Recently in Recovery Audit Contractors (RACs) and Medicare Appeals Category

August 13, 2013

HLP Publishes Client Alert on 2014 IPPS Final Rule

On August 2, 2013, the Centers for Medicare & Medicaid Services ("CMS") published its highly anticipated 2014 Inpatient Prospective Payment System ("IPPS") Final Rule (the "2014 IPPS Final Rule"). The 2014 IPPS Final Rule will be effective on October 1, 2013. There are two main aspects of the 2014 IPPS Final Rule that will significantly affect the day-to-day operations of hospitals nationwide: First, the 2014 IPPS Final Rule finalizes CMS' proposal to revise its "Payment Denial Policy" and allow billing of many services under Part B following a determination that a Part A inpatient claim will be denied as not medically necessary. Second, the IPPS Final Rule changes the criteria for coverage of Part A of inpatient hospital claims.

The HLP has prepared a Client Alert outlining key provisions of this important rule.

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August 6, 2013

New Inpatient Admission Requirements, Part B Inpatient Rebilling Policy Finalized

On August 2, 2013, the Centers for Medicare & Medicaid Services ("CMS") issued its highly anticipated 2014 inpatient prospective payment system ("IPPS") Final Rule (the "Final Rule"). Within this Final Rule, CMS finalized (1) its new requirements for Medicare Part A coverage of inpatient hospital admissions; and (2) its Part B inpatient rebilling policies.

Medicare Part A Coverage of Inpatient Hospital Admissions

Under the Final Rule, CMS adopts its proposal to presume that "inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption." See Final Rule at 1842.

This is a policy shift on the part of CMS. Under its previous policy, physicians admitting beneficiaries to inpatient status were instructed to use a 24-hour period as a benchmark (i.e., admitting physicians were instructed that they "should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis"). See Medicare Benefit Policy Manual (CMS Internet-Only Publication 100-02), Chapter 1, Section 10. However, there was no presumption of coverage tied to meeting this 24 hour benchmark.

Note that although a length of stay crossing 2 midnights could mean a 24 hour and 2 minute hospital stay, a length of stay crossing 2 midnights also could mean a 71 hour and 58 minute hospital stay.

The Final Rule also adopts CMS' proposal to require a physician's order to inpatient status before payment will be made for an inpatient claim. See Final Rule at 1789 et seq.

Part B Inpatient Rebilling

Under the Final Rule, CMS adopts its proposal to allow rebilling under Part B (following a denial of a Part A inpatient hospital claim) for many services (with certain notable exceptions, such as observation services). See Final Rule at 1653 et seq. The Final Rule retains many aspects of the Proposed Rule, including the following:

• Eventually rebilling will be limited to claims that are within 1 year of the date of service at issue; However, CMS is permitting hospitals to rebill under the timeframes set forth in Ruling 1455-R for claims eligible under the Ruling, as well as for services provided before October 1, 2013 that are denied after September 30, 2013;

• Certain services will be excluded from the opportunity to rebill, i.e. ED visits and observation services; However the Final Rule deviates from CMS' proposal in that it will allow hospitals to rebill physical therapy, occupational therapy and speech therapy services; and

• Administrative law judge jurisdiction remains limited to whether the Part A claim at issue was medically necessary.

The American Hospital Association ("AHA") has expressed its disappointment with the Final Rule as it relates to Part B inpatient rebilling and indicated its intent to proceed with its pending lawsuit against CMS related to this issue.

A more comprehensive summary will be forthcoming by way of HLP client alert. Please contact Jessica L. Gustafson, Esq. or Abby Pendleton, Esq. at (248) 996-8510 with any questions.

May 24, 2013

May 23, 2013 - CMS Announces a Revised Recovery Audit Program Map

On May 9th, the Centers for Medicare and Medicaid Services (CMS) announced the start of a procurement process for new Medicare Fee for Service Recovery Audit Program contracts. The General Services Administration issued a Request for Quotes (RFQ) seeking four A/B Recovery Auditors, one national Durable Medical Equipment auditor and one Home Health/Hospice Recovery Auditor.

