HFMA comments on the Senate Finance Committee Chairmen’s Audit & Appeal Bill

June 18, 2015  

Chairman Hatch and Ranking Member Wyden
Senate Committee on Finance
Attn. Editorial and Document Section
Rm. SD-219
Dirksen Senate Office Bldg.
Washington, DC 20510-6200  

Re: Open Executive Session to Consider an Original Bill entitled Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015, held June 3, 2015  

Dear Honorable Members,  

The Healthcare Financial Management Association (HFMA) would like to thank the Senate Finance Committee for the opportunity to comment on the Chairman’s Mark of the Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015. HFMA is a professional organization comprising more than 40,000 individuals involved in various aspects of healthcare financial management in hospitals and health systems, physician practices, and health plans. HFMA is committed to helping its members improve the management of healthcare delivery systems, comply with the numerous rules and regulations that govern the industry, and further the principles of administrative simplification.

HFMA would like to commend the Committee’s efforts to put forth solutions to the challenges faced by hospitals and Medicare beneficiaries as a result of the myriad of overlapping recovery audit programs and other well-meaning policies that have had negative unintended consequences. HFMA tentatively supports many of the provisions contained within the Chairman’s Mark. Below please find HFMA’s comments on specific sections of the Chairman’s Mark and related suggestions for improvement.  

Section 1: Increased Resources for the Office of Medicare Hearings and Appeals and the Departmental Appeals Board

Providing additional resources to the Office of Medicare Hearings and Appeals (OMHA) in isolation will not resolve the substantial backlog of appealed claims. In order to resolve the outstanding appeals backlog, the reforms contemplated in the remainder of the Chairman’s Mark (particularly in Sections 9, 11, and 12) need to be fully implemented as discussed and modified below. 

Section 4: Expedite Procedures with No Material Fact in Dispute

The Chairman’s Mark creates a process that allows Administrative Law Judges (ALJs) and Medicare Magistrates (as created in Section 2 of the Mark) to “issue decisions based on the evidence of the record, without holding a hearing when there are no material issues of fact in dispute or the ALJ or the Medicare Magistrate determines there is binding authority that controls the decision in the matter under review.” HFMA supports the use of expedited procedures such as allowing ALJs and Medicare Magistrates to issue a decision based on the evidence of the record; however, we believe that this should only occur at the request of the provider or supplier appellant. 

Further, the Mark would establish a process for an appeal before the ALJ to receive expedited judicial review when “1) the appellant has not requested expedited access to judicial review, 2) there is no material fact in dispute, and 3) neither the ALJ nor the Departmental Appeals Board has the authority to decide the questions of law or regulation relevant to the matter in controversy.” HFMA does not support allowing for expedited access to judicial review unless 1) the provider or supplier appellant specifically requests expedited judicial review and 2) the provider or supplier appellant agrees that there is no material fact in dispute.  

While allowing the ALJs and Medicare Magistrates to decide issues without a hearing or expedite a case for judicial review where there are no material issues of fact in dispute could significantly improve the efficiency of the appeals process, we believe it is more important to safeguard a provider or supplier’s right to due process and a full hearing by having the provider or supplier certify (by requesting one of the expedited processing steps) that there are no material issues of fact in dispute.  

Section 5: Authority to Use Sampling and Extrapolation Methodologies and to Consolidate Appeals for Administrative Efficiency

The Mark allows for a review entity (e.g., a MAC or a QIC); a Medicare Magistrate, as established in section 2; an ALJ, or the Departmental Appeals Board to consolidate multiple pending requests into a single appeal if “1) the individual requests involve one or more common question of fact or law for similar claims submitted by the same individual or entity, 2) the party requests aggregation of claims, 3) the requests for review or appeal were included within a statistical sample during initial review or previous level of appeal, or 4) other circumstances that are identified by the Secretary of HHS prior to the use of consolidation that would promote administrative efficiency.”  

