CLN Article

Regulatory Profiles

Hospitals Fight Back Against Billing Audits

After more than 2 years under a Medicare billing anti-fraud initiative, hospitals are on the offensive in a multipronged effort aimed at stemming the tide of what they see as a burdensome and flawed government program. The American Hospital Association (AHA) has asked the Office of the Inspector General (OIG) to review Recovery Audit Contractor (RAC) activity, at the same time that AHA and four hospital systems sued the Department of Health and Human Services (HHS) for denying payments.

Created by the Affordable Care Act, private-sector RACs have authority to demand large numbers of records from providers and sift through Medicare bills for past overpayments. RACs are allowed to infer from a sample of records at what rate a provider may have overbilled Medicare. If successful, they get to keep up to 10% of the money they force healthcare providers to give back to the government.

According to AHA, RACs have been consistently inaccurate and aggressive in their audits. AHA’s 2012 report on RACs found that 75% of appealed RAC decisions were ultimately reversed. "These data are not surprising because the RACs have a strong financial incentive to deny claims…the more claims the RAC denies, the more the RAC is paid," wrote AHA executive vice president, Richard Pollack, in a letter to OIG.

Hospitals now must hire additional staff solely to manage RAC audits, and more than half of hospitals AHA surveyed this year reported spending more than $10,000 in the first quarter to manage the RAC process, with 9% spending more than $100,000. "These redundant audits drain time, funding, and attention that could more effectively be focused on patient care," Pollack said.

More information is available from the AHA's RAC website.

Government Health IT Office to Examine Lab Data Exchange

The Office of the National Coordinator (ONC) for Health IT announced plans to survey labs about implementing health information exchanges, state-level databanks meant to improve the sharing of information in electronic health records.

The ONC survey will assess and evaluate the electronic transfer of health information from labs to ordering physicians, focusing on two key measures: the percentage of labs that are able to send structured results electronically to ordering physicians, and the percentage of lab results that are currently being sent electronically in coded format to ordering physicians. ONC plans two versions of the survey, one for hospital labs and one for independent labs.

ONC said it will use these survey findings to develop a comprehensive understanding of the baseline level of lab information exchange so that the agency can provide targeted assistance to the states in developing their laboratory information exchange strategies. ONC will proceed with the lab survey once the agency receives approval from the Office of Management and Budget.

The ONC plan is available from the Federal Register website.

Inspector General to Investigate LDTs, Lab Billing in 2013

Labs will get special attention from the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) next year, with investigations into the oversight of laboratory-developed tests (LDTs) and whether Medicare is paying too much money for too many tests.

OIG plans to study how the Food and Drug Administration and the Centers for Medicare and Medicaid Services are able to oversee the "clinical effectiveness" of LDTs, as well as how LDTs are used in clinical decision-making.

Three studies will look at how much Medicare pays for lab testing, what OIG terms "questionable billing." One study will examine the growth in volume of lab testing. OIG noted in its work plan that in 2008, Medicare paid about $7 billion for lab services, a 92% increase from 1998. Another 2013 study concerns the disparity between how much Medicare pays for lab tests compared to other payers, such as Medicaid and Federal Employees Health Benefits programs. OIG will compare Medicare payment rates for 20 tests, representing the most frequently ordered and most costly tests in terms of total dollars paid, with those of other payers.

Finally, OIG will take aim specifically at orders for hemoglobin A1c (HbA1c). The agency plans to review Medicare contractors’ procedures for screening the frequency of claims for HbA1c tests and determine the appropriateness of Medicare payments for these tests. According to OIG, preliminary work at two Medicare contractors showed variations in contractors' procedures for monitoring HbA1c ordering. OIG noted that it is not considered reasonable and necessary for Medicare to pay for HbA1c tests more often than once every 3 months in controlled diabetics.

More information about the 2013 OIG Work Plan is available from the agency's website.

IOM Report: U.S. Healthcare Needs System-wide Transformation

Healthcare in the U.S. has become too complex and costly to continue business as usual, with inefficiencies and data overload that threaten the nation's economic stability and global competitiveness, according to a new report from the Institute of Medicine (IOM), "Best Care at Lower Cost: The Path to Continuously Learning Health Care in America."

The report focused on two major problems: how the country pays for healthcare, and how providers deal with new information technology (IT) tools. While the knowledge and tools exist to improve healthcare efficiency and quality, both providers and patients have not been able to sort through these tools and use them effectively, the report said.

The report warns that mere incremental upgrades and changes by individual hospitals or providers will not suffice. Achieving higher quality care at lower cost will require an across-the-board commitment to transform the U.S. health system into a "learning" system. Moreover, the ways that providers currently process new information cannot keep pace with the flood of research discoveries and technological advances, the report said. At the same time, healthcare organizations should do more to engage patients using mobile technologies.

IOM also found that payment for healthcare is out of balance. Most payment systems emphasize volume versus quality and value by reimbursing providers for individual procedures and tests rather than paying a flat rate or reimbursing based on patients' outcomes, the report noted. It calls on health economists, researchers, professional societies, and insurance providers to work together on ways to measure quality performance and design new payment models and incentives that reward high-value care.

The report is available from the IOM website.