Continued evolution of CMS guidance and processes

Changes to the Changes—Change Request 8425 Revoked

Effective March 6, 2014 CMS changed the Program Integrity Manual (the handbook for auditors) to give Medicare auditors (including RACs, ZPICs and others) the discretion to deny “related claims” when auditing.  The examples given included a case where an inpatient claim was reviewed and determined to be unnecessary and therefor the associated (“related”) physician claim could also be reviewed and determined unnecessary.  Another example is a case in which a diagnostic test claim was not necessary and therefor, the professional component would not be reasonable and necessary.   In a rapid reversal of the March 6 directive, the policy change was rescinded effective March 19, 2014.   CMS rescinded the ability of auditors to deny “related claims” with the terse comment that the transmittal is “being rescinded due to the need to clarify CMS’ policy and will not be replaced at this time.”

Limitation on Recovery Auditors

In legislation passed March 31, 2014, Recovery Auditors (commonly referred to as RACs) were precluded from performing post-payment status reviews of inpatient claims with dates of admission of October 1, 2013 through March 31, 2015, unless there is evidence of systematic gaming, fraud, abuse or delays in the provision of care by a provider of services.  Medicare Administrative Contractors (MACs) will continue reviewing these cases and nothing in this transmittal precludes or limits review by the MACs, ZPICs or other Medicare contractors.  Please be aware that there is significant miscommunication about the limitation on Recovery Auditors with some advisors and publishers indicating that there is a “delay” in implementation of the two midnight rule and the certification requirements.  The 2014 IPPS requirements are the law and the law was effective October 1, 2013 and remains in full force and effect.  The only “grace” that has been extended is that the “Probe and Educate” audits are limited in number and scope and that Recovery Auditors will not be auditing inpatient claims for dates of admission October 1, 2013- March 31, 2015 for status determinations in the absence of allegations of delays or bad conduct as above described.  The “Probe and Educate” audits are not benign.  If a claim is denied, the claim is not paid and the hospital ultimately must follow the formal appeals process to have the denial reversed. If “errors” are detected, additional audits are conducted with broadening scope and consequences.  Once contracts are in place with the “new” Recovery Auditors those auditors will have authority to examine patient status for dates of service prior to October 1, 2013, as well as approved issues other than patient status for all dates of service.  It is not clear whether CMS will allow audits of the technical certification requirements by Recovery Auditors or whether that is considered part of the “status” review.  Finally, remember that the limitations imposed on Recovery Auditors do not apply to other Medicare contractors and all Medicare contractors can review cases if there is evidence of systematic gaming, fraud, abuse or delays.  The door remains open for extensive auditing.


In FY 2012 the Office of Medicare Hearings and Appeals (OMHA) received approximately 1,200 appeals a week.  In 2013 the number grew to 15,000 appeals a week and by February of 2014 OMHA announced that cases by providers would not be assigned to an Administrative Law Judge for 28 months.  Much attention has been focused on the recoupments by Recovery Auditors and the lack of an effective dispute resolution process for providers subjected to audits.  CMS seems to be responding to the cries of foul play from the industry and has asked the MACs to re-examine denials.  Unfortunately, some of the denial language and analysis echoes the familiar denial rational of the Recovery Auditors based on actual outcomes rather than expected length of stay based on the unique presentation, medical condition and appropriate plan of care for each patient.  Tiring of the prolonged resolution period (or lack thereof), the inability to receive payment and the expense of the appeals process, many providers are pursuing re-billing options.  While it does may sense to have an internal review process for rebilling (and one certainly needs to be in place for claims from October 1, 2013 forward when claim filing limits apply) keep in mind that the new guidelines issued by CMS for the new recovery auditor contracts indicate that the scope of future audit requests will be determined by past denial rates.  Before conceding the fight based on exhaustion, it may be wise to “stay the course” on appropriate appeals until there is clarification about dispute resolution options that will be available, and about the impact of rebilling on the scale of future audits.

If you have any questions please do not hesitate to contact us.

Joan C. Ragsdale
Chief Executive Officer
(205) 970-8804

Ann McEwen Purdy
Chief Development Officer
(205) 314-8859

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