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The Reimbursement Integrated Library delivers the key performance indicators for maximizing reimbursement. The Library includes three invaluable titles:

• Dennis Barry's Reimbursement Advisor - This monthly newsletter provides all the facts about reimbursement strategies to minimize the adverse effects of DRGs, RBRVs, APCs and capitation to optimize hospital reimbursement.
• Receivables Report - This monthly newsletter includes actual profit-improvement examples from facilities nationwide, secrets for successfully challenging denials, tips for using automation to increase cash flow, and strategies your colleagues are using now to prepare for health care reform.
• Hospital Accounts Receivable Analysis - This quarterly journal is a synopsis of statistical data related to hospital receivables.

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June 2008, Volume 23, No. 10

Among the articles featured in the June 2008 issue is one that examines a federal district court’s ruling in favor of a hospital that challenged the Centers for Medicare and Medicaid Services’ (CMS) calculation of the supplement security income (SSI) fraction used to determine Medicare disproportionate share hospital payments. This issue also features articles on recent decisions regarding the “good cause” requirement for claims reopenings, successor liability when purchasing a provider, and the potential financial risk related to the “foundation model” for graduate medical education (GME) programs.

• Avoiding successor liability when purchasing a provider more difficult: Successor liability under Medicare policy. When a health care provider’s assets are purchased—or there is another type of transaction whereby a provider’s assets will be held by a different organization—the seller’s Medicare provider agreement automatically is assigned to the purchaser. Part and parcel of such assignments are that the purchaser is liable for any Medicare overpayments and also receives disbursements from Medicare for any amounts owing to the seller. Any simplicity ends there, and purchasers must carefully weigh whether to accept or decline assignment of the seller’s provider agreement, particularly as it relates to successor liability for penalties for the prior provider’s conduct. This article examines avoiding success liability by not accepting assignment of the provider agreement, as well as the advantages and disadvantages of doing so.

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Fourth Quarter 2007, Volume 22, Number 1

• Billing Information. The average discharge-to-bill (DTB) time for all payer types rose to 10.35 days at the end of 2007. This 0.23-day increase in average billing time kept benchmark level performance for this major financial indicator out of reach for three of four quarterly financial reporting periods in 2007. In fact, the first quarter was the only one in which hospitals achieved the benchmark, which is to bill payers within ten business days. Read about it in the HARA Report on Fourth Quarter 2007.

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Local health care facilities in the flood-stricken areas of Iowa and Indiana have been assured by CMS that during the flood damage and clean-up that follows, the normal burden of documentation for beneficiaries will be waived and that the facilities may act under a presumption of eligibility. The following actions will be undertaken to waive certain program requirements for the following institutional providers: (1) critical access hospitals will be allowed to take more than the statutorily mandated limit of 25 patients and not count the expected longer lengths of stay for evacuated patients against the 96-hour average, (2) skilled nursing facilities will have the three-day prior hospitalization requirement waived for admission of evacuated patients and relaxed limitations on the benefit period for those patients, (3) long-term care hospitals will not need to count the evacuated patients in calculating the 25-day average length of stay, and (4) inpatient rehabilitation facilities will not need to count the evacuated patients in determining compliance with the 60 percent rule requirement. The definition of “home” would be expanded to allow beneficiaries who receive home health services to receive those services in alternative sites. Additionally, CMS will waive rules that prevent early refills under the Medicare Part D prescription benefit. Beneficiaries who left prescriptions in evacuated homes or lost their prescription during the evacuation would be covered. Certain sanctions under the Emergency Medical Treatment and Labor Act will not be imposed for 72 hours after a hospital implemented a disaster protocol, as long as the actions by the hospital did not discriminate among individuals on the basis of source of payment, ability to pay, or on the basis of race, color or national origin. CMS will allow beneficiaries in health plans to go out of network during this emergency. HHS Release, June 16, 2008.

Judgment in favor of the government in an action brought under the False Claims Act (FCA) (31 U.S.C. §3729, et seq.) was reversed According to the U.S. Supreme Court, to incur liability under the FCA, a person must have the purpose of getting a false or fraudulent claim paid or approved by the government. Moreover, the person must intend for the government itself to pay the claim. The government alleged that subcontractors engaged in a Navy contract to build destroyers issued false certifications that their work was completed in compliance with Navy specifications and presented invoices for payment to the prime contractor. The district court granted the subcontractors judgment as a matter of law, concluding that, absent proof that false claims were presented to the government, the evidence was legally insufficient under the FCA. The Sixth Circuit Court of Appeals reversed the district court's judgment, holding that the FCA claims did not require proof of an intent to cause a false claim to be paid by the government. Rather, the appellate court said, proof of an intent to cause such a claim to be paid by a private entity using government funds was sufficient. Contrary to the Sixth Circuit's interpretation of the FCA provisions, the U.S. Supreme Court held that a plaintiff asserting a claim under 31 U.S.C. §3729(a)(2) must prove that the defendant intended that the false statement be material to the government's decision to pay or approve the false claim. Allison Engine Co., Inc. v. United States ex rel. Sanders, U.S. Supreme Court, June 9, 2008, ¶302,437.