HFMA supports aggregating multiple claims involving a common question of fact only when it is requested by a provider or supplier appellant. While this seems to be the intent of the Mark, it is not clear from the current language. Further, as long as conditions 1, 2 (as clarified in the prior sentence), and 3 are satisfied, we believe the language in the Mark should be strengthened from “allowing” to “requiring” a review entity (as defined in the first sentence of the first paragraph of Section 5) to consolidate pending review requests when it is requested by a provider or supplier appellant.  

Section 8: Improvements to the Office of Medicare Hearings and Appeals

Section 8 of the Mark attempts to improve OMHA by: 

1. Providing ALJs and Medicare Magistrates annual education.
2. Requiring ALJs and Medicare Magistrates to include an explanation in their decisions how, in instances where their finding differs from the QIC, they reached their decision (as amended to the draft during mark-up).
3. Requiring the Secretary of HHS to annually publish via publicly available website appeal outcome statistics by ALJ.
4. Requiring the GAO to conduct a review of OMHA decisions to 1) identify the frequency with which ALJs’ and Medicare Magistrates’ decisions divert from CMS interpretation of Medicare policies, 2) ALJ or Medicare Magistrate decisions vary in the interpretation of similar Medicare policy, and 3) ALJ or Medicare Magistrates fail to apply the applicable Medicare law or policy. The results of this study will be reported to Congress by Jan. 1, 2018.
5. Requiring the Secretary of HHS to implement a process to identify Medicare policies or coverage decisions that, when surrounded by similar facts or circumstances, are most frequently interpreted differently by Medicare review entity contractors (HFMA assumes this use of “review entity” means one or more of the various forms of prepayment reviewer or recovery auditor), Medicare Magistrates, ALJs, or the Departmental Appeals Board. The process will determine whether future clarification or adjustment is necessary.
6. Requiring the Secretary of HHS to determine if specialization by type of appeal and/or mandatory use of clinical experts alongside ALJs would lead to more consistent decisions in cases with similar facts.
7. Creating an alternative dispute resolution or mediation process by which appellants could voluntarily resolve large volumes of pending appeals involving similar issues of law or fact. All claims covered by the settlement would be withdrawn from the request for hearing or review.  

Several of these provisions concern HFMA.  

While there is language in provision 4 (related to the GAO review) asserting the continued independence of the ALJs, there is no reference to the newly created Medicare Magistrates. HFMA believes the newly created magistrates need to be included in this language to ensure the independence of this newly created appeal entity.  

Further, despite the “independence” language included in provision 4, HFMA believes provisions 2-4 (as enumerated above) can’t help but have a chilling effect on the independence of ALJs and Medicare Magistrates. 

Therefore HFMA requests that in Section 8: 

1. Provision 2 be struck from the section.
2. Provision 3 be altered by deleting all references to reporting data for individually identifiable ALJs.
3. Provision 4 be clarified so that the data reported to Congress by the GAO will be aggregated such that it will not identify individual ALJs or Medicare Magistrates. 

HFMA believes making the data discussed in provisions 3 available to the public and 4 available to Congress is necessary to identify Medicare laws and policies that need clarification. However, we believe that specifically singling out specific ALJs would have a particularly chilling effect on their independence.

In regard to provision 5, HFMA generally supports efforts to clarify existing Medicare policy as a key component of administrative simplification. However, we believe that provision 5 must include language stating that newly clarified or adjusted policies are effective from the date they are clarified or adjusted. Without such language, HFMA is deeply concerned that providers and suppliers will be:

1. Disadvantaged if review entities retroactively apply the newly clarified policies to claims that were filed under a different interpretation of the policy and the ALJs or Medicare Magistrates are forced to decide cases under the newly clarified/adjusted interpretation.
2. Subject to fraud and abuse claims that could come about as a result of retroactively applying the “clarified” interpretation to claims fined under a different understanding of the Medicare policy.   

As contemplated in Provision 7, HFMA generally supports the creation of alternative dispute resolution processes. We concur with the Mark that the use of this option must be at the request of the appellant.

