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Volume 9, Issue 2 Download for iPad

The Office of Inspector General (OIG) and Medicare contractors continue to audit evaluation and management (E/M) services for inappropriate payments. Medicare contractors have noted an increased frequency of medical records with identical documentation across services.

The OIG announced in their 2014 Work Plan that they are reviewing multiple E/M services associated with the same providers and beneficiaries to determine the extent to which electronic or paper medical records had documentation vulnerabilities.

The OIG voices concern over the practice of copy-pasting or carrying forward documentation, also known as cloning, in the electronic health record (EHR). Through this practice, users select information from previous entries and replicate it in the medical record for a subsequent date of service.

In their January 2014 report, the OIG states that cloning documentation could lead to errors or even fraud, "When doctors, nurses, or other clinicians copy-paste information but fail to update it or ensure accuracy, inaccurate information may enter the patient's medical record and inappropriate charges may be billed to patients and third-party health care payors. Furthermore, inappropriate copy-pasting could facilitate attempts to inflate claims and duplicate or create fraudulent claims."

In response, Medicare Administrative Contractors (MACs) have begun a campaign to educate providers on the inadvertent issues that may occur with the use of EHRs and templates designed to facilitate documentation. They have also published articles that explain that documentation is considered cloned when it is worded exactly like or similar to previous entries. It can also occur when the documentation is exactly the same from patient to patient.

Cloned documentation fails to demonstrate medical necessity which requires individualized patient notes for each patient encounter, patient and date of service specific, reflecting the patient's condition, treatment rendered and overall progress of the patient when applicable. If, during an audit, documentation is found to be cloned, the Medicare contractors have been instructed to recoup payment. In addition, improper payments may be considered fraudulent.

While the Centers for Medicare and Medicaid Services (CMS) does not prohibit the use of templates to facilitate record-keeping they do discourage the use of templates which provide limited options and or space for the collection of information such as "check boxes," predefined answers, or limited space to enter information.

Templates focused for reimbursement purposes are often insufficient to demonstrate that all coverage and coding requirements are met. For example, templates that "score" the E/M requirements documented to bill a particular level of service do not take into account the medical necessity of the service. Medical necessity is the overarching requirement for coverage and as such must be supported in the medical record.

CMS maintains a Webpage dedicated to E/M billing and coding resources. In addition, your MAC also provides resources and training on billing and reimbursement for E/M services.


ICD-10-CM replaces ICD-9-CM as a HIPAA named code set to be used on electronic, paper, fax and phone transactions. All HIPAA "covered entities" including providers, payors and healthcare clearinghouses will be required to use ICD-10-CM. In addition, because ICD-9-CM will not be maintained after implementation of ICD-10-CM non-covered entities will also likely transition to ICD-10-CM.

The Department of Health and Human Services first published a proposed rule to replace ICD-9-CM with ICD-10-CM in August 2008. At that time, they proposed an effective date of October 1, 2011 for the transition to ICD-10. Since then, the ICD-10 deadline has been postponed four times.

The Protecting Access to Medicare Act of 2014 implemented on April 1, 2014, includes a provision that the U.S. Department of Health and Human Services Secretary may not adopt ICD-10 prior to October 1, 2015.

On Friday, May 2, CMS published a Special Edition MLN eNews article stating that they would release an interim final rule in the near future that will include a new compliance date of October 1, 2015 for the use of ICD-10. CMS also states that the rule will require HIPAA covered entities to continue to use ICD-9-CM through September 30, 2015.
The MLN Connects™ Special Edition eNews also announced the cancelation of the previously scheduled July 2014, ICD-10 end-to-end testing. CMS states that additional testing is planned for 2015.

The American Medical Association (AMA) has been very vocal in their opposition to the adoption of ICD-10. Still, in a letter to CMS just prior to the most recent delay, the AMA acknowledged that there were other "well-intended" stakeholders in the healthcare industry that are advocating the move to ICD-10. In their letter, the AMA asked CMS to implement the following provisions if they were intent on adopting ICD-10:

  • A 2-year 'implementation' period during which Medicare will not deny payment based on the specificity of the ICD-10 code; will provide feedback to the physician on any coding concerns; and will not recoup payment due to a lack of ICD-10 specificity.
  • When the most specific ICD-10 code is submitted no additional information will be required to adjudicate the claim, particularly in the absence of an attachment standard.
  • Physicians would be eligible for advance payments when the physician has submitted claims but is having problems getting the claim to reach the contractor due to problems on the contractor's end; a physician has not been paid for at least 90 days; at least 25 percent of their patients are Medicare, or at least 25% of their reimbursements are from Medicare.

Nevertheless, not everyone was in favor of another delay in ICD-10 implementation. The American Hospital Association (AHA), most of the national payors and the American Academy of Professional Coders (AAPC) lobbied against another delay.