CMS will launch a new "star" rating system to help patients and their families make an informed assessment of the care provided at nursing homes. The ratings will be posted on CMS' Nursing Home Compare website by the end of the year. This "five star" rating system is similar to one launched last year that rates health and prescription drug plans available to Medicare beneficiaries. Specific information regarding the quality rating system will be available after June 22 at http://www.cms.hhs.gov/SurveyCertificationGenInfo/02_HotTopics.asp after June 22, 2008. The "five-star" rating will begin publication in December 2008. CMS Release, June 18, 2008.

The Office of the Inspector General (OIG) reported it conducted audits and investigations resulting in anticipated recoveries of $2.2 billion; exclusions of 1,291 individuals and entities for fraud and abuse involving federal health care programs; 293 criminal prosecutions for crimes against HHS programs, and 142 civil actions including False Claims Act cases, unjust enrichment suits, civil money penalties law (CMPL) settlements, and administrative recoveries related to provider self disclosure matters during the time period from October 1, 2007 to March 31, 2008. OIG estimates that Medicare Part B made a total of $106.9 million in potential overpayments to suppliers of outpatient services on behalf of beneficiaries in Part A covered skilled nursing facilities (SNF) during calender year (CY) 2001 and 2002. Grants totaling $92 million were distributed to 49 states and the District of Columbia for this period to combat and punish fraud against Medicaid. CMS analysis of Part D data estimates revealed that Part D sponsors owe Medicare a net total of $4.4 billion for the 2006 program year. Eighty percent of the sponsors owed CMS money and 20 percent were due money. CMS also noted that there was no mechanism to collect funds or adjust prospective payments prior to reconciliation after close of the plan year. OIG Report, June 12, 2008.

A five-year contract to administer the Part A and Part B claims payments in Arkansas, Louisiana, and Mississippi has been awarded. The claims administrator contractor, will be the first contract for the processing and payment of Medicare fee-for-service claims from hospitals, skilled nursing facilities, physicians, and other health care practitioners for its three-state region. The contractor is taking over the claims payment work that was previously performed by three fiscal intermediaries and two carriers. CMS Press Release, June 11, 2008.

Exceptions to the $1810 outpatient therapy caps that allowed for reimbursement of medically necessary services with dates of service from Jan. 1, 2008 to June 30, 2008 will be restricted to medically necessary services billed by the outpatient departments of hospitals. Once the therapy cap has been reached, beneficiaries who are not residents in a Medicare certified part of a skilled nursing facility will be able to obtain medically necessary services that exceed the cap only when the services are billed by the outpatient department of the hospital. MLN Matters, No. SE0815, June 2, 2008, ¶52,252.

The House approved on June 19, 2008 the Iraq/Afghanistan Supplemental Appropriations bill (H.R. 2642), which contains a provision that would place a one-year moratorium on six Medicaid regulations proposed by the Bush administration to curb fraud and abuse. An earlier version would have delayed seven controversial rules. The Senate is expected to consider the legislation during the week of June 23. The legislation would prohibit the HHS from finalizing and enforcing certain Medicaid regulations until April 1, 2009. If finalized, these regulations would (1) restrict the use of intergovernmental transfers; (2) prohibit federal Medicaid payments for services transporting school-aged Medicaid patients to and from school; (3) prohibit Medicaid from making graduate medical education payments; (4) clarify the definition of rehabilitative services; (5) limit state-levied taxes on Medicaid providers; and (6) clarify and narrow payment policies for specific provisions in the targeted case management final regulation, according to a GOP summary. The supplemental does not include the Medicaid regulation clarifying the definition of outpatient clinic and hospital services. The White House has not issued a veto threat as it had on the previous version. “The Administration is pleased … that Congress did not enact a full moratorium on all seven Medicaid regulations,” it said in a statement. However, it called on Congress “to do more to address the very serious issue of waste, fraud, and abuse in this important health care program.” Lawmakers have said they want additional time to review the regulations before implementation. CCH Washington Bureau, June 19, 2008.

