New Patient Notification of Observation Status Law and the Extension of Two-Midnight Rule the Enforcement Delay

On August 6, 2015, President Obama signed the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act.  This legislation requires hospitals to provide specific notice to patients who receive outpatient observational services for more than 24 hours.  An AARP report on the growth in the frequency and duration of hospital observation services (OS) by Medicare beneficiaries between 2001 and 2009 found that Medicare claims for OS grew by more than 100 percent, with the greatest increase occurring in cases not leading to an inpatient admission.  The duration of OS visits has also increased dramatically.  Observation service visits lasting 48 hours or longer were the least common, but had the greatest increase—almost 250 percent for outpatient.

According to Medicare guidelines, the use of OS is appropriate when a patient does not meet screening criteria for an acute admission, but requires extended care of eight or more hours.  In general, the guidelines indicate that OS should be used for patients whose condition is expected to be evaluated, treated or significantly improved, usually in less than 24 hours, and should span more than 48 hours only in rare and exceptional cases.  Observation service is not appropriate for preoperative or routine postoperative care following outpatient surgery.  The decision to admit patients to the hospital as inpatients or place them on observation status is ultimately the responsibility of the attending physician, although the hospital may provide guidance.1

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Ten Tips as the Thirty Day Countdown to the ICD-10 Implementation Begins

In last week’s Alert we provided you with the Centers for Medicare and Medicaid Services’ (CMS) most recent Guidance regarding the ICD-10 implementation.  This week we want to provide you with some additional insight and tips on ensuring you are ready for the October 1, 2015 effective date.

Add the email of newly appointed CMS ICD-10 Ombudsman William Rogers, MD, CMS’s Director of the Physicians Regulatory Issues Team, to your contact list.  The creation of an ICD-10 Ombudsman to help receive and triage physician and provider issues was announced by CMS in July.  The Ombudsman’s role is to work closely with representatives in CMS’ regional offices to address physicians’ concerns. Dr. Rogers will work out of an ICD-10 coordination center in Baltimore, Maryland that will be set up at the end of September.  Dr. Rogers can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
 
Check whether your state’s workers compensation division is converting to ICD-10. According to the Workgroup for Electronic Data Interchange (WEDI), a not-for-profit healthcare industry trade group that promotes computerization in healthcare, only 21 states have adopted the October 1, 2015 deadline for switching over their workers' compensation systems to processing physician and hospital inpatient and outpatient claims to ICD-10.  Another four states have pending ICD-10 regulations for workers' compensation claims.  http://wedi.org/knowledge-center/resource-view/resources/2014/11/05/property-and-casualty-icd-10-state-readiness-resource-center
 

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CMS Issues 13 New FAQs Clarifying its Recent ICD-10 Guidance

On July 6, 2015, the Centers for Medicare and Medicaid Services (CMS) and the American Medical Association (AMA) jointly announced efforts to help physicians prepare for the October 1st changeover to ICD-10 diagnosis coding.  The joint announcement indicated that a full year from October 1, 2015, Medicare review contractors will not deny physician claims “based solely on the specificity of the ICD-10 diagnosis code as long as the physician/practitioner used a valid code from the right family.”  Confronted with many requests for a clarification of what constitutes “a valid code from the right family,” CMS issued a longer set of Frequently Asked Questions (FAQs) on July 27, and then revised those FAQs again on July 31.  The short answer is that a “valid” code is one consisting of three to seven characters but “a three-character code is to be used only if it is not further subdivided,” and the right “family” is, as we suspected, CMS-speak for what ICD-9 and ICD-10 call “categories” of codes.

The 13-item FAQs are short enough and important enough for us to include the entire document below:

Clarifying Questions and Answers Related to the July 6, 2015 CMS/AMA Joint Announcement and Guidance Regarding ICD-10 Flexibilities

Question 1:
When will the ICD-10 Ombudsman be in place?

Answer 1:
The Ombudsman will be in place by October 1, 2015.

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The “60-Day Refund Rule” A Federal District Court Defines How Quick is Quick Enough

The “60-Day Refund Rule” is a provision applicable to Medicare and Medicaid overpayments that was added as part of the Affordable Care Act (ACA).  The False Claims Act (FCA), as amended in 2009 by the Fraud Enforcement and Recovery Act (FERA), imposes liability on any person who “knowingly or improperly avoids or decreases an obligation to pay or transmit money or property to the government.”  Pursuant to the ACA, an “obligation” carrying liability under the FCA arises when the recipient of an overpayment fails to “report and return” it to the government within 60-days of the “date on which the overpayment was identified.”1

Unfortunately, the term “identified” is not defined in the statute.  The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule in February of 2012 to clarify for providers that an overpayment is identified if a provider either actually knows of the overpayment or “acts in reckless disregard or deliberate ignorance of the overpayment.”  The proposed rule has yet to be finalized and CMS in February of 2015 announced its delay for one more year due to the “complexity of the rule and scope of comments.”2

In its August 3, 2015 decision, the U.S. District Court for the Southern District of New York issued the first decision directly addressing when an overpayment is “identified” for purposes of starting the 60-day repayment clock under the federal FCA.  In denying the defendants’ motions to dismiss the government’s complaint in United States ex rel. Kane v. Healthfirst, Inc., et al., the court held that a provider “identifies” an overpayment when it is alerted to a potential overpayment, thus giving 60 days to complete an investigation into whether an actual overpayment exists and repay any funds to the government.3

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Merger and Acquisition Mania Requires Scrutiny

Hospitals merge with other hospitals.

Insurance companies are acquiring hospitals.

Hospitals are buying, or creating, their own insurance companies.

Insurance companies are acquiring other insurance companies.

