CMS Reaffirms the Rights of Non-Contracted Providers

EDITOR’S NOTE: Edward Hu, MD, CHCQM-PHYADV, a past president of the American College of Physician Advisors, also contributed to this article. Dr. Hu and Dr. Banker both participated in a series of meetings with Centers for Medicare & Medicaid Services (CMS) officials, with the end result being the recently issued CMS memo referenced below.

This memo will prove particularly useful for coding and clinical validation denials.

Remember the movie “Groundhog Day?” That has been the story of my work life for much of the past couple of years, trying to fight Medicare Advantage (MA) denials on behalf of a non-contracted provider.

I’ve read the regulations regarding Medicare Advantage (MA). I know how CMS defines “organization determination” and the appeal rights granted when a Medicare Advantage Organization (MAO) issues anything but a fully favorable determination. I know that if a MAO denies a first-level appeal, it is the MAO’s responsibility to forward that case to the Independent Review Entity (IRE) for automatic second-level reconsideration.

But most days, when I awoke, I was greeted to responses from MAOs that read something like, “your payment dispute has been denied, but you may continue to appeal circularly to our delegated review contractor, or within our company itself, until you decide to give up.” That’s if I could even tell when the MAO has denied us – because the first letter we received “wasn’t the actual denial – the actual denial comes when we take the money back on a financial statement – we’re just letting you know, but we won’t let you into our circular dispute process until that happens (but you won’t get another letter.)”

What in the world is a “payment dispute,” and why didn’t I read about it anywhere in the CMS regulations? What was this alternative reality that I was trapped in, where most MAOs seemed to feel my appeals should go, continually getting further and further from the light of day? Not that this happened with every MAO, but even one is one too many.

Almost a year ago, during a visit with some very knowledgeable and senior CMS officials, I and some colleagues finally began to get answers to these questions. What I, my colleagues, and surely countless other non-contracted providers across the country were experiencing was wrong. Just wrong.

Last week, CMS released a memorandum to all MAOs, reminding them of their responsibilities to non-contracted providers that have not signed any agreement to abide by the MAO’s rules. That document addresses many of the issues that I and undoubtedly many others have raised with CMS over the past year. The memo is written with regulatory jargon, so let me break it down in common-speak.

First, if a MAO is denying or recouping part or all of the payment the non-contracted provider asked for, on the basis of almost anything (DRG coding, clinical validation, inpatient level of care, bundling rules, ED facility charges, etc.), then the MAO must issue an appealable organization determination. That communication must explain what issue the MAO was looking at and why they did not agree with the provider, and it must advise the provider of the right to appeal. Basically, the letter must clearly state what is being denied, why, and how to appeal. CMS will not allow remittance advice (a financial statement from the MAO explaining whose care the check covers), with a boilerplate list of appeal addresses on page 35, to count as a denial letter. Furthermore, this should stop the practices of MAO-hired subcontractors issuing “pseudo-denials” that require pseudo-appeals before the MAO considers the denial formalized. As a non-contracted provider, if you receive a letter denying a level of care, removing a diagnosis, or changing the DRG, then that letter must explain the rationale for the denial and inform you of the right to appeal (also called a “reconsideration,” in CMS language).

There is one exception to this first point, and that is actually what CMS refers to as a “payment dispute.” Non-contracted providers must accept as payment in full from the MAO the amount that the provider could have collected if the patient were enrolled in traditional Medicare. However, the IPPS (Inpatient Prospective Payment System) pricing programs are complicated, and MAOs are actually not responsible for some of the unusual items that Traditional Medicare pays for separately – like bad debt, or indirect medical education payments. If the non-contracted provider and the MAO cannot agree on the amount that traditional Medicare would pay for a service, CMS allows the MAO to have an internal dispute pathway to adjudicate that one scenario only.

For instance, say the non-contracted provider and MAO agree that MS-DRG 191 is the proper assignment for an inpatient claim. However, is payment in full $11,512 or $12,087?

Prior to Feb. 1, 2014, CMS actually contracted with C2C Solutions to adjudicate these payment disputes. Thereafter, CMS started allowing MAOs to adjudicate.

