BY MICHAEL J. MCLAFFERTY CPA, MBA, CHFP, FACMPE
DIRECTOR, HEALTHCARE

The MMA is an important piece of legislation beyond the media coverage of prescription drug coverage for seniors. This act also contains provisions that include a new managed care program, provider reimbursement changes, coverage of preventive screening tests for certain diagnoses, new coverage timeline determinations, a requirement to contain Medicare costs by increasing deductibles, access to affordable pharmaceuticals and the creation of new health savings accounts.

The following is a brief description of the major provisions of this legislation:

Prescription Drug Coverage
MMAcreates a new voluntary prescription drug benefit under a new Part D of the Social Security Act. Beneficiaries entitled to Part A and enrolled in Pat B, Enrollees in the new Medicare Advantage private fee-for-service plans, and enrollees in Medicare Savings Account plans will be eligible individuals for the prescription drug benefit. Eligible individuals will have access to two prescription drug plans (PDP's). This legislation also provides for a transitional voluntary Medicare prescription drug discount program. The transitional program is scheduled to start six months after the legislation is finalized and continue until January 1, 2006.

The PDP's coverage for eligible individuals is scheduled to start January 1, 2006. Eligible individuals will have the option of standard coverage or alternative coverage. A participating plan can also offer supplemental benefits. Standard coverage will require an annual $250 deductible and coinsurance requirements on a graduated scale. Once an eligible individual spends $3,600 out of their own pocket, additional charges are limited to $5 for generic drugs, and $10 for nonpreferred drugs or 5 percent of the cost for the prescription medication, whichever is greater.

Medicare Advantage
A new Medicare managed care program, called "Medicare Advantage" will replace the current Medicare+Choice program between 2004 and 2010. All managed care plans will be reimbursed at least as high as the rate for traditional fee-for-service (FFS) Medicare. The traditional FFS Medicare rate represents a reimbursement increase for these plans. This reimbursement increase will provide the needed motivation for a number of plans to offer services on a regional and local level.

CMS will establish six demonstration sites in 2010 for a cost adjustment review. This will lead to future reimbursement based on the demographic and health risk of enrollees in the plan. Traditional Medicare FFS will be one of the plans offered to enrollees and will also be paid on the cost adjustment approach.

Provider Reimbursement
Hospitals will receive the full market basket increase in their annual reimbursement rate adjustment for fiscal years 2004 through 2007. Hospitals that do not submit the chosen 10 indicators of quality data will receive .4 percent less of a market basket reimbursement update beginning in fiscal year 2005.

The physician services conversion factor for 2005 and the 2005 fee schedule will not be less than a 1.5 percent increase. The conversion factor increase will be exempt from the budget neutrality adjustment that would have resulted in a negative 4.5 percent reduction in 2005.

Services and payments after January 1, 2004 will include an increase in practice expense relative value units that will include expenses for administering drugs and biologicals. The CPT codes used for administering covered outpatient drugs will be evaluated for potential additions, deletions and/or modifications.

Services furnished on or after January 1, 2004 for certain covered hospital outpatient drugs would be paid based on a percentage of the reference wholesale price for the drug. The reference wholesale price is the average wholesale price for the drug as of May 1, 2003.

Coverage Determinations
Medicare coverage has been approved for the following services or determinations:

1. An initial preventive physical examination that is performed no later than six months after the individual's initial coverage date under Part B.
2. Cardiovascular screening blood tests for services furnished on or after January 1, 2005.
3. National coverage determinations must be made within six months when a technology assessment is not required and within nine months when a technology assessment is required.
4. Diabetes screening tests for an individual at risk for diabetes for the purpose of early detection is a covered medical service.

Cost Containment
The Part B deductible will continue to be $100 for 2004, and will increase to $110 in 2005. The deductible will increase in subsequent years at the same rate the Part B premiums increase.

The amount a beneficiary pays for the Part B premium in 2007 will increase based on income. There will be a phase-in over five years that could result in an individual paying 80 percent of the Part B premium. All Medicare beneficiaries currently pay 25 percent of the Part B premium.

Access to Affordable Pharmaceuticals
Individuals will be allowed to purchase prescription drugs from Canadian providers. The purchase from Canadian providers is subject to U.S. government certification that the providers are safe.