For providers, the one-year delay in the ICD-10 transition is a welcome relief, however it is important to make the most of this additional time as the new deadline will be here before you know it. Therefore, if you have already begun preparations be sure you do not lose your momentum and if you have not begun preparations take advantage of this delay and start preparing today.

Do not overlook budgeting as you develop your detailed timeline for processes and tasks to facilitate the smooth transition to ICD-10. According to a white paper published by the Workgroup for Electronic Data Interchange (WEDI), which is responsible to ascertain and report ICD-10 readiness, studies authorized by CMS estimate that reject/denial rates may increase by 100% to 200% post implementation of ICD-10 at least through a transition period.

For medical oncologists this is particularly alarming as any significant delay in payment on purchased oncology drugs puts the practice at financial risk. For this reason, it is important that medical oncologists have available funds to tide them over until claims payment issues are resolved.

The most recent delay to ICD-10 adoption will also provide additional time for training on the new code set, more time to improve clinical documentation to support more specific coding and time for providers and payors to fully test and validate the ICD-10 transition.

Overview of ICD-10 Legislation
  1. August 15, 2008 - Department of Health and Human Services (HHS) publishes proposed rule to replace ICD-9-CM with ICD-10-CM effective October 1, 2011.
  2. January 2009 - HHS publishes the final rule for adoption of ICD-10-CM and ICD-10-PCS, setting a compliance date of October 1, 2013 (rather than the proposed date of October 1, 2011).
  3. April 2012 - HHS releases a proposed rule calling for a 1-year delay for the ICD-10 compliance date from October 1, 2013 to October 1, 2014.
  4. April 1, 2014 - President Obama signs the bill, Protecting Access to Medicare Act of 2014 into law, which mandates that ICD-10 cannot be implemented before October 1, 2015.
  5. May 1, 2014 - CMS announces new compliance date of October 1, 2015 and states that HIPAA covered entities are required to continue to use ICD-9 through September 30, 2015.


The Office of Inspector General (OIG) continues their scrutiny of Medicare Part B drugs with a particular focus on oncology drugs.

In their 2014 Work Plan, the OIG states that they will review Medicare outpatient payments to providers for chemotherapy drugs and the administration of the drugs to determine whether Medicare overpaid providers because of incorrect coding or overbilling of units.

Prior OIG reviews have identified certain drugs, particularly chemotherapy drugs, as vulnerable to incorrect coding. In some cases, the reviews have found that nearly 50% of the payments made for these drugs by the Medicare contractor were incorrect. In one case, a MAC made incorrect payments for 607 of the 1,254 line items for outpatient drugs reviewed resulting in overpayments of $3.7 million that the providers had not identified, refunded, or adjusted by the beginning of the OIG audit.

The most common errors reported were incorrect units of service, a lack of supporting documentation, incorrect Healthcare Common Procedure Coding system (HCPCS) codes, or drugs billed for non-covered uses.

In 2014, the OIG will also expand their review of physician-administered drugs to the state Medicaid program. The OIG will review Medicaid claims for Herceptin to determine if providers properly billed for the drug in accordance with their state Medicaid regulations. This review was prompted by the OIG's discovery of improperly billed claims for Herceptin in the Medicare program.

In particular, the OIG cites their findings of Medicare claims where providers billed Medicare for waste of Herceptin. Herceptin is packaged in multi-use vials and therefore only the actual amount used should be billed.

While the majority of these drug payment errors occurred in the hospital outpatient setting Medicare contractors are stepping up both pre and post payment reviews of drugs in both the outpatient hospital and physician office setting.


The 340B Drug Discount Program is a federal government program that was established in 1992 with the intent to "stretch scarce federal resources reaching more eligible patients and providing more comprehensive services" by providing reduced outpatient drug costs to qualified entities. The program is administered by the Office of Pharmacy Affairs (OPA), located within the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services, (HHS).

The 340B program requires pharmaceutical manufacturers participating in the Medicaid drug rebate program to sell outpatient drugs at discounted prices to taxpayer-supported health care facilities that care for uninsured and low-income people. The discounts for 340B drugs range from 20%-50%.

The Affordable Care Act (ACA) significantly expanded the list of eligible providers to include children's hospitals, freestanding cancer clinics, and critical access hospitals. Moreover, the trend of hospitals with 340B pricing acquiring community oncology practices is fueling the growth in the number of patients treated under the 340B program.

The program has come under scrutiny recently as the number of participating facilities has doubled between 2001 and 2011. The debate centers around the use of 340B drugs for patients who have third-party coverage, the margin between the 340B drug cost and payor reimbursement and to what degree this profit margin is contributing to hospitals' acquisition of physician practices.