Second, CMS reminded MAOs that appeals (reconsiderations) from a non-contracted provider must follow the regulations outlined at 42 CFR §422 Subpart M. Contained therein is a five-step, CMS-granted appeal process that is available to Medicare enrollees in Medicare Advantage, also available to any non-contracted provider that has signed a waiver of liability (WOL). The WOL declares that the non-contracted provider will not bill the enrollee for services, regardless of the outcome of the appeal, and that it is a prerequisite to accessing the appeal rights.

Once a non-contracted provider asks for an appeal and includes a WOL, the MAO is then bound to adjudicate the first-level reconsideration within the timeframes outlined by CMS. If the MAO determines anything but a fully favorable determination to the provider, the MAO must automatically forward its decision and all records used to make that decision to the Independent Review Entity (IRE) for a second-level reconsideration. If the IRE determines for the provider, the MAO is bound by the decision. If the IRE upholds the decision, the provider has the opportunity to escalate the case to the administrative law judge (ALJ) level.

This memo will prove particularly useful for coding and clinical validation denials, which by definition occur retrospectively, and often after the claim was initially paid (most claims must be paid within 30 days by the MAO, setting up a pay-and-chase scenario). Whether coding or clinical validation denials are performed by the MAO itself or by a third-party entity hired by the MAO, the usual points of contention are the selection of the principal diagnosis or the removal of a significant secondary diagnosis, lowering the claim payment amount.

Some MAOs have argued that partial denials are not afforded CMS appeal rights; we now have unequivocal confirmation from CMS that even these partial denials represent organization determinations, and must follow the CMS appeals process. Thus, if unsuccessful after the first level of appeal, your appeal be advanced to the second level. Your arguments regarding clinical validation diagnoses can finally be heard by adjudicators that do not use an MAO’s particular definition of certain clinical diagnoses.

The key to knowing your appeal rights, as a non-contracted provider, is knowing what CMS considers to be an organization determination. This five-part definition can be found at 42 CFR 566(b), and also Section 40.1 of the Parts C & D Determinations & Appeals Guidance. The most relevant part is the MA organization’s (or its delegated entity’s) “refusal to provide or pay for services, in whole or in part, including the type or level of services, that the enrollee believes should be furnished or arranged for by the MA organization.” If the denial you receive fits this description, then you have the right to formally appeal the denial using the CMS pathway.

“CMS also allows MAOs to have an ‘internal payment dispute process’ to adjudicate disagreements about the amount that a non-contracted provider could have collected if the beneficiary were in original Medicare,” Dr. Hu noted. “Non-contracted providers must accept as payment in full the amount they could have collected under original Medicare. They cannot hold out for a penny more. When there is a disagreement about what that amount actually is, that’s when the payment dispute process is in effect. Determining the payment amount is complicated, because MAOs and providers do not have access to the same Pricer programs that the MACs (Medicare Administrative Contractors) do. There can be disagreements on how to treat bad debt, or IME (indirect medical education) payments, or value-based-purchasing adjustments. It’s really complicated.”

Dr. Hu added that he feels that CMS’s memo is something of a game-changer.

“What I believe CMS is now reminding MAOs is that this payment dispute process was never intended to apply to organization determinations, whose issuance must conform to the rules of organization determinations – such as explaining why the review was done, the reason for the decision, and the right to formal CMS reconsideration (appeal),” he said. “CMS is saying that DRG coding downgrades, patient status downgrades, reducing E&M leveling – those are all organization determinations and must follow CMS rules, including the right for appeals to follow the CMS appeal pathway. In many instances, this was not being afforded.”

Indeed, the CMS memo is a welcome clarification of a process that actually is very clearly outlined in the CMS regulations and sub-regulatory guidance, but somehow got lost in translation to actual practice. Kudos to CMS for stepping up and bringing greater clarity to an area that had gotten really confusing.

Now that everyone knows how the process should have worked all along, it is up to all of us – both provider and MAO – to ensure that it does just that.

Programming Note: Listen to Dr. Edward Hu report this story live today during Talk Ten Tuesdays, 10-10:30 a.m. EST.