December 5th, 2011

CMS Tightening the Screws on Unnecessary Procedures in Florida and 10 Other States

After years of criticism that it has paid billions of dollars for unnecessary procedures, the Centers for Medicare & Medicaid Services (CMS) will soon ramp up efforts to rein in costs for unnecessary procedures. In 2012, CMS will perform an audit before paying for several big ticket cardiology and orthopedic procedures in certain key states. The news has provoked strong reactions from cardiologists and Wall Street.

In Florida, in fact, 100% of stent, ICD, and pacemaker implantation procedures will undergo review before payment. Similar programs will take place in California, Michigan, Texas, New York, Louisiana, Illinois, Pennsylvania, Ohio, North Carolina, and Missouri, but the precise percentage and mix of cases that will undergo auditing has not yet been stated.

On November 15, CMS announced the demonstration program:

The Recovery Audit Prepayment Review demonstration will allow Medicare Recovery Auditors (RACs) to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments. These reviews will focus on seven states with high populations of fraud- and error-prone providers (FL, CA, MI, TX, NY, LA, IL) and four states with high claims volumes of short inpatient hospital stays (PA, OH, NC, MO) for a total of 11 states. This demonstration will also help lower the error rate by preventing improper payments rather than the traditional “pay and chase” methods of looking for improper payments after they have been made.

On November 21, Juan Aranda, Jr., president of the Florida chapter of the American College of Cardiology (ACC), sent a letter to all ACC members in Florida about the “very serious proposed changes… that you need to be aware of immediately.” Aranda said that the Florida ACC “is fighting these onerous regulations” and that staff at the national ACC headquarters planned to meet with CMS officials.

Details of the CMS initiative only became widely known on Friday, when Wells Fargo analyst Larry Biegelsen issued a report summarizing the initiative in which he cited “reimbursement experts who have all indicated that this initiative seems onerous for hospitals and will likely reduce procedure volume because hospitals will begin making sure that every patient meets the coverage criteria.”

Reaction to the report on Wall Street was immediate. According to an article in Bloomberg News, hospital and medical device stocks plunged after the report was issued on Friday. Tenet Healthcare dropped 11%, while Medtronic lost 6%.

Here is the position of the Florida ACC chapter, as stated by Jerold Saef, the chair of the Third Party Reimbursement committee of the chapter, in the letter to Florida cardiologists:

As of the first of the year, there will be 100% pre-payment audits on all inpatient hospital stays relative to 15 DRG’s [diagnosis-related groups].  11 of these are cardiac and 4 are orthopedic.  This means that all inpatient stays involving a listed DRG will trigger a hold on any payment associated with Part A reimbursement.  Hospitals will not be paid for 100% of these admissions pending record review.  There will be a 30-60 day period during which the hospital records will be reviewed for whether they support medical necessity for procedures which occurred during the stay.  The Part B (physician) payment will proceed.  If the determination is made that records do not support necessity, then the entire hospital stay will be denied.  The physicians will receive a form letter which will be entitled a “Take-Back Letter” requiring return of any funds paid in conjunction with the affected hospitalization.  This will affect all cardiologists and orthopedists involved in the care – both invasive and noninvasive.  This may include outpatient reimbursement for follow-up care related to the hospitalization.  It’s not clear whether other specialists or primary care physicians will also receive Take-Back Letters.

The premise under which this program is being initiated is that physicians are not adequately documenting the justification for their procedures and that as many as half the procedures performed may be unnecessary.  This estimate apparently arises from White House and Congressional concerns that unnecessary procedures are being funded.  They draw their conclusions from Comprehensive Error Rate Testing (CERT).

In our discussions with FCSO, we are told this is an instruction from The Center for Medicare and Medicaid Services (CMS), and that it is being implemented nationally.  We have confirmed via the National ACC that this is the case in at least 10 other states.  We are also told that if, after a matter of months, it appears that the scrutiny being used is unnecessary, there will be a shift in focus away from the initial DRG’s towards other, different DRG’s.

The Chapter leadership is concerned that the Pre-Payment Audit Initiative is being launched at all and, additionally, that it is being launched with little more than 6 weeks warning. The FCACC and the Florida Orthopedic Society both think that the previous Local Coverage Determinations (LCD) that were formulated should have provided FCSO with the necessary tools to fight over-utilization and fraud, and that no additional measures are necessary at this time. It occurs when holidays are imminent and end of the year finances are being addressed.  We consider this unfair and unprecedented.  We are concerned that cardiology practices, already subject to huge technical component cuts, loss of consult codes, increasing certification overhead, costs of implementation of electronic medical record systems and the Sustainable Growth Rate issue, will now be threatened by unjustified “Take-Back” strategies.

