EisnerAmper Blog

An EisnerAmper Health Care Services Blog

New Jersey State Court Rules Not-for-Profit Hospital Must Pay Property Taxes

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July 14, 2015

McLafferty_MikeBy Michael J. McLafferty, CPA, MBA, FACHE, FHFMA, FACMPE

In a June 25, 2015 opinion in AHS Hospital Corp. v. Town of Morristown, Judge Bianco of the New Jersey Tax Court ruled that the Morristown Medical Center ("MMC"), a not-for-profit hospital, does not qualify for a property tax exemption. This decision could mean that MMC would be liable for millions of dollars in local property taxes, and the logic of the decision could apply to other not-for-profit hospitals throughout New Jersey.

The case arose when AHS Hospital Corporation, the parent company of MMC, challenged Morristown Township’s denial of its property tax exemption for 2006-2008. The Tax Court ruled that to get a property tax exemption, the hospital must meet the profit test – the entity’s "operation and use of its property must not be conducted for profit."

Judge Bianco’s ruling stated that it was impossible to determine what parts of MMC were used for not-for-profit activities and which parts were used for for-profit activities. If a not-for-profit hospital used property in for-profit purposes, such as renting space to a private restaurant chain, the hospital would be charged property taxes on that portion of its property.

Judge Bianco described how MMC was using voluntary physicians in the community to service its patients. There were also references to some of MMC’s for-profit entities.

Judge Bianco’s description of how MMC treats patients by interacting with voluntary community physicians is the basis for most not-for-profit hospital business models. The State of New Jersey also exempts not-for-profit hospitals by statute. This makes Judge Bianco’s ruling surprising and could establish the need for further New Jersey legislation for non-profit hospitals.

The New Jersey Tax Court acted as a trial-level court. An appeal from Judge Bianco’s decision would go to the Appellate Division of the Superior Court, and from there to the New Jersey Supreme Court.


Prepare for ICD-10 Documentation Changes

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June 25, 2015

Physicians need to understand the increased documentation requirements of ICD-10 prior to the October 2015 implementation date. Preparing now allows practitioners time to adjust to the increased specificity requirements. If providers’ documentation does not support the detail of the ICD-10 codes billed, they are at high risk of not being reimbursed and being penalized in the event of an audit. Future audits will likely focus on documentation support of the more detailed code set.

One new concept is laterality. This refers to the left or right side of the body and related organ structures. Currently, there is no such concept in ICD-9. In ICD-10, the following rules generally apply:

  • For bilateral sites, the final character of the codes in the ICD-10-CM indicates laterality.
  • The right side is usually character 1.
  • The left side is usually character 2.
  • If a bilateral code exists, the bilateral character is usually 3.
  • The unspecified side is either a character 0 or 9.

An example is the diagnosis of “shoulder pain.”  In ICD-9, there is only one applicable code, 719.41, Pain in joint, shoulder region. In ICD-10, there are 3 possible choices:

  • Pain in right shoulder, M25.511
  • Pain in left shoulder, M25.512
  • Pain in unspecified shoulder, M25.519

A significant concern arises when utilizing billing software conversion tools. In most software, the conversion of the ICD-9 code for Pain in joint, shoulder region will yield an ICD-10 code of Pain in unspecified shoulder. The physician may well know which shoulder is bothering the patient; however, if the doctor is not aware of this new concept in ICD-10 and relies on software conversion, the billing diagnosis may appear as though the practitioner is unaware of which shoulder he is treating. When insurance companies review claims, medical necessity for the procedure is one of the criteria for payment. It is unlikely that an insurance company will reimburse a claim for treatment of shoulder pain if the physician does not indicate which shoulder is being treated.

Prepare now to incorporate these new concepts into documentation. Failure to do so may result in denied claims or adverse audits in the future.

Medicare Hospital Settlements

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June 22, 2015

McLafferty_MikeBy Michael J. McLafferty, CPA, MBA, FACHE, FHFMA, FACMPE

The Centers for Medicare and Medicaid (CMS)  announced that approximately 300,000 Medicare claims have been settled for more than 1,900 hospitals in the amount of $1.3 billion dollars. There was a backlog of almost 800,000 claims that were being appealed by hospitals with an 18-month backlog waiting for a resolution of their cases. These claims were the result of audits by Recovery Audit Contractors (“RACs”). The settlement offered 68% of the amount due for hospitals that provided reasonable and necessary medical services but necessarily on an inpatient basis (RACs contended the patients should have been treated on an outpatient basis). The cases that qualified for consideration were hospital admissions prior to October 1, 2013. Hospitals could submit their cases for the settlement until October 1, 2014 with some additional extension dates.

The American Hospital Association reported that hospitals spend hundreds of thousands to millions of dollars each year to respond to RAC audits. This money could be better spent improving patient care.

Our hospital clients are burdened with annual audits on behalf of Medicare and Medicaid and the overregulation unique to the health care industry. The combination of both these items puts tremendous pressure on hospital management to effectively plan for the future of their organizations.

Medicare Charges and Payments

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June 12, 2015

McLafferty_MikeBy Michael McLafferty, CPA, MBA, FACHE, FHFMA, FACMPE

Medicare has released data regarding charges and the payment of claims to hospitals and physicians as of June 1, 2015. The data is being released as part of Medicare’s effort to be transparent regarding the payments amount for claims.

The latest data release provides charges for similar services in all 50 states and Washington D.C. The data covers annual periods of 2013, 2012 and 2011.

Medicare hopes that this data will provide Medicare beneficiaries and providers with the information they need to better understand the cost of various services. There is also a listing of the top 100 inpatient services that Medicare has paid for over the three year period.

