Kusserow on Compliance: CMS improperly paid $367M for outpatient physical therapy

The OIG issued an audit report that found sixty-one percent of Medicare claims for outpatient physical therapy services reviewed did not comply with Medicare medical necessity, coding, or documentation requirements, resulting in an estimated overpayment of $367 million for outpatient physical therapy services that did not comply with Medicare requirements. These overpayments occurred because CMS controls were not effective in preventing improper payments for outpatient physical therapy services. The Medicare Part B program paid approximately $2 billion for outpatient physical therapy services provided to beneficiaries and past OIG reviews of individual physical therapy providers identified claims for outpatient physical therapy services that were not reasonable, medically necessary, or properly documented.  The OIG analyzed a stratified random sample of 300 outpatient claims for physical therapy services. The OIG’s stated objective was to determine whether Medicare claims for outpatient physical therapy services complied with Medicare requirements. Errors identified fell under three categories:

  1. Services that were not medically necessary, including services which were not reasonable—there was no evidence that the services would be effective, the services did not require the skills of a therapist, or there was not expectation of significant improvement.
  2. Coding did not meet medical requirements—timed units claimed did not match units in treatment notes; missing modifiers; and incorrect codes.
  3. Documentation did not meet Medicare requirement—plan-of-care deficiencies; treatment note deficiencies; and recertification deficiencies.

The OIG recommended CMS: (1) instruct the Medicare contractors to notify providers of potential overpayments so that those providers can exercise reasonable diligence to investigate and return any identified overpayments, (2) establish mechanisms to better monitor the appropriateness of outpatient physical therapy claims, and (3) educate providers about Medicare requirements for submitting outpatient physical therapy claims for reimbursement. CMS generally disagreed with these findings and believes further analysis of the sampled claims is warranted to determine whether the claims met Medicare requirements, according to the report.

 

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 © 2018 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Controls working to prevent Medicare Advantage capitation payments after beneficiaries’ death

The OIG released a report that stated CMS policies and procedures were generally effective in ensuring that capitation payments to Medicare Advantage (MA) organizations for Medicare Parts A and B services were not made on behalf of deceased beneficiaries after their death. The Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015 requires CMS to establish policies to ensure that payments are not made for Medicare services rendered after death of beneficiaries. In prior audits, the OIG identified problems in controls to prevent these kinds of Medicare payments. In this case, the OIG conducted an audit to determine effectiveness of CMS’s policies and procedures to prevent capitation payments to Medicare Advantage (MA) organizations for Medicare Parts A and B services after individuals’ dates of death.

Details of the audit report noted that during calendar years 2012 through 2015, CMS received updated beneficiary date-of-death information and then made approximately 1.8 million adjustments to capitation payments, thereby recouping $2.96 billion from MA organizations for Parts A and B capitation payments that had been made on behalf of beneficiaries who had died.  However, the OIG found that CMS did not identify and recoup all improper capitation payments. As of March 7, 2017, CMS had not recouped $2.4 million associated with 1,817 capitation payments that were made on behalf of 978 beneficiaries. The OIG noted these improper payments represented .0004 percent of the total capitation payments made to MA organizations and .08 percent of the total adjustments that CMS made after receiving information on beneficiaries’ dates of death.

The OIG recommended CMS (1) move to recoup the $2.4 million in capitation payments made to MA organizations on behalf of deceased beneficiaries and (2) implement system enhancements to identify, adjust, and recoup improper capitation payments in the future. CMS concurred with both of these recommendations and described corrective actions that it had implemented.

 

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2017 Strategic Management Services, LLC. Published with permission.

CMS cut to 340B spending overshadows OPPS update; associations threaten suit

Reimbursement to outpatient departments in 2018 will increase $5.8 billion compared to 2017, according to the hospital outpatient prospective payment (OPPS) and ambulatory surgical center (ASC) PPS Final rule for calendar year 2018. However, CMS will drastically reduce reimbursement for drugs under the 340B Program, much to the ire of providers and associations, which have already threatened to sue. (Final rule, 82 FR 52356, November 13, 2017).

