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Hospitalizations With Observation Services and the Medicare Part A Complex Appeals Process at Three Academic Medical
Ann M Sheehy1, Jeannine Z Engel2, Charles F S Locke3,4
1Division of Hospital Medicine, Department of Medicine, University of Wisconsin School of Medicine and Public Health, Madison, WI, USA.
Insights
Medicare audits for hospital billing are lengthy and often miss deadlines. Hospitals win most appeals, but the system needs significant improvements beyond current proposals.
Area of Science:
- Healthcare Administration
- Health Policy
- Medical Auditing
Background:
- Hospital patient classification (inpatient/outpatient) impacts billing and patient costs.
- Centers for Medicare & Medicaid Services (CMS) audits hospital billing via the Recovery Audit program.
- A Government Accountability Office (GAO) report highlighted issues in the hospital appeals process.
Purpose of the Study:
- To analyze the timeline and process of complex Medicare Part A audits and appeals.
- To examine appeals reaching Level 3 of the 5-level process at academic medical centers.
Main Methods:
- Retrospective study of 219 Medicare Part A appeals reaching Level 3 by May 1, 2016.
- Analysis of decision outcomes, total time from service date, and time spent in appeals.
- Evaluation of government contractor and judicial timeliness compliance.
Main Results:
- Hospitals were successful in 71.1% of 135 decided appeals.
- Mean total time from service date to decision was 1663.3 days.
- Government contractors caused 70.7% of total appeal time; timeliness deadlines were met less than half the time (47.7%), with compliance decreasing at higher appeal levels.
Conclusions:
- The Medicare appeals system requires substantial process improvements.
- Current CMS proposed reforms may not fully address systemic delays and inefficiencies.
- Appeals often cited 24-hour criteria, yet most denied cases met this benchmark, indicating potential flaws in audit criteria.
Abstract:
Hospitalists and other providers must classify hospitalized patients as inpatient or outpatient, the latter of which includes all observation stays. These orders direct hospital billing and payment, as well as patient out-of-pocket expenses. The Centers for Medicare & Medicaid Services (CMS) audits hospital billing for Medicare beneficiaries, historically through the Recovery Audit program. A recent U.S. Government Accountability Office (GAO) report identified problems in the hospital appeals process of Recovery Audit program audits to which CMS proposed reforms. In the context of the GAO report and CMS's proposed improvements, we conducted a study to describe the time course and process of complex Medicare Part A audits and appeals reaching Level 3 of the 5-level appeals process as of May 1, 2016 at 3 academic medical centers. Of 219 appeals reaching Level 3, 135 had a decision--96 (71.1%) successful for the hospitals. Mean total time since date of service was 1663.3 days, which includes mean days between date of service and audit (560.4) and total days in appeals (891.3). Government contractors were responsible for 70.7% of total appeals time. Overall, government contractors and judges met legislative timeliness deadlines less than half the time (47.7%), with declining compliance at successive levels (discussion, 92.5%; Level 1, 85.4%; Level 2, 38.8%; Level 3, 0%). Most Level 1 and Level 2 decision letters (95.2%) cited time-based (24-hour) criteria for determining inpatient status, despite 70.3% of denied appeals meeting the 24-hour benchmark. These findings suggest that the Medicare appeals system merits process improvement beyond current proposed reforms. Journal of Hospital Medicine 2017;12:251-255.