Health Savings Accounts
Employees as well as individuals will be able to purchase new Health Savings Accounts (HSA). These accounts are part of high deductible health plans. A typical high deductible plan for an individual has an annual deductible of at least $1,000 and an out-of-pocket expense limit of no more than $5,000. These limits are doubled for family coverage.

HSA will allow workers up to age 65 to make pre-tax contributions up to $2,250 ($4,450 for families) and indexed for inflation to cover healthcare expenses. HSA, unlike flexible spending accounts, will be portable and assets can accumulate. Workers will have the opportunity to use them for tax-free distributions to cover both current and retirement healthcare costs.

BY MAUREEN A. DOHERTY, CPC, CPC-H
SUPERVISOR, HEALTHCARE SERVICES

To prevent fraud and abuse within the Medicare and Medicaid programs, the Office of Inspector General's (OIG) 2004 Work Plan reviews areas for potential investigations. The OIG can levy varying degrees of sanctions for violations, such as program exclusions and monetary penalties arising under the Civil False Claims Act.

In 2003, the OIG excluded 1,241 providers from Medicare for fraud and abuse, convicted 320 for crimes against program rules and penalized 106 in civil actions. False Claims Act civil settlements monetary recovery was $156.7 million.

Listed below are some of the target areas with guidelines to follow:

PHYSICIANS:
Consultations: When billing a consultation, you must have a Request (written or verbal) from another physician; the service is Rendered to the patient; and a Report must be sent back to the referring physician. New patient visits and Counseling/Coordination of Care visits that do not follow the 3 R's of a consultation should be billed accordingly.

High Level Evaluation and Management (E&M) Services: The OIG will assess the adequacy of controls to identify physicians with aberrant coding patterns, specifically coding disproportionately high volumes of high-level E&M codes that result in greater Medicare reimbursement. In 2001, Medicare paid $23 billion in E&M services.

Documentation must always support the Evaluation and Management code that is being billed. It is also important to review the utilization of codes billed for your practice against other practices of your specialty.

Use of Modifier -25: If a patient's condition requires a significant, separately identifiable E/M service above and beyond the other service provided or beyond the usual preoperative and postoperative care associated with the procedure performed, a 25 modifier can be utilized. If the E/M service is prompted by the symptom or condition for which the procedure and/or service was provided, a different diagnosis is not required for reporting the E/M service on the same date.

Use of Modifiers with National Correct Coding Initiative Edits: The CCI edits were designed to provide Medicare Part B carriers with code pair edits for use in reviewing claims. A provider may use modifier 59 (Distinct Procedural Service) to allow payment for both services within the code pair.

If the procedure is for a different session or patient encounter, different procedure or surgery, different site or organ system, separate incision/excision, separate lesion, or separate injury, a 59 modifier may be used. Documentation in the patient's record must support this information.

In 2001, Medicare paid $565 million to providers using the 59 modifier.

Place of Service Errors: The OIG will determine whether physicians properly coded the place of service on claims for services provided in ambulatory surgical centers and hospital outpatient departments. Higher payments are made for physician office services.

Care Plan Oversight: Reimbursement for care plan oversight increased from $15 million in 2000 to $41 million in 2001.

Document in the patient record whether the home health care plan was appropriate or if the proposed care plan needs to be modified to better meet the beneficiary's need. Keep a copy of the approved care plan in the patient's record and be prepared to provide supporting documentation if requested.

Billing for Diagnostic Tests: The medical necessity of diagnostic tests such as nerve conduction studies performed by physicians is under review. Nerve conduction study payments increased from $136 million in 2000 to $186 million in 2001.

Radiation Therapy Services:
The professional component of radiation therapy management is to be reimbursed as one billable unit of service for every five sessions of treatment.

Services and Supplies Incident to Physicians' Services: Direct supervision must be followed (a physician must be present in the office suite) in order to bill "Incident-to" and to be reimbursed 100% of the Medicare physician fee schedule.

HOSPITALS:
Consecutive Inpatient Stays: The OIG will review Medicare beneficiaries that received acute and postacute care through sequential stays at different hospitals. Payments may be denied when one or multiple stays constitute an attempt to circumvent the prospective payment system (PPS). Claims will be analyzed to identify questionable patterns of inpatient and long-term care.

