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AIS's Health Business Daily
Featured Story March 9, 2010
Hospitals Grapple With DRG Bundling of Nondiagnostic Services; CMS Policy May Change Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues. By Nina Youngstrom, Managing Editor (nyoungstrom@aispub.com) Hospitals are facing a logistical, compliance and public relations challenge over a longstanding feature of the DRG window unbundling rule because they have been, in a way, too compliant. Fixing the problem may be lucrative, but it also may be a billing and coding nightmare. However, there are hints that CMS may modify the DRG window unbundling rule.
Since the government cracked down on DRG window unbundling in the 1990s, many hospitals have rolled into Medicare inpatient claims all the outpatient services provided during the three days before the patient’s admission. That’s fine for diagnostic services, because bundling them into the DRG has been a no-brainer since the implementation of a 1991 regulation. But the billing rules for outpatient nondiagnostic services provided within three days of admission are trickier. Hospitals should bundle nondiagnostic services into inpatient claims only if there is an exact, five-digit match between the principal diagnosis code for the outpatient services and the principal diagnosis code for the inpatient stay, according to CMS’s 1998 revision to the DRG window unbundling rule.
Many hospitals, however, have bundled everything. And now they are waking up to their noncompliance (or ultra-compliance). “We were bundling all this stuff all these years, and no one said anything,” says the director of patient financial services at one hospital, who asked not to be identified. “It puts another layer of complexity in the whole three-day window rule. I don’t think we have dealt with this before.”
CMS and its Medicare contractors are waking up too, and there are hints that a policy change may be forthcoming. For example, First Coast Service Options, the Florida-based Medicare administrative contractor (MAC), is “currently re-examining this policy and how claims are handled within the CMS standard system,” an official with the MAC tells RMC.
Hospitals find the five-digit match requirement at odds with the real world. In emergency departments (EDs), operating rooms (ORs) and observation beds around the nation, patients are routinely diagnosed with something different from the ultimate diagnosis that precipitates their inpatient admission. For example, when patients come to the ED for chest pain and are admitted, and then it’s determined that they’re having a heart attack, the principal diagnosis codes won’t match (chest pain and myocardial infarction have different ICD-9 diagnosis codes). That means hospitals can unbundle the ED visit from the DRG and collect an APC payment.
Some Hospitals Have Not Billed Separately
But apparently, many hospitals have not been billing separately for nondiagnostic ED, OR and observation services when the principal diagnosis codes don’t match, despite the regulatory requirement. And CMS and its Medicare contractors either went along with the noncompliance or never noticed it.
Some hospitals may not have been aware of the 1998 clarification. And some hospitals felt safer bundling everything after the Department of Justice/HHS Office of Inspector General DRG window unbundling initiative, when hospitals made repayments or settled cases for unbundling diagnostic services from DRGs, says one compliance officer, who asked not to be identified. “We were burnt severely by the enforcement. And we had already implemented [billing] systems at all our hospitals to comply with the regulations before they came out with the [1998] change to the regulation that said you only have to roll in those primary diagnosis codes for the encounter that matched,” says the compliance officer. “There was no way to manage it. So we threw up our hands and said, ‘Screw it.’”
Now it appears that compliance — for both past and future claims — may be rewarding. There is money to be captured by rebilling past claims that have been erroneously bundled, according to the consultants who are hawking their services to hospitals. In fact, consulting firms, including McBee Associates of Wayne, Pa., appear to have gotten everyone hot and bothered about the inappropriate bundling in the first place.
Meanwhile, CMS and Medicare contractors have been asked to shed light on the five-digit match. For now, at least, the answer is yes, hospitals should abide by the diagnosis-code matching requirement — but there seem to be cracks in this stance. And some Medicare contractors aren’t taking the regulation at face value. Mary Hairston, the manager for Medicare audit and reimbursement at National Government Services (NGS), the Medicare administrative contractor for 10 states, asked CMS in an e-mail for clarification of bundling rules in circumstances where ED, OR and observation services morph into inpatient services. “I have been advised that CMS is discussing internally how to handle claims within 72 hours that do not have a break in service,” Hairston said in the November e-mail. In other words, when there is no separation of service — the patient is swept from the ED, observation or OR to the inpatient bed — can the outpatient services be charged to Medicare?