On May 23rd, the CMS announced that it has completed the next step in the transition process by creating a new Recovery Audit Program map with revised jurisdictions. To see the revised map, click here.

The current RACs will continue to function throughout the transition. CMS advised that beginning in Summer 2013, there may be a decline in Additional Documentation Requests (ADRs). However, all prepayment reviews and post-payment manual therapy reviews will continue without decline.

Continue reading "May 23, 2013 - CMS Announces a Revised Recovery Audit Program Map" »

May 15, 2013

American Orthotic and Prosthetic Association Files Lawsuit Alleging Unlawful Changes in Medicare Standards Resulting in Unfair RAC/Prepayment Audits

On May 13, 2013, the American Orthotic and Prosthetic Association ("AOPA") filed suit in the federal district court for the District of Columbia against the Centers for Medicare and Medicaid ("CMS"), alleging that payment denials by CMS and its Recovery Audit Contractors ("RAC") are invalid. The lawsuit states that CMS rules call for denial of payment for a prosthetic device if specific documentation from the prescribing physician is not obtained by the supplier of the prosthetic device, despite the fact that other documentation shows that the device is medically necessary.

The complaint alleges that new standards issued on CMS' contractor websites in a "Dear Physician" format are void because they did not go through the rulemaking process with a public notice and comment period. The complaint also argues that CMS changed its standard - where before records of prosthetists (deemed professionals) were accepted to show medical necessity with the same deference given as that afforded to other medical records, including physician records. Further, the complaint alleges that the posting of the "Dear Physician" Letter and subsequent enforcement of it is arbitrary and capricious. Additionally, the AOPA expresses frustration with CMS' inaction and lack of enforcement against physicians who do not provide prosthetists with the required documentation. In essence, the complaint argues, the physician has no skin in the game as no incentive exists for him to provide appropriate documentation.

The full complaint can be found here.

Continue reading "American Orthotic and Prosthetic Association Files Lawsuit Alleging Unlawful Changes in Medicare Standards Resulting in Unfair RAC/Prepayment Audits" »

March 28, 2013

CMS Acquiesces to Hospital Pressure, Allows Part B Billing of Hospital Services Following Part A Denial of Inpatient Hospital Claims for Medical Necessity: Is It Enough?

Jessica Gustafson, Esq. and Abby Pendleton, Esq., co-chairs of the firm's Medicare and RAC department authored an ABA Health eSource article titled "CMS Acquiesces to Hospital Pressure, Allows Part B Billing of Hospital Services Following Part A Denial of Inpatient Hospital Claims for Medical Necessity: Is It Enough?" To view this article click here.

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March 15, 2013

CMS Speaks: The Future for Payment of Part B Services Post-RAC Denial - CMS' Long-Term Solution Too Limiting!

On March 13, 2013, the Centers for Medicare and Medicaid Services ("CMS") concurrently issued Ruling CMS-1455-NR (the "Ruling") and a proposed rule for revising Medicare Part B billing policies in the event of Part A payment denials (the "Proposed Rule").


Since the conclusion of the Recovery Audit Contractor ("RAC") demonstration program and prior to March 13, 2013, CMS has taken the position that following a contractor's denial of a Part A inpatient hospital claim, hospitals were permitted to bill Medicare Part B for only a very limited portion of the denied services (i.e., the "ancillary services"). Moreover, these ancillary services could only be billed under Part B if such services were provided during the prior year under existing timely filing rules. Compounding the litany of financial problems created for hospitals from RAC denials, the RACs have denied an extraordinary number of short stay inpatient claims, in many cases many years following the dates of service, leaving hospitals with zero payment for services fully rendered, which the hospitals believe were reasonable and necessary under Part A. Although in many cases the RACs have determined that the services were reasonable and necessary as outpatient services, the RACs failed to provide Part B offset.

