When a Non-Covered Service Claim Gets Paid

It happens more often than you might expect.

One topic I often speak about is patient notices. Don’t we all love them? We all know no one really reads them until something goes wrong, and then you better be darn certain you did it right.

Recently I discovered something very interesting about one of the outpatient service notices. If you provide an Advance Beneficiary Notice of Non-coverage (ABN) to a Medicare patient for an outpatient service that you have determined does not meet Medicare coverage guidelines and they sign it, agreeing to pay, the billers will place a -GA modifier on the claim – informing the Medicare Administrative Contractor (MAC) that the hospital does not feel this is a covered service, that the patient agreed to pay, and that a signed ABN is on file at the hospital.

Well, it turns out that even with that -GA modifier, over 90 percent of those claims are actually paid by the MAC without any manual review at all.

Really? The provider does not think it is a covered service, the patient agrees to pay the full price for the service, and the MAC still pays it? While there are edits in place to deny claims with -GY and -GZ, indicating that the hospital does not expect payment and the patient will not be held liable, there is no edit for -GA.

First, this seems like a big waste of Medicare Trust Fund money. In 2011, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) audited payments for -GA claims and found that the Centers for Medicare & Medicaid Services (CMS) had paid out over $700 million in such claims; the OIG subsequently told CMS to fix this. But it seems that nothing has been done, at least from my anecdotal information. How can the MACs justify simply paying these claims? Did they do a cost/benefit analysis and determine that it would cost more to perform claim reviews that would be saved?

Yet there are two other sides to this that should be noted. When an ABN is completed, the provider indicates the chargemaster price for the service, and that is what the patient agrees to pay. When the MAC pays it, the hospital gets the Medicare rate for the service, likely a small fraction of the chargemaster rate. So, hospitals are losing money they would have been paid. Sure, chargemaster rates are inflated, as required by CMS regulations, but if the patient agrees, shouldn’t the hospital have the opportunity to collect the payment?

The other issue is an ethical and compliance issue. If the hospital knows that the service is not covered and submits a claim indicating as such, by use of the -GA modifier, and then the claim gets paid without any indication that the claim underwent a manual review, can the provider keep the money? Are they not in receipt of an improper payment? Are they allowed to justify keeping the payment by knowing they properly used the -GA modifier, and therefore they are held harmless – and the MAC would be the one to face consequences for “improperly” paying the claim (if MACs actually faced consequences at all?)

Any compliance officers want to comment? What would you do?

Programming note: Listen when Dr. Ronald Hirsch makes his Monday Rounds live on Monitor Mondays with Chuck Buck, 10 Eastern, and sponsored by R1-RCM.