Further, HFMA asks that this section be clarified by stating that a neutral third party with experience in Medicare law/policy be assigned to negotiate or mediate the resolution between CMS and the appellant to ensure a process that is fair and consistent for all parties involved. 

Section 9: Review Program Improvements

HFMA generally supports the intent of Section 9’s provisions. However, we have specific comments on several of the paragraphs included in Section 9.  

The second paragraph requires the Secretary of HHS to approve review guidelines and methodologies prior to their use in the review of any claims by Medicare. Further, these guidelines will be made publicly available on the CMS website no less frequently than annually. HFMA supports this step and has called in prior comment letters for CMS to translate Medicare law and its related policy determinations into more tangible clinical guidance. While HFMA believes the Mark is a good step, it must be improved by adding language that guidelines developed by CMS must only take into account information that the admitting/ordering physician had available to him or her at the time the order was written. Continuing to allow review entities to second-guess the clinical decision-making of an ordering physician—using evidence that was not available at the time an order was placed—would continue to unfairly disadvantage providers and suppliers while ensuring that appeals volumes remain high.  

In enumerated paragraph 2, the Mark instructs the Secretary of HHS to develop methods to ensure that there is not unnecessary duplication of review of specific individual claims among the review contractors. While HFMA fully supports this step and has asked for similar in prior comment letters to CMS, we believe the language is not strong enough. Language should be added to the mark forbidding the various review entities (e.g., pre-payment review, recovery auditor) from conducting reviews on the same claim simultaneously. If this occurs, they must be assessed a monetary penalty that escalates with the frequency of violation. We continue to hear from our members that it is not uncommon for a claim that has been denied and recouped by one auditor to be subsequently denied and recouped by a second auditor. When this occurs, it requires significant administrative effort to rectify the double recoupment and refund providers the over-recoupment.  

Enumerated paragraph 8 of the Mark instructs the Secretary of HHS to develop qualification standards to have audits conducted or approved by medical doctors with knowledge of relevant Medicare laws, policies, and program instructions, as appropriate. HFMA strongly supports this provision as we believe that an individual questioning an ordering physician’s clinical judgment should have at least sufficient education and credentialing to place the order in question. 

Enumerated paragraph 9 of the Mark instructs the Secretary of HHS to determine whether additional punitive actions against review entity contractors (HFMA assumes this use of “review entity” means one or more of the various forms of prepayment reviewer or recovery auditor), could be taken, and what, if any, financial incentives or disincentives could be used to promote the accuracy of a review entity’s reviews. HFMA has long held that the incentives in the various recovery audit programs reward auditors for the volume of claims they deny, not the quality/accuracy of their work. HFMA would strongly encourage the addition of language to the Mark that changes the fee structure from a percentage of denied claims to a flat fee structure for recovery auditors (as discussed further in our comments on Section 12). 

The Mark incorporates Senator Carper’s Amendment #1 entitled, “Providing Transparency Through a Medicare Provider Claim Audit Web Portal.” The amendment requires the Secretary of HHS to develop an internet based system for providers and other appropriate entities under review by a Medicare audit or oversight contractor, or that is under review through an ALJ. HFMA strongly supports this amendment and has asked for a similar portal in prior comment letters. We believe that the creation of a portal not only facilitates the elimination of duplicated audits, as discussed in our comments on enumerated paragraph 2, but also will facilitate administrative simplification.  

Hospitals are required to provide recovery auditors with a single point of contact to which all communications related to audits are directed. Despite this, correspondence—particularly correspondence related to appeals—is frequently sent to multiple individuals within a hospital. Not only does this increase the already significant administrative cost providers incur as a result of the program, but it also delays response times, increasing the likelihood of an inappropriate denial. HFMA believes that the website contemplated in Senator Carper’s Amendment #1 should also serve as a conduit for all communications—including appeals correspondence and medical records requests—ensuring that all communication is routed to the appropriate contact at the provider or supplier. 