In three years, hospitals participating in the hospital quality incentive demonstration (HQID) have improved their composite quality scores by an average of 15.8 percentage points in clinical areas such as heart attack, coronary artery bypass graft, heart failure, pneumonia, and patients with hip and knee replacements. Under the HQID demonstration, 15 of the hospitals moved from the bottom fifth to the top fifth in rankings for one or more of the clinical areas. Also, 112 of the top-performing hospitals received $7 million in incentive payments for substantial and continual advancement in quality of care. CMS extended the HQID project for three more years through September 2009.The demonstration was launched in 2003 by CMS with 250 hospitals in 36 states. The demonstration seeks to improve healthcare quality for hospital patients by paying for performance in health care using value-based purchasing (VBP) initiatives. Under the demonstration, a percentage of a hospital's payment for each discharge is contingent on the hospital's actual performance on a specific set of measures. In contrast, the current Medicare system pays a set amount for each discharge. Any change from the current payment system to standards used under the VBP initiatives would require new legislation. CMS Release, June 17, 2008.

Nonphysician professionals may bill for the administration of psychological testing, and one current procedural terminology (CPT) code may be used for different tests administered to the same patient on the same day according to CMS. CMS recently clarified Medicare billing and payment policy for CPT codes where testing is being performed by technicians and computers, and where one or more of the testing codes can be billed for services furnished to the same patient. Physical therapists (PTs), occupational therapists (OTs), and speech language pathologists (SLPs) may bill for time spent on face-to-face time administration of tests to a patient and time interpreting test results and preparing results for patients, but only when the ratio of patient is under a therapy plan of care. CMS Release, June 18, 2008.

Because there was no cause of action pursuant to federal law made against a rehabilitation facility, the motion to send this case back to state court was granted. Although the suit referenced federal Medicare and Medicaid statutes and regulations to establish the relevant standard of care to allege that the defendants breached that duty of care, the complaint did not contain a claim that would give rise to federal jurisdiction. A resident of the facility died and the administrator of the resident's estate alleged that her death was accelerated by deficient care and treatment she received at the facility. Generally, the complaint alleged negligence, medical negligence, violations of Kentucky's Nursing Home Residents' Bill of Rights pursuant to KARS §216.510, and wrongful death. The rehabilitation facility sought federal court jurisdiction because the rehabilitation facility believed the complaint raised an overt question of federal law which would require an interpretation of federal law. Shawver v. Bradford Square Nursing, LLC, d/b/a Bradford Square Rehabilitation and Nursing Center and Dana Marshall, E.D. Ky., June 5, 2008, ¶302,441.

A health care group's motion for summary judgment in a qui tam action brought by a former employee alleging violations of the False Claims Act (FCA) was denied because: (1) the employee alleged fraud with the detail required under Federal Rule of Civil Procedure 9(b); and (2) the employee's release of her FCA claims was unenforceable. All of the FCA claims centered around the group's alleged overbillling practices. Although the release the employee signed when her employment with the health care group terminated was broad enough to waive an FCA claim, the waiver was unenforceable because the government had no knowledge of the employee's fraud allegations or the release and, therefore, did not affirmatively consent to the release. United States ex rel. Boothe v. Sun Healthcare Group, Inc., D.N.M., June 2, 2008, ¶302,442.

Durable medical equipment prosthetics, orthotics and supplies (DMEPOS) suppliers in the competitive bidding program are subject to the same rules and regulations for marketing DMEPOS products to Medicare beneficiaries under the fee-for-service program. The regulations prohibit suppliers from misusing symbols, emblems, or names that reference Medicare or CMS. DMEPOS suppliers may not make unsolicited phone calls to Medicare beneficiaries, unless certain exceptions apply. MLN Matters, No. SE0820, June 4, 2008, ¶52,253.

Expressing concern that the competitive bidding program for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) would limit Medicare beneficiary access to care, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) on June 17, 2008 introduced legislation to delay implementation of the program. The bill is a companion to the Medicare DMEPOS Competitive Acquisition Reform Act of 2008 (H.R. 6252), introduced by House Ways and Means Health Subcommittee Chairman Pete Stark (D-Calif.) on June 12, 2008. Under current law, round one of the competitive bidding program is scheduled to begin on July 1 when CMS will begin paying suppliers who have been awarded contracts to provide durable medical equipment, prosthetics, orthotics, and medical supplies to Medicare beneficiaries, according to a summary. The bill would eliminate the annual inflationary adjustment for all items covered by round one of the competitive bidding program beginning in January 2009 and reduce payment rates for those items by 9.5 percent nationwide. This policy does not affect diabetic supplies furnished by retail suppliers, the committee noted. Items subject to the reduction would receive a 2 percent payment increase in 2014 in most cases. CCH Washington Bureau, June 17, 2008.

