EisnerAmper Blog

An EisnerAmper Health Care Services Blog

Cost-Sharing Tiers – Network Adequacy

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November 17, 2015

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

The National Association of Insurance Commissioners (“NAIC”) could vote as early as this month on the first revision to its Managed Care Plan Network Adequacy Model Act in nearly 20 years.

The proposed model, as well as another one under consideration this month by a committee of the National Conference of Insurance Legislators, comes amid new data on the increasing prevalence of plans that either have narrow networks or exclude coverage of out-of-network providers.

Among the changes recently sought to the NAIC model legislation by the American Hospital Association (“AHA”) was for all network adequacy standards to be applied to the lowest cost-sharing tier of any tiered network. Some states already have adopted requirements mandating network adequacy in tiered networks.

The AHA also urged that the model act require quantitative measures, appropriate for each state, to ensure access to all covered services by participating providers with the requisite training and expertise to provide that care.

These are similar arguments to those our health care team experienced during the 1970s regarding the introduction of Health Maintenance Organizations (“HMOs”). There were concerns about network adequacy and qualified providers in those networks.

Many states enacted “any willing provider” laws that prevented the closing of physician panels. The panels were filled only by providers willing to take a lower than market reimbursement rate.

Insurance companies lost numerous court cases when they tried to create narrow or restricted networks in the 1970s. These networks were eventually opened to all providers willing to participate and a full range of basic medical services was offered for patients that enrolled in these networks.

The legal argument by insurance companies that narrow networks allows for the survival of accountable care organizations and “value vs. volume” payments will be difficult to make. History may repeat itself again with insurance companies forced to provide adequate medical services in all of their network products.

ICD-10 Moves Forward

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November 5, 2015

Clark_NancyBy Nancy Clark, CPC, COC, CPB, CPMA, CPC-I

For dates of service October 1, 2015 and later, providers are now required to bill medical claims with ICD-10-CM codes.  Early reporting by the Centers for Medicare and Medicaid Services (CMS) indicates a low 2% rejection rate for Medicare Fee-for-Service claims .  Despite this positive news, CMS also posts denial rates of about 10% of total claims processed.  While this is par with the estimated historical baseline, it is still disconcerting that one-tenth of all Part B claims are being denied.

Previous concern about whether HIPAA (Health Insurance Portability and Accountability Act) entities will utilize ICD-10 codes despite not being specifically mandated has subsided.  Motor vehicle and workers’ compensation insurance, which are not HIPAA entities, are not federally mandated to accept ICD-10 codes, and in some states are legally allowed to accept ICD-9 codes.

Most New Jersey motor vehicle insurers verbally indicate that they are prepared to accept ICD-10 codes on claims and Attending Provider Treatment Plans (“APTP”).  However, there is no final rule on the New Jersey Department of Banking and Insurance web site.   “Automobile insurers, PIP (Personal Injury Protection) vendors and providers should be transitioning to ICD-10 codes but at this time, there is no requirement that automobile insurers and PIP vendors accept only ICD-10 codes. The Department may institute such a requirement in the future.”

New Jersey, New York and Pennsylvania’s workers’ compensation policies  are to accept ICD-10 codes.  In reality, there are several carriers which indicate they are not ready and are working toward integrating the new code set. Providers should call the specific carrier prior to claim submission to ensure the correct codes are used.

New Jersey Medicaid indicates that providers are required to utilize ICD-10 codes beginning with date of service October 1, 2015 .  New York and Pennsylvania have similar requirements. However, not all states have implemented ICD-10 compliance initiatives. Fee-for-service programs in California, Louisiana, Maryland and Montana are not ready to report ICD-10 codes. CMS has signed off on a “crosswalk” technique to translate codes in order to continue to utilize older ICD-9 codes.

Most commercial carriers are prepared to accept ICD-10 codes and many have already issued payments. While rejections seem to be low, at this time not all claims have been processed, so it is too early to comment on the denial percentage. Additionally, the recent upsurge of “risk adjustment” audits indicates that carriers are reviewing practices’ use of diagnosis coding. Providers should ensure that their documentation supports the ICD-10 codes billed, or risk losing the revenue in a future audit.

