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Hospitals Say They Spin Wheels With MAC Appeals; Better Odds with ALJs May Change

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.

By Nina Youngstrom, Managing Editor
November 19, 2012Volume 21Issue 41

Some hospitals feel like they are spitting into the wind when it comes to appeals of Medicare administrative contractor (MAC) prepayment denials and recovery audit contractor (RAC) overpayment determinations. MACs may overlook supporting documentation or disregard legitimate arguments for paying claims, some compliance officials say. And perhaps because they are slammed with cases, some MACs and other HHS administrative tribunals are taking longer to act on appeals, and in some cases failing to return underpayments or live up to other requirements.

“The first two levels of appeal are almost a worthless and costly effort,” says Wendy Trout, director of compliance for WellSpan Health in York, Pa. “We might as well just throw those levels of appeal out and go right to the administrative law judge [ALJ]. At least you feel like they read the information and listen — most of the time.”

However, there may be some changes coming to ALJs. In a Nov. 15 report, the HHS Office of Inspector General said that while ALJs overturn a significant number of claims denials in favor of providers, it happens less often when CMS participates in ALJ proceedings. This is partly because CMS “raised concerns about the acceptance of new evidence and the organization of case files,” the report said. OIG said CMS plans to insert itself into the ALJ process more often.

But as it stands, the HHS appeal process seems overburdened, says Colleen Dailey, WellSpan’s clinical coordinator of defense audits. For example, WellSpan is receiving letters from its qualified independent contractor (QIC), the second level of appeal in the HHS chain, saying it can’t meet the 60-day deadline for responding to appeals and therefore WellSpan has the option to jump to the ALJ. But it’s taking a year to get to the ALJ level even though hearings are supposed to be scheduled within 60 days of appealing, says Ft. Lauderdale, Fla., attorney Lester Perling, with Broad and Cassel. “I don’t think [MACs, QICs and ALJs] have the resources to do what they are supposed to do,” he says. “It gets more and more bogged down.” Dailey says at one October hearing, an ALJ expressed frustration with his perception that the MAC and QIC hadn’t even bothered to read the appeals.

Hospitals feel the frustration of preparing elaborate appeals for overwhelmed MAC reviewers. Laura Ehrlich, compliance auditor at Hanover Hospital in Pennsylvania, is concerned by the MAC’s apparent inattention during prepayment reviews for major joint replacement (RMC 9/24/12, p. 1). When the MAC, Novitas Solutions, sends additional documentation requests (ADRs) to the hospital, she gathers the physician and hospital records required to support the medical necessity of knee or hip replacements. At first it seemed like the MAC was satisfied with the hospital’s documentation because most of its joint-replacement claims were paid. But then several denials came. Ehrlich says no “substantive differences” exist between the paid claims and denied claims, but there was no choice but to appeal the latter. The MAC said there were no X-ray reports to show conditions, such as joint-space narrowing or subchondral cysts, that would support the medical necessity of joint replacement. But the MAC was wrong, Ehrlich says; “the X-ray reports did go out.” The MAC has also denied claims that included X-ray reports containing the exact words required by Medicare, such as joint-space narrowing, subchondral cysts, or osteophytes. In another denied case the X-ray report stated spurring, not osteophyte, which leads her to believe that if the X-ray reports were reviewed, they were not reviewed by a clinician because spurring is an osteophyte.

MACs Should Exercise More Care

Preparing appeals takes time, so Ehrlich would like to know it isn’t wasted. “I don’t have a problem with having to prove medical necessity but I wish they would review the medical records and not say something isn’t there if it is,” Ehrlich says. To make it screamingly obvious for the MACs, she is now putting arrow stickers on key documentation submitted for prepayment review and appeals.

WellSpan shares her frustrations. Novitas has denied a number of its appeals of RAC overpayment determinations without responding to the evidence presented, according to Dailey and Sherian Kelley, a defense nurse auditor and clinical documentation specialist. The MAC appeal denials parrot the RAC review results letters. “We don’t think they are reading our appeals,” says Sharon Everhart, a WellSpan nurse auditor.

In one case, the RAC denied a WellSpan MS-DRG claim, saying the patient, who was admitted for abdominal pain, could have been released in 24 hours and therefore should have been treated in an outpatient/observation bed.

WellSpan appealed, but the MAC sided with the RAC in a way that indicated it wasn’t listening, Dailey says. It was maddening because the hospital had first placed the patient in observation, Dailey says.

The patient, a 74-year-old woman, had end-stage renal disease and was on dialysis. She also had a history of chronic obstructive pulmonary disease, coronary artery disease with stents, neuroendocrine tumor metastatic to the liver and pancreas, peripheral vascular disease, transient ischemic attacks, diverticulitis and other problems. After staying in observation for 24 hours, the patient was admitted as an inpatient because she had a complication involving IV fluid administration and her ESRD.

MACs Don’t Always Respond to Specifics

In her appeal to the MAC, Dailey emphasized the problems with the denial, the use of observation and the shift to inpatient care. “If the auditor had read the entire medical record, they would have seen that the physician did precisely as recommended by the auditor…It is apparent that after 24 hours on reassessment, the patient was not ready to be discharged and was therefore safely admitted to inpatient status,” Dailey wrote. “The inpatient admission was medically necessary, appropriate and consistent with the best local and national standards of medical practice.”

