Para Services Presentation May 3 2018

PARA HealthCare Analytics Billing for Supplies – Navigating Health Plan Audits and Managing Revenue May 2018

Objectives • Classify non-billable supply charges • Recognize inappropriate reductions in payment due to audit overreach • Reduce Red Flags • Dispute improper denials • Identify elements of a compliant and efficient materials management chargemaster • Design pricing methodology to reallocate non-billable supply revenue

Facility Fees – Separately Billable Supplies • Similar to a hotel room rate, some things are understood to be included, such as sheets, towels, blankets, TP, TV, and the bed.

• The mini bar items are at additional charge.

Medicare Guidance • The Medicare Provider Reimbursement Manual offers guidance, not regulations: “This manual provides guidelines and policies to implement Medicare regulations which set forth principles for determining the reasonable cost of provider services furnished under the Health Insurance for the Aged Act of l965, as amended. These "Principles of Reimbursement for Provider Costs" have been published in HIRM-l. The provisions of the law and the regulations are accurately reflected in this manual, but it does not have the effect of regulations.” https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-BasedManuals-Items/CMS021929.html

Medicare Guidance • Medicare Provider Reimbursement Manual, Section 2203.2 Separately billable supplies should meet the following criteria: 1.

Directly identifiable to a specific patient

2.

Furnished at the direction of a physician because of specific medical needs (this must be documented in the patient's medical record

3.

Either not reusable or representing a cost for each preparation

Adminastar Federal An early Medicare Fiscal Intermediary which established the four-question test which is widely followed today: 1.

2.

3.

4.

Is the item medically necessary and furnished at the discretion of a physician? (not a personal convenience item such as slippers, powder, lotion, etc.)

Is the item used specifically for or on the patient? (not gowns, gloves, masks, used by staff or oxygen available but not specifically used by the patient) Is the item not ordinarily used for or on most patients or was the volume or quantity used for on patient significantly greater than normally used for or on most patients in the billed setting? (not blood pressure cuffs, thermometers, patient gowns, soap) Is the item not basically stock (bulk) supply in the billed setting and the amount or volume used is typically measured or traceable to the individual patient for billing purposes? (not pads, drapes, cotton balls, urinals, bedpans, wipes, irrigation solutions, ice bags, IV tubing, pillows, towels, bed linen, diapers, soap, tourniquet, gauze, prep kits, oxygen masks, and oxygen supplies, syringes)

Medicare Reimbursement • Under OPPS, while supplies are separately billable, they are not separately payable. Payment for supplies is “packaged” to the procedure or visit charge.

• Under IPPS, payment for all supplies provided during an inpatient stay is bundled into DRG reimbursement. Outlier cases are paid at a percentage above a cost threshold.

• Critical Access Hospitals (CAH) are paid on a cost basis for all line items on outpatient claims, including supplies.

• The Medicare Physician Fee Schedule bundles the cost of supplies into the CPT/HCPCS procedure. Pro fee claims generally do not bill supplies separately.

Auditors Mix and Match • Auditors may incorrectly justify hospital claim line item denials on the basis of ➢ Pro fee reimbursement methodology – arguing that supplies are not separately chargeable at all ➢ Misinterpretations of the Provider Reimbursement Manual provisions, identifying items that clearly pass the four question test.

➢ Misinterpretation/misapplication of CPT coding rules

• Auditors have no incentive to be accurate, and every incentive to err on the side of denials, placing the burden on hospitals to defend appropriate charges.

Claim Auditors – Hired Guns • Commercial insurers use third party claim auditors to review encounters with non-contracted facilities, particularly when the insurer is on the hook for billed charges.

• Claim auditors identify and dispute line items charges on the claim detail.

• A portion of the savings for the insurer is paid to the audit firm.

• There is no incentive for the audit firm to pass up any opportunity to deny a line item on the thinnest of pretenses.