The Mark incorporates Senator Cardin’s Amendment #1 entitled “Improving Accuracy and Transparency of Federal Reporting of Recovery Auditor (RA) Auditing and Appeals.” The amendment creates a standardized format for calculating appeal overturn rates across all stages in the discussion and appeal process. It also specifies the calculation of the denominator of total audits and appeals so as not to double count audits and appeals that span several years. This methodology would be used in conjunction with Section 12’s requirement to assess the accuracy of review entities’ decisions. HFMA strongly supports developing a standardized methodology to assess the accuracy of review entities’ initial decisions. 

Section 11: Ability to Rebill Inpatient Status Denials

Section 11 of the Mark prohibits recovery auditors from conducting patient status reviews more than six months after the date of service if the claim was submitted within three months of the date of service. It also requires the Secretary to study the impact of shortening the look-back period for other types of recovery auditor audits. HFMA supports the moratorium on patient status reviews six months after the date of service if the claim was filed within three months of the date of service. HFMA also strongly supports expanding this moratorium to other types of audits. 

Further, HFMA strongly encourages the Senate Finance Committee to add language to the Mark that “re-tolls” the timely filing window for claims retrospectively denied by a recovery auditor. While HFMA appreciates efforts to better align the recovery auditor look-back period with timely filing limits, the new policy fails claims that fall outside of the contemplated moratorium. The current draft does not provide sufficient time for hospitals to rebill for Part B services after an unsuccessful appeal. CMS’s policy forces a hospital to, in effect, waive its appeal rights to guarantee some level of payment for medically necessary services.

In addition, language needs to be added to the Mark compelling CMS to allow adjustment billing for certain services under Part B that were initially billed under Part A. CMS continues to exclude the following from rebilling subsequent to a recovery auditor denial:   

• Physical, speech, and occupational therapy
• Observation and related services provided by nurses and other personnel, e.g., therapists, that are furnished to an inpatient  

CMS’s position as articulated in CMS-1455-P is troublesome for several reasons. First, it willfully (and in contradiction of CMS’s own program manuals) overlooks the fact that the excluded services were medically necessary services provided to eligible Medicare beneficiaries. In these cases, hospitals have provided a medically necessary service for which they incurred a cost and should be appropriately reimbursed. CMS’s own manuals support this principle. CMS has stated in the Benefits Policy Manual in Chapter 1, § 10 and Chapter 6, § 10, that Part B payment will be made for hospital services provided if Part A payment is denied.  Further, the Financial Management Manual in Chapter 3, § 170.1 directs contractors to “ascertain whether the beneficiary is entitled to any Part B payment for services in question when the contractor determines that a Part A overpayment has been made.”¹ By ignoring its own administrative pronouncements and refusing to pay for medically necessary services, CMS is further shifting the cost of caring for eligible beneficiaries onto other purchasers of health care.  

Second, as CMS is well aware, the administrative distinction between an inpatient stay and an observation stay (during which many of these services are received) is not supported clinically. In almost all instances, observation patients are admitted to a bed on an inpatient unit and receive care from the same clinical staff as would an inpatient. This administrative distinction between inpatient services and observation was created at a time when it was inconceivable that three years after an admission, a Medicare contractor who has never seen the patient in question and who lacks the prerequisite education and credentialing to make an admission decision could subsequently deny a claim.  

When a retrospective audit denies the inpatient admission but recognizes the medical necessity of other services, the auditor is in essence stating that observation services were appropriate. Yet even in these instances where the place of care, not necessity of the care, is in question, CMS refuses to infer from the admission order that the physician would have ordered observation services had the option for inpatient admission been foreclosed. Again, CMS’s policy directly contradicts its own manual. Chapter 29, § 280.3 of the Claims Processing Manual recognizes that providers are entitled to correct payment for services that are not “covered as billed.”²

Section 12: Incentives and Disincentives for Medicare Contractors, Providers, and Suppliers

