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Decisions and DevelopmentsCCH® Reimbursement Integrated Library
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Reimbursement Integrated Library Dennis Barry’s Reimbursement AdvisorSeptember 2009, Volume 25, No. 1
In the September 2009 issue of Dennis Barry’s Reimbursement Advisor, authors examine Medicare overpayment determinations, bad debts and charity care and coverage for emergency dialysis services, as well as Medicaid regulations initiated in the Bush administration that remain proposed or delayed.
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 Receivables ReportOctober 2009, Volume 24, No. 10
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Hospital Accounts Receivable Analysis1st Quarter 2009, vol. 23, no. 2
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Headlines
from Medicare and Medicaid Guide Finance committee bill expands coverage and reduces deficitThe Senate Finance Committee's amended proposal for the America's Healthy Future Act of 2009 would expand coverage to uninsured individuals, increase spending while also increasing revenues, and ultimately reduce the federal deficit, according to a joint report by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). Tax credits and subsidies provided through insurance exchanges, Medicaid and the Children’s Health Insurance Program (CHIP), and small employers will result in a cost to the government of $829 billion during the time period from 2010 to 2019 as a result of the proposals, the CBO and JCT estimated. These costs will be offset by $201 billion in revenues from the excise tax on high-premium insurance plans, and $110 billion in net savings from other sources, including revenues from penalty payments from uninsured individuals, penalty payments by employers whose workers receive subsidies through the insurance exchanges, and other budgetary effects, such as tax revenues associated with the expansion of federally subsidized insurance. The result being a total cost of $518 billion over the time period to implement the program. Certain provisions in the amended proposal would change payment rates and payment rules in Medicare, Medicaid, CHIP, and other federal health programs that would reduce direct spending by $404 billion during the same time period. Those savings would result from: (1) permanent reductions in the annual updates to Medicare's payment rates for most services in the fee-for-service sector; (2) setting payment rates in the Medicare Advantage program; and (3) reducing Medicare and Medicaid payments to disproportionate share hospitals. The report estimates that the proposal would result in a net reduction to the federal budget deficit of roughly $81 billion during the time period. This number is achieved by adding an estimated increase of $196 billion in federal revenues during the time period to the $404 billion in Medicare and Medicaid savings, and subtracting $518 billion in costs. States to prepare for H1N1 inoculationsState health officials are advised to plan and prepare for the needs of Medicaid and Children's Health Insurance Programs (CHIP) enrollees and the healthcare workforce by preparing an inoculation program for individuals in these groups. Priority should be given to vaccination of eligible individuals as follows: (1) pregnant women; (2) individuals caring for or living with infants under the age of six months; (3) healthcare workers; (4) children between the ages of six months and 18 years; (4) adults between the ages of 19 and 24; and (5) adults between 25 and 64 with health conditions associated with increased complications of influenza. State officials are reminded that copayments and deductibles may not be required for services to individuals under 18 or pregnant women. Providers will be permitted to charge, and Medicaid and CHIP must pay, for only the administration of the vaccine to enrollees as the vaccine itself is free. Because of the need for prompt treatment, states are urged not to require prior authorization for medications used to treat influenza. Hospital malpractice insurance costs deniedA group of hospitals was not entitled to be reimbursed for medical malpractice insurance premiums paid to an insurance company that: (1) it owned, (2) was licensed in the Caribbean, and (3) invested more than ten percent of its assets in equities. Medicare is not required to reimburse any and all costs incurred by a hospital. Congress, at 42 U.S.C. §1395x(v)(1)(A), gave the Secretary broad discretion to exclude any cost found to be unnecessary in the efficient delivery of health services. The Provider Reimbursement Review Board (PRRB) expressed its concern that an offshore insurance company owned by its members is not subject to the same level of regulation as insurance companies licensed by a state insurance regulator and as such the requirements of the Provider Reimbursement Manual §2162.2A.4are not unreasonable or inappropriate. The PRRB did not need to go into a comparison of the requirements for off-shore versus domestically-licensed insurance companies for its decision to be reasonable. The Secretary's motion for summary