A new report from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) shows that Medicare administrative contractors (MACs) do not always comply with Medicare payment policies.
A case in point involves a September 13 performance report of Novitas Solutions, the MAC that currently oversees multiple jurisdictions covering 11 states and the District of Columbia. OIG performed an audit to determine whether Novitas reopened and corrected cost report final settlements because of the MAC's own audit errors and inconsistencies.
Cost reports are financial documents that convey the provider’s costs associated with providing services to people enrolled in Medicare. The cost reports are used by MACs to determine the final amount of Medicare program reimbursement due providers for their cost reporting period (i.e., accounting year).
MAC errors can include omitting, misclassifying, misreporting, or miscalculating audit adjustments, the OIG said. In this case, the mistakes resulted in either overpayments to hospitals failing in their hospital-acquired infection (HAI) quality measures, for example, or underpayments around the costs of other services that fall under Medicare fee-for-service arrangements.
Novitas' performance alone resulted in overpayments totaling nearly $1.1 million and underpayments of just over $285,000, according to the OIG's audit. One of the largest overpayments noted was in not applying the required pay cut due to hospitals that perform worst on HAI quality measures.
The CMS reduces overall Medicare payments for the 25% of hospitals that rank poorest on measures of hospital-acquired conditions. This payment adjustment applies to all Medicare fee-for-service discharges for the applicable fiscal program year when the CMS pays hospital claims. Evidently, Novitas reopened the cost report to show that the provider was subject to the HAC reduction and correct errors made by MAC personnel, according to the OIG. Ultimately, the provider received an overpayment of $271,939.
"Novitas reopened 8 of 281 (2.8%) audited cost reports, some more than once, for a total of 10 reopenings, to correct the final settlements that contained obvious errors caused by Novitas personnel," the OIG report said.
The excess reimbursement may have occurred because auditors and supervisors need additional training that is applicable to certain payments and bad debts. Additionally, Novitas’ procedures for review by supervisors did not detect the incorrect audit adjustments, the report stated.
Health law attorneys at the national firm Brown and Fortunato said it is refreshing to see such oversight.
Cara Bachenheimer (left) and Jeffrey Baird, Brown and Fortunato.Brown and Fortunato
"OIG has a long history of looking at providers and suppliers," said Cara Bachenheimer, a long-time industry advocate, industry lobbyist, and attorney at Brown and Fortunato. "It's refreshing because providers often disagree with entities like Novitas. Now we have the OIG checking the auditor.
"While it wasn't a massive percentage of errors that they found, the fact that they are finding errors and requiring Novitas to go back and fix that, it's nice to see. There really isn't much accountability for these auditors," Bachenheimer explained. "Conceptually, this Novitas report is refreshing, and I would like to see more auditing monitors."
"It looks like Novitas is being put on notice," added Jeffrey Baird, another attorney from Brown and Fortunato, in a call with LabPulse.com. "This report is different because it's not focused on actual providers or suppliers. It's focused on the contractor."
Elizabeth Sullivan, member attorney at McDonald Hopkins in Cleveland, Ohio, mentioned that MACs seem to use poor internal tracking and controls. "The result is that different groups have different information -- essentially the right hand doesn’t know what the left hand is doing," Sullivan said in an email.
MAC consolidation
Change may lie ahead for working with MACs in some parts of the U.S., however. As hospital and health system leaders and clinical laboratory and pathology billing teams know, MACs have a significant role in shaping the reimbursement of clinical laboratory tests. They can each make local coverage determinations (LCD) establishing coverage or noncoverage for services within their jurisdiction.
MACs have won jurisdictional work through competitive bidding under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. While it's not the first time, the CMS is exploring its options for consolidation.
Collectively, the CMS has 16 MACs spread across seven companies that provide claims administration and other services. Twelve cover Medicare Part A/B fee for service claims. In its RFI document, the CMS said it is considering extending MAC contract awards from seven to 10 years, adding that awarding 10-year contracts will motivate contractors to be more innovative and efficient because contractors would have more time to achieve a return on their investment and drive down costs.
