is not technically a proposed rule and is presumably only an announcement of the new strategy, CMS would likely answer questions submitted by providers.

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