Spreading Perspective on Ebola

On a day when the announcement of the second Dallas nurse infected with the Ebola virus frightened Americans, Carl Zimmer, the New York Times science journalist and author of the book A Planet of Viruses, provided some much-needed perspective to a Philadelphia audience. 

Zimmer was the keynote speaker on October 15, 2014, for the Penn’s Vet Center for Host-Microbial Interaction two-day symposium on Microbial Communities in Health and Disease. 

Zimmer started by discussing the Ebola epidemic, which started in December 2013 in West Africa and as of October 14, 2014, had infected 8,914 people and claimed the lives of 4,447 people. The current epidemic is serious, and public health experts warn that by December 2014 there could be 5,000 to 10,000 new cases a week. 

However, Zimmer contrasted the current problem with well-known viral infections such as flu, HIV, and rabies which every year kill 250,000, 1.6 million, and 69,000 people, respectively. Americans who are not healthcare workers have little to fear from the Ebola virus, according to Zimmer. Past Ebola epidemics have been contained by basic public health strategies, and the current crisis can be controlled with sufficient resources.    

Mass psychology experts worry that the current environment in the United States may result in public hysteria and an overwhelming of emergency rooms with the “worried well.” With the reporting of the inadequate response by the Dallas hospital that treated Thomas Eric Duncan, the Centers for Disease Control is having trouble keeping the public’s trust that experts know what they are doing. Unless there is competence and fairness with each case reported accurately and quickly and each patient treated with the maximum level of care, unnecessary public panic is possible. (http://www.nytimes.com/2014/10/16/health/ebolas-other-contagious-threat-hysteria.html?ref=science)

Using the Ebola virus as a starting point, Zimmer discussed how each human being hosts 100 trillion bacteria and about a trillion viruses. He stunned the Philadelphia audience by estimating that if you built a virus tower containing all the viruses on earth it would stretch 200,000,000 light years long. Although we have identified the viruses that cause human disease, we have just begun to understand other viruses. For example, Zimmer recently wrote in the New York Times about a Columbia study of 133 New York City rats, which identified 18 new species of viruses previously unknown to scientists. Most of the viruses in humans are attacking bacteria, and many of them may play an important role in controlling harmful microbes. 

Zimmer ended his lecture by describing ways that viruses can benefit humans. He described how our understanding virus biology has enabled us to make Flublok vaccine against influenza, cure x-linked severe combined immunodeficiency disease, and create an animal model to study Hepatitis C, which had previously only been identified in humans.

Since humans live in a universe with many bacteria and viruses, Zimmer emphasized how important it will be for mankind to learn to co-exist with its microbial neighbors.


68 Cents on a Dollar - What CMS' Settlement Offer on Denied Inpatient Claims Means for You

On August 29, 2014, the Centers for Medicare & Medicaid Services (CMS) released a statement that it is offering a settlement option to acute care and critical access hospitals with currently pending appeals of inpatient status claim denials.  If hospitals elect to accept the settlement, then they will receive a lump payment for 68% of the net allowable amount on all eligible claims. The intent of this offer is to alleviate the administrative burden for both the provider and Medicare, and to reduce the current backlog of appeals that are being disputed due to inappropriate patient status determinations.  CMS believes that the changes in Final Rule 1599-F, the “two-midnight rule,” will reduce future appeal volumes.

Background on Inpatient Status Reviews

Inpatient stays of two days or fewer have been a target by Medicare as it is believed that the services provided should be billed as an outpatient versus inpatient status. To clear up confusion, CMS issued a revision to the  2014 Inpatient Prospective Payment System (IPPS) Final Rule reimbursement criteria and instituted the two-midnight rule for Part A inpatient hospital claims, thus creating new guidelines for establishing the medical necessity of inpatient hospital admissions, as well as documentation requirements, inpatient admission orders, and certifications. The two-midnight rule clarifies that the decision to admit a patient should be based on an expectation that the patient will require a hospital stay with a duration of at least two midnights. 

The enforcement of the two-midnight rule will not begin until October 2014. However, CMS initiated a pre-payment medical review program, known as the “probe-and-educate” medical review program, designed to identify improperly billed claims and provide education to hospitals implementing the requirements of the 2014 IPPS Final Rule.  There is a current backlog of claims in the Medicare appeal process as a result of the audits initiated by the probe-and-educate medical review program.  Pending claim appeals are backlogged to 2009 and in some cases, further.