New in 2014, is the OIG study on Part B payments for drugs purchased under the 340B Program to determine how much Medicare Part B spending could be reduced if Medicare shared in the savings for 340B drugs.

In a previous OIG report, State Medicaid Policies and Oversight Activities Related to 340B-Purchased Drugs, the OIG revealed that over half of the state Medicaid agencies have developed strategies to take advantage of the discounts on 340B drugs. Most of these states have a policy requiring 340B-covered entities to bill Medicaid at cost for 340B-purchased drugs.

In their new study, the OIG will calculate the amount by which ASP-based payments exceed 340B prices and how much Medicare Part B spending could be reduced if Medicare were able to share in the savings for 340B-purchased drugs. The OIG states that they will calculate the amount by which ASP-based payments exceed 340B prices and estimate potential savings on the basis of various shared-benefit methodologies including reimbursing for these drugs at acquisition cost.

Currently, the 340B Program does not prohibit covered entities from providing 340B drugs to individuals with private insurance as long as the individual is a qualifying patient of the covered entity and the drug is not subject to a duplicate discount under Medicaid.

However, it is widely expected that the forthcoming HRSA regulations (expected to be published in June) will further clarify who qualifies as a covered entities patient. Other issues that have been raised include the need to identify how the revenue generated from 340B drugs can be used and whether increased use of 340B discounts shifts a larger share of drug costs to others in the health care system.


Recent studies have demonstrated that the cost of care provided in hospital outpatient departments (HOPDs) is generally higher than when those same services are provided in the physician office setting.

This is particularly true for cancer services. The March 2012 report by Avalere, Total Cost of Cancer Care by Site of Service: Physician Office vs. Outpatient Hospital, the August 2013, Milliman report, Comparing Episode of Cancer Care Costs in Different Settings: An Actuarial Analysis of Patients Receiving Chemotherapy and a report by the Moran Company, Cost Differences in Cancer Care Across Settings demonstrate that services for cancer patients were on average between 24%-53% higher in the HOPD than in the physician office.

In many cases, the physician practice purchased by the hospital maintains the same office space, the same staff and the services and level of care provided remain the same. Oftentimes, there are no visible differences that would alert patients of the fact that the clinic is now part of a hospital system.

Furthermore, when costs to the insurer rise there is generally a corresponding increase in the patient's cost. In February 2014, Highmark reported instances in western Pennsylvania where they were billed $32,000 for cancer-drug infusions that had previously cost $10,000 resulting in members' cost-sharing for those treatments to increase from $1,000 to $3,200.

Citing the increasing trend of health systems buying out private doctor practices and reclassifying them as hospital-outpatient departments (HOPD) Highmark announced that effective April 1, 2014 they will no longer pay the higher HOPD rates for cancer treatment.

The unprecedented rate at which hospitals are purchasing physician offices has brought the site of service cost differential to the attention of both public and private payors.

In their March 2014 Report to Congress, the Medicare Payment Advisory Commission (MedPAC) recommends that Medicare reimbursement for certain health care services should be site-neutral stating, "Medicare currently makes higher payments for many services provided in the hospital outpatient department, despite the fact that they are often safely provided to similar patients in the physician office setting."


Medicare's method of setting lab test rates has been under the microscope for some time. In 2010 Medicare paid just over $8 billion for clinical laboratory tests under Medicare Part B. Clinical diagnostic laboratory tests furnished in a physician's office, by an independent laboratory, or by a hospital laboratory for its outpatients and non-patients are paid on the basis of the Clinical Laboratory Fee Schedule (CLFS).

Once a payment rate was established for a lab test it was generally only updated for one additional year, during the reconsideration process, after the payment is initially set. After that, the payment would only be adjusted on an annual basis if there were a change in the Consumer Price Index for all Urban Consumers (CPI-U) and to apply a productivity factor adjustment.

In other words, there was no mechanism in place to change the payment rate based on the current technical costs of performing the test. This was addressed in the 2014 Medicare Physician Fee Schedule Final Rule when CMS finalized their proposal to conduct a yearly data analysis of codes on the CLFS to determine which codes should be proposed during the rulemaking cycle for a payment adjustment due to technological changes.

CMS' proposal to begin a yearly analysis of lab test payments was proceeded by a 2013 OIG report, Comparing Lab Test Payment Rates: Medicare Could Achieve Substantial Savings. The report was critical of Medicare's established method for setting lab test payment rates stating that in 2011, Medicare paid between 18 and 30 percent more than other insurers for 20 high-volume and/or high-expenditure lab tests. The report further stated that Medicare could have saved $910 million, or 38 percent, on these lab tests if it had paid providers at the lowest established rate in each geographic area.

