Medical Necessity How Medicare Administrative Contractors MACs are impacting your hospital and the H

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Medical NecessityHow Medicare Administrative
Contractors (MACs) are impacting your hospital
and the HIM Department
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Overview of Todays Presentation

• What brought us to MACs
• The Importance and Challenge of Compliance
• Chargemaster codes in HIM, a trend we see
• Value of Medical Necessity Validation at the
  Point of Coding

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Revenue Cycle Pain Points for Medical Necessity

• Registration has limited documentation
• Often doesnt match HIM codes
• Reg. clerks call HIM for clarification
• Creates conflict lost efficiency

• Billing needs correct codes
• Calls HIM for clarification
• HIM pulls records and re-codes
• Sends back to Billing

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The Importance of Compliance

• Denied claims hit hospitals hard
• When hospitals fail to meet Medicare medical
  necessity compliance requirements, they face
  significant consequences
• Primary among these is lost revenue in the form
  ofdenied claims or denied line items, payment
  delays, prolonged A/R cycles, reduced cash flow -
  and costs associated with medical necessity
  resolution, claims rework and resubmission

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Lost Revenue Medical Necessity

• Hospitals are experiencing 4-5 revenue
  leakagedue to revenue cycle mismanagement2
• Medical Necessity compliance can improve
  reimbursement reduce A/R and re-work in HIM
• Hospitals without a MN program typically face
  960,000 annually in denials1
• ROI can approach 1,0003
• CMS saves 1.1B in 1st half
• of FY05
• Source
• 1 - Gartner
• 2 - Health Care Advisory Board
• 3 - Superior Consulting
• 4 - HCPro Compliance Monitor

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The Importance of Compliance

• Common causes of denials
• Duplicate claims
• Bundling or unbundling errors
• Missing modifiers
• Procedure code mismatches including
• Procedure vs. Diagnosis (med nec)
• Procedure vs. Gender
• Procedure vs. Modifier
• Diagnosis vs. Age, Gender
• Source David Hammer, HFMA

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The Challenge of Compliance

• Where do the Medical Necessity policies come
  from?
• CMS establishes National Coverage Determinations
  (NCDs) applicable throughout the country
• MACs create additional policies known as Local
  Coverage Determinations (LCDs) for local coverage
  areas (these used to be Local Carriers and Fiscal
  Intermediaries (Fis) )

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Medicare Administrative Contracts

• Background
• Title XVIII of Social Security Act of 1966
• Medicare Part A (hospital insurance)
• Medicare Part B (physicians services, outpatient
  services, labs) one year later
• CMS charged with
• interpretation of SSA and developing national
  policy (NCDs)
• administration of Medicare program
• development of contract bidding process

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Medicare Administrative Contracts

• What Developed?
• A Patchwork Quilt organization comprised of
• 1989 100 Fiscal Intermediaries Carriers
• Wide variance in policies and program
  administration
• Single state vs. multi-state organizations
• Resource allocation
• Claims processing
• Largest 82.6 million
• Smallest 2.1 million

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Medicare Administrative Contractors

• Current Environment
• 2004 40 Fiscal Intermediaries Carriers
• Responsibilities
• 1 Billion claims from 1 Million providers
  500Billion
• Beneficiary enrollment
• Provider and beneficiary educational programs
• Medicare billing requirements, compliance
  regulations
• Fraud and Abuse Medicare Integrity Program CERT
  programs
• Medicare Payment Advisory Commission (MedPac)
• to reduce current complexity, inconsistency, and
  uncertainty.
• MedPac, Reducing Medicare Complexity
  Regulatory Burden, 2001

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Medicare Administrative Contracts

• Medicare Prescription Drug, Improvement and
  Modernization Act of 2003A provision of the
  Medicare Reform Act
• CMS mandated to develop a more efficient and less
  duplicative program
• Current business processes are out of date
•  Adoption of information technology by the
  heathcare system has significantly lagged the
  advance of clinical technologies
• Forthcoming retirement of the baby boom
  generation

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Medicare Administrative Contract

