Defense for Claim Sweeping of “Routine” Supplies

Recently a hospital client asked us to review claims where the supply items had been removed from the claim. In response to the request, we found the health plan had “swept” a few particular revenue centers, claiming these represented “routine supplies.” If you’re in the business office of a hospital I hear your collective screams right now. Yes, you’re not alone in this. This common business practice issue has a defense, that is called a medical claim audit or line item audit.

Important Issues to Consider

Shortly after the claim audit, the health plan and facility used our audit data to begin negotiations for 1.5 million dollars of unpaid claims. A few key questions included:

  • Mode of Audit – asked the health plan to explain the “mode of audit,” or “please explain in high detail the way in which you audited this claim.” This is a question no self-respecting auditor wants to answer because the answer is “we never compared the claim to the record, we never compared the claim to the coding, we simply sweep revenue centers that contain supplies.” This is not an audit and shouldn’t be considered valid.
  • Contract Review – Next, we review the health plans contract with the provider concerning ourselves with details such as contractual exclusions and disallowed items, and for audit related clauses that may have been violated. In the case of the first issue of contractual exclusions may be exhaustive and require a careful review. This is worth the time because you’ll inevitably find discrepancies, between their exclusions and your contract, and their list of actual exclusions. On the second issue of audit clauses most health plans and providers have scant contractual language about audit limitations, so your gains here may be small or none. (See our article on audit contract language.)

For most providers and payers, auditing seems like a burdensome, costly, and time-consuming task, serving only to prevent problems that may never arise. We therefore recommend our clients do “concurrent reviews”. These are internal audits of claims that are less than thirty days old. These allow firms to stay on top of trends and obvious error and the value here can be surprising in terms of the mistakes that creep in. Concurrent reviews can mitigate losses over time that are worth millions in potential losses. In one case we found a $205,000 single line item error in favor of the provider. We generally review the following aggregate content following an audit cycle:

  • Audit Pipeline – Dollars at risk.
  • Concurrent audit overview – Looks at total audited, total overbilled, total underbilled, including unbilled or late charges. These aggregate numbers should include overbilled and underbilled error percentages. In auditing, it is critical to try and reduce audit errors and thereby reduce audit requests. You’re looking for the tipping point where auditing is no longer valuable to the requestor.
  • DRG Validation – These should include all coding related audits.
  • Quality Reviews – Reviews that generally don’t involve a refund request

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In today’s healthcare environment staff on all levels both in patient care and business dealings are overwhelmed by the rigors of their daily work so the thought of audit, analysis, and departmental follow through is daunting at the very least. Self-audits can expose all sorts of issues however such as billing, documentation, and internal department task errors.

Progressive Thinking in Healthcare Management

There are a variety of ways that payers and providers could be performing self-audits. They also include the Occupational Safety and Health Administration (OSHA), corporate compliance, business associate agreements, HIPAA, revenue cycle management and internal restructure and vendors. In the example of our hospital embattled with the payer they look at everything from the slant of ROI. Auditing is often considered a financial drain but, in this case, we recovered one million dollars, which is far more than any fee or salary could account for. Progressive thinking firms understand that the “value” in auditing is in its continued practice.

Routine Care

The perfect place to start to defend Routine Care items is with CMS’ authoritative statement on the subject:

PRM-1 §2202.6 Routine Services.–Inpatient routine services in a hospital or skilled nursing facility generally are those services included in by the provider in a daily service charge–sometimes referred to as the “room and board” charge. Routine services are composed of two board components; (l) general routine services, and (2) special care units (SCU’s), including coronary care units (CCU’s) and Intensive Care Units (ICU’s). Included in routine services are the regular room, dietary and nursing services, minor medical and surgical supplies, medical social services, psychiatric social services, and the use of certain equipment and facilities for which a separate charge is not customarily made.

As with many of CMS rules the final determination of the rule is open for interpretation and in this rule, we’ve highlighted the key adjective here, which is “minor”. In this case, the word “minor” includes every supply item on a bill and the denials clearly show that the “training at this payer for denials is based on a sweep of the revenue center 270 and its sub categories.” To include all supplies, both surgical (when these are often used in an OR and/or procedure room setting) and medical is a gross misinterpretation of the word “minor” and the intention of the rule. Minor means minor like band aids, small dressings, personal items, and such. To even include IV supplies is incorrect in that it infers that all patients routinely receive IV’s which is not the case. While this payer has the right to interpret the rule, the Hospital further has the right to interpret the rule and it is our strong contention that this sweeping interpretation by this payer is a cost saving measure rather than an objective look at the rule.

In his letter posted online at Herb Kuhn, Director Center for Medicare Management responding to a similar issue says the following:

“Medicare does not dictate a provider’s charge structure or how it itemizes charges but does determine whether charges are acceptable for Medicare purposes. A hospital’s fiscal intermediary is the first recourse to discuss specific issues of routinely furnished items and services versus separate charges for additional items and services, both for inpatient general routine room and board services and for services in ancillary departments. However, for ancillary departments, section 2202.8 does not specifically address which items or services are part of the basic “routine” charge and which are charged in addition to the basic charge. Therefore, we do not see an issue in your examples of a hospitals having a basic ancillary department charge for the room with additional charges for other items and services furnished to patients depending upon the procedure, as long as the various charges are reasonably and consistently related to the cost of the services to which they apply and are uniformly applied”.

Determine what’s in the room rate

“So how should a facility’s staff initiate the discussion about what to bill separately? Start by determining and defining what’s included in the room rate. Generally, the room rate includes:

  • Housekeeping and maintenance services
  • Electricity
  • Water
  • Trash and bio-hazard disposal
  • Administrative services

What CMS actually says about billing ancillary procedures.

“When considering what guidance CMS provides regarding billing ancillary procedures, hospitals must understand how CMS defines charges. In §2202.4 of the Provider Reimbursement Manual, CMS states: Charges refer to the regular rates established by the provider for services rendered to both beneficiaries and to other paying patients. Charges should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient. All patients’ charges used in the development of apportionment ratios should be recorded at the gross value; i.e., charges before the application of allowances and discounts deductions. CMS makes it clear in §2203 that although it cannot dictate a facility’s charges or charge structure, it can determine whether the charges are allowable for use in apportioning costs, says Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc., in Danvers, MA. Apportioning refers to how a facility allocates costs between Medicare and non-Medicare patients. Apportioning can be traced back to when CMS reimbursed hospitals based on costs, Hoy says. Even though this is no longer the case, CMS still relies on this guidance to build rates, among other things. “So, they are still concerned about what costs are appropriate to Medicare and what costs are appropriate to other payers,” Hoy says. To qualify for apportioning, facilities should establish a charge structure and apply it uniformly to all patients. The charge structure should be reasonably and consistently related to the costs of the services, Hoy says. “If you have a cost for a service, it should be represented in some reasonable and consistent way somewhere on your claim.” A facility must follow the same method of charge setting regardless of the setting in which the services take place (e.g., inpatient, outpatient, distinct part units, or skilled nursing facility). A facility must also follow that charging practice for Medicare and non-Medicare patients. The consistent application is what makes the costs apportionable, which is the goal, Hoy says. In some instances, facilities may choose to incorporate the cost as part of a routine rate and consider other costs as ancillary. Either way, those charges should relate to costs. If a payer denies the charges, it is not allowing certain costs, Hoy says. As a result, facilities will have an imbalance between costs and charges. That’s because the payer has taken away the charge even though the facility still incurs the costs”

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