Claim Denials for Invalid ICD-10 Codes

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October 28, 2015

By Melissa Pizor, COC, CPC, CPCO, CPMA, CPRC

We are a few weeks into the official ICD-10 implementation and some physicians are facing a large number of denials due to invalid diagnosis codes. Some software systems have shortcuts, commonly referred to as crosswalks, that are designed to automatically convert an ICD-9 code to an ICD-10 code; however, one of the issues with this method is the translated codes are not always valid. A shortened or “truncated" code means required characters are missing which will cause the claim to be rejected at the clearing house or denied at the payer, so it is important to check the translations for accuracy. If invalid codes are identified in the system, they should be removed right away.
ICD-10 codes are made up of 3, 4, 5, 6 or 7 characters so a thorough understanding of how the new code books work is necessary. The complete ICD-10 codes are found in the tabular section of the book.
The heading of the category of codes is listed first and is then further divided by the use of additional characters in order to provide greater specificity. An example is listed below. R03 is not a valid code as it requires the use of a fourth character.
R03 Abnormal blood-pressure reading, without diagnosis 

  • R03.0 Elevated blood-pressure reading, without diagnosis of hypertension
  • R03.1 Nonspecific low-blood pressure reading

It is important to keep a close eye on all denials during this transition period. It is better to correct these errors before they have a huge impact on your financials. Now is the time to learn from your errors so you save time and money in the future.

Merger and Acquisition – Physician Practices

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October 16, 2015

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

The merger or acquisition of a physician practice is a complicated transaction. A process needs to be established that allows for both parties to reach a fair resolution. To complicate matters, there are issues at a federal and state level of “fair value” relative to the compensation paid to the physicians in the transaction.

The process that we see in the marketplace today that has been effective for both parties is as follows:

  • Perform a due diligence review for both parties.
  • Decide which business model is appropriate (i.e., acquisition, leasing or hybrid)
  • Negotiate a compensation plan with the physicians. 
  • Set up a term sheet outlining key aspects of the business agreement.
  • Set up a letter of intent and attach the term sheet. 
  • Finalize an employment or leasing agreement.

In this series of short videos, we summarize  and describe the process and the various business models available in today’s marketplace. For more information about the process to negotiate a potential merger or acquisition of a physician practice, please click on the links below.

Video Series: How a Physician Practice Can Negotiate an M&A Project with a Health System 

Researchers Say High-Deductible Plans (HDHP) Reduce the Dominance of Preferred Provider Organizations (PPO)

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October 6, 2015

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

According to Milliman, many consumers prefer traditional PPO coverage for a host of reasons, mainly because they know they understand how such plans work and are comfortable in the design. There is also the fear of high deductibles. All told, the reluctance by some employees, even when shown the possible financial benefits of moving to an HDHP with higher employer contributions, is a challenge for employers looking at full replacement.

A Kaiser Family Foundation Study indicated that there is an employer shift in health care costs to consumers. According to researchers, only 55% of plans had a deductible as recently as 10 years ago. Now, enrollment in HDHPs has nearly doubled since 2010, up to 24% in 2015. Kaiser said deductibles have increased 67% over the past five years, with the average deductible for single coverage growing from $917 to $1,318.

Mercer expects to see growth continue from the 48% offering HDHPs now for those employers with greater than 500 lives to 66% doing so over the next three years. The increase in HDHP enrollment has been sharp, according to Mercer’s figures, with membership in such plans at 23% in 2014 from just 8% in 2009.

Our own experience agrees with the findings of Milliman, Kaiser Family Foundation and Mercer. The majority of our health care clients now offer HDHP plans and expect to see a higher number of their employees choose these plans going forward.

As cost sharing with employers continues to grow, we expect more employees to start looking at the public exchanges as an option. Eventually we may see only subsidies from employers for the purchase of health care benefits. You can be certain that consumers going forward will be expected to share more of the cost of their health care benefits.