Twenty-five years ago you could still find small community hospitals with local businessmen and prominent physicians sitting on their Boards of Directors.  Larger metropolitan cities could have up to fourteen or more hospitals.  Those “good old days” of local or neighborhood control of the healthcare delivery system are sweet memories to some and “good riddance” to others.  Mergers and acquisitions have altered the healthcare delivery system through the growth of multi-institutional not-for-profit hospitals and the significant expansion of investor owned for-profit organizations.  Consolidation within the healthcare delivery system is viewed as a quick way to achieve efficiencies and reduce the cost of care.  In the bygone period before the cost of healthcare became every politician’s go to stump speech, health insurance and healthcare delivery were separate businesses that often found themselves as adversaries in negotiations over prices.

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Security Standards Challenges are Universal

Last week National Security Agency (NSA) contractor Edward Snowden was back in the news when the White House officially responded to a petition requesting the Obama administration pardon Mr. Snowden for revealing widespread government surveillance on millions of Americans.  Instead of constructively addressing these issues, “Mr. Snowden's dangerous decision to steal and disclose classified information had severe consequences for the security of our country and the people who work day in and day out to protect it,” the White House response reads.1  The official response recommends that rather than disclose sensitive information to the press, Mr. Snowden should have taken the issue up with the proper U.S. government channels:  “Challenge it, speak out, and engage in a constructive act of protest.”

In the same week, the Office of the Inspector General of the Intelligence Community (IC IG) sent a congressional notification to intelligence oversight committees updating them of the IC IG support to the State Department recently released memo that former Secretary of State Hillary Clinton sent emails with classified information in them through her private email account without marking them as classified.  The inspector general found that a sample of Clinton's emails contains information that was classified "when they were generated," which therefore "should never have been transmitted via an unclassified personal system."  The IC IG found four emails containing classified IC-derived information in a limited sample of 40 emails of the 30,000 emails provided by former Secretary Clinton.2

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Doctors Dealing with the High-Deductible Dilemma

Hospitals and physician groups are carefully watching the growing popularity of high-deductible health plans (HDHP) which result in patients taking on more of a financial responsibility for their healthcare.  HDHPs and health savings accounts (HSA) are meant to incentivize consumers to manage the costs of their healthcare.  For 2015, the Internal Revenue Service’s definition of high-deductible is $1,300 for an individual and $2,600 for a family. Maximum out-of-pocket expenditures are $6,450 and $12,900 for individuals and families, respectively.  Many, but not all, HDHPs include preventive care such as annual physicals or immunizations, as a no-cost benefit.

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A Busy Breaking News Week for Physicians

A few weeks ago, the healthcare industry, along with most Americans, was waiting for breaking news from the Supreme Court regarding the Affordable Care Act (ACA) and several other pending decisions. Since then, the Centers for Medicare and Medicaid Services (CMS) has been rolling out press releases faster than ever. Some of the breaking news like the recent compromise with the American Medical Association (AMA) on ICD-10 is final (or as final as CMS has ever been regarding anything dealing with ICD-10), whereas other announcements concern proposed rule changes. CMS rolled out several significant test balloons in the 800-page Proposed 2016 Medicare Physician Payment and Fee Schedule Rule. These include:

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Modify, Not Eliminate, 2-Midnight Rule

The 2-midnight rule was effective October 1, 2013 and from the start it was contentious. The Centers for Medicare and Medicaid Services (CMS) has over the past few years attempted to explain, clarify and respond to the ongoing assault from the American Hospital Association (AHA) to eliminate the policy. A week before it was adopted, Rich Umbdenstock, President and CEO, AHA called the regulation fundamentally flawed.1 In the ensuing months, the AHA filed a lawsuit. The CMS offered various settlements and postponement of enforcing the rule.

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Two Significant Healthcare Laws Celebrate Anniversaries Despite Their Initial and Ongoing Adversaries

Before Medicare was law, many uninsured seniors lived under the fear of bankruptcy if they became ill and needed expensive medical service. When the Medicare bill was being debated, the usual conservative pundits argued that Medicare would ruin our “wonderful medical service.” A future President and strong conservative, Ronald Reagan lent his voice to an 11-minute record album called “Ronald Reagan Speaks out against Socialized Medicine.” It delivered a strong warning against the dangers of government involvement in health care. “One of the traditional methods of imposing statism or socialism on a people has been by way of medicine,” Reagan says. “It’s very easy to disguise a medical program as a humanitarian project.” He calls on those listening to his record to contact their Congressman and oppose the legislation. 1 Some swore that Medicare would be the end of good patient care. Today, the nation’s seniors, most politicians and even providers praise Medicare coverage. Seniors hope for expanded services to cover other medical and dental needs. They are aware of the low administrative costs and excellent care that they receive under Medicare.

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GAO Report Identifies Vulnerabilities in CMS’s Enrollment Process

To enroll in Medicare, providers and suppliers must use the Provider Enrollment, Chain and Ownership System (PECOS).  According to CMS, as of December 31, 2014, there were about 1.8 million healthcare providers and suppliers enrolled in PECOS and, in fiscal year 2014, Medicare paid $554 billion for healthcare and related services.1  Moreover, CMS estimates that roughly 10 percent of the monies paid were paid improperly.  Because of such high expenditures and potential for improper payments, the government is continuously looking closely at the program to minimize opportunities for fraud, waste and abuse.  As such, it should come as no surprise that the Government Accountability Office’s (GAO) recent June 2015 report:  Additional Actions Needed to Improve Eligibility Verification of Providers and Suppliers (http://www.gao.gov/products/GAO-15-448) (Report), has identified some areas of vulnerability in the CMS enrollment processes that could be contributing to the 10 percent of improper payments.

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