CMS authorizes contractors to deny ‘related’ claims of physicians who are not undergoing review

UPDATE »  Effective March 19, 2014, CMS issued a notice that it was rescinding Transmittal 505 due to the need to clarify CMS’s policy. CMS has indicated that Transmittal 505 will not be replaced at this time. 

The Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services recently issued Transmittal 505 modifying Section 3.2.3 of the Medicare Program Integrity Manual. CMS employs a variety of contractors to process and review Medicare claims, including Medicare Administrative Contractors (MACs), Zone Program Integrity Contractors (ZPICs), Comprehensive Error Rate Testing (CERT) Auditors, and Recovery Auditors. The contractors and auditors review Medicare claims for potential overpayments or, in some instances, underpayments. They are authorized to solicit information from a provider or supplier by issuing an additional documentation request. They will use the documents supplied to determine whether payment of a claim to the provider or supplier under review should be denied.

Authorization to Deny ‘Related’ Claims

claim formCMS has authorized its contractors and auditors to deny “related” claims submitted by another provider or supplier, such as a physician. CMS indicated, “If documentation associated with one claim can be used to validate another claim, those claims may be considered related.” CMS provided the following examples of “related” claims:

  • An inpatient claim and associated documentation is reviewed and determined to be not reasonable and necessary and therefore the physician claim can be determined to be not reasonable and necessary.
  • A diagnostic test claim and associated documentation is reviewed and determined to be not reasonable and necessary and therefore the professional component can be determined to be not reasonable and necessary.

Impact on Physicians and Others

In both examples, CMS has referred to documentation requested from a party other than a physician as justification for denying payment to the physician. In the first, a hospital did not provide adequate documentation to substantiate the inpatient status of the patient. The contractor may rely on the hospital’s inadequate documentation to deny payment to the physician who treated the patient. In the second example, the contractor may rely on the inadequate documentation of a hospital or independent diagnostic testing facility to deny payment to the physician who interprets the test.

In theory, and assuming that the party subject to review (in the examples, a hospital or testing facility) has provided complete documentation, denial of the physician’s related claim would seem appropriate if the physician had been responsible for ordering the improper inpatient admission or unnecessary test.

In practice, however, denial of the physician’s claim may not seem appropriate. The party being audited may neglect or fail to maintain or timely provide complete documentation. The physician may have no idea that the claim is being reviewed and no meaningful opportunity to substantiate the claim until it has already been denied or recouped. Although the physician will have the right to appeal the denied related claim, an appeal will only be successful where the physician is able to document facts that the hospital or testing facility could not. Factors beyond the control of the physician may result in the physician’s inability to be paid for services performed in good faith.

For example, determining inpatient status has clearly been a difficult process for many physicians and hospitals, and the rules are evolving. A retroactive denial of the physician’s claims for incorrectly ordering admission as an inpatient may result in the physician being unable to resubmit claims for the services performed for the patient as an outpatient under timely filing rules.

Furthermore, a physician interpreting a diagnostic test may have no reason to suspect that a different practitioner who ordered the test had an inadequate basis for doing so or that the testing facility failed to secure, maintain or submit adequate documentation.

The contractors and auditors are not directed to deny the related claims; they are simply given authority to deny the related claims. Time will tell how they use that authority.

If you have any questions about healthcare transactions or would like assistance in reviewing or evaluating your compliance risk regarding healthcare transactions, please do not hesitate to contact any of our healthcare industry lawyers.

This alert has been provided for clients and friends of McAfee & Taft A Professional Corporation. It does not provide legal advice, and is not intended to create a lawyer-client relationship. Readers should not act upon information in this alert without seeking professional counsel.