DeKaye Consulting, Inc. Volume V Number 4

October 1999

The Newsletter of

DEKAYE Consulting, Inc.

231 Oakview Avenue
Oceanside, New York 11572
Phone / Fax: (516) 678-2754
E-Mail: ADKCMPA@AOL.COM
URL: http://www.dekaye.com

On Target

Millennium
Countdown

Vital Signs

Measuring Claim Denials

by Allan P. DeKaye, MBA, FHFMA, President & CEO, DEKAYE Consulting, Inc.

"How many denials? Let me count the ways!" Unfortunately, it’s becoming a truism for both physician and hospital providers. Denials come in two varieties: hard and soft. Let’s examine the soft denials first.

Soft Denials

They usually occur because you didn’t "cross your T’s or dot your I’s on the UB-92 or 1500 claim form. They can be corrected, albeit the loss of time associated with the second effort required. However, there is a cash flow loss from the delay in finally securing payment. Not so bad when you consider that more often than not this is a self-inflicted wound, resulting from a "glitch in the system," or a human-type error occurring somewhere in the cash flow cycle. It is generally preventable, or at least identifiable through pre- or post-bill edits (and of course, with somebody to resolve the edit items). This is the essence of a "clean claim," and its bad enough if a payer errs, but provider compounding may only mask the more severe, and harder to resolve "hard" denials.

Hard Denials

Some hard denials occur through provider fault. Failure to obtain pre-certifications and prior approvals can result in automatic denials with no recourse to the patient, if precluded in a managed care or HMO agreement. Similarly, a "fatal" claim error in patient identification or submission within required time frames may prove sufficient to deny payment. So what’s left.

Perhaps the new battleground can best be summed up with this payer’s response to the question, "When will the claim be paid...?" The answer, "It’s under ‘medical review’...." While not a new category, it has become one that is harder to fight, more difficult to win, and one that is seemingly growing with no end in sight, and causing negative financial impacts.

What is "Medical Review"

A claim under medical review has been screened out or targeted much in the same way a tax return may be selected by the IRS for review. One or more criteria elements have been matched against a profile requiring that it be scrutinized before payment is made. All too often, the result is a "challenge" to the claim. Outright denial is one outcome. Other remedies include "carve outs" or "level of care" changes. Bottom line: the provider is paid less--if at all!

Followers of the latest in compliance trends know that "unnecessary care" accounts for as much as 34% of the reported improper claim submissions. For them, this would not come as a surprise. However, the fact that this phenomenon is continuing, and the cottage review industry that it has spawned seems to be tying up a large number of claims in what has become a "subsidiary A/R" devoted to this category of claims.

While some jurisdictions (e.g., New Jersey) have legislatively constructed time frames for the "due process" for appealing and adjudicating claims, others (e.g., New York and Virginia) have instituted fines for payers who fail to provide timely adjudication. In Florida, which has penalized HMO’s who don’t pay for ER claims, it is still incumbent on the provider to realize that they have a problem with "under medical review" claims.

Combating Medical Reviews

In last quarter’s issue of OnTarget, the concept of "Cash Assurance Teams" was introduced as a vehicle to ensure that all denials were accounted for. Now, working with the premise that all medical reviews have been accounted for, the question remains: "Can you overturn a medical denial?" The short answer is "yes," but you can win the battle, and still lose the war.

Preparedness is the first ingredient. This includes having established "clinical pathways" that articulate the type of clinical care that is expected for different conditions seen (generally as inpatients in hospitals, but can also include outpatient or physician office settings). Once these clinical treatment protocols are established, including distribution to, and with buy in from the medical staff, a monitoring process needs to be in place to measure adherence to the plans. If differences do occur, then it is incumbent for the case(s) to be reviewed and discussed with the clinicians to explain the variation. While clinical justification to support to the exception is necessary, the need to recognize the differences in almost a "real time" environment is needed to effectively position the provider against the payer’s review agent.