Eligible Claims

Eligible claims must satisfy all the following criteria to be considered for the settlement offer:

  • The claim has a date of admission prior to October 1, 2013.
  • The claim was denied due to a patient status audit conducted by a Medicare contractor on the basis that services may have been reasonable and necessary, but treatment on an inpatient basis was not.
  • The hospital timely appealed the denial, and the appeal was still pending at the MAC, QIC, ALJ or DAB in which the provider has not exhausted its appeal rights.
  • The claim was denied by an entity that conducted a review on behalf of CMS.
  • The hospital did not receive payment for the service as a Part B claim.
  • The claim was not for items/services provided to a Medicare Part C enrollee.
  • The facility is an acute care hospital or critical access hospital.

Settlement Process

Hospitals that choose to accept the settlement must agree to settle all eligible claims and must complete and file with CMS an Administrative Agreement along with a spreadsheet containing all eligible claims by October 31, 2014.

Once the Administrative Agreement and Eligible Claim Spreadsheet are reviewed and confirmed by CMS, a copy of the signed agreement will be returned to the provider; all claims identified will be dismissed from the appeal process; and, a payment in the amount of 68% of the net allowable will be issued. Payment will be made 60 days after the execution of the Administrative Agreement by CMS.  The agreement states that hospitals are not allowed to collect the remaining balance from the patient for the services included in the settlement, including their coinsurance.

Where there is a discrepancy between the claim information submitted by the hospital and CMS’ records, the hospital will have the opportunity to submit a revised spreadsheet and Administrative Agreement within two weeks of receiving notice of the discrepancy.


Hospitals should determine if they want to take advantage of this offer, as the deadline is quickly approaching. Providers may request an extension; however, if they take advantage of this settlement by the deadline, then they should be able to receive their settlement by the end of this year.  Items to consider include:

  • Do they have the resources to quickly apply for settlement and isolate all claims that are eligible for this settlement offer? If not, then do they want to consider requesting an extension?
  • What is the current appeal success rate (net amount received less expenses compared to 100% payment for denied inpatient claims) for their organization relative to the 68% settlement being offered by CMS?
  • Which is more advantageous—waiting out the appeal process for the payment turnaround vs. receiving payment within 60 days of filing the settlement agreement to CMS?
  • Is the reduction of the administrative cost and burden worth the reduction in payment--which amounts to the difference of collecting 0.68 per each dollar on the denied inpatient claims compared to expected net payments based on historical or projected success of pursuing the pending denials?

Additional information can be located on CMS’ website here.

If you have questions about CMS’ settlement option or need assistance filing the requirements for the settlement, contact Denise Hall or Nancy McConnell at PYA, (800) 270-9629.

ACO Growing Pains - Not Death Throes

Last week, San Diego-based Sharp HealthCare announced its withdrawal from the Pioneer ACO program.  Sharp joins 9 other ACOs that opted out of the program last year, leaving 22 ACOs still participating.

The Pioneer ACO program is an alternative to the Medicare Shared Savings Program (MSSP) for organizations with greater experience operating in ACO-like arrangements.  Unlike MSSP ACOs, Pioneer ACOs are required to share downside risk.  If actual total cost of care for the attributed population exceeds the established baseline, the Pioneer ACO must repay a percentage of that difference back to CMS.  A Pioneer ACO that reduces total cost of care, however, receives a higher percentage of the savings. 

 While the idea behind a shared savings program is relatively straightforward, the execution has proven less so.  In Sharp’s case, it stood to lose millions due to the formula used to calculate the baseline.  Initially, the baseline is calculated based on historical cost of care for the attributed population.  In the first year of its three-year performance period, a Pioneer ACO works to lower total cost of care as compared to those historical numbers. 

During the second and third years, an ACO is not trying to beat its prior year’s performance.  Instead, the ACO’s goal is to lower costs as compared to what would have been expected absent the ACO’s interventions.  That includes accounting for anticipated increases in healthcare costs by adjusting the baseline for inflation. In the Pioneer ACO Program, the baseline is trended forward each year using a hybrid inflationary factor based on national average growth and absolute dollar growth. 

In the San Diego area, however, Medicare spending has increased at a rate significantly above these national averages due to the area’s higher labor costs.  Here’s how it works:  to establish the national Medicare payment rate for a specific inpatient or outpatient hospital service each year, CMS multiplies the assigned relative weight for that service by an annually adjusted conversion factor.  The relative weight is based on the resource requirements for that service, including labor. 