judgement was granted. Catholic Health Initiatives, et al. v. Sebelius, D.D.C., Sept. 30, 2009, ¶303,135.Statutory merger was not a bona fide saleThe CMS Administrator properly determined that the statutory merger between a hospital and a nonprofit medical center was not a bona fide sale because the medical center did not receive reasonable consideration for its assets, according to the U.S. District Court for the District of Columbia. Therefore, the hospital could not recover a loss on the depreciable assets that the hospital claimed was recognized in the merger. On January 1, 1997, the medical center's assets passed to the hospital and the hospital became responsible for the medical center's liabilities. The court found that there was a sizable gap between the purchase price and the value of the medical center's assets. At the time of the merger, the medical center's current and monetary assets were nearly double the value of the liabilities assumed and the total assets were more than five times the price. Therefore, the CMS Administrator properly ruled that the merger was not a bona fide sale. St. Luke's Hospital v. Sebelius, D. D.C., Sept. 29, 2009, ¶303,136.Mandatory Medicare enrollment suit to proceedThree retirees have standing to challenge the Social Security Administration's (SSA) policies that requires them to accept Medicare Part A as a condition of their receiving monthly Social Security benefits, according to the U.S. District Court in the District of Columbia. In support of their position, the retirees referred to a section of a Social Security manual which states, "Individuals entitled to monthly benefits which confer eligibility for Health Insurance (HI) many not waive HI Entitlement. The only way to avoid HI Entitlement is through withdrawal of the monthly benefit application. Withdrawal requires repayment of all Retirement, Survivors and Disability Insurance (RSDI) and HI benefit payments." Other manual provisions related to this litigation also contain similar language. The government argued that the five retirees did not have standing to sue because the retirees had failed to exhaust their administrative remedies. The district court held that two retirees who had not yet received Social Security benefits do not have standing, however, the other three retirees who had received Social Security have standing because having begun to receive RSDI benefits they have a redressable injury. Furthermore, the district court held, the POMS determine the retiree rights or obligations and, therefore, the POMS constitute a final agency action that is subject to judicial review. Hall v. Sebelius, D. D.C., Sept. 29, 2009, ¶303,134.Sentencing requires pecuniary harmThe sentence of a business owner who was convicted of health care fraud was vacated and remanded because the district court erred in sentencing when it based an upward victim adjustment on individuals who suffered no pecuniary harm. After being convicted of health fraud, he was sentenced to the statutory maximum, 120 months. The fact that Medicaid denied some claims did not nullify his intent to recover the full amounts he billed Medicaid. However, contrary to the government's assertion, the owner's crime had only two victims—Indiana Medicaid and CMS—not the 2,500 individuals whose Medicaid numbers he used. Loss is defined as pecuniary harm that is monetary in nature; accordingly, the individuals whose numbers he used to bill were not victims, as none of them actually paid for a service they did not receive. Therefore, while the owner's conviction of health care fraud was not in error, no upward adjustment of the owner's sentence should have been made. U.S. v. Sutton, 7th Cir., Sept. 28, 2009, ¶303,132.False Claims Act suit survives dismissalA district court granted in part and denied in part motions to dismiss a qui tam complaint alleging that a durable medical equipment (DME) supplier, its parent company, a "sham" DME company, and several nursing home chains violated the Anti-Kickback Statute. The district court dismissed certain FCA claims because the complaint failed to allege with specificity any fraudulent conduct on the part of two nursing homes and to identify by name all of the nursing home entities that engaged in kickback schemes. Other FCA claims in the complaint did pass muster because they specifically alleged the "who, what, when, where and how of each claim. For instance, the government's FCA claim that the DME supplier violated §3729(a)(1) by submitting false claims through the sham company survived dismissal because it: (1) alleged sufficient detail of the scheme involving the creation of the sham DME provider and the alleged kickbacks from the supplier to the nursing home chain, and (2) provided reliable indicia that led to the strong inference that false claims were actually submitted, such as quotations from internal memoranda, specific documents evidencing the fraud, and the supplier's filing of over 56,000 claims, which totalled over $23 million worth of Medicare reimbursements. U.S. ex rel. Jamison v. McKesson Corp., N.D. Miss., Sept. 29, 2009, ¶303,133.Recoupment challenge untimelyA provider's claim that