Accordingly, hospitals have had no choice but to vigorously pursue relief through the Medicare appeals process. In many cases, hospitals have argued that the inpatient services were medically necessary. Moreover, as an alternative, hospitals have argued that they are at least entitled to an offset under Part B (e.g., payment for outpatient observation services, payment for the procedure as if the patient had been an outpatient, etc.). Notably, some Administrative Law Judges ("ALJs") have agreed that to the extent the Part A denial is upheld, the hospital is entitled to Part B payment (not limited to ancillary services) and have ordered same ("Partially Favorable Decisions"). The Medicare Appeals Council likewise agrees and has issued many decisions to this effect. Although CMS has been vocal in its disagreement on this issue, in July of 2012, CMS issued a memorandum to its contractors providing instructions as to how to effectuate the Partially Favorable ALJ and MAC decisions. For the past few months, many ALJs have also started to remand cases back to the Qualified Independent Contractor ("QIC") stage of appeal as the QICs have ignored the hospitals' arguments related to the Part B offset issue. Amazingly, despite the remand orders, the QICs have been reissuing the exact same decisions made in the first instance, in essence failing to comply with the ALJ's orders and refusing to address the Part B offset issue.

CMS' position, as adopted by its contractors, has led to a significant financial impact on hospitals as well as resulted in the unnecessary unburdening of the Medicare appeals process.


Given pressures asserted by the hospital community, including the recent litigation over the above issues filed by the American Hospital Association and five (5) health systems, on March 13, 2013, CMS announced a new Ruling in conjunction with the release of a proposed rule to define Part B billing policies when a Part A claim for a hospital inpatient admission is denied as not medically reasonable and necessary. While this Ruling provides significant relief, CMS' continued position that outpatient observation services cannot be billed is troubling. Moreover, CMS proposed long term solution as set forth below is not palatable for the hospital community.



Ruling 1455-NR (the "Ruling") became effective immediately on March 13, 2013. The Ruling is the interim guideline until CMS finalizes the proposed rule on the issue, establishing a permanent policy. The Ruling reiterates CMS' position that the MAC and ALJ decisions discussed above are contrary to longstanding CMS policy that only allows billing for Part B ancillary services within a specified time from the dates of service (following a finding of Part A overpayment). The Ruling acknowledges that CMS is "acquiescing" to the ALJ and MAC decisions discussed above, and is applicable to all denials made (1) while the Ruling is in effect, (2) prior to the effective date of the Ruling where appeal rights have not expired, and (3) prior to the effective date for which an appeal is pending.

Summary of Billable Services under Ruling

When a Part A claim for inpatient services is denied by a Medicare contractor (not self-audit determinations or utilization review determinations) as not reasonable and necessary, the hospital may do the following:

1. Submit a Part B inpatient claim for more than just ancillary services. The hospital is entitled to bill a Part B inpatient claim for the Part B services that would have been payable had the beneficiary originally been treated as an outpatient rather than admitted as inpatient. However, CMS states that the hospital may NOT bill for those services that specifically require an outpatient status (e.g., outpatient visits, ED visits, and outpatient observation services). CMS' decision to not permit observation services is particularly problematic as many of the cases at issue involve admissions from the ER where observation services would be applicable.

2. Submit a Part B outpatient claim for reasonable and necessary services for the outpatient services furnished during the 3-day payment window prior to the original inpatient window, including ED visits and observation services.

No Duplicate Claims

In order to rebill the claims, a hospital cannot have an outstanding appeal for payment under Part A. In other words, a hospital must withdraw the pending Part A appeal or wait for an appeal decision to become final or binding before rebilling is allowed. Once a claim for Part B reimbursement is submitted, the hospital will no longer be able to pursue an appeal for the Part A claim.

Timeframe for Rebilling

While the Ruling is in effect, a hospital will have 180 days from the date of determination or dismissal of a Part A appeal to rebill under Part B. The Ruling retains the presumed date of receipt: 5 days from the date of the notice/decision unless there is evidence to the contrary.

Treatment of Current ALJ Remands

Cases that have been remanded by an ALJ will be returned to the ALJ level and adjudicated according to the new scope defined by this Ruling - namely, the ALJ may only decide if Part A inpatient billing was appropriate because the services provided were reasonable and medically necessary. According to the Ruling, it is CMS' position that the ALJ may not order Part B payment. Rather, the hospital must either withdraw the appeal from the ALJ or wait for a determination before rebilling for Part B services. This statement is particularly problematic, raising questions as to whether CMS has such authority via a memorandum ruling to essentially take away a provider's due process appeal rights. Hospitals who seek outpatient observation payment as an alternative are well advised to continue making arguments in the appeals process as such issues may need to be preserved for potential federal court cases. Patient Status (copayments, deductibles, etc.)