The first paragraph of Section 12 of the Mark requires the Secretary of HHS to implement a system that takes denial rates as a percentage of claims audited and the final determination of appeals into account when determining the volume of medical record requests providers or suppliers are subjected to. Providers or suppliers with a “low error” rate over a two-year period would be exempt from audits by recovery auditors and MACs on a post-payment basis for one year. While HFMA supports this provision, we believe it needs to be improved by shortening the measurement period over which a provider must maintain a “low-error” rate to twelve months. We fully support the requirement that the denial rate be calculated such that it includes the final determination of appeals. In order for this “safe harbor” due to a low error rate to be meaningful, HFMA believes that a clearly defined, transparent methodology to calculate denial rates is necessary at the outset. Therefore, we support applying the language in Senator Cardin’s amendment entitled “Improving Accuracy and Transparency of Federal Reporting of Reporting of Recovery Audit (RA) Auditing and Appeals” to the first and third paragraphs in Section 12.  

The third paragraph of Section 12 of the Mark requires the secretary to adjust the number of medical records a review entity (HFMA assumes this use of “review entity” means one or more of the various forms of prepayment reviewer or recovery auditor), can request for review based on an assessment (described in the paragraph 2 of Section 12) of the review entity’s accuracy of reviews. Contractors with an accuracy rate of 95% or more may be eligible to request additional records. Contractors with an accuracy rate of less than 95% may be limited in their ability to request medical records, according to a sliding scale established by the Secretary.  

HFMA believes that under no circumstances should contractors be permitted to request additional records from providers or suppliers beyond the current statutory limit. We strongly support Senator Stabenow’s Amendment #1 entitled, “Strike Contractor Document Collection Language” and believe the language in paragraph one of Section 12 that permits contractors to request additional documentation must be deleted. 

Further, HFMA believes that review entities with accuracy rates of less than 95% should not be allowed to request medical records up to the current statutory limit. HFMA believes that “may” should replace “must” in the fourth sentence of the third paragraph of Section 12. The newly revised sentence should read “Contractors with an accuracy rate of less than 95% must be limited in their ability to request medical records, according to a sliding scale established by the Secretary.”  

The Mark also incorporates Senator Stabenow’s Amendment #2 entitled, “Recovery Auditor Payment Structure.” The amendment directs the Secretary of HHS to recommend to Congress budget-neutral ways to change the recovery audit payment structure from an incentive-based model to a non-incentive based approach. HFMA strongly supports the addition of language to the Mark that attempts to change the recovery auditor fee structure from a percentage of denied claims (more or less a bounty) to a flat fee structure.  

However, we believe this language needs to be strengthened by adding to the Mark a provision instructing the Secretary of HHS to implement penalties (in the form of a reduced recovery percentage) targeted to recovery auditors who have relatively high denial overturn rates. This penalty should take effect immediately and remain in effect until Congress implements a flat fee structure. Further, the language must instruct CMS to not renew the contract of the review entities who have the highest rates of decisions overturned across the various levels of discussion and appeal.

If you have additional questions, you may reach me or Richard Gundling, Vice President of HFMA’s Washington, D.C., office, at (202) 296-2920. The Association and I look forward to working with you.  

Sincerely,

   

Joseph J. Fifer, FHFMA, CPA
President and Chief Executive Officer
Healthcare Financial Management Association  

About HFMA

The Healthcare Financial Management Association (HFMA) provides the resources healthcare organizations need to achieve sound fiscal health in order to provide excellent patient care. With more than 40,000 members, HFMA is the nation’s leading membership organization of healthcare finance executives and leaders. HFMA helps its members achieve results by providing education, analysis, and guidance, and creating practical tools and solutions that optimize financial management. The organization is a respected and innovative thought leader on top trends and challenges facing the healthcare finance industry. From addressing capital access to improved patient care to technology advancement, HFMA is the indispensable resource for healthcare finance.

footnotes

¹ Financial Management Manual (FMM) (CMS Pub. 100-06), ch. 3, § 170.1 (internally referring to the Part B payment policy in BPM (CMS Pub. 100-02), Chapter 6, § 10)

² Claims Processing Manual (CMS Pub. 100-04), ch. 29, § 280.3 (“Claims Where There is Evidence That Items or Services Were Not Furnished or Were Not Furnished as Billed”)