• Growth in Social Security Medicare
• 78 Million baby boomers by 2030
• 7 percent of U.S. economy to 13percent by 2030
• 15 percent by 2050
• To fund at these rates, the rest of government
  spending would have to be reduced by 700
  Million.
• The Coming Demographic Transition Will We Treat
  Future Generations Fairly?
• Remarks by Ben Bernancke, Economic Club of
  Washington, October 4, 2006

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Medicare Administrative Contracts

• General Goals
• Enhanced Customer Service
• Operational Excellence
• Efficient Financial Management
• Specific Objectives
• Balance allocation of workloads among MACs
  through division into jurisdictions
• Promote increased competition
• Integrate claims processing functions of Parts A
  B
• Beneficiary-centered contracting
• Modernize administrative IT platform
• Standardize administrative services
• More efficient and effective administrative
  organization

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Medicare Administrative Contracts

• Implementation Timeline and Status
• 2005 2011
• 15 Primary A/B MACs
• 4 Specialty MACs (Hospice and Home Health)
• 4 Specialty MACs (Durable Medical Equipment
  Suppliers)
• July 31, 2006
• Noridian Administrative Services awarded contract
  for Jurisdiction 3
• Arizona, Montana, North Dakota, South Dakota,
  Utah and Wyoming

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RFP Issuance September 29, 2006 Awarded to
Trailblazer Health Enterprises Transition Date
March 1, 2008
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Looking specifically at the LCDs, Oklahomas
experience

• The Oklahoma medical necessity content was one
  of the states that has changed most significantly
  from their former contractors Chisholm and
  Pinnacle
• The former Fiscal Intermediary (Chisholm) had
  hardly any LCDs (only 4 as of 2/29/08)
• Trailblazer as their MAC for Part A has 135

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More Challenges

• The outpatient medical necessity guideline
  changes, that Oklahoma hospitals faced with this
  MAC transition change, are especially worth
  noting
• In the OK Part A, the transition to their J4 MAC
  added almost 248,000 Diagnoses in over 1000
  procedures that were not addressed by their
  former Fiscal Intermediary, Chisholm
  Administrative Services

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134 LCD/NCD Policies prior to the MAC
implementation
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200 LCD/NCD Policies after the MAC implementation
134 included new information in the policies
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The Challenge of Compliance

• Why is Medical Necessity compliance so difficult?
• Maintaining medical necessity policies
• Integrating policies into existing systems and
  workflows
• Incomplete or inaccurate documentation and code
  selection
• Incorrect charge code selection or CDM line
  charge not agreeing with HIM coding
• Complexity of medical necessity rules

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The Compilation Process in Summary

• Detailed analysis of policies reveals that they
  do not only refer to simple code pairs that pass
  Medical Necessity
• In many cases there are secondary rules that may
  be associated one or more with subsets of codes

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An Example of Secondary Rules in Action

• LCD "Hyperbaric Oxygen (HBO) Therapy
• M-15.1
• CPT 99183 (Current Procedural Terminology) 
• Policy lists many covered ICD-9s, such as
• 030.0-040.0
• 250.70-250.83
• 441.21-444.22
• 444.81
• And others
• This policy may seem clear but

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An Example of Secondary Rules in Action

• the coding guidelines actually say
• For diabetic wound of the lower extremity,
  one of the ICD9 codes for diabetic complications
  (250.70-250.73 or 250.80-250.83) must be
  listedin addition to a covered wound diagnosis
  (707.10, 707.12-707.14, or 707.19) to indicate
  this condition

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An Example of Secondary Rules in Action

• Therefore
• While Hyperbaric Oxygen Therapy (HBO) is not in
  of itself a treatment for diabetes...
• if there are lower limb or foot ulcers and
  diabetes present, it may be an covered treatment
• The bottom line?
• Understanding the complete policy - including the
  secondary rules is essential

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3M Medical Necessity Dictionaries