recoupment of overpayments without a prior opportunity for a hearing violated its rights under the Due Process Clause of the Fourteenth Amendment to the United States Constitution was dismissed as untimely. The state statute of limitations, which controls in federal civil rights actions, allowed only one year from the discovery of an injury. The civil rights action under 42 U.S.C. §1983 concerned the injury of prehearing recoupment, not the challenge to the overpayment determination on which the recoupment was based. Even if the state's actions during the administrative appeal process were the basis of the §1983 case, the process ended in 2004, more than one year before the filing of the case. The statute of limitations was not tolled during the appeals process because exhaustion of administrative remedies is not required in actions under §1983. The provider's tort claims under state law were not within the jurisdiction of the federal court; those claims were remanded to state court. The Doc's Clinic, APMC v. State of Louisiana, through the Department of Health and Hospitals, M.D. La., Sept. 25, 2009, ¶303,130.ICD-10 fact sheetCMS has issued a revised ICD-10-CM/PCS: An Introduction Fact Sheet, available at http://www.cms.hhs.gov/MLNProducts/downloads/ICD-10factsheet2009.pdf. The fact sheet includes the benefits of adopting the new International Classification of Diseases, 10th Edition, Clinical Modification/Procedure coding System (ICD-10-CM/PCS), structural differences between the ICD-9-CM and ICD-10-CM/PCS, and implementation planning recommendations. CCH Chicago Bureau, Oct. 1, 2009.2010 OIG workplanThe fiscal year (FY) 2010 edition of the Office of Inspector (OIG) General Work Plan, effective October 2009, describes targeted audits and evaluations by OIG to identify significant improper payments and problems in specific parts of the Medicare and Medicaid programs. These reviews have revealed payments for unallowable services, improper coding, and other types of improper payments. OIG' FY 2010 planned reviews of Medicare Part A and B will include review of: hospitals, home health agencies, nursing homes, durable medical equipment and supplies, Part B payments for prescription drugs, Part A and Part B contractor operations, and certain other Part A and B provider payments. The review of several aspects of the Medicare Advantage (Part C) and the prescription drug benefit (Part D) are also planned. Medicaid review plans include review of hospitals; home, community, and nursing home care; prescription drugs; the administration of the program, and other services provided. Other OIG reviews of CMS will include review of information systems and data security, the Children’s Health Insurance Program (CHIP), and investigative and legal activities related to CMS programs and operation. Fiscal Year 2010 Office of Inspector General Work Plan, Oct. 1, 2009, ¶53,156.HIT, CHIP, wellness fundsHHS has released $27.8 million to 27 health center networks and multi-site health centers to implement specific electronic health records (EHR) and health information technology (HIT) programs. The grants are part of funds provided under the American Recovery and Reinvestment Act of 2009 (ARRA) (PubLNo 111-5) to expand health care services to low-income and uninsured individuals. Related to HIT, David Blumenthal, HHS' national coordinator for HIT, announced on Oct. 1 that CMS will issue a proposed rule by December 31, 2009, defining "meaningful use" in the context of the adoption of HIT. HHS also provided $40 million in grants to 69 grantees in 41 states and the District of Columbia to help them find and enroll children who are uninsured but eligible for either Medicaid or the Children's Health Insurance Program (CHIP). The funds were authorized under the Children's Health Insurance Program Reauthorization Act of 2009 (PubLNo 111-3). Twenty percent of the finds released will target Hispanic children; 11 percent will focus on homeless children and 7 percent on Native American/Alaska Native children. HHS also awarded $7.6 million to 63 grantees to help states recruit new health care clinicians and alleviate their debt burden. The funds were provided under ARRA as well. Finally, HHS also released $120 million provided for under ARRA for prevention and wellness programs funded by states. The funds will be used for programs focusing on statewide policy and environmental change, tobacco cessation, and initiatives to create health-promoting policies and environments. CCH Chicago Bureau, Oct. 6, 2009.Decisions and Developments
CMS Manuals
On-site inspections to verify provider and supplier practice locations
Medicare Program
Integrity Manual, Pub. 100-08, Transmittal No. 306, Oct.
2, 2009, ¶158,469.
Medicare Part B portable x-ray supplier enrollment revalidation not in the Provider Enrollment, Chain and Ownership System (PECOS)One-Time Notification Manual, Pub. 100-20, Transmittal No. 564, Oct. 2, 2009, ¶158,470.Enrollment validation for all home health agencies not enrolled in the Provider Enrollment, Chain and Ownership System (PECOS)
One-Time Notification Manual, Pub. 100-20, Transmittal No. 567, Oct 2, 2009, ¶158,473.
