OIG Report on Medicare Advantage Organization Denials – Are the MAOs Actually Right?

The OIG’s determinations seem to fly in the face of the basic concepts of medical necessity.

The recent report from the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) on Medicare Advantage Organizations (MAO) inappropriate denials has received a lot of attention, both within the medical community and in the lay press. And it is unlikely that a single person who works in healthcare was surprised to see that the OIG found that MAOs commonly denied medically necessary services. (For sake of consistency, I will use MAO, as does the OIG, even though I generally use “MA plan.”)

In most respects, I completely agree with the OIG’s findings, especially in regard to the denial of access to skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs), an area where we have seen payment denials by the OIG itself. But it will come as a surprise to many that I am going to disagree with the OIG’s determinations on some issues, and dare I say it, support the MAOs.

The first “inappropriate” denial with which I disagree was “an 80-year-old who went to the emergency room; the patient had fallen 24 hours before and was unable to get up. Beneficiary was diagnosed with a fracture in the thigh bone (femur).” The OIG’s conclusion was that “The MAO denied the provider’s request for inpatient admission based on internal clinical criteria and stated that the patient did not need an inpatient level of care. The MAO offered a lower level of care: observation. However, our physician panel determined that the patient’s age and health concerns, such as a fall at home and hip fracture, required a higher level of care than an observation stay would have provided” (emphasis added).

While an acute hip fracture should always be admitted as inpatient, based on the two-midnight rule, with an expectation of over two midnights of necessary hospital care and the severity and risk inherent in such an injury, based on every commercially available criteria set, and simply based on common sense, I disagree with the OIG’s statement that the patient “required a higher level of care than an observation stay.” While hospital care may be provided in different statuses, there is no “level of care” difference between observation and inpatient. They are both “hospital level of care.” In the 2014 Inpatient Prospective Payment System (IPPS) Final Rule, the Centers for Medicare & Medicaid Services (CMS) said “we do not refer to ‘level of care’ in guidance regarding hospital inpatient admission decisions.” The patient will receive the exact same level of care, regardless of their admission status. They will occupy a hospital bed, they will have at least daily physician visits, if they have surgery they will go to the operating room, and all of this and more will remain the same, whether their status is inpatient or outpatient.

For a traditional Medicare patient, their admission status is important in that it affects the patient’s ability to access their Part A SNF benefit. But that requirement does not exist for MAOs; the MAOs have the ability to refer a patient for a covered SNF stay without any preceding inpatient admission. Patient out-of-pocket costs may vary, but that is a separate issue, and not related to the care they will receive. Admission status is about hospital and physician payment. It is important, especially since hospitals file shadow claims for MAO patients and get paid supplemental payments from Medicare for inpatients but not outpatients – but it does not affect access to care. In this case, the OIG reviewers were right that inpatient admission was warranted, but for the wrong reason.

I also disagree with a few of their reviews of cases in which prior authorization was not provided for imaging. In these cases, the rationale for overturning the denials included such statements as “further, the applicable NCD does not require that a patient receive an X-ray prior to receiving a CT scan;” “NCD guidelines do not require conservative treatment prior to an MRI,” and “A healthcare coding expert determined that the applicable NCD does not restrict the timing of MRIs based on the size of the lesion.”

While this is true in a totally literal sense, that the NCDs do not state those things, it is also true that there is no NCD specific for the MRIs or CTs for which these denials addressed: CT of the hand, MRI of the hip, and MRI of the adrenal gland. But importantly, both the NCD for CT scans (220.1) and the NCD for MRIs (220.2), which refer to CT and MRI scans in general, explicitly state that the scan must be “reasonable and necessary.” For CT scans, the NCD states that “Diagnostic examinations of the head (head scans) and of other parts of the body (body scans) performed by computerized tomography (CT) scanners are covered if medical and scientific literature and opinion support the effective use of a scan for the condition, and the scan is … reasonable and necessary for the individual patient.” The MRI NCD states that “in addition, the services must be reasonable and necessary for the diagnosis or treatment of the specific patient involved.”

In other words, while the NCDs do not prohibit the imaging to be performed, the lack of prohibition does not automatically mean it is a covered service. For a service to be covered by Medicare, it must be “reasonable and necessary.” While CMS did codify a definition of reasonable and necessary in early 2021, that rule was rescinded later in the year (because of issues unrelated to that definition.) Nonetheless, the Medicare Program Integrity Manual (Chapter 13) continues to define it to include the requirement that the service be “furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member.”

In one case, a patient had fallen five months prior, and the physician ordered an MRI of the hand for continued pain. The MAO denied the request, as a plain X-ray had not been done. While there is validity to the Quality Improvement Organization (QIO) reviewer’s statement that “An X-ray would not be sufficient for this patient, because some hand injuries – such as those involving small bones, muscles, and ligaments in the hand – may not be visible with an X-ray,” and it is true that the NCD does not require a plain X-ray prior to an MRI, in this case, if the plain X-ray did reveal a fracture, it would significantly affect the treatment plan.

In other cases, the MAO denials were overturned based on the timing of the imaging, such as a follow-up MRI of small adrenal gland lesions. Again, while the NCD for MRIs does not specifically address the appropriate interval for follow-up imaging, nor even mention adrenal glands at all, there are “accepted standards of medical practice,” which have been developed by organizations, both public and private, that can guide the decision on how often and under what circumstances imaging is reasonable and necessary.

In fact, on Jan. 1, 2023, pending the end of the COVID-19 public health emergency (PHE), the use of a qualified clinical decision support mechanism that leverages an appropriate use criteria tool prior to performance of most advanced imaging studies will be required, and is currently in use voluntarily. 42 CFR 414.94(b) even defines appropriate use criteria as “only developed or endorsed by national professional medical specialty societies or other provider-led entities, to assist ordering professionals and furnishing professionals in making the most appropriate treatment decision for a specific clinical condition for an individual. To the extent feasible, such criteria must be evidence-based.”

Without access to the medical records, and without knowing the rationale of the MAO’s denial, I cannot debate the appropriateness of these specific denial reversals, as there may be clinical circumstances that warrant deviation from the guidelines. That being said, in my personal opinion, based solely on the information contained in the OIG report, the OIG’s determinations seem to fly in the face of the basic concepts of medical necessity – and CMS’s ongoing adoption of appropriate use criteria.

It pains me to state it, but with the information provided, I am on the side of the Medicare Advantage Organizations here. The MAOs are absolutely permitted to screen requests for services, including imaging, using evidence-based criteria, developed either internally or externally, assuming that there is a mechanism allowing deviations from those criteria based on specific patient characteristics. If the stance that “the NCD does not prohibit/require it” is truly the way the OIG thinks that Medicare should cover services, then CMS has their work cut out for them. They will need to retire their appropriate use criteria initiative, train the myriad of contractors on these new rules, and convey to doctors that the new standard is “Unless an NCD prohibits it, if you order the service, it will be covered.”

I certainly hope there is much more to the story.

Programming Note: Listen to Dr. Ronald Hirsch as he makes his rounds during Monitor Mondays, 10 Eastern and sponsored by R1 RCM.

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Ronald Hirsch, MD, FACP, CHCQM, CHRI

Ronald Hirsch, MD, is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays. The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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