Then, to account for geographic differences in labor costs, CMS adjusts the national payment rate by the local wage index rate.  Thus, the amount Medicare pays a hospital for providing  certain services will be higher in those areas of the country with higher labor costs.  As a result, the total cost of care for beneficiaries residing in these areas is higher. 

Because a Pioneer ACO’s initial baseline was calculated based on historical cost of care for the attributed population, these payment differences were taken into consideration.  However, the annual adjustment to an ACO’s baseline has been based on national averages.  For those Pioneer ACOs in areas where labor costs have increased more than the national average, the adjusted baseline does not accurately reflect the expected cost of care absent the ACO’s interventions.

In the case of Sharp, the San Diego wage index rate increased by 8.2%, meaning that Medicare payments for hospital inpatient and outpatient services in that area increased by more than the national average.  But the ACO’s adjusted baseline assumed those payments only increased at the lower national average.  Stated another way, the fact that Sharp was receiving higher than average fee-for-service payments for its hospital services meant that it could not generate the savings needed to beat the baseline based on national fee-for-service rates, even though it had been successful in reducing readmissions and utilization while improving quality performance.   

Contrary to some of the hyped-up commentary from last week, Sharp’s decision to pull out of the Pioneer ACO Program does not prove the ACO concept is doomed to fail.  Instead, it highlights the need to use local data – not national or even regional averages – to establish spending targets for shared savings programs as well as bundled and capitated payments. 

More broadly, Sharp’s decision reminds us there is no proven path from fee-for-service to value-based purchasing.   Instead, there will be many wrong turns and detours along the way.  Following the plan-do-study-act model, we will need to re-evaluate and recalibrate strategies on an ongoing basis.  But simply throwing up our hands and declaring defeat at each setback will get us nowhere.  Or, worse yet, we will remain in the unsustainable cycle of increasing costs until the wheels come off our healthcare system and, in turn, our economy.

As the Sharp decision demonstrates, new payment models will succeed only if they create incentives for providers to change their behaviors.  If the annual adjustments to Sharp’s baseline had taken into consideration higher Medicare payment rates, for example, the organization likely would have continued its participation in the Pioneer ACO Program as it would have had a realistic opportunity to earn shared savings. 

Despite defections, CMS claims the Pioneer ACO Program has been successful.   As the agency reported last summer, “[c]osts for the more than 669,000 beneficiaries aligned to Pioneer ACOs grew by only 0.3 percent in 2012 whereas costs for similar beneficiaries grew by 0.8 percent in the same period. 13 out of 32 pioneer ACOs produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million to the Medicare Trust Funds.  Pioneer ACOs earned over $76 million by providing coordinated, quality care.” 

However, CMS cannot rest on reported success; it must address the identified shortcomings – the misaligned incentives –in the Pioneer ACO Program.  Overcoming these growing pains by appreciating and being sensitive to these incentives will drive progress in all value-based payment models.


340B Recertification Requires Attestation of Regulatory Compliance - Are You Prepared to Do That?

By no later than September 10, 2014, each organization participating in the 340B Drug Pricing Program must submit its annual electronic recertification of compliance with all 340B program requirements.  The individual identified by the organization as its Authorizing Official must provide the information the electronic form specifies and attest to the organization’s continued compliance with 340B program requirements. 

Failure to submit the recertification in a timely manner may result in exclusion from the program.  A false attestation regarding compliance may expose the organization to significant liability under the federal False Claims Act. 

PYA has prepared a self-assessment checklist for 340B program compliance.  The checklist addresses the requirements for program infrastructure, duplicate discounts, eligibility, contract pharmacy arrangements, procurement and inventory, and community benefit.  Reviewing the checklist with appropriate staff prior to submitting the recertification, in addition to properly executing the organizations’ other 340B compliance measures, should give Authorizing Officials additional confidence in attesting to 340B program compliance.

Our team has years of experience assisting healthcare organizations in designing and maintaining sound internal controls, processes and procedures. For more information, please contact Shannon Sumner at PYA, (800) 270-9629.

ACPE Cover Story Examines "Big Data: Understanding the Pros and Cons of Big Analytics"

The July/August 2014 issue of the Physician Executive Journal of Medical Management from the American College of Physician Executives features a cover story titled “Big Data:  Understanding the Pros and Cons of Big Analytics,” authored by PYA Analytics leaders Kent Bottles, MD (Chief Medical Officer and PYA Principal), Edmond Begoli, PhD (Chief Technology Officer), and Brian Worley, PhD (President and CEO).