Here is the list of DRGs that will be subject to 100% prepayment medical review in Florida:

  • 226 — Cardiac defibrillator implant without (w/o) cardiac catheter with (w/) major complications or comorbidities (MCC)
  • 227 — Cardiac defibrillator implant w/o cardiac catheter w/o MCC
  • 242 — Permanent cardiac pacemaker implant w/MCC
  • 243 — Permanent cardiac pacemaker implant w/CC
  • 244 — Permanent cardiac pacemaker implant w/CC or MCC
  • 245 — Automatic implantable cardiac defibrillator (AICD) generator procedures
  • 247 — Percutaneous cardiovascular procedure w/drug eluding stent w/o MCC
  • 251 — Percutaneous cardiovascular procedure w/o coronary artery stent w/o MCC
  • 253 — Other vascular procedures w/CC
  • 264 — Other circulatory system or procedures
  • 287 — Circulatory disorders except acute myocardial infarction (AMI), w/cardiac catheter w/o MCC
  • 458 — Spinal fusion except cervical w/spinal curve, malign, or 9+ fusions w/o CC
  • 460 — Spinal fusion except cervical w/o MCC
  • 470 — Major joint replacement or reattachment of lower extremity w/o MCC
  • 490 — Back and neck procedures except spinal fusion w/CC/MCC or disc device/neurostimulator

4 Responses to “CMS Tightening the Screws on Unnecessary Procedures in Florida and 10 Other States”

  1. Steven Greer, MD says:

    CMS pilot project for pre-payment of procedures will not be onerous according to former CMS official

    December 5, 2011
    Steven Greer, MD The Healthcare Channel

    We spoke with the former Medical Director of Medicare for the State of California, Bruce Quinn, MD PhD, about the CMS pilot program in 11 states to require pre-payment approval for certain types of procedures. The bottom line is that he is skeptical the impact on medical procedure volumes will be significant.

    The 11 state program will expand the RAC audit program and allow contracted companies (MACs), such as FCSO in Florida, to delay payment to medical centers until supporting paperwork is submitted that supports the validity and necessity of the medical procedure. Payment can be delayed for 60 to 90 days. The CMS term is “suspend the claim” until it is reviewed. The process takes place after the procedures have taken place. Therefore, hospitals have sunken costs at stake and will be motivated to reduce unnecessary procedures. However. Dr. Quinn pointed out that Medicare has always had full power to “ask for money back” upon a review or audit. This pilot program will simply order more RACs to be conducted.

    This is much different then the less onerous private insurance pre-authorizations, before a procedure takes place, that simply ask for a short paragraph to justify the case. In that sense, this new CMS pilot program is a “new” and a potential paradigm changer.

    Dr. Quinn did not know whether the 10 other states will have MACs like the Florida FCSO, but he assumed that they would. Although FCSO claims that they will do pre-payment audits, Dr. Quinn felt that this was unrealistic. FCSO would not have the staff required, nor the politically power, to delay payment to financially struggling medical centers.

    He said that FCSO likely is reimbursed by CMS 30% of the value of each case they deny and then request refunded by the medical center, but will still be unable to audit 100% of the cases in Florida. “It is unlikely that FCSO will be able to execute their plan to audit 100% of the cases in Florida. There are checks and balances to prevent (FCSO) from denying too many claims. Hospitals can complain to oversight boards, to their senators, etc.”

    We asked whether there were previous programs from CMS from which we could use to estimate the impact of this program, and he said that this was all new and uncharted territory. Of note, he was the California administrator when RACs were just a pilot program.

    We asked whether there would be dramatic reductions in case volumes for stents, ICDs, ortho, spine, etc. Dr. Quinn did not think that there would be. He explained that the paperwork submitted will simply adapt in ways so as to increase the chances of passing an audit. Dr. Quinn also said, “If there are truly (unwarranted, unnecessary) procedures, those will be discouraged, which is what we all want.”

    Editor’s opinion: This new CMS “pre-payment” pilot project is indeed a new obstacle for hospitals and will be a significant deterrent to the outlier hospitals and doctors, such as the Maryland cardiologist in prison now for implanting unnecessary stents. Also, the entire field of spine surgery has such low success rates, and the evidence is lacking so much, that spine procedures will also likely be curtailed, with a ripple effect into private insurance. After speaking with Dr. Quinn, we are slightly less certain that elective procedures in ortho and cardiology will be curtailed.

    Competing interests pertaining specifically to this post, comment, or both:

  2. I have no objection that CMS stop payment for unnecessary procedures. Indeed, it sounds like a fine idea. My concern is how do we define “unnecessary” and who makes this determination.

    A splint for a sprained ankle is “unnecessary”. Should it result in a penalty to the physician recommending it?

    A better standard would be withholding payment for “inappropriate” treatments. A higher standard and easier to agree upon.

    Competing interests pertaining specifically to this post, comment, or both:

  3. It is not important that CMS will or will not perform an audit before paying.What has been conveyed definately is, some of us are incompetent in decision making or dishonest.

    Competing interests pertaining specifically to this post, comment, or both:

  4. “The premise under which this program is being initiated is that physicians are not adequately documenting the justification for their procedures and that as many as half the procedures performed may be unnecessary. This estimate apparently arises from White House and Congressional concerns that unnecessary procedures are being funded. They draw their conclusions from Comprehensive Error Rate Testing (CERT).” this is the critical issue, the validity of this statement. it is difficult to argue that this is onerous to providers if physicians are bilking the wealth and health of the public by doing unnecessary procedures. nuclear imaging has had a tremendous “haircut” and the post facto evidence of decreased volumes when pre approval criteria were more stringent in character and enforcement perhaps harbingers the need for such scrutiny. maybe a more palatable way of rolling this plan out would have been giving providers a trial period of clearer guidelines for documentation and a period of self policing to convince all parties that such actions are justifiable.

    Competing interests pertaining specifically to this post, comment, or both: