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Latest Medicare Revisions

Medicare Carriers Performance Standards

Ever have trouble getting through on the telephone to your Medicare carrier? Did you know that the Centers for Medicare and Medicaid Services, formerly known as the Health Care Finance Administration (HCFA), a branch of the Department of Health and Human Services has set performance standards and criteria for Medicare fiscal intermediaries and carriers? The CMS routinely evaluates Medicare contractor performance to ensure contractual obligations are met. These evaluations focus on several areas: claims processing, customer service and payment safeguard.

Medicare carriers need to achieve a monthly all-trunk busy rate of no more than 10% when responding to telephone inquiries from customers. The all-trunk busy rate is the rate at which telephone line can stay busy when a beneficiary is trying to access a carrier. CMS also reminded carriers to answer telephone inquiries and respond to written inquiries expeditiously and accurately. At least a 97.5% or more of callers who speak with a customer service representative should have their calls answered within 2 minutes and no less than 85% should have their calls answered within the first minute. For more details on this regulation see Federal Register October 31, 2000.

Employment Retirement Security Act (ERISA) Health Coverage and Appeals Changes

Help also appears to be on the way to those individuals who have had trouble with the processing of health claims. The Department of Labor has issued rules that require most private health plans to expedite processing of health claims and appeals decisions on denied claims. The rules, published in the Federal Register, November 21, 2000, pertain to the Employment Retirement Income Security Act (ERISA). The rules replace the current 90-day deadline to issue a coverage decision. Under the new rules, health plans will have up to 72 hours to decide on claims for urgently needed care, 15 days for procedures that need advanced approval and 30 days for care already delivered. If the coverage is denied, individuals will have up to 180 days to appeal the decision. Currently, one had up to 60 days to file an appeal. Appeals are to be handled by an "appropriately trained" healthcare professional.

This is the first change made in the rules governing claims and appeals in 30 years. The change was based on a memorandum issued by the then President, Bill Clinton ordering the Department of Labor to institute permanent rules in ERISA health coverage. There is still need for Congress to pass a comprehensive patients bill of rights that would apply to all insurance plans.

Outpatient Prospective Payment System (OPPS) under Medicare

The Outpatient Prospective Payment (OPPS) system went into effect on August 1st 2000. This replaces the cost-related methods that Medicare previously used to reimburse hospitals. Just like the in-patient DRG’s, outpatient encounters are going to have their own predetermined rates or fees based on Ambulatory Patient Classifications (APCs).

In the past, Medicare paid different amounts for comparable outpatient services. These amounts exceeded the amount paid for similar services done in physician offices and other types of ambulatory settings. This old system enabled hospitals to establish "hospital based" entities to maximize their net income.

The new system aims to simplify Medicare reimbursement policies, while improving hospital efficiency in rendering outpatient care and insure that payments are sufficient to compensate hospitals for reasonable Medicare costs. Under the APC system, hospitals will be paid fixed amounts for services, so the hospital will need to develop and implement cost reduction strategies, without sacrificing quality of care. Those facilities that are able to reduce operating costs and manage the new billing requirements appropriately may actually benefit in this new system. Ideally, patients will get a more focused treatment. There should be an elimination of the performing of a large number of tests (over-investigation) in patients whose medical problems are straightforward. Greater stress may be placed on the wisdom and experience of the treating physician. Eliminated would be "the just in case" testing and possibly some routine tests whose results hardly contributes to the diagnosis.

OPPS also attempts to reduce co-insurance amounts for beneficiaries. Part B of Medicare has an annual $100 liability to the beneficiary. After the deductible is satisfied, the beneficiary is responsible for 20% of the fee schedule. (Because hospital charges have consistently increased faster than reasonable costs, Medicare beneficiaries have absorbed an increasing share of total amount –Medicare payment and co-insurance- that hospitals were paid for outpatient care reimbursed on a cost-related basis.) Since beneficiaries were paying more, there was minimal incentive for hospitals to curb costs and avoid unnecessary, or inappropriate utilization because the greater the spending, the more Medicare pays.

