All posts by Cliff Hoffman

CMS proposes removing total knee replacements from inpatient-only list

In the 2018 OPPS proposed rule, CMS is moving ahead with a proposal to remove total knee replacements under CPT code 27477 (arthroplasty, knee, condyle and plateau; medial and lateral components with or without patella resurfacing (total knee arthroplasty)) from the inpatient-only list. If finalized, the procedure would be added to comprehensive APC (C-APC) 5115 (Level 5 Musculoskeletal Procedures) and assigned status indicator J1 (hospital Part B services paid through a C-APC).

The agency solicited comments from the public on whether total knee arthroplasty (TKA) should be removed from the inpatient only list in the 2017 OPPS proposed rule. In making the decision to officially propose removal of TKA from the IPO list the agency indicates that they have reviewed (1) the clinical characteristics of the TKA procedure and related evidence, including current length-of-stay (LOS) data for inpatient TKA procedures, (2) peer-reviewed literature related to outpatient TKA procedures, (3) input from the comment solicitation and (4) the professional opinions of orthopedic surgeons and CMS clinical advisors. CMS also indicated that they had taken into account the recommendation from the summer 2016 Advisory Panel on Hospital Outpatient Payment (HOP Panel) meeting that this procedure be removed from the IPO list. Based on their review and evaluation of the above, CMS has determined that the TKA procedure would be an appropriate candidate for removal from the IPO list.

CMS indicated that they “expect providers to carefully develop evidence based patient selection criteria to identify patients who are appropriate candidates for an outpatient TKA procedure as well as exclusionary criteria that would disqualify a patient from receiving an outpatient TKA procedure.” CMS believes that the subset of Medicare beneficiaries who meet patient selection criteria for performance of the TKA procedure on an outpatient basis may have the procedure performed safely in the outpatient setting.

CMS said removing the procedure from the inpatient-only list does not prohibit providers from performing it in an inpatient setting; it simply allows for Medicare coverage and payment for the procedure when performed in either the inpatient or outpatient setting. CMS reiterated that the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and preferences and on the general coverage rules requiring that any procedure be reasonable and necessary. The agency indicated that it will prohibit Recovery Audit Contractor (RAC) review for patient status for total knee replacements in the inpatient setting for two years to allow time and experience for these procedures under this setting:

We would not want hospitals to err on the side of inappropriately performing the procedure on an outpatient basis due to concerns about the possibility of an inpatient total knee replacement claim being denied for patient status. That is, given that this surgical procedure would be newly eligible for payment under either the IPPS or the OPPS, RAC denial of a hospital claim for patient status would be prohibited.

In addition to total knee replacements, CMS is soliciting comment on removing partial and total hip replacements from the inpatient-only list. This proposal would affect procedures described by CPT codes 27125 (hemiarthroplasty, hip, partial [e.g., femoral stem prosthesis, bipolar arthroplasty]) and 27130 (arthroplasty, acetabular and proximal femoral prosthetic replacement [total hip arthroplasty], with or without autograft or allograft]). Specifically, CMS has requested comments addressing the following questions:

  • Are most outpatient departments equipped to provide PHA and/or THA to some Medicare beneficiaries?
  • Can the simplest procedure described by CPT codes 27125 and 27130 be performed in most outpatient departments?
  • Are the procedures described by CPT codes 27125 and 27130 sufficiently related to or similar to other procedures we have already removed from the IPO list?
  • How often is the procedure described by CPT codes 27125 and 27130 being performed on an outpatient basis (either in an HOPD or ASC) on non-Medicare patients?
  • Would it be clinically appropriate for some Medicare beneficiaries in consultation with his or her surgeon and other members of the medical team to have the option of either a PHA or THA procedure as a hospital outpatient, which may or may not include a 24-hour period of recovery in the hospital after the operation?

The agency is also soliciting comment on whether to add total knee replacements to the list of ambulatory surgical center-covered surgical procedures.   Comments on the proposed rule are due by September 11th.

“Grace Period” Coverage Under Exchange Plans: How Federal Regulations Can Alter Eligibility Determinations for Providers

By Matthew Horton, Fotheringill & Wade, LLC

The Affordable Care Act (ACA, or commonly referred to as Obamacare) altered the landscape for individual and small group insurance plans. ACA altered this market with two important provisions: (1) the creation of Qualified Health Plans (QHPs, also referred to as Exchange Plans) and (2) establishing Exchanges (also called health care marketplaces), such as the Federal Exchange, With the creation of QHPs under the ACA, there are a litany of new federal requirements health insurers must follow; one such requirement is the “grace period,” and providers should be aware if a patient is in the grace period because of the potential for denied claims.