For some there will be a tendency to "appeal" all denials. This may be a noble cause, but when it comes to defending each one, there may just not be enough resources--not to mention gaining physician support to prepare rebuttals for each case. Perhaps a more effective strategy places a greater analytic burden on the provider to decide which denials are truly inappropriate. In this way, by selecting the truly winnable cases, a more effective "win ratio" (favorably overturned denials) may be attainable. Simply saying, "I appealed 100% of my denials," may be an empty statistic, if your win ratio is only 10%. Bottom line, a more impressive win ratio (say 30%-40%) would yield a higher dollar recovery, even if you only appealed 75% of all denials.

If you are in effect pleading "no contest" on some denials, it is incumbent upon the provider to identify operational and clinical practices that led to these non-refutable denials. If there are more than a few, then there is no doubt a practice pattern that needs to be discerned. Having clinical pathways that aren’t followed, or that aren’t consistent with your area’s medical review criteria, means that you have some corrective actions that need to be taken.

Changing practice patterns are admittedly not easy; but neither is the loss resulting from denied claims. However, if there is a battle to be fought, be prepared with both clear and convincing clinical and administrative arguments. Some providers have reported greater success when the review agent has its "reviewers" on-site. They report that by "seeing" the patient, they are able to plead their cases more effectively. While larger providers may be able to make a bid for these on-site personnel, others should not be dissuaded from asking, especially if you enjoy preferred provider status--or thought to include it as a requirement in your contract agreement. Keep in mind: "the toughest appeal is the next one!" Good luck.

Perspectives And Commentary

Compliance in Crisis: "Auditing the Auditors"

by Allan P. DeKaye, MBA, FHFMA

The recent news accounts that the OIG had found errors with its Medicare contractors and intermediaries regarding claims adjudication and performance reporting raises concerns for both providers and payers. In a scene reminiscent of this summer’s movie remake of "The Thomas Crown Affair," we find the "hero" (or should we say, "main character"--a wealthy businessman turned "art thief") trying to replace the stolen art work in the museum. He successfully returns the art work in a well-orchestrated scheme that has many look-a-likes flooding the museum’s gallery as a diversion, while he succeeds in returning the stolen picture, only to make-off with another. For our "main character," the challenge was in the sport: could he challenge and succeed--in effect beat the system, and then confound it, as well!

Seeing this report of Medicare contractor problems gives us reason to conclude that the incidences of fraud and abuse in healthcare are widespread. The OIG has announced their workplan for the Year 2000, and now the list of targets has grown beyond hospitals, physicians, home health agencies and nursing homes to include medical equipment and supplies, Medicaid Managed Care and Medicare contractor operations. As the list grows, it is becoming clear that the more the OIG spends, the more it saves.

And perhaps unlike the movie, where the "hero" had the resources and wherewithal to correct the errors of the past, our industry is still grappling with effecting the good corporate citizenship delineated in the pages of our compliance plans. We seem to be spending considerable sums to achieve a level of awareness that will afford us protection from bad acts whether deliberate or unintentional. However, the headlines continue to recount the recoupment of vast sums from all types of providers, now even intermediaries and payers. Even the government is having trouble concluding if the industry’s best efforts are truly reducing incidences of abuse. Somehow, we need to make a dent that will show up, in if you will, "statistically significant terms." unless we are to stem the tide, and reverse the seemingly growing negative trends identified by the level of investigations and reviews, we may find ourselves paraphrasing a passage from the Bible:

"...He who troubles his household will inherit (the) wind..." Or a minimum, the wrath of the OIG! (Proverbs 11:29)

: Ask The Expert

by Allan P. DeKaye, MBA, FHFMA

Q: Our IS department seems to have trouble regarding "project prioritization". Their priorities seem to be at odds with our PFS department? Is there any way we can smooth out this problem?

A: Many providers will consider a committee structure to assign priorities. Rankings generally resemble: "High or Must Do" when regulatory requirements or patient care issues are at stake. "Medium or Resource Available" are usually assigned on a cost/benefit basis where operational improvement or savings can be demonstrated. "Low" priorities are not likely to be assigned in a resource scarce environment. You may want to consider having each department budget MIS services. In affect, a departmental budget will be charged to effect changes. That will help "users" request necessary services. It may still be necessary to have committees, but those budgeted funds could also be used to defray or cover the cost of outside programming services

Q: I had heard the term A/R benchmarks before. Where can you find them and what should they be?

