Issues an Exception to the "Clinical Reasonable and Necessary Requirements" of an LCD and Approves Issues for RAC Audits for Region A

September was a busy month for CMS' recovery initiatives and is concluding by CMS publishing its final rule limiting recoupment on Medicare overpayments during the first and second levels of overpayment appeals; issuing an exception to the Local Coverage Determination ("LCD") clinical reasonable and necessary requirements; and approving RAC audit issues in all regions.

On September 16, 2009, CMS issued its final rule implementing a provision of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("MMA"), which prohibited Medicare from recouping overpayments during a provider's or supplier's appeal of an overpayment determination until an appeal decision is received from a Qualified Independent Contractor ("QIC") at the conclusion of the second level of appeal.[1] The final rule, which is consistent with CMS' current policy, makes clear that CMS will not begin recoupment efforts where the provider or supplier has filed a timely appeal for the first level of appeal, termed a "redetermination," within 41 days of receipt of the overpayment determination and a timely appeal for the second level of appeal, termed a "reconsideration," within 60 days of receipt of the redetermination decision. Although CMS may initiate recoupment if timely appeals are not filed within the 41-day and 60-day deadlines, respectively, CMS will cease recoupment efforts after a timely first or second level appeal is filed.

The final rule also provides that recoupment efforts may be initiated or resumed following a QIC determination that either fully or partially upholds the overpayment determination. Thus, a provider's or supplier's continued appeal through the latter stages, including to an Administrative Law Judge, Medicare Appeals Council or federal court, will not prevent CMS from recouping the overpayment. Finally, the final rule changed how CMS pays interest to providers or suppliers whose appeals are successful in either fully or partially reversing the overpayment determination during these latter stages. Prior to the MMA, CMS was liable for interest only if it failed to pay the recouped amount within 30 days of the "new final determination" overturning the original overpayment determination. The final rule provides that if the overpayment determination is overturned during the appeals process, CMS is liable for interest on recouped overpayments that have accrued since the original determination. No other interest calculations were changed in the final rule. As such, if the provider or supplier ultimately loses on appeal, the provider or supplier will remain liable for all accrued interest since the date of the original notice of overpayment.

In addition, on September 11, 2009, CMS issued Change Request ("CR") 6586, which provided that "during complex reviews, ACs, MACs, RACs and CERTs now have the authority to apply an exception to the clinical reasonable and necessary requirements of a LCD in rare and unusual circumstances."[2] LCDs set forth the circumstances under which a service is generally considered to be "reasonable and necessary." CR 6586, which is effective October 13, 2009, provides MACs, FIs, RACs, and carriers with the authority to apply, during complex medical reviews, an exception to the clinical criteria described in the LCD in "rare and unusual circumstances."

The exception must be based upon a thorough review of the patient's medical records and a comprehensive analysis of the evidence contained in relevant medical literature. The exception cannot be made for missing or insufficient documentation. Although ACs, MACs and CERT can apply the exceptions process to approve or deny a claim, unless otherwise directed by CMS, RACs can only apply the exceptions process to not deny a claim.

Finally, as described in our September 4, 2009, Client Alert, CMS requires that each of its four RAC contractors have issues subject to RAC review pre-approved by CMS following which they must be posted to the RAC's Web site. In our Client Alert we listed the issues subject to review for Regions B, C and D.[3] On September 21, 2009, Region A posted its approved audit issues as follows:

  • Pharmacy Supply and Dispensing Fees. Pharmacy supply and dispensing fees billed by DME suppliers must be accompanied by an oral anti-cancer, oral anti-emetic, immunosuppressive drug or inhalation drug. The absence of one of the drugs or the denial of the drug on the same date of service will be considered an overpayment.
  • Wheelchair Bundling. Coding guidelines provide that where wheelchair options/accessories are included in the "global" payment for certain codes, the options/accessories are not separately payable.
  • Urological Bundling. Urological supplies consist of catheters and urinary collection devices. Coding guidelines provide that certain components of the catheter kits are not separately billable and are included in the "global" payment for the kit.

The applicable manual provisions and publications detailing the billing and coding requirements for each approved audit issue are provided on the RAC Web sites. We will continue to monitor the implementation of the RAC program and issue additional client alerts as new issues for RAC review are approved by CMS.

Next Steps for Providers

The September publications are continued evidence of CMS' commitment to recovery efforts and emphasize the need for providers and suppliers to be diligent in implementing an internal process for responding to RAC audits. As evidenced by CMS' September 16, 2009, Final Rule, in order to prevent recoupment efforts during the first two levels, appeals must be filed timely. Thus, providers and suppliers need to designate a contact and provide the contact information to the RACs. In addition, to minimize their exposure to potential recoupment, providers and suppliers also should consider reviewing and monitoring compliance with the audit issue areas in coordination with their compliance and legal departments. Finally, providers and suppliers should ensure that they are familiar with the relevant medical scientific literature governing the clinical practices of these areas.