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Auditors to Review Physician Fees ‘Related’ to Denied Hospital Claims

According to AIS’s Medicare Compliance newsletter, if hospitals suddenly find that more physicians embrace compliance and documentation improvement, it’s probably because Medicare auditors are now authorized to rebuff professional fees “related” to hospital payment denials, according to the Center for Medicare and Medicaid Services (CMS). As of Sept. 8, auditors may deny physicians’ claims based on hospital records, upping the ante for the quality of documentation outside their offices.


Medicare Transmittal 534 issued by CMS on Aug. 8, gives Medicare administrative contractors (MACs), recovery audit contractors (RACs) and zone program integrity contractors (ZPICs) the authority to review physician payments “related” to hospital and other claims that are rejected because they are not considered medically necessary for various reasons.

Transmittal 534 says MACs and ZPICs will soon have the discretion to deny physician claims before or after related hospital versions are submitted. “If documentation associated with one claim can be used to validate another claim, those claims may be considered related,” according to the transmittal, which provides two examples of claims that can be denied as related:

  • Inpatient vs. outpatient: The MAC reviews Part B payments from admitting physicians and/or surgeons if the inpatient admission is denied as not reasonable and appropriate for Part A payment because the services could have been provided in an outpatient or observation bed. If the MAC decides the physician service was “reasonable and necessary,” it will be recoded “to the appropriate outpatient evaluation and management service.”
  • Medical necessity of the procedure: The MAC recoups Part B payments from admitting physicians and/or surgeons post-payment when the patient’s history and physical, physician progress notes or other hospital documentation doesn’t back up the medical necessity of the procedure.

CMS has recently replaced Medicare Transmittal 534 with Transmittal 540 to adhere to CMS’s inpatient recording policy standards.

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