Issue: With QHPs sold on the Exchange, there is a federally mandated three-month grace period where health insurers cannot cancel the policies of members who do not pay their premiums. During a portion of the grace period, the member will be eligible under the plan, but the health insurer may pend any claims submitted for healthcare services during this time until the member pays his or her premium. If the member’s premium remains unpaid, the health insurer may deny claims that were pended during the grace period. How are providers supposed to know when this grace period is in effect, and what can they do to avoid pended or denied claims?


  • Providers need to be aware of the required notice health insurers must provide when a member has not paid their premiums.
  • Consider establishing a specific process for identifying QHPs during verification at the time of registration and creating system alerts for patients who are in a grace period.
  • Consider specifically asking the health insurer if the patient is in a grace period.
  • Once a patient is confirmed as in a grace period, take notes of the verification process and document any available reference numbers, tracking numbers, etc.
  • Determine the manner in which QHP insurers provide notice of potential nonpayment of pended claims. It could range from a reason code on your remittance to calling the provider services line of the plan when determining eligibility.
  • Paying the premium for patients who are in the grace period to ensure claims will be paid would seem to be one solution. However, there are multiple legal and compliance issues that must be considered and appropriately addressed. Consultation with an experienced in-house counsel or attorney will be necessary.


The ACA has led to multiple new federal requirements health insurers must follow in the individual and small group health insurance marketplace. One such requirement applicable to health plans is the three-month “grace period.” This federal requirement is not applicable to all QHPs or Exchange plans. In general, if the patient you are treating meets the following, then the grace period provision likely applies:

  • Enrolled in a QHP through an Exchange;
  • Receives an advance payment of the premium tax credit; and,
  • Pays at least one full month’s premium during the benefit year.

The grace period requires QHP insurers to provide three consecutive months coverage, even though their member (your patient) is not paying premiums, prior to terminating the member’s coverage. The crux of the issue lies in determining responsibility for payment of the member’s health care services during the three-month grace period. Federal regulations requires QHP insurers to pay claims during the first month of the three-month grace period. During the second and third month, however, the QHP insurer may pend claims until the member has paid his or her premium. If no premium payments are made, then the insurer can retroactively terminate the member’s coverage and deny the claims that were in pended status. It is also a possibility that QHP insurers could pay claims and later retract if the overdue premiums are not paid, so long as the required notice to providers was met.

For providers, a patient, the QHP member, may appear to be eligible and covered for health care services during this grace period, but there exists substantial risk of denied claims if the patient falls within the grace period. The two examples below provide simple scenarios where the grace period applies.

Example 1:

John Doe enrolls in a QHP through an Exchange in January and receives advance payment of premium tax credits. He paid his first month’s premium for the month of January but stops paying his premiums. John comes to you for healthcare services to be performed in February. Patient Access verifies his coverage and that he has not yet paid his February payment, but that January was paid.

In this example, John qualifies for the three-month grace period since he enrolled in a QHP through an Exchange and receives an advance payment of the premium tax credit. John paid his first month’s premium but did not pay February. The month of February begins the three-month grace period. You, as the provider, will be rendering healthcare services during the first month of the three-month grace period. The regulation states QHP insurers must pay for these services rendered during the first month of the grace period, even if the premium for February is never paid.

Example 2:

Same facts as Example 1, except John comes to you for healthcare services performed in March (the second month of the grace period).

Since John has still not paid his premiums, he is now in the second month of the grace period during the month of March. The QHP insurer may pend the claim until premium payments are received. If John does not pay the outstanding balance to the QHP insurer by the end of April, the QHP insurer can retroactively terminate John’s policy. Further, your claim for healthcare services provided to John during the month of March will most likely be removed from pended status and processed as a denial.

Notice Requirement

Within the federal regulations, there is a notice requirement QHP insurers must provide to providers when there is a possibility for denied claims during the second and third months of the grace period. However, the regulations are silent on how QHP insurers must provide notice to healthcare providers. It could vary from reason codes on a remittance advice post-service, to being notified verbally during eligibility determinations. It is important for providers to determine how their payors plan to comply with the federal notice requirement because the regulations do not state the manner of the required notice. Since the notice requirement is a new and developing issue, some payors may provide notice only post-service on the remittance advice.

There are arguments available to overcome notice only provided on the remittance advice, but the important concern for providers is to know how payors are planning to comply with the notice requirement.

Some plans, such as UnitedHealthcare, have published guidance on the notice requirement for providers.[1] Once a provider knows a payor will be handling the notice requirement in a certain manner, they can then work to establish processes to avoid unnecessary claim denials.