Medicare Claims Processing Manual, Pub. 100-04, Transmittal No. 1532, June 11, 2008, ¶157,387. Premium content

One-Time Notification Manual , Pub. 100-20, Transmittal No. 355, June 13, 2008, ¶157,392. Premium content

Medicare Claims Processing Manual, Pub. 100-04, Transmittal No. 1534, June 13, 2008, ¶157,394. Premium content

Medicare Claims Processing Manual , Pub. 100-04, Transmittal No. 1535, June 13, 2008, ¶157,395. Premium content

Provider Reimbursement Manual, Pub. 15-1, Transmittal No. 438, June 1, 2008, ¶157,396. Premium content

Medicare Program Integrity Manual, Pub. 100-08, Transmittal No. 259, June 13, 2008, ¶157,397. Premium content

Medicare Claims Processing Manual, Pub. 100-04, Transmittal No. 1532, June 11, 2008, ¶157,387. Premium content

One-Time Notification Manual, Pub. 100-20, Transmittal No. 351, June 13, 2008, ¶157,388. Premium content

One-Time Notification Manual, Pub. 100-20, Transmittal No. 352, June 13, 2008, ¶157,389. Premium content

One-Time Notification Manual, Pub. 100-20, Transmittal No. 353, June 13, 2008, ¶157,390. Premium content

One-Time Notification Manual, Pub. 100-20, Transmittal No. 354, June 13, 2008, ¶157,391. Premium content

Medicare Claims Processing Manual, Pub. 100-04, Transmittal No. 1533, June 13, 2008, ¶157,393. Premium content

The intermediary improperly disallowed direct graduate medical education (DGME) and indirect medical education (IME) payments for three cost reports because the instructions and process established by CMS to implement the provisions of the Balanced Budget Act of 1997 did not require the provider to bill the intermediary for DGME and IME supplemental payments. The provider sought to have the intermediary accept data submitted that demonstrated entitlement to payments for fiscal years 1998 through 2000 under 42 C.F.R. §424.44(b), because the provider's failure to meet deadlines were caused by error, misrepresentation and excessive delay by CMS. The provider had not received health insurance claim (HIC) numbers needed to bill for IME from CMS. The provider furnished to the intermediary a detailed log of managed care enrollees serviced during the periods at issue from its records for verification and inclusion in its cost reports. The intermediary refused to extend deadlines and accept the data, noting that the provider received prior notice of the requirements as evidenced by the intermediary's processing a significant number of claims for payment. The intermediary's refusal to audit the data was improper, because an effective mechanism was not established to allow providers to obtain HIC number by requiring patients, HMOs or the intermediary to provide the HIC numbers to providers. PRRB Hearing Dec. No. 2008-D26, Loma Linda (Loma Linda, Cal.), May 9, 2008, ¶81,888. Premium content

An intermediary improperly disallowed a provider's bad debts from uncollectible deductible and coinsurance amounts arising from outpatient therapy services paid under the Part B fee schedule for its cost reporting period ending in December 1999. The intermediary disallowed the entire amount for Medicare Part B bad debts on the cost report because the services were paid on the basis of a fee schedule, rather than on a reasonable cost basis. 42 C.F.R. §413.80was the controlling bad debt policy during the time period at issue.

Beginning with claims with dates of services on or after January 1, 1999, Soc. Sec. Act §1834(k), as amended by the Balanced Budget Act of 1997 (PubLNo 105-33), changed the payment methodologies for outpatient therapy services from adjusted reasonable costs to the lesser of charges or fee schedule amounts. Congress fully understood that the bad debt regulation was derived from the policy against cross-subsidization articulated in Soc. Sec. Act §1861(v), and that there were no concomitant regulatory provisions addressing bad debts for Part B services.

Congress' silence on bad debts was demonstrative of its intent that the bad debt policy remain unchanged. A February 2003 Proposed rule would have eliminated bad debts arising from any service provided under a fee schedule (see ¶220,206), but CMS' failure to finalize its proposed rule suggests that it considered but rejected the policy change. Absent a change in that regulation, via either a legislative change or through the rule-making process, the Provider Reimbursement Review Board cannot modify or eliminate its mandate. Accordingly, the intermediary's adjustment was reversed. PRRB Hearing Dec. No. 2008-D21, Vitality Rehab, Inc. (Long Beach, Calif.) v. Mutual of Omaha Insurance Company, Mar. 17, 2008, ¶81,892. Premium content

The intermediary's refusal to include patient days attributable to recipients of New Jersey's Charity Care Program (CCP) in the numerator of the “Medicaid fraction ” used to calculate a provider's disproportionate share hospital (DSH) adjustment was improper. Soc. Sec. Act §1886(d)(5)(F)provides that the numerator is the number of days attributable to patients who “ were eligible for medical assistance under a State plan approved under subchapter XIX of this chapter.” The CCP is available to low-income individuals who are not eligible for traditional Medicaid or any other assistance program.