Electronic Health Records – Internal Control Issues

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September 14, 2015

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

The Health Care Compliance Association recently sponsored a webinar in NYC. The webinar highlighted the following features of electronic health records (“EHR”) that can be misused because of a lack of internal controls and training by the users:

  • The “make me an author” tool: It allows physicians to substitute their signature for that of another person who entered notes in the EHR. Some vendors even allow the user to opt out of tracking changes, which makes it impossible to figure out who edited the records. Our experience with audits suggests that the inability to know when edits are entered will cause serious audit issues regarding proper documentation.
  • EHRs with no place for providers to include narratives: If EHRs lack space for providers to write their observations about patients on a given visit, they are at greater risk of appearing identical to each other. When medical records appear identical from one visit to the next, auditors deny claims for the reason that medical necessity cannot be established. Medical necessity is currently the number one reason that payers are requesting refunds.
  • Copy and paste or cloning: Documentation is considered cloned if every entry in the record is worded the exact same way or is very similar to previous entries. When entries are copied and pasted without being edited, this doesn’t meet medical-necessity requirements for Medicare coverage because documentation isn’t specific enough to the patient and his or her experience. This has been a major focus of Medicare Administrative Contractor audits the last two to three years.
  • Failing to enter information in relevant fields: Medicare won’t pay for inpatient admissions without a physician order, but patients may be discharged without a flag in the EHR that it’s missing. Our coders still find missing information during our audit reviews.
  • Templates: Most EHRs have built-in time savers, such as self-populating fields. They insert the patient’s medical history into the record when the physician checks a box. That multiplies the effect of even one incorrect piece of data. Templates can be useful as guides, but staff must be careful to insure the data entered is correct.

Many of our clients and contacts view an EHR as a “black box” that solves all of their coding and documentation problems. We continue to remind our clients and contacts that EHRs are just a tool and that effective training on their software is critical to efficiently and effectively utilizing the software.

Countdown to ICD-10-CM

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August 27, 2015
Clark_NancyNancy Clark, CPC, COC, CPB, CPMA, CPC-I

ICD-10 implementation is only one month away!  The Centers for Medicare and Medicaid Services (CMS) recently posted clarifications to commonly asked questions.   The countdown begins!

5. Is there a delay in implementation?

No.  Per CMS, “Medicare claims with a date of service on or after October 1, 2015, will be rejected if they do not contain a valid ICD-10 code. The Medicare claims processing systems do not have the capability to accept ICD-9 codes for dates of service after September 30, 2015, or accept claims that contain both ICD-9 and ICD-10 codes for any dates of service.”

4. What is a valid ICD-10 code?

Per CMS, “ICD-10-CM is composed of codes with 3, 4, 5, 6 or 7 characters.”  It is required that all ICD-10 codes be coded to the highest level of specificity, or the claim will not be processed by Medicare.  A complete list of 2016 ICD-10-CM valid codes and code titles is posted on the CMS website.

3. What are the recently announced “flexibilities”?

CMS indicated that “for 12 months after ICD-10 implementation, Medicare review contractors will not deny physician or other practitioner claims billed under the Part B physician fee schedule through either automated medical review or complex medical record review based solely on the specificity of the ICD-10 diagnosis code as long as the physician/practitioner used a valid code from the right family.” 

“Family of codes” indicates that the codes are in the same ICD-10 three character category and are clinically related.  For example, if the code documented is “Crohn’s disease of small intestine without complications” K50.00, and the code billed is “Crohn’s disease, unspecified, without complications” K50.90, then the code will not be denied in an audit because it is in the same family, “K50”.  This is referred to as “audit flexibility”.  CMS emphasizes that every code must be valid. 

2. Local Coverage Determinations (LCD) and National Coverage Determinations (NCD) frequently indicate medically necessary diagnosis code requirements.  Does the recent guidance mean the published NCD’s and LCD’s will be changed to include families of codes rather than specific codes?

Per CMS, No. The flexibility determination will be used when Medicare review contractors audit claims.   Medicare review contractors include the Medicare Administrative Contractors, the Recovery Auditors, the Zone Program Integrity Contractors, and the Supplemental Medical Review Contractor.  There will be no leniency in NCD and LCD interpretation.

1. What is the ICD-10 Ombudsman?

CMS will have an ICD-10 Ombudsman to help receive and triage physician and provider issues.  The Ombudsman will work closely with representatives in CMS’s regional offices to address physicians’ concerns. As we get closer to the October 1, 2015, compliance date, CMS will issue guidance about how to submit issues to the Ombudsman.”
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