The article explores how the explosion of data can be analyzed to develop actionable correlations that hospital and medical groups can use to address pain points such as length of stay, re-admissions, and hospital-acquired infections.  These correlations can help hospitals and medical groups cut per-capita costs and increase the quality of the care they provide.  The development of cloud computing makes it economically feasible for small systems and organizations to utilize predictive analytics without investing millions of dollars in data-warehousing projects. 

Despite economically attractive opportunities for entry, the authors also explain some of the pitfalls that often trip up unsophisticated analysts.  Predictive analytics can be a powerful tool, but the complexity of the approach must be appreciated and taken into account.

For more information, please contact PYA Principal Kent Bottles, MD, (800) 270-9629.


CMS Awards $12.5 Million Grant For Innovation In Rural Healthcare

On July 9, the Center for Medicare and Medicaid Innovation (CMMI) completed its announcement of grant recipients under the Health Care Innovation Awards. From the hundreds of applications received during the second round of the Healthcare Innovation Awards, CMMI intends to fund 39 proposals, ranging in size from $2 million to $23.8 million, for a total of $360 million.

The University of Kansas Hospital (KUH) was awarded $12.5 million (the 7th largest of the 39 grants awarded) to develop and implement new rural healthcare delivery and payment models. Partnering with Hays Medical Center, 10 critical access hospitals, and physicians practicing at these facilities, KUH will support a rural clinically integrated network, or RCIN, to improve health outcomes while reducing costs.  

The RCIN will focus on improving the prevention, diagnosis, management, and treatment of heart disease and stroke in rural Kansas communities. Participating providers will form a collaborative governance structure through which these providers can refine the entire care continuum for the population they serve.

As explained by CMMI, the RCIN “resembles another uniquely rural business entity: the agricultural service cooperative. By working through a jointly owned and operated association, independent farmers secure resources and market products more efficiently than acting alone. Similarly, RCIN members will pursue collaborative implementation of clinical interventions to improve care and lower costs.”

The RCIN will test transitional payment policies, including a disease-specific shared savings program and centralized care management services, as incentives for collaborative care. Using data analytics, the RCIN also will develop a transformational payment model for rural healthcare, such as global payments tailored to the unique needs of rural communities. 

PYA is honored to have worked with KUH and its partners to develop the RCIN model and prepare the successful grant application. Along with our sister company, PYA Analytics, we look forward to continuing that work over the next three years to make the RCIN a reality – protecting and preserving rural healthcare.


Ten Key Payment Policies in the Proposed 2015 Medicare Physician Fee Schedule

While the rest of us were heading out the door for the holiday weekend, the Centers for Medicare & Medicaid Services (CMS) in the late afternoon of July 3 posted the proposed 2015 Medicare Physician Fee Schedule.

CMS does not propose to make any payment update for 2015, noting the Protecting Access to Medicare Act of 2014 provides for a 0% payment update for services furnished during the first quarter of 2015.  According to CMS, any payment update – positive or negative – for services provided on or after April 1, 2015, is the subject of the legislative process, not agency rulemaking. 

The payment policies proposed by CMS in the 607-page document, however, will have a direct and lasting impact on Part B providers’ day-to-day operations.  From this point forward, there is no turning back on the road to value-based purchasing in the Medicare program.

Comments on the proposed rule are due to CMS by September 2, 2014, the day after Labor Day.  The final rule will be published around Thanksgiving. 

(1) Chronic Care Management

As promised last year, CMS will move forward with payment for non-face-to-face chronic care management (CCM) services.  Beginning January 1, 2015, Medicare will make a per-beneficiary-per-month payment (at a proposed rate of $41.92) for CCM services provided to patients with two or more significant chronic conditions.

With two exceptions, CMS has not changed the elements of CCM services outlined in the 2014 Medicare Physician Fee Schedule Final Rule.  (Those requirements are detailed in PYA’s very-soon-to-be-updated
white paper on CCM services.)  First, CMS eliminated the requirement that CCM services be furnished under direct physician supervision (i.e., physician present in the office suite), opting instead for general supervision (no physician presence requirement).  This change is welcome news, as it opens up new opportunities in delivering CCM services that will be detailed in our updated white paper.

