Using an Improvement Standard to Deny Claims - Part 1 - DoctorsManagement Using an Improvement Standard to Deny Claims - Part 1 - DoctorsManagement

Using an Improvement Standard to Deny Claims, Part 1

“Another Illegal and Unfair Tactic by Some at Payors”

by Sean Weiss, Partner & VP of Compliance

In my work, I frequently run into situations where some at the payors are blatantly ignoring rulings by the courts as well as CMS published guidance, which clearly tells claims processors/adjudicators what is and is not appropriate with regard to claims processing. Additionally, I run into this same situation more with auditors both at the MAC and contractor level, which again is frustrating for so many reasons. The costs of running a medical practice have continued to soar over the past decade while reimbursements have either remained stagnant or declined. Couple this with the added headaches of unfair/improper denials, lack of integrity on the part of payors for processing clean claims accordingly, and post-payment reviews whereby the only goal of the auditor is to find fault with the provider no matter how minor and demand monies back and you have a situation so lopsided you wonder why anyone would participate with insurance. Typically, in my writings I try to remain impartial and not demonize those at the insurance companies because the truth is, they do not need my help since they do such a good job of that on their own. But, to be fair, there are some great folks at the insurance companies willing to do the necessary work with providers to ensure fairness. And those are wonderful people to know.

In 2018, I was a part of several cases regarding home health agencies and rehabilitation centers whereby they rendered skilled services for those unable to properly care for themselves or maintain appropriate Activities of Daily Living (ADLs) levels. One case stands out in my mind since it was so egregious and a clear demonstration of the government and their contractor (ZPIC) knowing what they were doing was wrong, yet believing they could get away with it. In March of 2018, the OIG performed an audit of a Rehab Group in the Northeastern part of the U.S. During the previous 3-year period, the group was paid $39 million for services rendered. However, based on an audit of 100 claims and the auditor determining 85 of the 100 claims were errored, the OIG demanded $29.9 million of the $39 million back. Imagine receiving a letter indicating that you owe approximately 75% of the money you were paid for rendering services back to the government. Now, you may be thinking this was a large health system or hospital group and you would be completely wrong. This group was an independent small to medium sized organization and they were devastated. In addition to the financial demand for repayment, the authorities set out to bring this group down, not based on facts, but more because they can and they wanted to send a message to the rest of the region that they have the power to crush anyone they want at any time. You’re probably thinking I am exaggerating this story a bit and I am here to tell you, that again, you would be wrong. This group was hung out to the court of public opinion without any due process. The government simply lobbed accusations of fraud and malfeasants. Damaging stories were on the daily news channels and in print all because some person(s) at the government believed they were above the law and could flex their muscles and make this group crack. Beyond having to deal with a huge demand for refund, they were dealing with the public blowback and declining numbers in their patient census, which means a decrease in reimbursements, that placed operational strain on the group as well as began the process of destroying morale and company loyalty. This meant the group had to bring in a crisis management team and go on the offensive against the government to battle back and preserve their reputation in the community. The costs associated with this battle ran them in the millions of dollars but it was unfortunately a necessary part of defending themselves.


The Facts of The Case:

The ZPIC refused or determined that the skilled services were “Not Medically Necessary” under the “Improvement Standard”. The ZPIC audited services using the “Improvement Standard,” which would be in direct violation of a federal judge’s order. Currently, it is illegal to use the Improvement Standard “rule of thumb” to deny coverage conflicts with the Medicare Act. Unfortunately, due to a lack of training and education within the system, auditors were and are still applying this standard. Those who hold the power to make determinations throughout the Medicare decision-making process ardently follow this Improvement Standard and it deprives tens of thousands of patients if not more from receiving proper care and treatment they desperately need.

This Improvement Standard is especially prevalent in the coverage of maintenance health services and physical/occupational therapy services. “The restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities…” The regulations state, “Support coverage if the individuals’ condition will improve “OR “the skills of a therapist [are] necessary to perform a safe and effective maintenance program.” Indeed, the Medicare Act itself only refers to the need to improve with regard to services for a “malformed body member.” So, unless care is specifically for the improvement of a “malformed body member,” improvement is NOT necessary for Medicare coverage. This was the first part of our argument with CMS Region I in Boston who had jurisdiction over the case.

The second argument made was using Jimmo v. Sebelius, No. 11-cv-17 (D.Vt.), filed January 18, 2011, and was brought on behalf of a nationwide class of Medicare beneficiaries to challenge the use of the illegal Improvement Standard. The proposed settlement was filed in federal District Court on October 16, 2012. The Settlement Agreement clearly states that qualification for Medicare coverage turns on the beneficiary’s need for skilled care (nursing or therapy) not on his or her potential for improvement. The Settlement applies to Medicare coverage for home health care, skilled nursing facility services, outpatient therapies, and to some extent, care provided by inpatient rehabilitation facilities. The judge granted final approval of the Settlement after the Fairness Hearing on January 24, 2013. The settlement was effective immediately for both Medicare and Medicare Advantage plans. The ruling did not result in any new regulations. What it did was to provide a detailed clarification of existing standards (“Nothing in this Settlement Agreement modifies, contracts, or expands the existing eligibility requirements for receiving Medicare coverage…”).


In Part II of my Blog on Thursday, I will address the various aspects of this case and share with you the incredible outcome.

What to do next…

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