340B program 

In calendar year (CY) 2018, CMS will change its reimbursement for separately payable drugs and biologics (other than pass-through drugs and vaccines) acquired through the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. Rural sole community hospitals, PPS-exempt cancer hospitals, and children’s hospitals will be exempt from this policy for CY 2018. This change, said CMS, addresses recent trends of increasing drug prices and will save beneficiaries about $320 million on copayments in 2018. CMS will offset the projected $1.6 billion decrease in drug payments by redistributing this amount for non-drug items and services across the OPPS.

The 340B Program (see 42 U.S.C. §256b, as expanded by Secs. 2501, 7101, and 7102 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148)), has been controversial, as critics have accused hospitals of abusing the program (see Participants in drug delivery system testify to impacts on patient prescription drug costs, Health Law Daily, October 18, 2017). However, the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals criticized the cut to 340B spending as contrary to Congressional intent and a threat to safety net hospitals (see, e.g., Testimonies focus on benefits of 340B Drug Program, Health Law Daily, October 12, 2017).

Further, said the AHA, the policy “does nothing to address the stated goal of reducing the cost of pharmaceuticals” and could cause increases in beneficiaries’ out-of-pocket costs for non-drug Part B benefits. American’s Essential Hospitals predicted that, “given their fragile financial position, essential hospitals will not weather this policy’s 27 percent cut to Part B drug payments without scaling back services or jobs.” The three associations plan legal action to stop CMS from cutting 340B spending.

OPPS update

For CY 2018, CMS increased the payment rates under the OPPS by an increase factor of 1.35 percent, which is based on the hospital inpatient market basket percentage increase of 2.7 percent, minus the multifactor productivity adjustment of 0.6 percentage point, and minus a 0.75 percentage point adjustment required by Sec. 3401(i) of the ACA.

Direct supervision requirement

42 C.F.R. Sec. 410.27(a)(1) requires therapeutic outpatient services to be furnished under the direct supervision of a physician or nonphysician practitioner. Sec. 16004 of the 21st Century Cures Act (P.L. 114-255) delayed enforcement through 2016 of this requirement for therapeutic hospital services provided by critical access hospitals and small rural hospitals with fewer than 100 beds. The CY 2018 OPPS Final rule continues the nonenforcement of the direct supervision requirement for hospital outpatient therapeutic services for CAHs and small rural hospitals having 100 or fewer beds for CYs 2018 and 2019.

Inpatient only list

Services that typically would be paid in an inpatient setting will not be paid by Medicare under the OPPS (see 42 C.F.R. Sec. 419.22(n)). These are services that require inpatient care because of (1) the invasive nature of the procedure; (2) the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged; or (3) the underlying physical condition of the patient. Effective for CY 2018, CMS will remove total knee arthroplasty (TKA) and five other procedures from the inpatient only list and will add one procedure to the list. CMS is also prohibiting recovery audit contractors from reviewing TKA procedures for “patient status” for two years to give providers time to gain experience with the procedure in the outpatient setting.

Packaging

CMS will conditionally package low-cost drug administration services assigned to Ambulatory Payment Classifications (APCs) 5691 and 5692 effective January 1, 2018. In addition, CMS assigned skin substitutes with a geometric mean unit cost (MUC) or a per day cost (PDC) that exceeds either the MUC threshold or the PDC threshold to the high cost group. For CY 2018, a skin substitute product that was assigned to the high cost group for CY 2017, but does not exceed either the CY 2018 MUC or PDC threshold for CY 2018, will be assigned to the high cost group for CY 2018.

OQR program

CMS removed six measures from the Outpatient Quality Reporting (OQR) program beginning with the CY 2020 payment determination (CY 2018 reporting). CMS stated that the removal of these measures results in a burden reduction of 457,490 hours and a saving of $16.7 million in CY 2020 for hospitals. CMS also delayed the mandatory implementation of the Consumer Assessment of Healthcare Providers and Systems Outpatient and Ambulatory Surgery Survey under the Hospital OQR Program beginning with the CY 2018 data collection.

Laboratory tests

A new exception to the laboratory date of service policy will generally permit laboratories to bill Medicare directly for advanced diagnostic laboratory tests and molecular pathology tests excluded from OPPS packaging policy if the specimen was collected from a hospital outpatient during a hospital outpatient encounter and the test was performed following the patient’s discharge from the hospital outpatient department.