Second, CMS will require that a provider furnishing CCM services utilizes an electronic health record (EHR) system certified by the National Coordinator for Health Information Technology (ONC).   CMS previously had discussed imposing some sort of separate standards that providers would have to meet to bill for CCM services, such as certification as a patient-centered medical home.  Instead of going that route, the agency chose this more limited requirement intended to ensure members of the care team have immediate access to the most updated information informing the care plan.    

(2) Value Modifier

Over the last three years, CMS has introduced the value-based payment modifier for the Medicare Physician Fee Schedule.  The value modifier provides for differential payment to solo practitioners and physician groups based on the quality of care they provide to Medicare beneficiaries compared to the cost of that care over a specified period of time. 

Based on their relative scores on specified quality and efficiency measures, solo practitioners and physician groups will be placed in one of nine quality tiers ranging from high quality/low cost to low quality/high cost.  Each tier will have a corresponding upward, downward, or neutral payment adjustment.

The agency has made available to providers
resources detailing the calculation and application of the value modifier.  The payment differentials go into effect in 2015 for groups with 100 or more eligible professionals and in 2016 for groups with ten or more.

In the proposed rule, CMS announces its plans to expand the value modifier in 2017 to apply to all physicians and non-physician practitioners.   CMS proposes also to increase the maximum upward and downward adjustments from -2.0/+2.0 in 2015 and 2016 to -4.0/+4.0 in 2017.  That is, solo practitioners and groups in the lowest tier (as well as those that do not meet reporting requirements for the Physician Quality Reporting System [PQRS]) would see a negative 4% payment adjustment while those in the highest tier would benefit from a positive 4% payment adjustment. 

CMS also proposes solo practitioners and groups with fewer than ten eligible professionals would not be subject to downward adjustments in 2017 so long as they meet PQRS reporting requirements.  Those that do not meet those requirements, however, will be subject to the full negative 4% payment adjustment. 

(3) Physician Feedback Program/QRURs

Later this summer, CMS will make available on its
portal individualized Quality and Resource Use Reports (QRURs) for all solo practitioners and group practices based on 2013 data.  Each QRUR will include the recipient’s performance on the quality and cost measures used to calculate the value modifier as well as the specific performance tier to which the recipient would be assigned based on its scores on those measures.

For those groups subject to the value modifier in 2015, the QRUR also will show how the group’s payments will be affected.  CMS strongly encourages all providers to access their QRURs once they are available to better understand their current performance levels and how to improve their scores on quality and cost measures.

In the proposed rule, CMS states it will make available informal review mechanisms for providers to request certain limited corrections to their QRURs.  For 2015, such requests will have to be made by January 1, 2015.  CMS intends to formalize and expand the review process in 2016 and beyond.  

(4) Physician Quality Reporting System

After years of bonus payments for physicians who reported specific quality information to CMS, PQRS switches gears in 2015.  Now, physicians who did not report in 2013 will be subject to a downward payment adjustment.  Failure to report in 2014 will mean a downward adjustment in 2016. 

In the proposed rule, CMS outlines updates to PQRS related to the 2017 payment adjustment.  In addition to increasing the downward adjustment from 2% to 4%, CMS proposes adding 28 new individual measures and two new measures groups to fill existing gaps.   Also, CMS intends to require physicians to report measures from a newly proposed set of cross-cutting measures (i.e., measures of improvements in patient functional status) in addition to any other required reporting.

The proposed rule includes several changes to the methods and manner in which quality data is to be submitted.  Finally, CMS continues its phased approach for public reporting of PQRS data on the Physician Compare website.  By 2016, the number of group-level and individual measures to be publicly reported will be expanded significantly, giving beneficiaries more information on which to base treatment decisions.      

(5) Open Payment Act

The Open Payments program requires applicable manufacturers of covered drugs, devices, biologicals, and medical supplies to report payments or other transfers of value they make to physicians and teaching hospitals to CMS.  This information will be made available to the public on CMS’ website through searchable databases.

Now excluded from the reporting requirements are payments related to certain accredited or certified continuing medical education events.  CMS proposes to eliminate this Continuing Education Exclusion in its entirety, noting this will create a more consistent reporting requirement.

(6) Elimination of Global Surgery Periods

CMS proposes to eliminate all 10- and 90-day global codes in 2017, noting that many providers are not performing the number of post-surgical visits contemplated by these codes.  To address this potential for misvaluation of surgical services, CMS plans to make one payment for all services rendered on the day of surgery and to pay separately for visits and services actually furnished any subsequent day.

(7) Expanded Telehealth Services

CMS proposes to include four new services on the list of services that can be furnished to Medicare beneficiaries under the telehealth benefit.  These include annual wellness visits, psychoanalysis, psychotherapy, and prolonged evaluation and management services.    

(8) Medicare Shared Savings Program Quality Measures

The proposed rule includes updates to parts of the Medicare Shared Savings Program regulations. First, CMS proposes to reward accountable care organizations (ACOs) that make year-to-year improvements in quality performance scores by adding a quality improvement measure that adds bonus points to each of the four quality measure domains based on improvement.

Second, CMS intends to make revisions to reflect up-to-date clinical guidelines and standards of practice, reduce duplicative measures, increase focus on claims-based outcome measures, and reduce the ACO reporting burden.  New measures would be added to focus on avoidable admissions for patients with multiple chronic conditions, heart failure, and diabetes; depression remission; all-cause readmissions to a skilled nursing facility; and stewardship of patient resources.  Also, the existing composite measures for diabetes and coronary artery disease would be updated.

Finally, CMS proposes that during a second or subsequent participation agreement period, an ACO would continue to be assessed on the quality performance standard that would otherwise apply to an ACO if it were in the third performance year of the first agreement period.

(9) Off-Campus Hospital Departments

CMS proposes to begin collecting data on services furnished in off-campus provider-based departments beginning in 2015.  Specifically, hospitals and physicians would be required to report a modifier for those services furnished in an off-campus, provider-based department on both hospital and physician claims.  CMS would use this data to evaluate whether practice expense methodology should be revised in response to the growing number of hospital acquisitions of physician practices.

(10) Adjustments for Misvalued Codes
CMS continues its statutorily mandated hunt for misvalued codes, i.e., those codes for which work and/or practice expense (PE) relative value units (RVUs) are overstated based on comparison to actual practice.  For 2015, CMS has identified that special building requirements to house linear accelerators do not represent a direct cost in its PE methodology; instead, it is accounted for in the indirect PE methodology. 

CMS, therefore, proposes to remove these building requirements as a direct PE input from radiation treatment procedures.  This seemingly minor change is expected to result in a 4% reduction in Part B payments for radiation oncology and an 8% reduction for radiation therapy centers. 

With regard to future adjustments, the proposed rule includes a list of all high-expenditure codes across specialties CMS intends to review.  It is likely, therefore, that CMS will identify and propose more high-impact revisions to work and PE RVUs in the near future. 

PYA’s Opportunity Forecasting & Positioning Team can assist your organization in analyzing the impact of proposed payment policies and preparing comments for submission to CMS.  Additionally, our consultants can support your organization in developing CCM services, maximizing performance under the value modifier, complying with PQRS and Open Payment Act requirements, and establishing and expanding a successful telehealth program.  For more information, please contact
Marty Brown, Nancy McConnell, or Martie Ross at PYA, (800) 270-9629.


PYA Assists Missouri Hospitals In Forming Health Network of Missouri

Back in 2011, as the University of Missouri Health System (MU) was considering population health management initiatives, executives recognized the need to collaborate with surrounding hospitals, given that more than half of the academic medical center’s inpatient admissions were coming from outside the county in which it is located. MU, therefore, invited leaders from four surrounding community hospitals - Bothwell Regional Health Center (Sedalia, MO), Capital Region Medical Center (Jefferson City, MO), Hannibal Regional Healthcare System (Hannibal, MO), and Lake Regional Health System (Osage City, MO) – into a discussion regarding  joint efforts to improve healthcare in Central Missouri.

For the next two years, members of the Learning Collaborative, as it was called, met on a quarterly basis to discuss healthcare payment and delivery reform and related opportunities. Over time, however, frustration set in, as it seemed impossible for this information-sharing organization to convert conversations into concrete plans of action.

Leaders of the five hospitals decided earlier this year to pursue a more formal relationship through a legal entity co-owned equally by the hospitals. They envisioned this entity would provide a trust environment through which the hospitals could protect their independence through interdependence. 

Following several months of careful planning, the hospitals announced on June 25, the formation of the Health Network of Missouri.  The five founding members combined have more than 1,000 hospital beds, more than 9,300 employees, and approximately 1,000 employed and affiliated physicians. They serve patients in adjacent counties throughout Central and Northeast Missouri.