Claim Auditors – Hired Guns Non-Par (uncontracted) provider claims and implants are targets

Claim Auditors – Hired Guns http://www.corvel.com/services/health/

Claim Auditors – Hired Guns Supply charges, such as IV tubing, are scrutinized for line item denials, resulting in savings for the insurer

Claim Auditors – Hired Guns Supply charges, such as IV tubing, are scrutinized for line item denials, resulting in savings for the insurer Justification is slippery -- from “Provider Reimbursement Manual” to “CPT Book”

Billable Items in the Mix

Examples of Supply Line Items Denied

Reduce Red Flags • Remove items from the chargemaster which do not meet the four-question test as separately billable supplies; • Avoid red flag terms in the supply description such as pack, tubing, set, kit, tray; • When a supply is always used with a procedure, consider incorporating the cost of the supply into the procedure charge; i.e. contrast injectors for CT studies; • Make your claims for supply charges bullet-proof, but expect trouble and be prepared to dispute denials.

Dispute Improper Denials

Subject: Reference:

Refund request in the amount of $XX Account #

This is to notify you that [Community Hospital] disputes your claim for recovery on the subject account in the amount of $XXX.XX. The amount claimed is wholly inconsistent with the reimbursement methodology applicable to [insert one: hospital outpatient claims/Medicare inpatient prospective payment methodology/Industry standard billing practices/Medicare Provider Reimbursement Manual provisions.]

Dispute Improper Denials “[Community Hospital] will comply with appropriate reimbursement adjustments consistent with [insert reference here].”

“Please be advised that any party attempting to improperly claim reimbursement of federal funds allocated for the care of Medicare beneficiaries is liable for penalties under the False Claims Act.”

Dispute Improper Denials

“Your prompt withdrawal of this inaccurately calculated refund request will serve as evidence that your error was inadvertent and that you intend to fully comply with Medicare regulations.”

“We will vigorously defend our right to correctly calculated reimbursement. Please respond in writing to retract your incorrect refund request at your earliest opportunity.”

Supply Pricing Methodology

Supply Pricing Background • Departments such as materials management develop separate pricing policies when compared to the rest of the organization.

• Supply pricing policies involve the development of distinct formulas.

• Markups generally assign higher multipliers to lower cost items and lower multipliers to higher cost items.

• Industry is moving toward standardization of supply prices across all departments and services.

• This improves compliance issues associated with inconsistent charging practices.

Supply Pricing Recommendations • Use the actual cost basis to create a rational markup schedule.

• Determine cost threshold for items with a low-cost.

• Identify and remove non-billable items from charge master.

• Distinct markup for implants to provide sensitivity to any payer contract terms with carve-out language.

• Fixed add-on or minimum charges to compensate for any departmental resources for handling the supply.

Supply Pricing Fixed Add-On & Minimum Charges Without the use of minimum charges or fixed add-on fees, there are areas in the markup where higher cost items will have a lower patient price.

Supply Pricing Fixed Add-On & Minimum Charges The markup with minimum charges shows a consistent increase in the patient prices as the cost of the item increases.

Supply Revenue Considerations • Many facilities have fallen away from managing supply pricing due to complexities of the system or the inability to link to the Purchase Item Master system.

• Most will apply an across the board pricing increase to supplies year after year causing a disparity in the relationship of cost to patient price.

• Removal of items considered non-billable also causes issues with decreased gross revenue.

• Revenue can be recovered through increasing areas such as room rates, ED Levels, and OR Levels, or by increasing the markup of other supply items.

Medical Supplies - Best Practice

Questions

Contact Information Monica Lelevich Director, Audit Services PARA HealthCare Financial Services Phone: 800-999-3332 ext 221 Email: mlelevich@para-hcfs.com Randi A Brantner, MBA-HA Director, Financial Analytics PARA HealthCare Financial Services Phone: 800-999-3332 ext 215 Email: rbrantner@para-hcfs.com