Archives for April 2015

Kusserow on Compliance: CMS Round 2 process for inpatient claims settlements

CMS announced Round 2 of the settlement process for inpatient claims denied on the basis of patient status. CMS contends that hospitals should have billed the denied inpatient claims as outpatient claims. In September 2014, CMS offered hospitals the opportunity to settle the denied inpatient claims for a timely partial payment equal to 68 percent of the net allowable amount. CMS believes that the changes in their Final rule 1599-F (78 FR 50496, August 19, 2013) will not only reduce improper payments under Medicare Part A, but will also reduce the administrative costs of appeals for both hospitals and the Medicare program.

During Round 1, Medicare Administrative Contractors (MACs) reviewed denied inpatient claims submitted by participating hospitals and created a contractor eligible claims list. For all denied inpatient claims that matched the contractor eligible claims list, CMS will countersign and settle with each hospital according to the original Round 1 administrative agreement. Where MACs disagreed with particular claims submitted by hospitals during Round 1, MACs will issue a disagreement spreadsheet of ineligible claims to each provider. The Round 2 process will allow hospitals to further resolve the eligibility of denied inpatient claims through the submission of further evidence and through direct work with CMS and MACs. Once a MAC issues a disagreement spreadsheet, a provider has 14 calendar days to review and submit comments to the spreadsheet as well as submit a new administrative agreement to CMS. Once hospitals and MACs come to an agreement during Round 2, CMS will issue a secondary settlement payment for inclusion of those claims in the settlement process.

The deadline for hospitals to request settlement was October 31, 2014. CMS encouraged hospitals with inpatient status claims currently in the appeals process or within the timeframe to request an appeal to make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.


Senior respect or abuse and neglect? Florida law sparks debate

A bill designed to address problems of abuse and neglect in Florida’s assisted living facilities has passed the Florida Senate and was sent to the state’s governor for approval. Proponents of the bill say that it will fill a problematic void and improve enforcement and oversight in the facilities that serve over 86,000 senior Floridians. Opponents of the legislation criticize the fact that the law would reduce the number of oversight visits for facilities with good records.

HB 1001/SB 382

Under the status quo in Florida, facilities are subject to inspections every two years. However, under the new bill, HB 1001/SB 382, homes that are found to have a major violation would be subject to more frequent inspections. The bill clarifies standards for the revocation of licensing for facilities that continually violate regulatory standards. The bill also authorizes a $500 penalty for facilities that fail to provide background screenings for staff. Regulators would also be permitted, under the law, to double fines on facilities that fail to correct serious violations within a six-month period.


Republican state representative Larry Ahern said that the goal of the legislation was to “find a balance” between oversight, business interests, and patient needs. Ahern expressed the opinion that the focus of any legislation should be on “bad apples because the good ones will take care of themselves—for the most part.” However, Brian Lee, director of the advocacy group Families for Better Care, said that the legislation “will only shrink oversight of those assisted living facilities who care for the most vulnerable ALF residents.” Additionally, Lee warned that the facilities “need more oversight, not less.”

New York’s Medicaid program wasted $874M due to errors

From January 2011 through February 2015, New York’s Medicaid program lost $513 million in improper payments or potential revenue, and an additional $361 million in questionable transactions might be recoverable through agency action. The Office of the State Comptroller (OSC) released a report based on 73 audits of the Medicaid program. These audits found multiple deficiencies in eMedNY, New York’s Medicaid management information system (MMIS) that caused at least $190 million of the loss due to improper payments.


The report indicated that the most money lost was through questionable transactions totaling over $360 million. Close behind was failure to obtain drug rebates and discounts from manufacturers, which cost the program over $171 million, and dual eligible claims, costing over $168 million. Nursing home claims took $46.7 million, while provider errors, low birth weight babies, multiple client identification numbers, managed care organization (MCO) and fee-for-service (FFS) payments, and hospital billings were each responsible for between $14 million and $18 million in excessive costs and lost revenue.

eMedNY and drug rebates

Much of this money was lost due to issues with eMedNY. The system made incorrect errors interpreting claim codes, maintaining limits, and properly identifying providers. The OSC cited the Department of Health’s (DOH) delays in implementing modifications based on audit findings as the reason for many of these issues. Additionally, the DOH did not make proper changes to eMedNY to ensure that drug rebates were collected according to the 340B Drug Pricing Program, which requires drug manufacturers to discount prices for certain providers. Nearly $50 million was lost due to improper payments and billing, failure to collect available rebates, and failing to apply more than two out of 15 claim categories.

Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) Section 2501(c) expanded the Medicaid Drug Rebate Program, which allows states to recover some prescription drug costs through similar rebates. The expansion covered managed care organization (MCO) members, but eMedNY did not appropriately collect $119.3 million in newly available rebates.

Dual eligible enrollees

Over 800,000 New Yorkers are enrolled in both Medicare and Medicaid, known as dual eligibles. Over $111 million was improperly paid for many dual eligibles who were not entitled to Medicaid managed care. Due to difficulties in implementing a new payment system, eMedNY incorrectly interpreted claim codes and overpaid $26 million.

Other claims

A flaw in the previous MMIS passed down to eMedNY meant that contributions from nursing home residents, who must share care costs with Medicaid, were not collected. New York also paid multiple premiums for the same person, and some people were issued multiple identification numbers resulting in millions of unnecessary expenses. Incorrect hospital billing, improper payments for newborns with low birth weight, provider errors on claims and other mistakes accounted for the rest of the expenses. The OSC provided several recommendations regarding strengthening of system standards to enhance the state’s oversight of MCOs in Medicaid, including implementing previous recommendations that have not been addressed.

Bipartisan bill would strengthen FDA’s oversight of cosmetics

The Personal Care Products Safety Act (S. 1014), a new bill sponsored by Senators Dianne Feinstein (D-Cal) and Susan Collins (R-Me), seeks to protect consumers and streamline compliance in the cosmetics industry by giving the FDA enhanced authority to regulate the ingredients of such products.

Notably, the bill would allow the FDA to force the recall of dangerous products, whereas under the Food, Drug, and Cosmetic Act (29 USC §301 et seq.) manufacturers are not required by law to disclose adverse health effects reported by consumers, and the FDA is only able to request the voluntary recall of products. Scott Faber, the vice president of government affairs for the Environmental Working Group, told the New York Times, “Most consumers don’t have much faith in voluntary company commitments. The absence of a credible regulator has undermined consumer confidence in everyday products.”

The bill also requires that companies report serious adverse health effects, including reactions to products resulting in death, disfigurement or hospitalization, within 15 business days of obtaining the information from consumers. All nonserious events, such as rashes, must be included in an annual report.

According to a press release from Sen. Feinstein, the FDA would also be mandated under the new bill to annually study five chemicals in order to determine their safety and appropriate use: urea, lead acetate, methylene glycol/formaldehyde, propyl paraben, and quaternium-15.  The process will help provide companies with clear guidance about whether the products should continue to be used and at what concentration levels. The FDA will also provide guidance regarding the consumer warnings needed for products containing these chemicals.

Funding for the FDA’s expanded oversight will come from user fees from personal care products manufacturers.