A: As a general industry rule, a provider (physicians, hospitals, etc.) should not have more than 25% of its A/R in its > 90 days aging category. Some have argued that anything over "30" days is too much. Generally what I advise clients is to consider your patient financial class mix and aim for the absolute "best" payment time frame scenario.

For example, Medicare will pay a "clean" claim no sooner than "14" days from the receipt date (which when electronically submitted is usually the bill date). Therefore anything > 14 days represents a "target of opportunity." Again, keep in mind that if your fiscal intermediary (FI) pays weekly, you may have to add anywhere up to 7 days (bringing the total to 21 days) for calculation purposes. Similarly Medicaid "holds" vary by state, but providers should use these time frames to target their follow-up--including taking payers to task for violating contractual or regulatory requirements or guidelines, as well as state and federal statutes.

Managed Care payers can be treated the same way. Use the contract payment provisions. Pay particular attention to the preposition in front of the "days" to pay--it can make a difference. But distinguishing payment "...at 30 days...," "within 45 days...," etc., can be used to your advantage in setting up internal follow-up activities and escalation of follow-up to senior levels at the payor or governmental agency.

Although MGMA may have some physician practice specific aging statistics, the HARA (Hospital Accounts Receivable Analysis) Report (Aspen) does provide the requested breakdowns for hospitals. I think you'd find the breakdowns as fairly representative of good industry norms--and they are broken down by percentages so that dollar amounts are not a factor per se. You'll also find several chapters in the "The Patient Accounts Management Handbook" (Aspen Publishers) address the topics of A/R percentages, follow-up, tracking and reporting.

Q: I am wondering if you have much experience with analyzing the dollars adjusted from accounts. For example, we bill everyone the same amount, whether it is Medicare, private pay or commercial carriers. However, I feel uncomfortable about the fact that we bill our assistant surgeon who is a PA at the same rate as our surgeon. The basis is that the carrier is going to cut the charge so why should we cut it ourselves. But, the amount of money that appears in the write off column of our reports is extremely high. Do you have any suggestions, or am I just being extra cautious?

Also, we have a contract that we do not get paid for x-rays. Therefore, any x-rays taken because the doctor needs immediate results vs sending them to the carriers outside facility are written off as well. Is there any consistency regulations that we must bill them when we know we will not be paid?

A: It is appropriate to record all revenue (service rendered) at "gross" or "posted" charges. As a physician practice, you may similarly have usual, customary and reasonable (UCR) fees that are determined for specialists in your area. There may be separate fees established for Assistant Surgeons or PA--but you are best advised to check with your state medical society and Medicare fiscal intermediary for exact ruling and procedures.

From a patient accounting perspective, the full (posted or UCR) charge should be recorded. Any contractual allowance that is agreed to should be posted to the account. This allowance brings the value of the patient's account to the paid amount. While contractual allowances generally reduce the posted charge, it is possible for it to increase the value of the account--but be certain you know the reason should it occur.

Again, regarding x-rays, merely not having a contract doesn't mean it's a write-off. Usually, no insurance payment means the amount due is transferred to the patient's responsibility. The type of allowance taken is important. Write-offs that would otherwise be attributable to a patient may be construed as an "inducement"on your part to attract patients. You could be in violation of federal statutes. See if you have charity requirements in your state; bad debts needs to have genuine collection efforts before they can be taken, too.

A lot here depends on who your payers are, contractual obligations re: billing to patients for non-covered services. Pay particular attention to Medicare beneficiaries, but don't overlook all agreements and state laws and regulations, too.

Q: I have been in the healthcare business for 20 years and have never heard the term"first bill" until today. What is this?

A: First bill refers to the payment you receive from your initial insurance billing. If you receive less than expected, or a pend or denial, your first billing is less effective. Similarly, your ability to collect deductibles and/or co-payments at time of service, and then collect your first insurance bill in full (net of contractuals) is a very positive influence on cash flow and A/R. I find first bill effectiveness to be a good indicator of performance in A/R Management.

Q: We are having problems with our laboratory billing and registration areas especially in the coding. How can we improve this situation?