Medical Necessity of Inpatient Psychiatric and Inpatient Rehab Facility Stays: Both inpatient psychiatric and inpatient rehab facility stays are being reviewed for medical necessity or coverage issues.

Medical reviews of outpatient psychiatric services provided by prospective payment hospitals and specialty psychiatric hospitals found very high rates of unsupportable or unallowable services.

Admission and discharge assessments for inpatient rehab must be entered and transmitted within defined time limits or payment is reduced.

Diagnosis-Related Group Coding: The OIG will review some acute hospitals that exhibit aberrant DRG coding patterns that increase reimbursement from Medicare. Some DRG's that have been reviewed for upcoding are 416 (Septicemia); 079 (Respiratory infections and inflammations); 475 (Respiratory system diagnosis with ventilator support) and 014 (Specific cerebrovascular disorders except TIA's).

Coronary Artery Stents: Medical necessity and supporting documentation will be reviewed for both inpatient and outpatient arterial stent implantations. Claims will also be reviewed for stent implantations that were performed during multiple surgical procedures to determine if they should have been performed simultaneously.

Diagnostic Testing in Emergency Rooms: Diagnostic testing such as x-rays, MRI's and CAT scans will be reviewed for medical necessity and if the testing coincided with the patient's treatment.

The additional target areas of the OIG Work Plan can be reviewed on their website, http://oig.hhs.gov/publications/workplan.html.

ARE YOU IN A STATE OF DENIAL?

BY LEWIS D. BIVONA CPA
MANAGER, HEALTHCARE SERVICES

Many providers believe that they are being paid correctly until a situation develops such as a reduction in cash flow due to a number of claim denials. We have recently seen medical necessity denials become more prevalent in the marketplace. Don't let reality slap you in the face. Confront your problems by asking for assistance. Some of the best hospitals and largest medical practices in the country have faced the same issues you have encountered. Knowing that, they have consulted specialists that have stabilized their business and set them on to the road to recovery.

Payment denials are best combated through knowledge and, as we all know, knowledge is power. We have helped clients both large and small through the following activities:

• Educating your patient billing, scheduling and collection staff on all relevant laws and regulations regarding payment for healthcare services. A key outcome from educational efforts is staff empowerment to take on insurers’ denials by knowing their “payment rights.”
• Digesting contracts into understandable terms to ensure that your staff is knowledgeable in all of the provisions of your payer contracts. Many administrative and/or medical denials can be nipped in the bud through strict compliance with payer protocols.
• Teaching staff how to enforce payer compliance by developing follow up tools that will track key patient and insurer data elements, correspondence, and other communications. Accuracy of records will assist your staff in leveraging their newly found knowledge of “payment rights.”
• Developing strong contracting philosophy for you business and supplying you with guidelines and tools to extract the best concessions from payers. Many providers have found that once their contracts have been “straightened out”, denials become less of an issue for them.

Another way to increase the effectiveness of your denial strategy is to make full use of the State law pertaining to Independent Utilization Review Organizations (IURO) oversight of managed care plan denials. The Health Care Quality Act that was enacted in 1997 gave New Jersey residents many important consumer rights. One of the most important was the right to appeal denials to an independent organization for binding arbitration when an HMO or other managed care plan denies, limits or terminates a covered service on the grounds that it is not medically necessary. Providers, with the approval of the insured, have expedited the process by assisting consumers with providing the necessary documentation to the IURO. Below you will find an excerpt from the Department of Senior Services data on the percentages of overturned/affirmed claims denials since inception of the program in 1997 by payor:

	IURO	IURO
HMO Product	For Patient	For Plan
Aetna/USHC	49%	51%
Amerihealth	46%	54%
Oxford	46%	54%
HealthNet	45%	55%
HMO Blue (HHNJ)	45%	55%
Non-HMO Product
Aetna/USHC	75%	25%
Amerihealth	60%	40%
CIGNA	60%	40%
HMO Blue (HHNJ)	50%	50%
HealthNet	43%	57%

Combining process enhancements with the use of regulatory remedies can yield great results for your organization. Although the process is complex, we have helped many beleaguered healthcare providers implement solutions that make sense. Remember - admitting you have a problem and seeking help is the best path towards fiscal health!