The effort to provide charge and cost information to Medicare beneficiaries and providers is part of the Affordable Care Act legislation. The sharing of this data is seen as one of the many steps the Centers for Medicare and Medicaid is taking to reduce costs.

The more direct efforts to reduce costs and improve quality of services on the provider side include the Medicare Shared Savings Program, the Physician Quality Reporting System, Meaningful-Use, and the Value-Based Modifier. All of these programs are at different stages of implementation and success at reducing costs and improving quality. A new Merit-Based Incentive Payment System will be introduced in 2019.

Merit-Based Incentive Payment

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June 1, 2015

McLafferty_MikeBy Michael McLafferty, CPA, MBA, FACHE, FHFMA, FACMPE

The Merit-Based Incentive Payment (MIPS) system was set up as a compromise by the Health and Human Services Department to replace the current Medicare Part B Sustainable Growth Rate (SGR). The MIPS system is based on aggregating annual levels of activities for eligible providers.

MIPS annually measures Medicare Part B providers in four performance categories to derive a score from 0 to 100 points, which can significantly change a provider's Medicare reimbursement in each payment year.  The performance categories are: Value-Based Modifier (VBM)-measured quality (up to 30 points), VBM-measured resource use (30 points), Meaningful-Use (MU) (25 points), and a new category named "clinical practice improvement" (15 points).  The MIPS score's maximum impact on reimbursement increases from +/- 4% for the 2019 payment year to +/- 9% for the 2022 and subsequent payment years. 

 The measurement or performance period determining the MIPS score should end prior to and as close as possible to the provider’s payment year.  Based on our past experience with Medicare programs such as MU and VBM, there is typically a two-year lag from performance year to payment year, making 2017 the anticipated first performance year—the MIPS score would then adjust reimbursements in the 2019 payment year. 

The payment adjustments that could be made to the reimbursement levels of a practice are potentially significant. Providers and their business management team needs to be compliant with the requirements of the MIPS program.

Unnecessary Health Care

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May 11, 2015

Bisciello_Steven(1)By Steven Bisciello, MBA, CMPE

Our newspapers and journals routinely update us on Medicare and Medicaid fraud committed throughout our country. In these fraud cases, patients’ identities and insurance information have been stolen, sham-clinics are opened where tests are billed for visits that never occurred, etc. The effects these fraud cases have on the costs of health care in the United States are well-documented.

Another area being brought to light is one we will call ‘unnecessary care.’   A recent article in The New Yorker written by Atul Gawande, a general surgeon,  goes into great detail about the amount of unnecessary care being performed today. The article references a recent study performed on 1 million Medicare patients.

From this study, researchers determined these patients had received a litany of unnecessary tests from their respective physicians. To be more specific, the article shows that the researchers reported “twenty-five to forty-two per cent of Medicare patients received at least one of the twenty-six useless tests and treatments”  – those that have been determined to either  1) have no medical benefit for the patient, and/or 2) be directly  harmful to the patient. Some examples of these tests, as presented in the article, include: “Performance of an EEG for an uncomplicated headache, doing a CT or MRI scan for low-back pain in patients without any signs of a neurological problem, or putting a coronary-artery stent in patients with stable cardiac disease.”

The author also talks about performing some research on some of his own new patients. This involved reviewing their medical records prior to being referred to him. Out of 8 new patients he saw and researched, he found that seven of them had received unnecessary care.

The results of unnecessary care can have a dramatic financial impact on both the patient’s wallet and the overall costs of health care.  Even more disturbing is the physical harm that can be done to patients who had received this unnecessary care (excessive radiation exposure, unnecessary surgeries, prescription medication, etc.) and resulting unnecessary treatments and further testing from a lack of results or findings from the original unnecessary tests. 

This is a very slippery, dangerous and expensive slope to be on and reinforces the need to continue to perform preventative medicine and treat the glaring issues, such as obesity, high blood pressure, and diabetes, which lead to numerous health complications and expensive on-going treatment for patients.

Sustainable Growth Rate (“SGR”) Repealed After 10 Years of Effort

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April 30, 2015

McLafferty_MikeBy Michael McLafferty, CPA, MBA, FACHE, FHFMA, FACMPE

The Senate recently voted to repeal the SGR and avert a 21% reduction in Medicare payments to physicians. The House had repealed this legislation on March 25, 2015.

Congress did pass the Medicare Access and Children’s Health Insurance Program (“CHIP”) Reauthorization Act. There are three major components to this legislation as follows:

  1. Eliminates a 21% payment cut that went into effect April 1, 2015 and eliminates any future erases future SGR cuts. The legislation also provides a 5-year period of stable, annual updates of 0.5% in order to transition to a new payment system. 
    • Physicians will receive an annual update of 0.5% in each of the years 2015 through 2019. The first 0.5% update will begin July 1, 2015. The second 0.5% update will begin January 1, 2016.
  2. Financial incentives are included for physicians who move into alternative payment models (“APMs”). 
    • There’s an opportunity to earn a 5% bonus for eligible professionals who receive a significant share of their revenue through an APM from 2019 through 2024.
  3. Sunsets the financial penalties associated with the Physician Quality Reporting System (“PQRS”), the value-based payment modifier (“VBPM”), and meaningful use (“MU”) in 2018. Established a new program called the Merit-Based Incentive Payment System (“MIPS”).

The legislation also reverses the Center for Medicare & Medicaid Services' decision to eliminate the use of 10- and 90-day global surgical codes in Medicare. There has been a significant amount of lobbying and hard work by many health care professional organizations to influence Congress to initiate these legislative changes.

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