Implementation of recovery audit contractors adjustment process in VMS
One-Time Notification
Manual, Pub. 100-20, Transmittal No. 573, Oct. 2, 2009, ¶158,478.
Expansion of the current scope of editing for ordering/referring providers for claims processing by Medicare carriers or Medicare Administrative Contractors
One-Time Notification Manual, Pub. 100-20, Transmittal
No. 572, Oct. 2, 2009, ¶158,477.
Directions for Medicare Part B Common Edits and Enhancements Module (CEM) Multi Carrier System (MCS) contractors on CEM analysis, design and implementationOne-Time Notification Manual, Pub. 100-20, Transmittal No. 565, Oct. 2, 2009, ¶158,471.Annual data exchange between the Multi Carrier System (MCS) and the Provider Enrollment, Chain and Ownership System (PECOS) to ensure synchronized, current Medicare Participating Physician or Supplier Agreement (PAR) information
One-Time
Notification Manual, Pub. 100-20, Transmittal No. 566, Oct.
2, 2009, ¶158,472.
One-time mailing to physician and non-physician providers of their reporting responsibilities
One-Time Notification Manual, Pub. 100-20, Transmittal
No. 568, Oct. 2, 2009,¶158,474.
2010 file layout for the Medicare physician fee schedule databaseOne-Time Medicare Claims Processing Manual, Pub. 100-04, Transmittal No. 1822, Oct. 2, 2009, ¶158,466.Place of service and date of service instructions for the interpretation and technical component of diagnostic tests
Medicare Claims Processing Manual, Pub. 100-04,
Transmittal No. 1823, Oct. 2, 2009, ¶158,467.
Update to influenza vaccine payment allowances
Medicare Claims Processing Manual, Pub. 100-04,
Transmittal No. 1824, Oct. 2, 2009, ¶158,468.
Community mental health center (CMHC), comprehensive outpatient rehabilitation facility (CORF), federally qualified health center (FQHC) and rural health clinic (RHC) provider enrollment revalidation
One-Time Notification Manual, Pub. 100-20,
Transmittal No. 569, Oct. 2, 2009, ¶158,475.
Modification of the file-based recovery audit contractor mass adjustment process in fiscal intermediary shared systems
One-Time Notification Manual, Pub. 100-20,
Transmittal No. 571, Oct. 2, 2009, ¶158,476.
PRRB Decisions
Hospital exemptionsVarious providers were not eligible to receive 85 percent of their allowable Medicare inpatient hospital capital-related costs for their first two years of operations, because the providers' claimed costs were not incurred as "new" hospitals. The intermediary rejected the claimed costs because it considered the physical assets of the newly leased operation as pre-existing. Under 42 C.F.R. §412.300(b)(4), a hospital is not considered "new" if it changes its status from a hospital that is excluded from the prospective payment system to a hospital subject to the capital prospective payment system. Although the language of the regulation was ambiguous regarding a definition of "new," whether only the physical assets or the entire operation were to be considered, evidence supported the intermediary's contention that the facilities were established for more than two years prior to the lease arrangement. The facilities' original costs, thus, were presumed to have been reimbursed. PRRB Hearing Dec. No. 2009-D36, Select Medical 2002-2003 Freestanding "New Hospital" Capital-Related Costs Groups (Various), Aug. 19, 2009, ¶82,403.Improper DSH calculationA Medicare intermediary's adjustment for five hospitals was reversed because it improperly excluded dual eligible exhausted and Medicare Secondary Payer (MSP) days from the number of Medicaid eligible days used for purposes of calculating the Medicaid fraction of disproportionate share hospital (DSH) payments. All of the patients whose days were at issue were eligible for medical assistance under a Medicaid state plan, and all of the patients were also eligible for Medicare Part A. For all the days at issue, Medicare did not make payment under Part A either because the patient had exhausted Medicare Part A benefits or because a payer other than Medicare made payment for the days. None of the days at issue were included in the denominator of the "Medicare fraction," which includes days for which CMS has determined that the patients were entitled to benefits under Medicare Part A. The intermediary improperly eliminated from the DSH calculation patient days for patients who were eligible for Medicaid benefits but not entitled to Medicare benefits due to Medicare benefits being exhausted, and services being covered by a payer other than Medicare. Such days should be included in the calculation of the Medicaid fraction in the determination of the DSH adjustment in accordance with the plain language of Soc. Sec. Act §1886(d)(5)(F). PRRB