The Health Network of Missouri is structured to allow these providers to work together as a clinically integrated network while enabling them to serve the healthcare needs of their own communities and preserve their independence and unique identities. Each hospital will have equal representation in governance of the network.

Initially, the Health Network of Missouri will focus on developing three compacts defining how all members will work together on care coordination, population health management strategies, and employer and payer initiatives. Committees comprised of representatives from all five hospitals already are hard at work on these compacts. 

Also, members will explore potential contractual arrangements between two or more members to address more specific needs, such as telehealth, clinical research, and joint purchasing. Over time, the Health Network of Missouri expects to expand its membership as well as its scope of operations to meet the needs of the communities it serves.

PYA is proud to have assisted the members of the newly formed Health Network of Missouri in designing and implementing the organizational structure and developing the network’s initial operational plan. We look forward to working with the network in the near term to put this plan in motion.  

In the near future, PYA will publish a detailed case study on the development and implementation of this innovative model for hospital affiliation to address regional needs. We will focus on overcoming obstacles in creating a trust environment in which independent providers committed to a common cause can leverage resources to improve patient experience of care and clinical outcomes and enhance efficiency.

For more information about PYA’s approach to affiliation strategies, contact Jeff Ellis or Martie Ross at PYA, (800) 270-9629.


OIG "Top Ten" List Costs Hospital Nearly $10 Million

 Nothing strikes fear in the heart of a hospital compliance officer like receiving a medical record request from the Office of Inspector General (OIG). Now, with the OIG’s recent report on its review of Medicare billing by a Midwestern academic medical center, the prospect of such a review is even more terrifying. 

Based on an extrapolation of its findings from a review of 228 claims, the OIG concluded the University of Cincinnati Medical Center (UCMC) owes $9.8 million for overpayments received in 2010 and 2011.

For reasons not explained in the report, the OIG chose to review “Top Ten” claims submitted by UCMC in 2010 and 2011. Through computer matching, data mining, and data analysis techniques, the OIG has identified the following ten types of hospital inpatient and outpatient claims that pose a high risk for noncompliance with Medicare billing requirements: 

1.           Inpatient short stays

2.           Inpatient claims paid in excess of charges

3.           Inpatient claims billed with high-severity-level DRG codes

4.           Inpatient and outpatient manufacturer credits for replaced medical devices

5.           Inpatient transfers

6.           Inpatient psychiatric facility (IPF) emergency department adjustments

7.           Inpatient claims for blood clotting factor drugs

8.           Outpatient claims with payments exceeding $25,000

9.           Outpatient claims billed with evaluation and management (E&M) services

10.       Outpatient claims billed for Doxorubicin Hydrochloride

According to the report, Medicare paid UCMC $256 million for 16,674 inpatient and 98,043 outpatient claims during this two-year period. The OIG’s audit covered $22.8 million in Medicare payments for 2,742 “Top Ten” claims submitted by UCMC in 2010 and 2011.  

Of the total number of “Top Ten” claims, the OIG selected for review a stratified random sample of 228 claims (169 inpatient and 59 outpatient) with payments totaling $3.3 million. The OIG auditors found billing errors on 127 of the 228 claims and calculated the net overpayment as $603,267. Nearly all of the overpayment was attributable to inpatient billing errors; only one-half of 1% related to outpatient billing errors.

With respect to inpatient billing, the vast majority of the overpayment – nearly $400,000 – related to short stays that should have been billed as outpatient rather than inpatient services. The OIG noted that UCMC “may be able to bill Medicare Part B for all services (except for services that specifically require an outpatient status) that would have been reasonable and necessary had the beneficiary been treated as a hospital outpatient rather than admitted as an inpatient.” The OIG, however, did not reduce the total overpayment, noting it would not have enough information to do so unless and until such Part B services are billed by the hospital and adjudicated by the Medicare administrative contractor.  

Two other “Top Ten” errors had significant price tags: claims paid in excess of charges ($153,000) and claims billed with high-severity-level DRGs ($130,000). Other identified errors included manufacturer credits for replaced medical devices, transfers, and psychiatric facility emergency department adjustments.

Without an explanation of how it made the calculation, the OIG extrapolated that UCMC received net overpayments totaling at least $9,818,296 for 2010 and 2011. This represents nearly half of the total amount UCMC received in payment for “Top Ten” claims during the same period.