Under the Ruling, because a patient's status (inpatient vs. outpatient) cannot be changed after discharge, the patient will be considered an inpatient for Part B inpatient services billed, and an outpatient for Part B outpatient services billed.

Part A/B Rebilling Demonstration Terminated

The Ruling noted that the demonstration program for Part A to Part B billing, an experiment targeted at solving the problem of excessive lengths of observation care stays, is terminated since the Ruling and the permanent rule to follow are the perceived resolution to the problem.


The Ruling is only the interim solution. Also on March 13, 2013, CMS released a proposed rule to be published in the Federal Register on March 18, 2013, which would supersede the Ruling once issued as a final rule. The Proposed Rule would retain the right for hospitals to rebill under Part B for inpatient hospital services deemed not to be reasonable and medically necessary within the same scope as defined in the Ruling, but significantly narrows the circumstances for doing so. In fact, CMS readily admits that the Proposed Rule will "greatly limit the capacity in which a hospital could rebill," thus offsetting the cost to the Medicare program. The additional limitations not present in the Ruling, but introduced in the Proposed Rule are described below.

As detailed below, CMS's proposed long term solution is not a fair remedy for hospitals and must be challenged. Hospitals must take advantage of the comment period as well as continue to pursue legal recourse if necessary.

One Year from Service Limitation

The most significant problem with the proposed rule is CMS' position that Part B claims may only be filed within one (1) year of the beginning date of service, irrespective of any audit or decision on appeal. This severely restricts the availability of CMS' solution and casts doubt as to its real intention behind the Proposed Rule. If a determination is not made within one year of the beginning date of service (which will be the circumstances in most audit determinations outside of pre-payment review), a hospital will not be able to avail itself of Part B billing in the event that Part A services are found by an auditor to be not reasonable and medically necessary. CMS treats the billing as an original claim, and not as an adjustment.

Hospitals May "Self-Audit" and Rebill

Unlike the interim solution under the Ruling discussed above, the Proposed Rule would allow hospitals that discover inpatient hospital admissions to be not medically necessary in the course of utilization reviews to rebill these claims as Part B if the other requirements of the Proposed Rule are met. CMS anticipates that hospitals will increase "self-audits" and rebill under Part B, saving the Medicare program money by reducing the number of Part A claims. CMS also anticipates lower appeal volumes.

Patient Requirement and Treatment

For a hospital to be allowed to rebill services under Part B, the subject patient must be enrolled in Medicare Part B. The Proposed Rule also requires that any Part A payment collected from the patient be refunded. Additionally, the Proposed Rule contemplates requiring prior notice to patients about possible changes in deductible and cost sharing if Part A payment is denied. Patients would continue to be liable for Part B copayments, the full cost of drugs that are usually self-administered, and Part D coverage (the patient may pursue Part D reimbursement).
A patient's right to appeal a Part A inpatient admission denial is not extinguished by a hospital's submission of a Part B claim. If a patient has a pending Part A claim, the hospital may not file a concurrent Part B claim. If the patient's appeal is not decided within 12 months of the date of service, hospital will not be able to rebill under Part B.


While CMS purports to address the problem of increasing lengths of outpatient hospitalizations and resolve the piecemeal solution of MACs and ALJs ordering payment as if outpatient services were performed when it is determined that inpatient hospital services are not reasonable and medically necessary, in reality the Proposed Rule will not likely result in these solutions.

First, as noted above, in permitting hospitals to rebill claims as Part B claims if an inpatient hospital claim is denied as not medically necessary under Part A, CMS has expressly created an exception for rebilling observation services; this is not permitted. Therefore, as it is clear that RACs are continuing to aggressively deny hospital "short stay" cases, there is very little incentive for hospitals not to admit beneficiaries as outpatients and order observation services for the first 24-48 hours of each hospitalization, in cases where there beneficiary will require services that can be provided both to "outpatient observation" patients and inpatients (i.e., ongoing monitoring and assessment). This result decreases reimbursement to the hospitals, and increases costs passed along to beneficiaries and does not ensure "accurate" reimbursement.