Outpatient Prospective Payment System (OPPS) establishes fee schedule for "covered" hospital outpatient services, which are sorted into Ambulatory Patient Classification (APC) groups. Depending on the service rendered during an encounter, a patient may be assigned to a single or multiple groups. Medicare pays a set price or rate for each group, regardless of the costs incurred in providing care. This payment arrangement encourages hospitals to contain costs of the service within an APC group, but not the numbers of groups provided. All else being equal, the lower the cost of a group and the greater the number of groups, the healthier a hospitals bottom-line.

There are about 450 APC groups including surgical procedures, radiology and other diagnostic procedures, clinic visits, emergency department visits, medical supplies and surgical dressings and colorectal cancer screenings and various preventative services. In the final regulations, the original 345 classifications were expanded to 450 and include three categories: surgical, medical and ancillary. There are 255 APCs for procedures, 188 for diagnostic activities and 8 for medical services. APC system does not cover physical, speech and occupational therapies, mammography screenings, clinical diagnostic lab services, durable medical equipment, orthotics and prosthetic when hospital acts as a supplier of these items, services covered by the composite rate for patients with end stage renal disease, professional services of physicians and non-physician practitioners, and ambulance services. (Medicare continues to pay for these under fee-for-service schedule or other prospectively determined amounts.) It will not reward over-testing or under-testing patients in the Emergency Department and some services may be excluded or denied if HCFA does not feel the patients’ condition require emergency treatment.

Forty-four hospital procedures from the inpatient list were classified ambulatory payment classification. These procedures include excision of chest wall tumors, orthopedic repair procedures, vascular procedures and ureteral entoscopies. Previously, these procedures were billed under a cost basis, but will be on a set fee basis under the APC program. Payments tend to be reduced when procedures are reclassified from the inpatient list to APC, although payments have increased for certain procedures.

In the future, the CMS will create APC groups for insertion of pacemakers, replacement of pacemaker electrodes, implantation of a pacemaker and electrodes and removal of a pacemaker.

Certain services have been bundled into APC groups such as anesthesia, medical and surgical supplies, introcular lenses, certain drugs, observation beds, operating and recovery rooms and incidental services such as venipuncture.

Example of distinct APCs are strapping and casting services, blood and blood products, and certain expensive drugs. Corneal tissue acquisition, orphan drugs and innovative medical devices are reimbursed on a cost related basis.

The APC payment rate derived from historical hospital costs updated for inflation and adjusted for case-mix and geographic wage variation. To become APC compliant, hospitals will need to alter their current information systems and invest in APC-related billing coding, and decision support systems. It is HCFA way of pushing for an upgrade in provider documentation, with the goal of bolstering accuracy and quality of medical records, thus facilitating accurate billing and assessment of quality of care. CMSs Common Procedural Coding System (HCPCS) will be used to classify visits into APCs. Level II codes, which are used for pharmaceuticals and supplies, will be required. Hospitals will have a Charge Description Master program that links financial and clinical data in a common dataset. If these requirements are not met, an outpatient visit will not group to an APC. Compliance with the new regulations will be essential. Providers are subject to fines ranging from $5000 to $10000 for knowingly submitting inappropriate claims.

The 450 APC groups consist of significant surgical and non-surgical procedures, medical visits to clinics and emergency department and ancillary services. Within, the APC services are similar or clinically homogeneous. The median cost of the most expensive services in a group statutorily cannot exceed twice the median cost of the least expensive service group.

OPPS substantially lightens the requirement that an entity must meet in order to be designated "provider based" instead of freestanding and thus be eligible to receive Medicare outpatient hospital payments. Hospitals can use this to nurture a healthier bottom line by furnishing outpatient care in an off-campus ambulatory clinic. The new eligibility standards are effective 1/10/01.

FOR AN INFORMATIVE AND PERSONAL ARTICLE ON PRACTICAL SUGGESTIONS WHEN SELECTING A NURSING HOME SEE OUR ARTICLE "How To Select a Nursing Home"

Harold Rubin, MS, ABD, CRC, Guest Lecturer
January 28, 2001

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