In response, CMS official Valerie Miller cited the relevant policy, which appears in the Medicare Claims Processing Manual, Chapter Three, Section 40.3. “Nondiagnostic outpatient services that are related to a patient’s hospital admission and that are provided by the hospital or by an entity wholly owned or wholly operated by the admitting hospital…to the patient during the 3 days immediately preceding and including the date of the patient’s admission are deemed to be inpatient services and are included in the inpatient payment…we defined nondiagnostic preadmission services as being related to the admission only when there is an exact match (for all digits) between the ICD-9-CM principal diagnosis code assigned for both the preadmission services and the inpatient stay.” The CMS official added that the manual makes no distinction between services that are separated and nonseparated.
Some Medicare contractors’ doubts about the policy are manifesting on the payment side as well. One MAC suspended a few claims submitted by a hospital that is trying to collect reimbursement on outpatient services it had improperly bundled into the DRG. The MAC explained that “we are asking CMS for guidance as to whether or not CMS Pub. 100-4, Chapter 3, Section 40.3 [on the five-digit match] is intended to apply to preadmission services rendered in the emergency room when the Medicare beneficiary is then admitted as an inpatient that was not previously admitted.”
Beware Upcoding Risk as Well
Meanwhile, the jury is still out on how much hospitals will gain from rebilling the claims. But the process is not costing them any money. A number of consulting firms are offering to help hospitals — on a contingency basis — unbundle and rebill outpatient services when their principal diagnosis codes don’t match the inpatient admission’s principal diagnosis codes. One hospital that has used the services of Deloitte Development LLC rebilled from October 2007 through 2008 and is getting ready to work through the unbundled claims for 2009. “We adjusted the inpatient bill and rebilled the outpatient part that did not match so we can be compliant,” a hospital billing manager says. “For the most part, the DRG stays the same, but you get the ED payment.”
However, sometimes the noncompliant bundling may have triggered a higher-paying DRG, which means the hospital will have to repay Medicare. “If you do not pull those outpatient nondiagnostic services out, but rather leave them, along with their associated procedure and/or diagnosis code(s) on the inpatient claim, your facility may be erroneously increasing payment under the inpatient prospective payment system (IPPS) under which acute care hospitals are paid,” NGS said in a December teleconference. If, for example, a patient comes in for outpatient surgery, but complications force an inpatient admission, the DRG may be upgraded to surgical, which pays more than a medical DRG.
RACs and OIG Are Targeting Issue
Because revisiting the five-digit match unbundling issue could uncover upcoding as well as underbilling, the end result may be a wash for hospitals financially, the billing manager says. But it’s a risk worth taking because the consulting firm is paid a percentage based only on the money recovered, she says. Presumably the upcoding angle is why two recovery audit contractors (RACs) — CGI Federal and HealthDataInsights — and OIG are targeting DRG window unbundling.
Going forward, the hospital will unbundle the outpatient services without the matching principal diagnosis codes, so rebilling will be moot. That’s the only route another compliance officer thinks hospitals should take. “Hospitals have missed an opportunity to receive Medicare APC payments for services that don’t have an exact match to the inpatient’s principal diagnosis at discharge, but retrospectively adjusting claims may open another can of worms,” the compliance officer says. The reason: A separate claim for the outpatient service will mean a separate copayment. “CMS may rule that this harms beneficiaries because they have financial liability for an outpatient claim they were totally unaware of,” the compliance officer says.
Now that the unbundling Pandora’s box is open, hospitals have to compare outpatient and inpatient claims for the five-digit ICD-9 principal diagnosis code match. The bottom line: “It requires a new level of analysis,” says Rick Snyder, vice president of finance and information services at the Oklahoma Hospital Assn. “It…will probably require comparing the outpatient documentation with inpatient documentation to see if they have the degree of matching that would make the bundling appropriate.” Bundling may or may not change the DRG assignment, he notes.
Some hospitals are shellshocked by the hassle of it all. “The problem is, when these services are combined, as in an ED visit, the ED visit is never separately coded,” says Mic Sager, compliance officer for Olympic Medical Center in Port Angeles, Wash. If patients are admitted as inpatients from the ED, coders don’t separately code the principal diagnosis of the ED services, which obviously makes it impossible to evaluate whether there is a five-digit inpatient/outpatient match. Sager has worked at four hospitals, and none of them coded ED services as stand-alone services when patients were admitted. “It’s always been just documentation for the inpatient coders,” he says. |
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