As the Medicare administrative contractor (MAC) for jurisdiction 9 (J9), First Coast Service Options Inc. (FCSO) is committed to assisting the Centers for Medicare & Medicaid Services (CMS) in reaching the goal of reducing the national Medicare fee-for-service (FFS) paid claims error rate. Although FCSO has been successful in maintaining exceptional Part A error rates in the past, there are challenges that are impacting FCSO’s ability to achieve CMS’ current error rate reduction goal. As reflected in CMS’ November 15, 2011,

the overall national improper payment rate was 8.6 percent with an inpatient hospital payment error rate of 7.9 percent. The projected November 2011 MAC J9 overall Part A error rate and inpatient hospital specific error rate are significantly higher than the national rates and are driven by J9 hospitals (with the exception of Puerto Rico and U.S. Virgin Islands hospitals). The purpose of this article is to provide additional information regarding J9 payment errors, including insight into the reasons for these errors.

Throughout 2011, FCSO has conducted an aggressive provider outreach approach and has performed significant prepayment medical record reviews related to Medicare severity-diagnosis-related-group (MS-DRG) services in an effort to reduce the MAC J9 Part A paid claims error rate.

FCSO’s provider education and outreach has included:

• Numerous articles (please refer to references below)

• 13 hospital onsite sessions which represented 43 unique facilities

• Three webcasts

• Three face-to-face educational sessions during FCSO’s Medifest symposium

• Four association meetings

• 42 provider-specific letters to targeted hospitals, providing detailed hospital specific error rate information

In addition to education and outreach efforts, FCSO provided notice to the provider community and implemented prepayment medical record review for targeted MS-DRGs (see MS-DRG breakdown below) throughout 2011. Unfortunately, the number of comprehensive error rate testing (CERT) findings show that error rates related to inpatient admissions are not improving and that high-dollar MS-DRG medical necessity denials involving surgical procedures and short-stay MS-DRG admissions were driving J9 payment errors. Therefore, FCSO continued to partner with key stakeholders to provide open communication and published an article in the November 2011, Part A publication (see article references below), which provided notice regarding upcoming additional prepayment medical review for 15 targeted MS-DRGs. As noted in the November article, FCSO plans to take a staggered approach to implementing additional prepayment edits. As Part A errors significantly decrease for the MS-DRGs identified in the J9 prepayment error prevention strategy, prepayment medical review of those MS-DRGs will be decreased or discontinued. Also, as individual providers’ performance shows consistent compliance with requirements, which results in low error rates, those providers will be removed from prepayment medical review of the applicable MS-DRG code(s). FCSO will continue to educate hospitals with persistent high error rates. If a provider fails to correct their compliance issues and billing practices, it may lead to 100 percent review for high error-prone MS-DRGs.

FCSO will continue to provide education and feedback on the prepayment review process and will partner with associations, medical societies, and provider groups in order to successfully lower the error rates. Hospitals should consider this information when evaluating internal coding and billing processes. Hospitals should also work with the physicians associated with these services to ensure they have a clear understanding of inpatient level of care requirements and the importance of documentation to support the medical necessity of services (particularly medical necessity for procedures and any related national coverage determination (NCD) and/or local coverage determination (LCD) requirements). FCSO will continue to provide outreach and education to the physician associations and Part B providers associated with high payment error risk MS-DRG services.

Effective February 1, 2012, FCSO will also perform post-payment review/recoupment of the admitting physician’s and/or surgeon’s Part B services. For services related to inpatient admissions that are denied because they do not meet an inpatient level of care (i.e., services could have been provided in a less intensive setting such as outpatient or observation), FCSO will review the hospital record and if the physician service was reasonable and necessary just not at an inpatient level of care, the service will be recoded to the appropriate outpatient evaluation and management service. For services where the patient’s history and physical (H&P), physician’s progress notes or other hospital record documentation does not support the medical necessity for performing the procedure, postpayment recoupment will occur for the performing physician’s Part B service.