Moreover, creating a result that ALJs are purportedly stripped of authority to issue "partially favorable" decisions raises significant due process concerns.

The one-year claims filing limitation included in the Proposed Rule would put a hospital between a rock and a hard place - it must decide whether to preemptively accept reduced payment when in fact it is very likely that an ALJ or MAC may find that inpatient hospital services were indeed medically necessary, or to risk losing all payment for medically necessary services rendered to the Medicare patient.

For the reasons described above, the Proposed Rule does not create a meaningful solution for hospitals, and will not result in more "accurate" payments being made to hospitals.

The HLP intends to submit comments to this Proposed Rule. For more information on the information addressed herein, including RACs, the Ruling or Proposed Rule, please contact Abby Pendleton or Jessica Gustafson at (248) 996-8510.

February 25, 2013

OIG Report Discusses Inadequacy of CMS' Collection of Medicaid Overpayments

On February 19, 2013, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") published OIG Report A-05-11-00071 (the "Report"), detailing the results of an audit to determine the adequacy of CMS' collection of Medicaid overpayments identified in certain OIG audit reports.

Under federal regulations (specifically 42 C.F.R. § 433.304), the Secretary of HHS is required to recover the federal share of any Medicaid overpayment from the responsible state - this responsibility has been delegated to CMS. The process is as follows:

• The OIG performs audits of CMS' expenditures, in this case specifically CMS' Medicaid payments
• The OIG identifies overpayments made by CMS through the Medicaid program
• Audit results are reviewed by CMS and OIG. When an audit resolution is agreed upon, CMS then takes corrective action - in the case of overpayments, often by a refund from the state or (if necessary) a negative grant award - an offset against that state's quarterly Medicaid grant

OIG Report A-05-11-00071 focuses on 152 OIG audit reports issued to 11 states (selected for their high amounts of overpayments) between the years 2000 and 2009. Five of these, handled by the Department of Justice, were excluded. The remaining 147 reports recommended an aggregate refund of overpayments totaling $1,213,085,167. Specifically, the Report reviewed CMS' collection efforts on the 147 audit reports. The report found that CMS had collected $987,481,600 in overpayments, leaving $225,603,567 outstanding. The OIG noted this was because CMS had not pursued collection in a timely manner. Notably, the uncollected amount stemmed from 10 audit reports where the states involved did not agree to refund. The discrepancy also accounted for more than $7 million reported as collected, but without adequate supporting documentation by CMS.

In its Report, the OIG made specific recommendations that, in addition to collecting the remaining overpayment, CMS act more promptly on OIG audit recommendations and implementation of corrective actions. The Report also highlighted the need for CMS to maintain better supporting documentation of its collection of overpayments in accordance with the Office of Budget Management ("OMB") Circular A-50 and CMS Standard Operating Procedures. Finally, the Report recommended educating states on properly reporting and documenting overpayments to CMS. This would involve improvement in CMS oversight as well.

CMS concurred in large part to the recommendations of OIG Report A-05-11-00071. However, it noted that the reason for delay in the 10 outstanding audit reports was due to continued review by CMS, including consideration of additional information supplied by the states involved, review of OIG supporting documentation, and internal deliberation. The OIG responded by arguing that delays of 3 to 7 years after initially concurring with the OIG's recommendations were contrary to federal statutes, regulations, and circulars, as well as CMS' own policies, in requiring timely collection of overpayments.

Continue reading "OIG Report Discusses Inadequacy of CMS' Collection of Medicaid Overpayments" »

December 11, 2012

CMS Releases Report on Recovery Audit Statistics

CMS has posted on its website the latest RAC statistics. The statistics for the 4th quarter of FY 2012 show CMS collected $648 million in alleged overpayments and returned $46.5 million in underpayments. CMS' report on the total amounts collected and returned from October 1, 2009 through September 30, 2012, indicates that $3.16 billion in overpayments were collected and $268.2 million in underpayments were returned. The top issue for each of the four RAC regions remains whether inpatient hospitalizations (rather than outpatient stays) were medically necessary.