MAC work includes processing claims received from providers and suppliers; appeals; reopenings; provider and supplier enrollment; customer service; provider outreach and education; medical review; and cost report audits, among other services. Contracts can be valued at $530 million (in the case of Palmetto GBA's 2024 estimate) to close to $1 billion (in the case of Novitas' 2019 estimate).
The Association for Molecular Pathology (AMP) weighed in on the idea. An October 3 letter penned by AMP President Dr. Maria Arcila conveyed concern that MAC consolidation would grant additional work to MACs that have been less successful with working with organizations, such as AMP, that want to weigh in on coverage determinations.
"Some MACs are less than successful at serving as operational contacts and at bridging the gap between the payer and provider community," Arcila wrote. "MAC consolidation would limit patient and provider opportunities to engage, reduce competition, and diminish varied input into key decisions, which is essential to ensure a full complement of evidence and experience is considered in coverage determinations."
Losing this variety would be particularly harmful in the field of molecular diagnostics, where technology and scientific knowledge are evolving at a rapid pace, Arcila added.
"We also believe it is CMS’ responsibility to continue to support a robust multiple‐MAC system," Arcila said, adding that several MACs are owned by the same parent company [such as the Celerian Group and GuideWell]. "Additionally, AMP would like to note that the Molecular Diagnostic Services (MolDX) program is administered in several states by different MACs. Thus, there is already reduced diversification in the LCD and gap-filling processes strengthening the power of LCDs to be almost as encompassing as NCDs."
The CMS now has fewer jurisdictions than it had originally intended and, further, even fewer companies and programs are involved in executing the work, continued the letter. AMP and other physician groups have been vocal that the CMS is not publicly stating the reasons for proposing to consolidate any jurisdictions.
"MACs use varying standards for information gathering and review and are inconsistently transparent in their relationships with stakeholders," AMP said, adding that a multiple‐MAC system allows patients and providers to advocate directly to their MAC. "Though some MACs release similar draft LCDs for an assay, they often respond individually to AMP’s presentation of scientific data in a manner that reflects their local constituencies’ needs."
Insurer interference
Meanwhile, the College of American Pathologists (CAP) published a position paper emphasizing that payers have too much power in their control over pathologists and clinical laboratories.
The report, "Examining the State of Health Care's Private Payer and the Adverse Impact of Insurance Interference," airs serious grievances starting with the market share that some insurers now have as a result of insurance consolidation and other trends.
In a video, CAP President Dr. Donald Karcher said he hoped industry stakeholders would share the report using the hashtag #InsurerInterference.
In 90% of metropolitan service area markets, at least one insurer had a commercial market share of 30% or greater, and in 48% of markets, a single insurer’s share was at least 50%, the CAP's report noted.
"Insurers have increasingly used their market power to impose rate cuts and other burdens on pathologists," the report stated. A CAP survey found that at least 72% of pathology practice leaders reported that their practice experienced some kind of detrimental effect due to decreased reimbursement rates for pathology services over the last five years.
The ramifications include an inability to fund an adequate number of pathologists and/or other laboratorians, increased turn-around time for pathology reports, and decreased or completely discontinued on-site pathologist services at one or more hospitals, the CAP said.
"This consolidation and improper conduct leaves physicians with little negotiating/bargaining room to secure appropriate contracts," stated the CAP's report.
One area of trouble with payers is that “the No Surprises Act has emboldened many payers to pull certain tricks on us, like narrowing the networks, denying claims, and making us jump through hoops with laboratory benefit managers, prior authorization, et cetera," stated Dr. A. Joe Saad, chair the CAP Council on Government and Professional Affairs, for CAP Today in April, a point highlighted in the CAP's report.
"Payers are in the driver’s seat," Saad's point continued. "They can challenge us, and if we don’t like it, they don’t mind if we go out of network, which gives them the upper hand when it comes to payment. They know it’s time-consuming, laborious, and costly if we want to contest it, go through the negotiation period, and go to arbitration. They have deeper pockets and figure they can outlast us.”