• Knowledge Base/Policy Analyst Group
• Lead by an MD with a Masters in Health
  Informatics from Columbia University
• Team of 20 professionals MBAs / RNs /
  Certified Coders / Billing experts
• Hundreds of years of combined experience in
  hospitals clinics
• Knowledge Base includes LMRPs/ LCDs / NCDs /
  CCIs / Frequency checking
• Thorough understanding of CMS Medicare Bulletins
• Every FI /Carrier/MAC in all 50 States
  Territories - Accurate Up-to Date
• New payor rules BC/MA / Texas Medicaid /
  Medi-Cal / Anthem/Aetna
• 1500 Hospitals w/Medical Necessity Dictionaries
  Medical Necessity Online
  
• MN Dictionary integration with many HIS systems
  and departments/work flow
• 3M Medical Necessity Dictionary/Tables updated
  twice monthly

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Response to a code-pair question
This policy has resulted in a number of recent
inquires. It seems like some contractors have
implemented a recent CMS rule incorrectly. If I
were the provider I would appeal the denials.
Noridian should be making no automated medical
necessity denials without issuing an LCD or when
there is not NCD indicating the service should
not be paid. This violates CMS
instructions. 627.2 ("menopausal or female
climacteric states") is considered by most
Medicare payers with a policy to be supportive of
a bone mass density study. Noridian however has
not issued an Part A Fiscal Intermediary LCD
(they did however issue one for Part B noted
below). The published rule for hospitals is
therefore is a recent CMS Transmittal
(Transmittal 70 Change Request 5521 dated
5/11/07) at http//www.cms.hhs.gov/transmittals/do
wnloads/R70BP.pdf . That document states
Contractors shall accept/allow CPT procedure
code 77080 when billed with the following
ICD-9-CM diagnoses codes or any of the other
valid ICD-9-CM diagnoses codes that are
recognized by Medicare contractors as appropriate
for BMMs. 733.00, 733.01, 733.02,
733.03, 733.09, 733.90, or 255.0.
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Response to a code-pair question, cont.
The context of this ruling is to contrast the
statement in the same document that all other
Bone Mass Measurement codes (i.e. 77078, 77079,
77081, 77083, 76977, and G0130) must be denied
for these diagnoses since they do not represent
"dual-energy x-ray absorptiometry." So the above
list is certainly not the list of all appropriate
ICD-9s for 77080, just those CMS makes a point of
stating are covered only for that one particular
type of Bone Mass Measurement indicated by CPT
77080. When 77080 is billed with an ICD-9
outside the list above, 3M software states that
medical necessity cannot be concluded (after all,
if Noridian does not issue a Part A policy - we
really can't say definitively which "other valid
ICD-9-CM codes" will be considered appropriate by
the contractor). Regarding the denials your
prospect has been getting, the following Noridian
LCD for Arizona Part B clearly lists 627.2 as a
covered ICD-9 for 77080. http//www.cms.hhs.gov/mc
d/viewlcd.asp?lcd_id24279lcd_version9showall
This is not unusual. As mentioned above, 627.2
is nearly always covered for 77080 by Medicare.
We have 48 states/jurisdictions/payers who have
policies for BMM. 44 of the 48 list 627.2 among
the covered ICD-9s. So if about 90 say 627.2 is
covered, and Noridian's own Part B Carrier policy
for Arizona lists it as covered, why should
anyone expect Noridian to deny the claim when
they issued no Part A policy. From the point of
view of 3M software, while we can't confirm with
absolute certainty what Noridian will do with a
Part A claim like this, we see no problem.
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Compliance is an Enterprise-wide Concern

• The Spectrum of Healthcare Compliance through the
  Revenue Cycle
• Physician Office / Clinics
• Central/Departmental Scheduling
• Pre-Registration / Registration
• Standalone ambulatory facilities
• Laboratory / Walk-ins / Lab Reference - Outreach
• Health Information Management
• Business Office / Patient Accounting
• Denial Management / Collections

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HIMs Role in an Enterprise-wide Approach
ABN can only be issued here

• Medical necessity validation must
• Address issues at each stage of the revenue cycle
• Facilitate the flow of patient data from the
  front to the back end

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Chargemaster codes in HIM?...a trend we are seeing

• If the Hospital HIS System allows, CPT codes are
  loaded prior to computing the APC
• HIM gets a more complete view of the patient
  episode and can get more complete edits

