Health Information Management

OIG to examine provider-based facilities, observation services, diagnostic testing

JustCoding News: Outpatient, October 21, 2009

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Although the 2010 OIG Work Plan is aimed at a significant number of inpatient areas, don’t lose sight of certain targets in the outpatient setting. In particular, analyze your compliance related to provider-based status.

When you submit claims as a provider-based facility, you need to make sure that you satisfy CMS criteria (Federal regulations 42CFR Section 413.65) and actually qualify as a provider-based facility, says John Steiner, Esq., chief compliance officer at UK HealthCare in Lexington, KY.

“If they follow the criteria, they get a higher level of reimbursement,” Steiner says. “The payment policy rationale is to pay for these services to reflect the costs that are incurred, which often are comparable to those in a typical hospital setting.”

Provider-based facilities receive two payments: One for the professional component (for the physician) and one for the technical component (for the facility). For example, when a provider-based facility performs a pathology laboratory test, it receives one fee for the physician’s services interpreting the test and another fee for the technical component of performing the test.

A hospital can operate and perform services as a department within the hospital itself, for example, or as an off-site facility, such as a clinic across town.

“They’re focusing on these because frankly the criteria as to whether a facility qualifies for this provider-based status, and therefore, additional payment, is a little fuzzy,” says Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc.

Review the criteria and look at potential refinements or changes that will take effect in 2010 per the outpatient prospective payment system final rule, and make sure you have appropriate documentation in order that supports your determination of provider-based status, Kares says.

Look at the three-day rule
Another area to examine in the outpatient setting is hospital payments for nonphysician outpatient services. For example, a nonphysician may provide certain diagnostic services up to three days before an inpatient admission. You should not bill separately for these services. This is sometimes referred to as the 72-hour rule or the three-day rule.

Diagnostic services provided on the day of admission and three full days prior to the date of admission are packaged into the subsequent inpatient admission, and facilities must report them on the subsequent inpatient claim, Kares says.

“There was significant enforcement of these bundling rules a few years ago that recouped thousands from hospitals all over the country,” she says. “It’s interesting that they feel the need to look at this again.”

When services are nonrelated and nondiagnostic, then you can bill for these separately, Kares says. 

Review observation services
In addition, the OIG plans to determine to what extent hospitals order observation services for patients and decide whether the frequency is excessive.

“They’re going to look at how that affects the care Medicare patients receive and the patients’ ability to pay out-of-pocket expenses,” Steiner says. “This may be more of a volume-driven analysis.”

Medicare has been intensely scrutinizing inpatient admissions and denying coverage for those that don’t meet medical necessity criteria, Kares says. So many facilities are ordering observation services for patients who are not recovering from outpatient surgery normally, for example. They can’t make a clear determination for the need to admit them as inpatients, but it’s not yet safe to send them home, Kares says. '

“I think hospitals are on the horns of a dilemma,” she says.

Because this could lead to significant co-insurance and deductibles for patients when they remain outpatients, the OIG plans to examine the necessity for those who receive observation services.

Assess the volume of diagnostic testing
The OIG Work Plan also indicated that the agency would increase its analysis of payments for diagnostic x-rays ordered in hospital emergency departments (ED) to ensure that these tests are not excessive.

Hospitals are stuck between a rock and a hard place, Kares says, because according to the Emergency Medical Treatment and Active Labor Act (EMTALA) requirements, providers are obligated to perform thorough screenings when patients come to the ED.

However, what happens when a physician orders an electrocardiogram (EKG) for a patient who comes to the ED with chest pain and it subsequently comes back clear because it turns out the patient just has a digestive problem? CMS could argue the EKG did not meet medical necessity and consider the diagnostic test unnecessary, Kares says.

Because diagnostic tests result in payment to the facility as well as to the physician for their interpretation, this reflects a shift in the OIG focus to include physicians in addition to facilities.

“Prior to this, there hasn’t been much risk to physicians,” she says. “They appear to be focusing now as much on the physician side as well as the hospital side. They may think that physicians might be more cost effective if there was more of a direct impact on their reimbursement when unnecessary services are ordered.”

To examine your own trends, identify the number of diagnostic x-rays ordered in the ED by type as well as by physician to determine whether you need to address any outliers, Kares suggests.

Consider additional OIG areas of interest
Although the outpatient setting has more of an indirect effect on the focus areas indicated in the OIG Work Plan, Kares recommends you take the following additional steps:

  • Review Medicare secondary payer rules. The OIG is going to study both inpatient and outpatient claims to decide whether hospitals are asking the right questions to determine whether there are primary payers who should pay before Medicare.
  • Focus on relevant documentation that affects present on admission indicator assignment. Hospital outpatient departments need to ensure that all relevant diagnostic information is clearly documented in the record so this data is available for any subsequent inpatient admissions.
  • Assess your policies for capturing data on adverse events (e.g., wrong surgery, blood incompatibility, and medication errors) that occur in the outpatient, as well as the inpatient, setting. Perform analyses to track and trend this information.



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