The approved state plan provides for state DSH payments to hospitals, and specifically includes patient days attributable to the CCP in the calculation of state's DSH payments to the hospital. Federal Medicaid funds are paid to the state for its DSH program. CCP patients are eligible for assistance under the state plan approved under Title XIX of the Social Security Act, and CCP days must be included in the numerator of the Medicaid fraction for purposes of the hospital's eligibility for Medicare DSH adjustments. PRRB Hearing Dec. No. 2008-D22, Cooper University Hospital (Camden, N.J.), March 28, 2008, ¶81,893. Premium content

An intermediary properly used the inflation-adjusted 1984 base year rate and properly applied the fiscal year 1998 and 1999 Tax Equity and Fiscal Responsibility Act (TEFRA) limits to reimbursement for a provider's psychiatric unit. The provider, a not-for-profit acute care hospital, had an adult psychiatric unit, but disbanded it in 1992 after a census showed there were no patients. After its psychiatric unit was disbanded, the provider did not offer psychiatric services for five years and requested that the state of California remove psychiatric services entirely from its hospital license.

In 1997, the provider opened an inpatient geriatric-psychiatric unit, and received approval from the state of California to offer psychiatric services. The provider is subject to 42 C.F.R. §413.40(b)(1)(i), which says that a TEFRA target amount remains applicable to a hospital “despite intervening cost reporting reports during which the hospital or excluded hospital unit is not subject to the ceiling as a result of other provisions of the law or regulations, or nonparticipation in the Medicare program, unless the hospital or excluded hospital unit qualifies as a new hospital or excluded part hospital unit under the provisions of paragraph (f) of this section.” Subsection (f) only applied to hospital units that never had a target amount set. PRRB Hearing Dec. No. 2008-D24, Summit Medical Center (Oakland, Calif.) v. BlueCross BlueShield Association/ National Government Services, LLC - CA, April 15, 2008, ¶81,889. Premium content

The intermediary's calculation of the 5.8 percent and 10 percent reduction in payments to the provider was correct. Soc. Sec. Act §1861(v)(1)(S)(ii)requires determination of reasonable costs before calculation of the payment-to-cost ratio (PCR) used to determine the payment reduction. The statute does not provide for any redetermination of the provider's costs. Therefore, 42 C.F.R. §419.70 and CMS' implementing instructions, which do not permit the application of the percentage reduction factor to the provider's costs, are binding; neither the intermediary nor the Provider Reimbursement Review Board have any legal authority to change the calculation PRRB Hearing Dec. No. 2008-D23, University of Texas M.D. Anderson Cancer Center (Houston, Tex.), April 4, 2008, ¶81,891. Premium content

The reclassification of professional fees paid from the administrative and general (A&G) reimbursable cost center to the A&G-shared cost center was improper. The provider argued that the professional fees were paid for the preparation of Medicare cost report documents. If not for these Medicare reimbursable cost centers and related Medicare reimbursement, the professional fees would not have been incurred. The intermediary, erroneously following guidelines that were applicable only until 1996, reclassified these professional fees in the providers cost report for its fiscal year (FY) ending December 31, 1999. PRRB Hearing , Dec. No. No. 2008-D28, Quality Lifestyles of Mesa (Mesa, Ariz.) v. BlueCross BlueShield Association/Cahaba Government Benefit Administrators, May 20, 2008, ¶81,895. Premium content

An intermediary's adjustment to a critical access hospital provider's allowable owner's compensation was modified, but its methodology for determining the benefits and pooled cost allocation for the provider was proper. The provider had filed a cost report for a seven-month period from June 1, 2002, through Dec. 31, 2002, when it was licensed for 12 beds and incurred a very low utilization rate. Originally, the intermediary did not account for the fact that the provider was only operational for seven out of 12 months and used compensation survey data for the low range of hospitals with less than 25 beds. At the hearing, the intermediary explained that it reevaluated its original position and believed that the higher end of the 1988 survey data should be used to compute allowable owner's compensation. The resulting higher reimbursement was offset to some extent by the partial cost reporting period. PRRB Hearing Dec. No. 2008-D27, Oswego Medical Center (Oswego, Kan.) v. BlueCross BlueShield Association/Wheatlands Administrative Services, May 15, 2008, ¶81,890. Premium content