A: Under normal circumstances, it would be desirable to have HIM trained and credentialed coders involved in the laboratory registration and charge collection processes--especially when the laboratory is responsible for billing payors directly. Physician orders are often missing a diagnosis, and even when present--it may not be a relevant diagnosis for the test(s) being ordered. But there is a shortage of qualified personnel to meet all of these coding demands--especially in high volume outpatient settings.

Merely providing "lists of the top 10 diagnosis codes" to staff unfamiliar with diagnostic and procedural nomenclature can be a risky business. In today's compliance conscious environment, providers would be well advised to combine an educational investment in staff to promote appropriate credentialing, or at a minimum assuring their familiarity with medical terminology and industry rules and regulations concerning appropriateness and medical necessity.

Various software applications can provide editing capability to assist with identifying problem requisitions. Reliance on software alone can be a partial solution. Ordering provider regulatory and operational/procedural awareness is essential to reduce the administrative burden. Consideration of "deferral/rescheduling" of service is also an option to reduce financial and compliance exposure.

Q: How would you handle an insurance company’s attempt at recovering large errant overpayments at one time?

1. Full value recoupment seems adverse, and certainly discussing with a payor the need to make restitution over an agreeable time frame makes sense. Even governmental and commercial payors have long used the "take-back" as a means to recover overpayments, rate adjustments or audit penalties. Although, there are a number of facts that have not been stated that would have a bearing on the outcome. These include:

a. Are all physicians in a geographic area affected, or only those in one practice?

b. You refer to "one of our clients," which suggests that perhaps only your physician clients (in this specialty) were affected.

c. There seems to be a controversy over "correct coding" vs. "when the payor determined that they were paying in error" may be indicative over either party should have realized something was amiss long before the issue exploded.

d. Reference to a specific policy (or lack thereof) suggests that other payors should be examined for how they handle this procedure.

e. Is there a contract or agreement that spells out coverages, payments or dispute resolution--including claim adjustments? There may be provisions in your State to resolve these disputes.

2. If the payor is a governmental payor, then you should be considering if the underlying cause of the dispute could be related to the federal False Claims Act; even non-governmental payors should be reviewed to ensure that nothing or no one ran afoul of the Federal Fraud Act--which can be applied to all payors. Similarly, payors, as well as providers, have found themselves under review for questionable activities in the claims review and payment cycle, too.

3. Was there any correspondence or communication concerning these claims prior to the take-back? The extent of this issue should have a "paper correspondence trail" given the magnitude implied.

While these additional facts may clarify the background, you might consider contacting your State Insurance department, as they have may rules governing these matters. Your local and state medical society (and specialty society) should also be contacted to enlist their support (especially if the problem is widespread).

Q: When do you send a write-off of a file to bad debt?

A: A provider should have a formal procedure specifying both the timing and criteria for an account to be written-off to collection. Many providers will require that an account with "third party" responsibility needs to be rejected, have non-covered services, or residual amounts (e.g., deductibles and co-payments) transferred to the patient's responsibility. Then the account will usually follow a proscribed "dunning" series of letters requesting (and then demanding) payment.

Dunning sequences tend to follow a 30 day cycle (30-60-90). However, since this cycle is now starting after already exhausting the insurance cycle (perhaps as long as 90 days), then it is not surprising, that accounts finally go to collection at 180 days from the service date.

Providers should be considering the following factors:

  1. Need to differentiate between indemnity and HMO/managed care insured patients, since the latter is more likely to have contractual prohibitions against billing the patient;

  2. Consistency in treating Medicare and non-Medicare patients with regard to referrals to collection;

  3. Shortening the overall time frame in which an account stays in an un-paid insurance category before initiating balance transfers to self-pay status;

  4. Following the legal requirements specified in the federal Fair Debt Collection statutes;

  5. Specifying how you would handle "recoveries from bad debt;" and

  6. Differentiating between "bad debt" and "charity care" write-offs.

For additional references, you can contact the American Collectors Association for material on Fair Debt Collection practices. "The Patient Accounts Management Handbook (Aspen, 1997) devotes the following chapters to these and related topics: Chapter 13, Ensuring Cash Flow (Shapiro), Chapter 14, The Self-Paying Patient (Lund), Chapter 15, Following-up on Patient Accounts--Employing New Techniques (Friia) and Chapter 20, Fixing Your Compass: Assessing Your Current Position (Hallowell).

