Knowledge Base Article

Hospitals claims are often denied by Medicare reviewers while the associated physicians’ claims receive payment. Hospitals and physicians strive for more complete and thorough documentation to prevent denials but physicians’ claims may never be evaluated based on the documentation even when there is a denial of the hospital claim. Based on a recent CMS manual update this may change and Medicare may be trying to kill two birds with one stone.

CMS has now opened the door for a direct effect on physician claims when hospital claims are denied. CMS had previously issued a transmittal for the denial of “related” claims, but that transmittal was rescinded. On August 8th, CMS released Transmittal 534, CR 8802 addressing claims that are related. This transmittal updates the Medicare Program Integrity manual to allow Medicare Administrative Contractors (MACs) and Zone Program Integrity Contractors (ZPICs) the discretion to deny other “related” claims submitted before or after the claim in question. The transmittal is effective September 8, 2014.

A claim is considered “related” if documentation associated with that claim can be used to validate another claim. The MACs and ZPICs must obtain CMS approval prior to initiating requested “related” claim(s) review. Also, MACs must post the intent to conduct “related” claims review(s) to the website within one month of initiation. Recovery Auditors (RAs or RACs) shall utilize the review approval process outlined in their Statement of Work when performing reviews of “related” claims.

The transmittal only provides one approved example of claims that may be denied as “related”, but reserves the option for future approved “related” claim review situations. The example appears to address one of the most common denials for hospitals – the situation in which an inpatient admission is denied for Part A payment (inpatient setting not medically necessary). The example also offers two options on addressing the physician’s payment in this situation– 1) the physician’s Part B payment could be downgraded from inpatient evaluation and management (E&M) services to outpatient E&M services or 2) the physician services could be denied all together if the documentation does not support the medical necessity of the procedure performed.

The exact wording of the approved example is:

• “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 recoupment will occur for the performing physician’s Part B service.”

It will be interesting to see how this plays out in reality, with the requirements for CMS approval, possible time delays resulting from the approval/notification process, and only one “related” scenario for now. But hospitals and physicians alike need to watch out for those stones.