For FY 2012, CMS collected $397.7 million in the 1st quarter, 588.4 million in the 2nd quarter, 657.2 million in the 3rd quarter and $648 million in the 4th quarter for a total of $2,291.3 billion in FY 2012.

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November 27, 2012

OIG Releases Semi-Annual Report on Recovery Audits and Investigations

Washington, DC - The Department of Health & Human Services (HHS) Office of Inspector General (OIG) today announced expected recoveries of about $6.9 billion from audits and investigations in its semi-annual report to Congress. The report focuses on OIG accomplishments for the second half of FY 2012 (April 1, 2012 - September 30, 2012) and for FY 2012 in total.

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November 27, 2012

Government Announces Changes to Medicare Premiums and Deductibles for 2013

The U.S. Department of Health and Human Services recently announced that Medicare Part B premiums (i.e., for physician services, outpatient hospital and durable medical equipment) will rise in 2013 by 5%--to $104.90 a month. The deductible for Part B services will increase from $140 in 2012 to $147 in 2013.

Part A premiums (i.e., for inpatient hospitals, skilled nursing facilities, and home healthcare) will fall by $10 to $441 per month in 2013. Part A deductibles that Medicare beneficiaries pay when they are admitted to a hospital will rise next year to $1,184, an increase of $28 from the 2012 deductible level of $1,156.

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November 26, 2012

Abby Pendleton, Esq. and Jessica Gustafson, Esq. Featured in "Putting Practices on the RAC"

Abby Pendleton, Esq. and Jessica Gustafson, Esq. of the HLP were quoted in the November 12, 2012 issue of Physician's Money Digest in an article titled "Putting Practices on the RAC". Pendleton and Gustafson were interviewed based on their experience in defending health care provider audits around the country and their significant involvement in the Medicare RAC program. To read the article click here.

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November 21, 2012

CMS Revises DME Face-to-Face Requirements

On November 1, 2012, the Centers for Medicare and Medicaid Services ("CMS") released a final Durable Medical Equipment ("DME") face-to-face policy. As a pre-condition to payment, the rule requires that a beneficiary receive a face-to-face encounter with a Physician, Physician Assistant ("PA"), Nurse Practitioner ("NP"), or Clinical Nurse Specialist ("CNP") within six months prior to a DME order. The encounter must then be documented in the medical record and communicated to the DME provider with the order.

The final rule makes the following key changes:

• Delays implementation of the DME policy until July 1, 2013 and clarifying that the rule will only apply to DME orders made after the implementation date.

• Expands the timeframe between the face-to-face encounter and order of DME to six months, although it eliminates the option of having the face-to-face encounter occur within thirty days following the order.

• Clarifies that Physician Assistants, Nurse Practitioners, and Clinical Nurse Specialists may complete the face-to-face encounter, but the encounter must be documented by a physician.

• Clarifies that orders may be made verbally for items that do not require a written order before dispensing, but the supplier must have a written order and face-to-face documentation before submitting for payment.

• Clarifies that DME orders for beneficiaries discharging from a hospital do not require a separate face-to-face encounter post-hospitalization.

• Written orders do not require "necessary and proper usage instructions" or the diagnosis, although related diagnoses must be in the Beneficiary's medical chart and usage instructions provided to the Beneficiary and/or the Beneficiary's Caregiver.

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November 20, 2012

"Fast-Track Certification" for Medicare-only ACOs in New York State

In accordance with New York State's recently enacted accountable care organization ("ACO") law (Article 29-E of the New York Public Health Law), the New York State Department of Health ("DOH") will begin to process applications for Medicare-only ACOs to obtain certification under the new statute. The so-called "fast-track certification" under the statute will grant protection for ACO operations under several New York laws, including those pertaining to fee-splitting; corporate practice of a profession; practitioner self-referrals (New York Stark law); anti-trust and restraint of trade. However, under fast-track certification, such protection will only extend to the ACO's coordination of care for Medicare beneficiaries. ACO activities related to others (i.e., members of commercial insurance health plans) will not be eligible for the legal immunities that flow from the fast-track certification. This more broadly applied protection will not be available until the DOH has promulgated the ACO regulations.

