Hospitals on the Hook for New Medicare Prior Authorization Process

Debbie Mackaman, RHIA, CCDS, April 23, 2020

The potential for increasing employee costs and write-offs is a reality for hospitals that perform a significant volume of outpatient services requiring prior authorization.

This article appears in the March/April 2020 edition of HealthLeaders magazine.

For many years, prior authorization or pre-certification has been a standard process for many services covered and paid by commercial insurers. To assist with payment of services, hospitals have added staff, or even entire departments, just to complete the prior authorization process in a timely manner.

In the commercial insurance world, prior authorization has a direct correlation to the term "medical necessity," which is often used in the context of Medicare services. In theory, both terms describe the justification for services or supplies that are needed to diagnose or treat an illness, injury, condition, disease, or symptom and that meet the accepted standards of medicine.

This year, prior authorization for certain Medicare services will refer to the process by which a request for a provisional affirmation of coverage is submitted to CMS or its contractors for review before the service is provided to the beneficiary and before the claim is submitted for processing.

Similar to the inpatient-only rule, CMS has determined that the hospital will ultimately remain responsible for ensuring this condition of payment is met. Claims for physicians' services outside of the hospital outpatient department setting will not be affected if the hospital fails to submit a prior authorization request for the service.

Hospital executives should begin establishing relationships with ordering and/or performing physicians now to identify best practices for submitting prior authorizations on behalf of their outpatient departments.

Provisional affirmations of coverage processes

Provisional affirmations of coverage will be implemented by either CMS or the Medicare Administrative Contractors. These will fall into one of two processes:

1. A provisional affirmation is a preliminary decision that the service will meet Medicare coverage, coding, and payment rules. The expected turnaround time for the decision will be 10 business days.

2. An expedited review is used for situations when a delay in service may jeopardize the beneficiary's life, health, or ability to regain maximum function. The expected turnaround time for the decision will be two business days.

A prior authorization request must include all documentation necessary to show that the service meets applicable Medicare coverage, coding, and payment rules; be submitted before the service is provided to the beneficiary; and be made before the claim is submitted.

CMS will be able to exempt a provider from the prior authorization process upon that provider's demonstration of compliance with Medicare coverage, coding, and payment rules. The exemption would apply to providers that achieve a prior authorization provisional affirmation threshold of at least 90% during a semiannual assessment. Likewise, if the rate of denied claims submitted becomes higher than 10% during the semiannual assessment, CMS may consider withdrawing the exemption. Hospitals should monitor their compliance rates internally to achieve and maintain the exemption, which could decrease the overall cost of performing the services that require prior authorization.

Hospitals will have to educate Medicare patients and the ordering and performing physicians well in advance of implementing this new practice. In a nutshell, the potential for increased employee costs and write-offs is a reality for hospitals that perform a significant volume of these services.

Prior authorization for the final list of services (CPT/HCPCS codes) can be found in Table 65 of 84 Federal Register 61464 and will be implemented by CMS beginning with dates of service on and after July 1, 2020. CMS has also created a website for hospitals to monitor updates to the prior authorization process at https://hlm.tc/2V0137d.

Prepare for Changes to Medicare's Inpatient-Only Procedures

Debbie Mackaman, RHIA, CCDS, April 1, 2018

Determine the current and future financial impacts of inpatient and outpatient TKA procedures at your healthcare organization.

This article first appeared in the March/April 2018 issue of HealthLeaders magazine.

For several years, CMS has been tossing around the idea of removing total knee arthroplasty (TKA) from its inpatient-only list (IPO) of procedures.

After much debate and input from providers, surgeons, device manufacturers, private insurance plans, and other stakeholders, CMS did just that on January 1, 2018.  

However, although CMS has removed TKA from the IPO list, this move does not categorically define the procedure as always safe to be performed on an outpatient basis.

In fact, in the CY 2018 OPPS final rule (82 Federal Register 52522–52526), CMS stated that it expects providers to use comprehensive patient selection criteria to identify appropriate outpatient candidates for the procedure, which includes patients who are in excellent health, who have limited or no comorbidities, and who will have adequate caregiver support after discharge. 

This may feel like a reprieve from a complex and burdensome healthcare regulation; however, it is actually another gray coverage and payment directive that leaves each facility in control of its own fate.

Just like with evaluation and management (E/M) code assignment in hospital outpatient departments, the data will lack consistency between facilities and development of future payments. 

Moreover, CMS is leaving it to providers to carefully develop evidence-based criteria that identify patients who are appropriate candidates for an outpatient TKA procedure, as well as exclusionary criteria that would disqualify a patient from receiving a TKA as an outpatient. The agency has no intention of developing these criteria on its own.

Keep in mind that the 2-midnight rule remains in effect, including the caveat that if a physician expects the patient to remain in the hospital for less than two midnights, he or she may still admit the patient. 

The case may be payable under Medicare Part A, dependent on solid documentation to support the admitting physician's determination that the patient requires inpatient hospital care. This might be viewed as overriding the facility's own evidence-based selection criteria, which can give fodder to external auditors. 

CMS has also stated that from January 1, 2018 through the performance period end dates for BPCI (September 30, 2018) and CJR (December 31, 2020), it does not expect much of a shift in the data from inpatient to outpatient payment for TKA. 

CMS' position does little to quell the anxiousness of hospitals currently participating in these payment models.

With more complex patients being admitted as inpatients, the patient mix could increase the average episode payment and potentially hinder the hospital's ability to generate savings. However, CMS advised that it will monitor the case mix and make adjustments to the payment models as necessary. In other words—not to worry!

From a purely financial perspective, what does this mean to healthcare organizations? In general, there is about a $1,600 difference between the inpatient and outpatient national payment rates.

At first glance, facilities may want to just leave all Medicare TKA patients as inpatients. After all, the patient's out-of-pocket expense will be similar (or sometimes less than an outpatient), and if the patient needs SNF care after the surgery, a three-day qualifying acute care stay is still required.

However, individual hospital payment rates can vary widely depending upon numerous factors, such as wage index, quality measures, and DSH. Each hospital needs to do its own math to determine what the financial impact will be. 

But don't get sidetracked by the numbers alone. CMS also built in a two-year moratorium on Recovery Auditor review for inpatient TKA cases. The intent is to allow providers to become comfortable with their own patient selection criteria, as well as obtain clear documentation to support the inpatient decision. 

Other arthroplasty codes such as total hip, total shoulder, and total ankle were not removed from the IPO list during this go-round; however, CMS said they will be considered for review in future rule-making. With that in mind, providers might want to get on the fast track to develop selection criteria with required documentation elements and study insurance contracts to prepare for the inevitable changes in the coming years.