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The missing linkHIM

• Market Research
• One third of those surveyed said that gt 50 of
  medical necessity errors could be corrected at
  point of coding
• 17 of those surveyed said between 26-50 of the
  medical necessity errors could be corrected at
  point of coding
• 67 said they wanted BOTH part A and Part B

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Post-Service/Pre-Bill Challenges

• Check if appropriate compliance checking was
  performed in the Pre-Service environment?
• YES did it result in an ABN being signed by the
  patient?
• Less than 20 of OP procedures fail for Medical
  Necessity based on the initial order
• Another 25 of the procedures that do fail for
  Medical Necessity on the initial order ultimately
  pass after further review of the medical record
• If an ABN was completed, does the hospitals
  billing module recognize that fact and produce an
  appropriately coded Medicare claim?

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Market Research¹

• In 84 of the facilities that had pre-service
• HIM staff had to help make changes to records
  with errors
• 82 N-200 HIM staff tracks down the
  documentation problems
• Any point in the process pre-service, pre-bill,
  after denial

1. 3M HIS survey
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A Real Example
An ounce of prevention is worth a pound of Cure!
Not too bad
or is it???
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Converting the Numbers to Dollars
An ounce of prevention is worth a pound of Cure!

• 22,310 failed claims in a year
• Average charge for each claim is 307
• Ratio of payment-to-charges is 33
• Average payment is 101

Lost charges 22,310 x 307 6,849,170 Lost
payments 22,310 x 101 2,253,310
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2. Rework Costs
An ounce of prevention is worth a pound of Cure!

• Payment delays, claim rejections, investment in
  rework and hidden write-offs
• Claim error rates of 8-30 typical
• Cost of correcting rejected line item and
  handling record a second time is 75 - 125 per
  record

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A Real Example
An ounce of prevention is worth a pound of Cure!

• 25 will eventually be paid as a result of
  corrections
• 563,277 recovered / 5,577 claims
• Assume these come back to HIM for review, calls
  to the physician, re-coding, etc.
• Assume a conservative average cost of 75/claim
  to correct

Additional 139,425 cost of labor to
correct (Net recovery now 423,852)
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Value of Medical Necessity Validation at the
Point of Coding

• Leverages HIM coding and patient documentation
  expertise
• Leverages coder access to patient information
• Offers consolidated editing at point of
  documentation and coding
• Utilizes standard bill hold period to solve MN
  issues without impact to AR cycle
• Reduces denials, improves A/R turns and cash flow

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Value of Medical Necessity Validation at the
Point of Coding

• Supports medical necessity compliance programs
• Ensures consistent medical necessity edits
  throughout revenue cycle
• Decreases rejected claims and line items, rework
  and payment delays

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Standard Clinical Edit Suite

• OCE Edits
• NCCI Edits
• Medical Necessity Edits (now offering)
• LCD/NCD
• Accompanying / Prior Procedure Required
• Secondary Diagnosis Required

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Application Workflow

• 1. Coder is working in APCfinder just like today
• 2. Theyll assign codes
• Upon hitting Compute APCfinder makes a request
  to 3M Edit Engine
• The MN edit will appear Pass / Fail - (along
  with any OCE / NCCI edits)

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Application Workflow
5. Coder has the ability to review the relevant
policy information via the URL sent back with the
response 6. The IID can be defaulted - e.g.
Medicare / Hospital 7. Other IIDs can be
checked for Medical Necessity - Medicare
/ Professional - TX Medicaid -
CA MediCal - Other Payors
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Summary

• HIM professionals and other employees from
  departments
• involved with a hospitals revenue cycle can work
  together in
• many ways to minimize denials, delays, and write
  offs
• Verifying medical necessity when a patient is
  first seen, rather than when the patient arrives
  for service, so that an advance beneficiary
  notice can be issued and signed at the time of
  service
• Ensuring that the proper codes and modifiers are
  assigned before a claim is submitted
• Augmenting software compliance tools with human
  expertise in compliance and internal education
  programs to reduce errors over time before they
  reach the billing department

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Questions

• Steve Spear
• 3M HIS Hospital Compliance
• srspear_at_mmm.com
• 801-265-4906