But the MAC denial of the appeal appeared to be generic, Dailey says. “The MAC made no mention that the patient was in observation and no mention there was a change in status, so they could not have read it,” she contends.

Dailey described another MAC denial that indicates “they read nothing in my appeal.” The RAC denied WellSpan’s inpatient stay for an 89-year-old woman after transurethreal resection and fulguration of the bladder. The hospital appealed and the appeal was denied, with the MAC stating: “The procedure was completed successfully and without complications….There is no evidence that the plan of treatment could not have been performed in an observation status with an admission to inpatient if the patient’s condition worsened.”

These words boggle Dailey’s mind. The surgery didn’t go as planned. The presence of a large bleeding tumor prevented the anticipated placement of two stents. Although the patient was stable when transferred to the post-acute anesthesia unit, she had difficulty breathing, so the anesthesiologist ordered respiratory treatments, a reduction in IV fluids and Lasix IV, Dailey says. Ultimately she was admitted to an inpatient bed. In WellSpan’s appeal, Dailey spelled out the rationale for upgrading the setting. She wrote, for example, that the patient:

  • Has atrial fibrillation and takes Coumadin to prevent clots, which greatly increased the risk for intraoperative and postoperative bleeding;

  • Has a history of congestive heart failure and is on Lasix twice a day; and

  • Was classified by the anesthesiologist as an American Society of Anesthesiologists (ASA) level of 4, which increases the risk of a prolonged hospitalization, complications and death in older surgery patients, according to the American College of Surgery (Turrentine et al.).

Both of these cases are now on appeal before the QIC.

A CMS spokesperson tells RMC that “CMS requires MACs to conduct fair, thorough and timely reviews for all redetermination appeals. We continually look for ways to improve the administration of the Medicare program, including work performed by all contractors. At the same time, we are responsible for safeguarding Medicare trust funds by working to reduce and eliminate improper payments.”

Three MACs did not respond to requests for comments by RMC’s press time.

Hospitals and attorneys assume many appeal problems are a function of HHS being swamped. “I don’t think MACs have the resources to do what they are expected to do,” Perling says. “MACs are like a speed bump you drive over heading to the ALJs,” he says. Sometimes the QICs surprise him, however, and give appeals their due. But most deadlines “are a joke.” Providers are held to the deadlines but contractors are not. “Florida ALJ cases are getting assigned to California,” Perling says. Providers can skip over exhaustive arguments with MACs to conserve resources, he says, but they have to get all the documentary evidence in to the QIC in order for it to be considered by the ALJ.

MACs Often Parrot RACs

Olympic Medical Center in Port Angeles, Wash., is having similar problems. When it appeals RAC overpayment determinations to its MAC and loses, the MAC “quotes exactly what they quoted in the RAC review results,” says Compliance Specialist Vera Phillips. That’s an indication the MAC, Noridian Administrative Services, didn’t take the appeal seriously, she says. The same thing happens with the RAC discussion period, which lets the hospital present new support for its claim so the RAC can reconsider a denial before setting an appeal in motion. But Phillips says the RAC, HealthDataInsights (HDI), uses the same language — pre and post-discussion period — to deny the claim, which tells her the RAC wasn’t listening.

There are also technical problems that require her vigilance. For example, the MAC still has not credited the hospital for a number of underpayments identified by the MAC, despite Phillips’ repeated requests and numerous phone conversations between her and the RAC Medicare liaison. And the RAC has requested medical records for claims outside the three-year audit look-back period and sent demand letters for underpayments, Phillips says.

Interactions Can Be Very Frustrating

It’s all sort of Kafkaesque. “The MAC cannot stop the invalid demand letter from processing, even though I have a rescinded letter from HDI, until they receive the closure file,” she says. The MAC told her it should take only about 24 hours, but already a week has gone by “and the MAC still does not show it being received in their system. We had to send an offset letter in order to avoid paying interest until both systems can see the same information,” Phillips says, noting how “frustrating” all of this is.

There is also confusion over how to proceed when hospitals appeal cases that were downcoded but the MAC shifts gears to medical necessity and denies the entire claim, says Carol Wise, external audit coordinator at Ephrata Hospital in Pennsylvania. She calls this a “DRG turn,” and while Perling says MACs are allowed to morph coding appeals into medical necessity denials, it has unintended consequences. “It’s a one-two punch,” Wise says. “We are definitely becoming more hesitant to do our DRG appeals. Is it worth risking their throwing them out and then we have to appeal to the QIC over medical necessity?” More than 40% of Ephrata’s coding appeals are DRG turns, Wise says, and the MAC didn’t focus solely on short-stay admissions. “These include four, five and seven-day stays,” she says.

DRG turns raise the question of how hospitals proceed with appeals. Medicare isn’t clear on how to handle dual denials, Wise says. The demand letter for the balance of the inpatient stay says the medical-necessity appeal should go back to the MAC. “I know some providers split the appeals, taking medical necessity to the MAC and the DRG change to the QIC. Novitas told me to take them both to the QIC,” which would mean losing a level of appeal for medical necessity, Wise says.

View the OIG report at http://go.usa.gov/YhP4

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

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