Finally, the Protecting Access to Medicare Act of 2014, which was signed into law on April 1, 2014, included Section 216, entitled Improving Medicare Policies for Clinical Diagnostic Laboratory Tests. The legislation eliminated the 2014 CMS rule (described above) and instead, requires that beginning in January 2017, Medicare payment for these lab tests be established by a market-based payment system.

Under this new payment methodology, CMS is required to establish Medicare payment for each test based on the weighted median of the payment rates for private payors for the test. Beginning January 1, 2016 laboratories that receive the majority of their Medicare revenues from payments made under the CLFS or the Physician Fee Schedule would report private payor (including health plans, Medicare Advantage plans and Medicaid managed care organization) payment rates and volumes for their tests.

Reductions in payment rates based on private payor rates are to be phased-in and not to exceed 10% for each of 2017 through 2019 and 15% for each of 2020 through 2022.

Beginning in 2017, new Advanced Diagnostic Laboratory Tests introduced to the market will be paid at the actual list charge for three quarters after which it will be paid under the market-based payment system.

The legislation states that the Secretary may designate one or more (not to exceed 4) Medicare Administrative Contractors to either establish coverage policies or establish coverage policies and process claims for payment for clinical diagnostic laboratory tests, as determined appropriate by the Secretary.


In December 2013, the Office of Medicare Hearings and Appeals (OMHA) announced a backlog of nearly 357,000 claims at the third level of appeal. Chief Administrative Law Judge Nancy Griswold explained that they were unable to keep up with the workload, which has grown by 184% since 2010.

In response to the growing backlog, the OMHA has suspended acting on most new requests for hearings filed by hospitals, doctors and other providers for approximately 2 years. Ms. Griswold said OMHA will continue to process requests filed directly by Medicare beneficiaries to ensure their health and safety is protected. The OMHA will also continue to process Part D prescription drug denial cases that qualify for expedited status within 10 days.

According to the latest information posted on the OMHA Website, the average processing time for appeals decided in fiscal year 2014 is 356 days.

Perhaps it is no coincidence that two months after the Medicare appeals backlog was announced CMS announced a "pause" in the Recovery Auditor (RA) program. CMS states that the pause will allow then to refine and improve the RA (formerly RAC) program while in the process of obtaining new RA contracts.

As a result of the pause, the last day that Recovery Auditors (RAs) may send claim adjustment files to the MAC is June 1, 2014, and as of June 2, 2014, only claim closure files may be sent to the MACs, by the RA.

RAs must continue to update the "Claims Status" portion of their provider portal, in a timely manner, until further notice, complete all Discussion Periods that are underway as of June 1, 2014, and continue to accept new Discussion Period requests until June 30, 2014.

Recovery Auditors are also required to continue to maintain their customer service areas and to continue to support the appeal process.

CMS outlined the following changes to the RA program:
  1. RAs will have to wait 30 days to allow for discussion before sending claims to MACs for adjustment. Providers will no longer have to choose between initiating a discussion and an appeal.
  2. RAs will have to confirm receipt of a discussion request within three days.
  3. RAs have been paid their contingency fee after recovering improper payments, even if providers decide to appeal the claims. With the next round of contracts, RAs must wait until the second level of appeal is exhausted before collecting their contingency fee.
  4. Additional documentation request limits are currently based on the entire facility, without taking differences in department into account. Going forward, CMS is establishing revised additional documentation request limits diversified across different claim types (for example, inpatient and outpatient).
  5. Additional documentation requests have been the same for providers of similar size and haven't been adjusted according to compliance with Medicare rules. For the next round of RA contracts, CMS will require auditors to adjust the limits based on providers' denial rates so that those with low rates will have correspondingly low request limits.

Representative Jim McDermott (D-Wash.), a ranking member of the Committee on Ways and Means Subcommittee on Health does not think the proposed changes go far enough. In a March 18 letter to Secretary Sebelius, he suggested several steps that CMS could take administratively without intervention by Congress including requiring enhanced accountability for the RAs.

Representative McDermott suggested that future RA contracts include performance standards for accuracy of collections from providers. He also suggested that there should be a financial penalty to the RA if they collect money from a provider and the decision is overturned on appeal.

Published by Rise Marie Cleland. Sponsored by Lilly Oncology

Risë Marie Cleland Rise@Oplinc.com

Oplinc, Inc.
1325 Officers Row
Suite A
Vancouver, WA 98661
360.695.1608 office

Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com

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Risë Marie Cleland is the Founder and CEO of Oplinc, Inc., a national organization of oncology professionals. Through Oplinc, Inc., Ms. Cleland publishes the weekly Oplinc Fast Facts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.

Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.gov.

CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2014 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

Copyright ©2014 Oplinc, Inc.

Oplinc, Inc., grants permission to distribute this newsletter without prior permission provided it is forwarded unedited and in its entirety.

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