The Return of “Reach-Thru Denials” – CMS Transmittal 534

“Reach-Thru” or “Shadow” Denials

You Can’t See Them Coming

Who's in Your Pocket?

Who’s in Your Pocket?

CMS Transmittal 505, issued February 5, 2014 and effective March 6, 2014, modified Section 3.2.3 of the Medicare Program Integrity Manual, to authorize all their various contractors who process and review Medicare claims – including Medicare Administrative Contractors (MACs), Zone Program Integrity Contractors (ZPICs), Comprehensive Error Rate Testing (CERT) Auditors, and Recovery Auditors (RACs) – to deny “related” claims submitted by another provider or supplier, such as a physician. CMS proclaimed, If documentation associated with one claim can be used to validate another claim, those claims may be considered related.

Essentially, this gave CMS auditors the authority to deny a claim for professional services based solely on the auditor’s conclusion that the related inpatient claim or diagnostic test claim was not reasonable and necessary.

The Denials are Denied

So, even the Denials can be Denied. Just not for long. So... who does their appeals?

So, even the Denials can be Denied. Just not for long.

A mere six weeks later, on March 19, 2014, CMS rescinded Transmittal 505, stating that this was being done “…due to the need to clarify CMS’s policy and will not be replaced at this time.”

The news of 505 was greeted with mixed reviews, and tons of questions. The biggest question was about how far down the line would the contractors go to deny these so-called related claims? Would a physician who merely interpreted a diagnostic test be denied payment, even though they had no way of knowing if the originator of the test had an appropriate claim? Or would anesthesiologists get denied when the hospital got denied? Where would the line be drawn? Who would police the line? Certainly someone would need to police the RACs or they would deny everything in sight, right?

My two favorite articles on the subject of Transmittal 505 were written by two physicians who are frequent listeners and contributors on Finally Friday! – Dr. Ron Hirsch and Dr. Steve Meyerson, both of Accretive PAS.

Dr. Hirsch’s article appeared in RAC Monitor on March 20, 2014; and Dr. Meyerson’s article was in Accretive’s PAS Update for April 2014. I recommend them both.

The demise of 505 left everyone waiting for the other shoe to drop: what would it look like when it returned?

Well, now we know. 505 is resurrected as 534.

Everthing is Related, After All


Perhaps the artist is alive and well, on CMS payroll?

CMS Transmittal 534, issued August 8, 2014 and effective September 8, 2014, modified Section 3.2.3 of the Medicare Program Integrity Manual, to authorize – not all the contractors this time – the Medicare Administrative Contractors (MACs) and the Zone Program Integrity Contractors (ZPICs) to deny “related” claims submitted by another provider or supplier, such as a physician, before or after the claim in question.

In this new policy, CMS now calls for the MAC and ZPIC to get prior approval from CMS before they can perform “related” claim(s) review. That seems a bit more conservative than the last version, yes?

Here’s another difference: the examples provided by CMS are… sketchy.

Typical CMS Clarity


Per their usual demeanor, they have a hard time hitting the target, much less the bullseye.

In Transmittal 505, CMS provided two examples of “related” claims, but this time, in 534, they only provide… well I’m not sure what to call it… it’s a single bullet that seems to have three scenarios in it:

The MAC performs post-payment review/recoupment of the admitting physician’s and /or surgeon’s Part B services. For services related to inpatient admissions that are denied because they are not appropriate for Part A payment (i.e., services could have been provided as outpatient or observation), the MAC reviews the hospital record and if the physician service was reasonable and necessary the service will be recoded to the appropriate outpatient evaluation and management service. For services where the patient’s history and physical (H&P), physician progress notes or other hospital record documentation does not support the medical necessity for performing the procedure, postpayment [sic] recoupment will occur for the performing physician’s Part B service.

Ok, they did “reserve” one more bullet for “future approved ‘related’ claim review situations.” Let’s hope they are better written.

Another difference from 505 can be noted: while I cannot find an original copy of Transmittal 505 now, it seems like 534 has a new twist – physician services that are part of a Part A claim later denied as not appropriate for Part A payment will be recoded by the MAC to an appropriate E&M service code. The question remains how this will really work, and even IF it will work, and what about other codes?

At the end of the day, this may all seem like good news – at least good news for hospitals, assuming the experience of hospitals in Florida can be taken as predictive – see Dr. Meyerson’s nice report (in his article mentioned above) on what happened with First Coast Service Options (FCSO) became the first MAC to implement prepayment reviews of some specific DRGs in 2011, and later began doing post-payment review and recoupments of admitting physician’s and/or surgeon’s Part B services in 2012. Evidently, physicians – orthopedic surgeons in particular – started asking hospitals for help in learning what to put into their documentation, to survive these audits.

And really, since the physician whose bill is in question was likely the one responsible for ordering the inpatient admission and/or the relevant test(s), it would seem to make sense that the physician should share in the accountability – so denial of their payment makes sense – from a certain point of view.

(Star Wars fans may recognize the phrase “…from a certain point of view…” but I remind them that both the good guy, Jedi Obi-wan, and the bad guy, Emperor Palpatine, delivered that line as a caveat/justification for their actions. Sauce for the goose, perhaps?)

We’re All in this Together

Ok, so we're all here, but exactly where are we, anyway?

Ok, so we’re all here, but exactly where are we, anyway?

Nevertheless, it is also *possible* that the party being audited did in fact neglect, or failed to maintain or provide in timely fashion, complete documentation, even if the physician did indeed provide timely and appropriate documentation. The physician, then, may have no idea that the claim is being reviewed, and therefore no opportunity to defend the claim until it has already been denied and/or recouped. Yes, the physician will have the right to appeal the denied related claim, but this will only work – to garner a favorable decision and overturn the denial – when the physician can produce documentation/facts which the hospital or testing facility could not produce. So, factors beyond the control of the physician may deny their payment for services performed in good faith.

If that seems unfair to physicians, consider that the same could be said about what has already been happening to hospitals for years – factors beyond their control (physician documentation that survives audit/review by showing appropriate medical necessity) have been responsible for a huge percentage of the dollars denied by RACs, since 2008.

All of this puts physicians in the same boat as the hospitals: RACs have a 3-year look-back window, so they can issue a retroactive denial of a physician’s claims found to be “related” to an “incorrect” inpatient admission, and like the hospital, the physician will be unable to rebill the claims at all, due to the timely filing rules.

We’re Still in “Hurry Up and Wait” Mode

It's our normal corner and signpost.

It’s our normal corner and signpost.

Transmittal 534 rule gave MAC and ZPIC auditors the authority to deny the related claims, but did not instruct them to in fact deny related claims. So it remains to be seen what they will in reality do with this new-found authority.

And the transmittal at least hints at future RAC activity, too. So. We wait.

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