Title: Medical Necessity How Medicare Administrative Contractors MACs are impacting your hospital and the H
1Medical NecessityHow Medicare Administrative
Contractors (MACs) are impacting your hospital
and the HIM Department
2Overview 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
3Revenue 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
4The 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
5Lost 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
6The 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
7The 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) )
8Medicare 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
9Medicare 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
-
10Medicare 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
11Medicare 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
12Medicare 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
13Medicare 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
14Medicare 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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16RFP Issuance September 29, 2006 Awarded to
Trailblazer Health Enterprises Transition Date
March 1, 2008
17Looking 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
18More 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
19134 LCD/NCD Policies prior to the MAC
implementation
20200 LCD/NCD Policies after the MAC implementation
134 included new information in the policies
21The 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
22The 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
23An 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
24An 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
25An 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 -
263M 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
27Response 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.
28Response 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.
29Compliance 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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32HIMs 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
33Chargemaster 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
34The 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
35Post-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?
36Market 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
37A Real Example
An ounce of prevention is worth a pound of Cure!
Not too bad
or is it???
38Converting 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
392. 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
40A 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)
41Value 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
42Value 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
43Standard Clinical Edit Suite
- OCE Edits
- NCCI Edits
- Medical Necessity Edits (now offering)
- LCD/NCD
- Accompanying / Prior Procedure Required
- Secondary Diagnosis Required
44Application 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)
45Application 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
46Summary
- 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
47Questions
- Steve Spear
- 3M HIS Hospital Compliance
- srspear_at_mmm.com
- 801-265-4906