With the increasing enrollment numbers of QHPs, providers can expect to treat more patients that are subject to the grace period provisions. Additionally, it is unclear how the grace period provision is interpreted with other federal provisions, such as redeterminations and reenrollments in QHPs. With this in mind, providers can expect a difficult environment for determining coverage for patients with QHPs who fall within the grace period provision and should be aware of the required notice QHP insurers must provide during the grace period when claims potentially could be denied.

Additionally, for patients falling within the grace period, providers may be considering paying the premiums to avoid pended and, ultimately, denied claims. However, the legal intricacies of the fraud and abuse laws and tax laws requires consultation with experienced attorneys, in-house counsel, and hospital executives. Following articles will touch on these legal and compliance issues of third-party payment of premiums by providers.

Do you have questions regarding the topics covered in this article?

Contact the author, Matthew Horton, at 410-296-1552, ext. 169, or fill out the contact form available under the “contact us” tab.

[1] UnitedHealthcare, Health Insurance Exchanges: Three-Month Grace Period

CMS Issues Proposed Updates to the “Two-Midnight” Rule

On July 1, 2015, CMS released proposed updates to the “Two-Midnight” rule regarding when inpatient admissions are appropriate for payment under Medicare Part A.  The proposed updates were included in the calendar year (CY) 2016 Hospital Outpatient Prospective Payment System (OPPS) proposed rule.  As per the fact sheet, CMS is:

  • Proposing to change the standard by which inpatient admissions generally qualify for Part A payment based on feedback from hospitals and physician to reiterate and emphasize the role of physician judgment
  • Announcing a change in the enforcement of the standard so that Quality Improvement Organizations (QIOs) will oversee the majority of patient status audits, with the Recovery Audit program focusing on only those hospitals with consistently high denial rates.

For hospital stays that are expected to be two midnights or longer, CMS policy remains unchanged.  That is, if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Medicare Part A payment.  For stays expected to last less than two midnights (and the procedure is not on the inpatient only list or otherwise listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician.  The documentation in the medical record must support that an inpatient admission is necessary, and is subject to medical review.

CMS’ does reiterate the expectation that it “would be rare and unusual for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for a period of time that is only for a few hours and does not span at least overnight.”  CMS indicates that they will monitor the number of these types of admissions and plans to prioritize these types of cases for medical review.

CMS also announced changes to the approach toward educating providers and enforcing the Two Midnight rule.  Specifically, CMS has decided to use QIOs, rather than Medicare Administrative Contractors (MACs) or Recovery Auditors, to conduct the first line medical reviews of providers who submit claims for inpatient admissions.  CMS indicates that QIO patient status reviews will focus on educating doctors and hospitals about the Part A payment policy for inpatient admissions. Recovery auditor patient status reviews will be conducted by the recovery auditors for those hospitals that have consistently high denial rates based on QIO patient status review outcomes.

Finally, CMS indicates that, upon procurement of the new recovery auditors, or sooner, if possible, the following changing to the Recovery Audit program (RACs), will be implemented:

  • To address hospitals’ concerns that they do not have the opportunity to rebill for medically necessary Medicare Part B services by the time a medical review contractor has denied a Medicare Part A claim, CMS is changing the recovery auditor “look-back period” for patient status reviews to 6 months from the date of service in cases where a hospital submits the claim within 3 months of the date that it provides the service.
  • CMS has announced limits on additional documentation requests (ADRs) that are based on a hospital’s compliance with Medicare rules, incrementally applied ADR limits for providers that are new to recovery auditor reviews, and diversified ADR limits across all types of claims for a certain provider.
  • CMS has also announced a requirement that recovery auditors must complete complex reviews within 30 days and that failure to do so will result in the loss of the recovery auditor’s contingency fee, even if an error is found.
  • Finally, CMS will require recovery auditors to wait 30 days before sending a claim to the MAC for adjustment.  This 30-day period allows the provider to submit a discussion period request before the MAC makes any payment adjustments.

CMS will be accepting comments on the Two Midnight portion of the proposed rule until August 31, 2015 and will respond to comments in a final rule to be issued on or around November 1, 2015.  The proposed rule will appear in the July 8, 2015 Federal Register.

CMS Presolicitation Notice: Unified Program Integrity Contract (UPIC)

On June 5, 2015 CMS issued a presoliciation notice indicating that they will be issuing a Request for Proposal (RFP) to solicit services for the Unified Program Integrity Contract (UPIC).  As per the notice, “the UPIC will combine and integrate existing CMS program integrity functions carried out by multiple contractors and contracts into a single contractor to improve its capacity to swiftly anticipate and adapt to the ever changing and dynamic nature of those involved in health care fraud, waste, and abuse across the Medicare and Medicaid program integrity continuum.” The solicitation will be available on or about June 22, 2015, and will be distributed solely through the Federal Business Opportunities (FBO) website. Proposals are expected to be due 30 days from the RFP issue date.

