Among the questions unresolved by the pause is when physicians’ use of a new exemption to the two-midnight rule will be allowed.


June 7—Following a newly announced “pause” in short-stay claims adjudication by quality improvement organizations (QIOs), claims that have been rejected since October 2015 will be reevaluated, the Centers for Medicare & Medicaid Services (CMS) recently decided.

The “pause”—as CMS referred to the temporary stoppage in an online posting—in QIO audits of payment claims under the two-midnight inpatient admissions policy will last 60 to 90 days.

During the pause, which began May 4, CMS will aim to improve standardization around the QIO review process, retrain QIOs on the two-midnight policy, re-review claims denied by the QIOs, and conduct provider outreach and education.

“CMS took this action in an effort to promote consistent application of the medical review of patient status for short hospital stays,” the agency stated in the post.

Industry advisors said the audit pause had followed complaints from many hospitals that QIOs were not following regulatory requirements to count patient time in observation as part of a stay lasting at least two midnights, which would allow the care provided to qualify for inpatient rates.

“It shows that CMS once again did a poor job of preparing its contractors for a very simple task,” Ronald Hirsch, MD, vice president of regulations and education for Accretive Health, said in an interview.

On Oct. 1, QIOs took over from Medicare administrative contractors (MACs) initial patient status reviews of providers to determine the appropriateness of Part A payment for short stay inpatient hospital claims.

MACs had the same difficulty accounting for patient time in observation when they began enforcing the two-midnight rule, Hirsch said.

CMS did not quantify the feedback it received from providers on the issue.

“They evaluated the process and put a halt to it,” Hirsch said. “I can’t imagine if it was isolated instances that they would have done something this drastic.”

CMS specifically cited “inconsistencies” in QIOs’ application of the two-midnight policy but did not further specify the cause of the delay.

It’s unclear whether those inconsistencies have increased or decreased payment denials, but Emily Evans, a managing director at Hedgeye, noted in an interview that the auditing haul has been larger than expected in the most recent quarter.

The recovery auditor contracting (RAC) program collected $126 million in overpayments in FY16 through the first quarter of 2016, according to a CMS report.

The American Hospital Association said its staff spoke with CMS about hospitals’ concerns about the QIO review process, including the lack of sufficient time to implement education and improvement activities between a first-round audit and second audit request and delayed receipt of review results and educational guidance. Such delays could prevent the hospital from rebilling denied claims under Part B due to the one-year filing limit.

“Is [not] rebilling six readmissions going to break a hospital’s financial year?” Hirsch said about reviews of claims that CMS allowed to stretch back as far as May 2015. “Probably not, but shouldn’t they have every opportunity to get every dollar that they deserve?”

Fresh Eyes

Hirsch hailed the re-review of denied claims as “a chance to have them looked at again with a fresh set of eyes.” However among the unknown elements of the re-reviews is whether they will include up-to-date patient records or re-audit the same records used in QIOs’ first review.

CMS urged hospitals to work with their QIOs to determine whether denied claims have been re-reviewed prior to appealing a denial. If a denied claim was appealed and a re-review by the QIO determined it was denied inappropriately, then the QIO will share its re-review findings with appeals adjudicators for consideration during the appeal process.

CMS anticipates that QIOs will resume audit activities within 60 to 90 days, but the agency will formally advise stakeholders once the pause is lifted.

The pause also has not produced further details on a new exception added Jan. 1, which allowed physicians to use their judgement to approve inpatient admissions of patients likely to be discharged short of two midnights. Anecdotally, some hospitals using that criteria for admission were denied payment before the pause, although “a rare one or two” were approved, Hirsch said.

“Hospitals are still left with this potential exception but no guidance on when they can really use it,” Hirsch said. “It just created a whole other can worms and ample opportunity for denial.”

Restart Outlook

Evans said the expected restart of QIO audits is good timing because it coincides with the expected launch of new RAC contracts.

“We’re getting the decks cleared here so they can restart the RAC contracts and presumably the QIO referral process in 60 to 90 days,” Evans said.

Evans expected the RAC restart to have a relatively lower impact on hospitals because those organizations have significantly lowered their improper payment rate.

“So there’s not as much to do there,” Evans said.

Instead, RACs are expected to focus more on post-acute providers, with a single RAC set to focus exclusively on home health, durable medical equipment, and hospice providers.

Evans noted that RACs obtained no payment recoveries from hospices in 2015.

“Those areas will get a lot more attention than they have before,” Evans said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C. office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, June 07, 2016