It is expected that the New York State Department of Health soon will issue a letter instructing potential Medicare-only ACO applicants to submit documentation to the DOH's Hospital Review and Planning Council. It is expected that the DOH will review the following items as part of the application process:

1) The ACO's CMS letter of approval
2) The ACO's signed agreement with CMS
3) The ACO's application to CMS for ACO status
4) The ACO's formation documents

Continue reading ""Fast-Track Certification" for Medicare-only ACOs in New York State" »

November 16, 2012

OIG Cites Shortcomings in Medicare Appeal ALJ Hearings

On November 14, the Office of Inspector General ("OIG") of the Department of Health and Human Services ("HHS") issued a report stemming from a review of the Administrative Law Judge ("ALJ") level of the Medicare appeals system. The study analyzed all ALJ appeals decided in fiscal year 2010 from a multitude of perspectives, including interviews of ALJ staff and Qualified Independent Contractors ("QICs"), charged with administering the second level of appeal.

The report compiled ten recommendations for changes to enhance the ALJ level of appeal. OMHA and CMS responded to each of these recommendations. The report and agency comments are available here. This table is a summary of the recommendations in the left hand column and a summary of the agencies' response on the right.

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November 16, 2012


Last week, AARP, along with five other consumer and professional organizations, sent a letter to leaders in Congress, urging them to protect access to health care for people with Medicare by addressing the flawed Medicare physician payment formula. Without congressional action, a 27.5 percent cut in payments to physicians treating Medicare beneficiaries will take effect on January 1, 2013. Here is a copy of the letter that was sent:

"Dear Chairman Baucus, Ranking Member Hatch, Chairman Upton, Ranking Member Waxman, Chairman Camp, and Ranking Member Levin:

"The undersigned organizations, representing health care providers, clinicians, and Medicare beneficiaries, write to urge Congress to avert looming payment cuts to the providers who millions of older adults and people with disabilities rely on for care. The Medicare physician payment formula is long overdue for reform in order to ensure stable access to health care for people with Medicare. We need to move away from the current payment formula that year after year relies on congressional action to postpone scheduled payment cuts, including a drastic 26.5 percent cut scheduled to take effect beginning January 1, 2013.

"Congress has long recognized that the Sustainable Growth Rate (SGR) is a poor method for establishing payment rates for health care providers paid under the Medicare physician fee schedule. In each of the last ten years it has voted to override the cuts mandated under the formula. These stop-gap measures have served to increase the size of future cuts, the cost of long-term reform, and the insecurity among people with Medicare about their ability to maintain access to their doctors. We urge you to pass the longest possible SGR fix this year, in order to allow for the development of a long-term and sustainable solution. New payment methods are needed that maintain access and encourage the delivery of high-quality care.

"Addressing the current flawed payment formula is a necessary and far-sighted course of action. Congress has an opportunity to repeal the SGR -- the first step toward enacting a better payment system -- by redirecting money from the Overseas Contingency Operations (OCO) fund the Pentagon says will never be spent. Each of the organizations signing onto this letter supports the use of OCO in the final package.

"As we address this problem, we must also be sure to keep the Medicare program affordable for beneficiaries, especially given that today the typical older person relies on less than $22,000 a year and spends over 15 percent of his/her income on health care. Therefore, we must avoid imposing any additional costs of SGR reform on beneficiaries. We also urge a continued focus on improving the quality of care for older adults and the disabled, including access to primary care services and care coordination, which are key to achieving the goals of better care, better health, and lower costs.

"The annual legislative struggle to avert Medicare physician payment cuts has gone on far too long. It is crucial to ensure that people in Medicare can maintain relationships with the doctors and providers who treat them. Our organizations are ready to work with you to help all members of Congress to address this issue, which is vitally important to the older adults and people with disabilities across the nation."

In addition to AARP, the letter was signed by the American Academy of Family Physicians, the American College of Physicians, the American Geriatrics Society, the Center for Medicare Advocacy, Inc. and the Medicare Rights Center.