The notice that CMS plans to issue an RFP for Unified Program Contracts comes almost two years after CMS put forth their strategy for contractor consolidation under the Unified Program Integrity Contract.  On July 2, 2013, CMS posted a Special Notice inviting interested industry representatives to participate in the Center for Program Integrity (CPI) Industry Day.  The objective of the Industry Day was stated to be “to introduce the CPI’s vision and goals for strengthening the integrity of the Medicare and Medicaid Programs through improved contracting approaches and strategies.” The Notice indicated that “CPI seeks to integrate the program integrity functions for audits and investigations across Medicare and Medicaid.”

During the Industry Day, Craig Gillespie, currently Director of the Contract Management Group at CPI, presented a conceptual overview of UPICs and CMS’s strategy as they related to contractor consolidation under the program .  The strategy was aimed toward a “holistic and coordinated Medicare/Medicaid program integrity strategy” that included cooperation and communication between regional program integrity contractors, leverage of CPI’s centralized tools nationally and a strengthening of CMS’ national level oversight of contractors.  At that time, the “Fundamental Contractor Activities” were stated to be the following:

1. Identify and Prioritize Leads
2. Data Analysis and Managing Leads
3. Conduct Investigations
4. Protect Program Dollars
5. Identify Medicare and Medicaid Overpayments
6. Support to the Administrative Appeals Process
7. Support to CMS
8. Support to Law Enforcement

In conjunction with the Special Notice, CMS issued a draft Request for Information (RFI) Requirements Document for the Unified Program Integrity Contractor. The RFI notice sought feedback from industry representatives regarding the draft Requirements Document.  Each of the “fundamental activities” listed above is presented in more detail in the draft document.

Further to the above, on May 1, 2014, CMS issued a Sources Sought Notice (SSN) related to the UPIC program.  The SSN states that CMS currently relies on a network of contractors to carry out program integrity work and that they are seeking to combine the functions of various contractors under the UPIC.  Specifically, the SSN identifies the functions of the Zone Program Integrity Contractors (ZPICs) and Program Safeguard Contractors (PSCs), the Medicaid Integriy Contractors (MICs) and the Medicare-Medicaid Data Match (Medi-Medi) incorporated under the ZPIC scope of work as functions which would be combined under the UPIC.  As part of the SSN, CMS included a Draft Statement of Work for the UPIC.  The draft SOW totals 86 pages and includes the scope, applicable statutes, regulations and documents, program goals, implementation and transition requirements, functional requirements, expected outcomes and administrative requirements related to the UPIC.

The draft requirements document issued in conjunction with the Industry Day Notice, as well as the RFI Questions posted alongside the draft, combined with the Draft SOW issued as part of the SSN provide a comprehensive overview of the development of CMS’ UPIC strategy and may provide detailed insight into the forthcoming RFP from CMS.

Zone (Program Integrity Contractor) Defense: Successfully Navigating ZPIC Audits

Sarah Mendiola, Esq., Linda Fotheringill, Esq., Fotheringill & Wade, LLC

While the provider community has been focusing on combating denials from the RACs and MACs, audits by the Zone Program Integrity Contractors (ZPICs) have been quietly recovering hundreds of millions of dollars in identified overpayments. If you talk to a provider who has been involved in a ZPIC audit, you will quickly realize that this type of audit can be devastating in its impact.  This paper explains why the ZPIC is not your typical Medicare auditor and what a provider can do to potentially minimize the impact of a ZPIC audit on their organization.

Issue: ZPICs are looking for “fraud & abuse”, and their audits have the potential to significantly impact the revenue of a hospital through statistical sampling, extrapolation and False Claim Act penalties. Yet, from our work with various hospital providers around the country, we have found that many are not familiar with ZPIC audits and how they differ from audits by the RACs and MACs. A ZPIC medical record request is often handled just like any other auditor request for records.

Takeaway: Do not respond to a ZPIC audit request in a business as usual fashion. Involve your Compliance Officer and executive team at the time records are requested.   Strongly consider enlisting the help of legal counsel experienced with ZPIC audits and the Medicare appeal process. A ZPIC audit can potentially open your organization up to civil and criminal penalties if the ZPIC identifies fraudulent activity.

Check out our white paper for a fuller exploration of this topic.