Q: We have a large A/R and would prefer not to outsource. What are our options?

A: You will have limited alternatives to outsourcing your aged > 120 day accounts, and your biggest considerations will be: what financial classes are affected, how many accounts are there (in each class and in total), what is the aggregate dollar value, and in turn the average value per account. Since they've aged to 120+ days, it may be safe to say "all current staff are presently doing other things." You might consider the following:

  1. Form a task force of 3-5 qualified staff drawn from temporary agencies for a limited project. Either use these staff for dedicated follow-up on these accounts, or backfill these staff to more routine tasks to free up more seasoned staff to pursue the aged backlog. (Adjust the staffing according to volume, and don't forget to add supervisory time or supervisor, again depending on volume of open accounts; or

  2. Re-evaluate the overall open follow-up account approach so as to include focus on aged backlog. Here again, there may be a better "game plan" than you are currently following (follow-up by financial class, high to low balances (if there is enough of an account value spread), etc.

  3. Compare the costs of 1 and 2 and again compare to the outsourcing alternative (for which there will be variations). For more information on this subject, you'll find several chapters in "The Patient Accounts Management Handbook" to be useful. Also see our OnTarget newsletter on our web site), July 1996 issue, for an article, "Outsourcing: When is it Time to Let Go?" More customized solutions require a detailed examination and review of trial balances and selected accounts, workflow observation and interviews.

The Contributor's Corner

Home Health Care Update

by Andrew B. Shulman. Manager, Holtz Rubenstein & Co., LLP

The time is now ripe for national and state home health associations, agencies, staff and patients to unite in advocating for relief. Several Interim Payment System (IPS) relief bills in the House of Representatives and the Senate are either pending or perhaps poised for introduction. Despite caution that looms against making wholesale changes in the Medicare reforms enacted under the Balanced Budget Act (BBA) of 1997, the bills do reflect the growing concerns, no doubt, felt in Washington, D.C., and all over regarding the state of the home care industry.

Basically, all legislation that has been introduced would eliminate the automatic 15% reduction in home health reimbursement, and would also establish a period of perhaps up to 5 years for an interest free grace period for the IPS related overpayments.

The IPS effect would be as follows. It has been reported that approximately 15% of Medicare certified agencies closed between the time the 1997 BBA was passed (10/1/97) and January 1999. The total amount of care provided to beneficiaries has decreased, and agencies have been forced to reduce their patient admissions and visits per patient to stay within the payment limits established by the IPS. Many home health agencies (HHA’s) nationwide have no doubt been shouldering a tremendous financial burden that has jeopardized the access of frail and vulnerable Medicare beneficiaries to critically needed home health services. Agencies which have been fortunate enough to continue operating under the reimbursement limits imposed by IPS have done so by lowering their operating costs, reducing staff and overhead costs, as well as hopefully educating staff personnel about specific revenue caps.

In recent weeks, HCFA has published the interim payment system cost limits for FY 2000, and all HHA’s participating in the Medicare and Medicaid programs must collect, encode and book Oasis data as required by the final regulations published in the Federal Register. A mere $0.12/visit was added to the per visit cost limits to presumably cover Oasis collection and reporting costs. On average, per beneficiary caps will show an average increase of 1.7%, while per visit limits will increase from 2%-8%, according to industry officials. In addition, HHA’s will soon be required (effective 10/1/99) to report visits in 15 minute increments. Previous guidelines instructing providers not to report services lasting less than eight (8) minutes should be disregarded. Basically, Congress’ intent for the 15 minute reporting requirement is to capture data that might be useful in the development or future requirement of a home health prospective payment system still mandated for October 1, 2000 implementation.

Finally, questions concerning implementation of policies on proration continue to arise. Home Health proponents are hopeful that proration of per beneficiary caps be assessed only if HHA’s knew or should have known patients were shared by two or more agencies. Industry officials are hopeful policies on proration would not be addressed until after the Y2K issues are resolved.

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URL: http://www.dekaye.com E-Mail: Adkcmpa@aol.com or DKConsult1@aol.com