The Catastrophic Effect of Natural Disasters on Medicare Audits

Medicare does not provide funding for financial losses.

When natural disasters strike, Medicare and Medicaid audits become less important, and human safety becomes most important. During Hurricane Ian, 16 hospitals were evacuated in Florida alone. Some hospitals and long-term care facilities were without water.

Approximately 8,000 patients were evacuated from 47 nursing homes and 115 assisted living facilities. Seventy-eight nursing homes lost power, and all had to implement emergency plans involving generator power. Did the providers continue to bill during this time?

These natural disasters impact future Medicare and Medicaid audits. Obviously, during natural disasters, a hospital may not be able to maintain adherence to the two-midnight rule or determine whether a patient is in observation status or inpatient. You may be surprised to hear that there are no automatic audit exceptions during a disaster.

The general rule, which has exceptions, is a 30-day extension for records requests. Broadly speaking, Medicare fee-for-service has three sets of potential temporary adjustments that can be made to address an emergency or disaster situation. These include the following: 

1. Applying flexibilities that are already available under normal business rules. This is on an individual basis;
2. Waiver or modification of policy or procedural norms by the Centers for Medicare & Medicaid Services (CMS); and
3. Waiver or modification of certain Medicare requirements pursuant to waiver authority under § 1135 of the Social Security Act. This waiver authority can be invoked by the Secretary of the U.S. Department of Health and Human Services (HHS) in certain circumstances.

These waivers are not automatic.

Section 1135 of the Social Security Act authorizes the HHS Secretary to waive or modify certain Medicare, Medicaid, Children’s Health Insurance Program (CHIP), and Health Insurance Portability and Accountability Act (HIPAA) requirements. Two prerequisites must be met before the Secretary may invoke the § 1135 waiver authority. First, the President must have declared an emergency or disaster, and the Secretary must have declared a Public Health Emergency (PHE).

Waivers authorized by the statute apply to Medicare in the context of the following requirements:

• Conditions of participation or other certification requirements applicable to providers;
• Licensure requirements applicable to physicians and other health professionals;
• Sanctions for violations of certain emergency medical standards under the Emergency Medical Treatment and Labor Act (EMTALA);
• Sanctions relating to physician self-referral limitations (Stark);
• Performance deadlines and timetables (modifiable only; not waivable); and
• Certain payment limitations under the Medicare Advantage (MA) program.

Following a disaster such as Ian, there is no standing authority for CMS to provide special emergency/disaster relief funding in order to compensate providers for lost reimbursement. Congress may appropriate disaster-specific special funding for such, but absent such special appropriation, Medicare does not provide funding for financial losses.

In the context of Medicare audits, providers can obtain extensions to audit requests. Audits will only be suspended on a case-by-case basis, which means it is a subjective standard. Natural disasters are awful, and we probably need more comprehensive audit exceptions.

Programming note: Listen to healthcare attorney Knicole Emanuel’s RAC Report every Monday on Monitor Mondays, 10 Eastern.