Hearing Dec. No. 2009-D35, Allina Health System 1995-2003 DSH Dual Eligible Days Group, Feb. 4, 2009, ¶82,402.Merger and lossA non-profit, general acute care hospital that had merged with a community hospital was entitled to: (1) a depreciation adjustment for the loss on the disposition of assets claimed by the acute care hospital as a result of the merger, given that the two hospitals were unrelated and the merger qualified as a "statutory merger" under 42 C.F.R. §413.134; and (2) the "new provider exemption" for skilled nursing facilities (SNFs) under 42 C.F.R. §413.30, given that it was a licensed, Medicare-certified SNF that operated as such for less than three years. The fiscal intermediary's (FI) contention that the merger was not a "bona fide" sale and therefore not entitled to the depreciation adjustment was rejected, because §413.134 did not restrict depreciation adjustments to only "bona fide sales. In either event, the evidence revealed that the merger was bona fide. The FI's argument that the provider was not a "new provider" was also rejected. The provider purchased the rights to operate a nursing home's beds, and subsequently opened a new transitional care unit to provide skilled nursing care. Prior to the provider's purchase, the nursing home had been primarily engaged in rendering custodial care, not skilled nursing care as the FI contended. Therefore, when the provider opened its SNF, it was a "new" provider that had been operated as a licensed, Medicare-certified SNF for less than three years, and was exempt from the cost limits for approximately the first three years of operation, as set forth in §413.30(e). PRRB Hearing Dec. No. 2009-D34, Whidden Memorial Hospital, Everett, Mass., July 28, 2009,¶82,401.SNF routine cost limitsCMS' methodology for determining the amount of a skilled nursing facility's (SNF's) exception to the hospital-based SNF routine cost limit was not consistent with the statute and regulation related to this issue. The fiscal intermediary (FI) argued the SNF's cost limit exception request was properly calculated in accordance with 42 C.F.R. §413.30, which allows a provider to request an exception when it has provided atypical services. The provider was reimbursed only for its costs that exceeded 112 percent of the peer group mean per diem cost rather than for all costs that exceeded the SNF's cost limit. This method is established in the Provider Reimbursement Manual, CMS Pub 15- 1, §2534.5, which "in essence" replaced the SNF cost limit with an entirely new and separate "cost limit" (112 percent of the peer group mean routine services cost). The only reimbursement limit Congress intended is the cost limit. The controlling regulation specifically states that a provider must show only that its cost "exceeds the applicable limit," not that its costs exceeds 112 percent of the peer group mean cost. CMS has no authority to establish a new peer group for hospital-based SNFs and determine atypical services exceptions from an entirely new cost limit rather than from the limit intended by Congress. The SNF is entitled to reimbursement for all costs above the routine cost limit. PRRB, Dec. No. 2009-D37, Canonsburg General Hospital Skilled Nursing Facility v. Blue Cross of Western Pennsylvania/Highmark Medicare Services (d/b/a Vertius Medicare Services), Aug. 20, 2009, ¶82,404.DSH calculationA fiscal intermediary (FI) properly computed the numerator of the Medicaid fractions that were used to calculate a provider's disproportionate share hospital (DSH) payments for years 1999 through 2002 by excluding inpatient days attributable to individuals who received assistance under the Massachusetts Uncompensated Care Pool (UCP) for such days. Massachusetts established the UCP to distribute more equitably the burden of uncompensated care, and received federal matching funds for its expenditures on the assistance furnished through the UCP Medicaid DSH payments. The UCP program beneficiaries were not eligible for Medicaid. Given that the UCP program was funded by a state government and was included in the low income utilization rate, not the Medicaid inpatient utilization rate, UCP patient days did not fall within the Medicaid statute definition of "eligible for medical assistance under a State plan under Soc. Sec. Act §1923(b)(2). Therefore, UCP patient days could not be included in the Medicare DSH statutory definition of "eligible for medical assistance under a State plan" under Soc. Sec. Act §1886(d)(5)(F)(vi)(II). PRRB Hearing, Dec. No. 2009-D38, Southwest Consulting 1999-2002 MA Uncompensated Care Days Group, Aug. 28, 2009, ¶82,405. |
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