The OIG expects UCMC to repay this nearly $10 million to the Medicare program. Presumably, the total overpayment will be reduced somewhat once UCMC bills and receives payment for Part B services as explained above, but the amount remains staggering.

According to the OIG, “[t]hese errors occurred primarily because [UCMC] did not have adequate controls to prevent the incorrect billing of Medicare claims within the selected risk areas that contained errors.” For the short stays, the OIG identified three specific weaknesses in UCMC’s internal controls: (1) lack of documentation to support the physicians’ clinical decisions to admit patients; (2) physicians’ non-receptiveness to the involvement of case managers; and (3) interpretation of third-party vendor services.

With respect to improper billing for high-severity-level DRG codes, the hospital acknowledged some of these errors were the result of mistakes made by hospital staff. Although mistakes were made on a small number of claims, the alleged lack of adequate oversight had a significant financial impact given extrapolation of the error rate over a larger number of high-dollar claims.    

For UCMC, the OIG’s “Top Ten” list billing errors stands to cost the organization nearly $10 million, an amount hospital officials claim will have a “devastating effect” on its operations. In light of the OIG’s extrapolation of audit results, the importance of proper documentation, coding, and billing procedures cannot be overstated.  

PYA can assist your organization in evaluating and enhancing internal controls and processes around each of the OIG’s “Top Ten” billing errors. Our professionals can assist in resolving internally identified overpayments and provide support in anticipation of and during government audits and investigations. For more information, please contact Nancy McConnell or Denise Hall at PYA, (800) 270-9629.

MedPAC Recommendations: New Approach to Quality Measurement, Per-Beneficiary Payments for Primary Care

The Medicare Payment Advisory Commission (MedPAC) is an independent congressional agency established by the Balanced Budget Act of 1997 to advise Congress on issues affecting the Medicare program.  Its 17 Commissioners meet publicly to discuss policy issues and formulate recommendations based on staff research, presentations by policy experts, and comments from interested parties. 

Twice each year – in March and June – MedPAC delivers its report to Congress.  Over the years, many recommendations made in these reports have been the basis for significant program initiatives including, for example, EHR meaningful use incentive payments and the Medicare Shared Savings Program.  Thus, each semi-annual MedPAC report offers a glimpse into the future of the Medicare program.

Of the many recommendations in MedPAC’s June 2014 report, there are two in particular that deserve a close study.  First, MedPAC offers a new approach to quality measurement in the Medicare program.  Today, there are dozens of process measures on which providers report (e.g., tobacco use assessment and cessation counseling, vaccinations, cancer and depression screening), all of which focus on detecting underuse of clinically appropriate services.  For the future, MedPAC envisions reporting on a small set of population-based outcome measures to assess the quality of care provided under each of Medicare’s three payment models – fee-for-service (FFS), accountable care organizations (ACOs), and Medicare Advantage (MA) plans – within a local area.  Specifically, MedPAC proposes the following measures:


MedPAC contemplates these population-based outcome measures would be used for public reporting and payment policy for ACOs and MA plans, but acknowledges these measures are ill-suited for FFS Medicare in both regards.  Instead, individual provider quality measures, with all of their shortcomings, would remain the dominant evaluative tool for FFS Medicare providers.  Despite a host of technical challenges, MedPAC concludes the benefits to be realized from population-based outcome measures are well worth the effort involved in developing, deploying, and reporting on these measures.

MedPAC’s second recommendation of note is the development of a per-beneficiary payment for primary care, or PBPC.  Recognizing that the Affordable Care Act’s 10% primary care bonus payment expires at the end of 2015, MedPAC emphasizes the need for a new incentive structure to support primary care.  According to the report, “a per-beneficiary payment could help move away from a fee-for-service, volume-oriented approach toward a beneficiary-centered approach that encourages care coordination, including the non-face-to-face activities that are a critical component of care coordination.”

Unlike reimbursement for transitional and chronic care management, which is limited to services for a specific population, PBPC would cover all Medicare beneficiaries.  MedPAC addresses several design issues relating to PBPC—requirements that practices must meet to receive the payment, mechanisms for attributing beneficiaries, and funding sources—none of which appear to be deal-breakers.  Like population-based outcome measures, PBPC would support providers – as well as beneficiaries – through the transition from volume-based to value-based reimbursement.

For more information about how quality reporting and new payment models will impact your organization, contact David McMillan or Martie Ross at PYA, (800) 270-9629.