ASCs

For CY 2018, payments to ASCs will increase 1.2 percent, or $4.62 billion, based on a projected consumer price index of 1.7 percent minus a multifactor productivity adjustment required by the ACA of 0.5 percentage point. For CY 2018, CMS added three procedures to the ASC covered procedures list. In addition, CMS removed three measures from ASC Quality Reporting program for the CY 2019 payment determination and later and added two measures of hospital events following specified surgical procedures for the CY 2022 payment determinations and later (see Approximate 2 percent increase in OPPS, ASC payments proposed for 2018; cuts to 340B drug discount pay, Health Law Daily, July 20, 2017).

Report finds flaws in proposals for premium support programs in Medicare

The Urban Institute issued a report titled “Restructuring Medicare: The False Promise of Premium Support,” in which the authors attempt to point out the potential flaws in the proposed premium support program in Medicare. The report states that the proposals attempt to model the program off of the arguably successful Medicare Advantage (MA) program, but fail to account for the features of MA that actually make it work. According to the Urban Institute, the proposals also ultimately shift the burden of the rising cost of the Medicare program to the beneficiaries, who are not in a position to shoulder the increased costs.

The proposal

Current Medicare beneficiaries can choose between traditional Medicare, where they have defined benefits covered by specified providers, or MA, where the beneficiary picks from a selection of private plans that have been approved by Medicare and charge close to traditional Medicare costs. A premium support program would allow beneficiaries a fixed-dollar contribution that they could take and apply to the insurance plan they choose in a health insurance marketplace. Beneficiaries could choose a plan that costs more than their Medicare contribution amount, but they would be responsible for paying the difference out of their own pocket. Supporters of this proposed program argue that setting a fixed cost for each beneficiary would reduce government spending and the marketplace would create competition, which would in turn drive down prices.

Burden shifting

Proponents of the premium support plan argue that without the plan, the Medicare program will run out of money, noting that the “CBO projects that between 2017 and 2047, Medicare spending will grow from 3.1 percent to 6.7 percent of GDP.” However, the report argues that the proponents of are focusing on the wrong problem. The aging-in of the baby boom generation is expected to increase Medicare enrollment by about 50 percent by 2030. By focusing on the cost of premiums and restructuring the program to force more beneficiaries to pay more out of pocket, they are shifting the burden of the increase in incoming enrollees to the beneficiaries. Medicare beneficiaries reported an annual median income of about $25,000 in 2012. “Medicare households spent nearly three times as much of their household budgets on out-of-pocket spending as non-Medicare households did” in 2012. A premium support plan could potentially increase the financial burden on those low-income beneficiaries, and force them into plans that they wouldn’t choose otherwise just to alleviate some of that financial burden.

Competitive markets

Proponents argue that forcing insurance plans to submit bids to participate similar to the way MA does would create competition and lead to lower premiums. The government contribution would then be set based on a weighted average of all of the bids for each region. However, premiums can drastically vary within a region and if premiums are higher in an area than the benchmark government contribution for the region, beneficiaries would be forced to pay the difference. The difference between earlier versions of the premium support plan and the current proposals show that the proponents have noted that there would not be an even playing field in all areas and they have attempted to come up with different ways to set the government contribution amount and increase it annually based on different factors. The MA program has an administratively set benchmark government contribution that is based on traditional Medicare spending in each area, which varies significantly compared to the bids.

Providers who bid to participate in MA are aware that there is a billing limit and they will be paid Medicare rates. The premium support plan does not take into account the impact this has on who submits bids and at what rate. In 2013, “CBO found that commercial insurance rates for inpatient hospital services were 89 percent higher than traditional Medicare rates, but Medicare Advantage plan rates for inpatient services were roughly equal to traditional Medicare’s rates.” Private insurers competing with one another in the bidding process are not likely to drop their prices down to Medicare level rates unless limits are placed on the billing of Medicare beneficiaries, similar to the limits in the MA programs. This leaves Medicare beneficiaries effectively priced out of these competing private insurance plans.