RAC denials: CMS' Part B re-billing rules for hospitals rebuffed

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In the permanent national recovery audit contractor (RAC) program, the Centers for Medicare and Medicaid Services (CMS) has established stringent rules limiting which services, and when, hospitals can re-bill Medicare Part B for RAC denials of Part A claims. However, the Medicare Appeals Council, which represents the fourth level of Medicare appeals, thinks that CMS' position is "inconsistent" with the guidance in its own program manuals, according to the decision, "In the Case of O'Connor Hospital."

CMS currently allows hospitals that follow claim processing and timely filing requirements to re-bill for certain Part B ancillary inpatient services, but prevents hospitals from re-billing Part B for observation services when a RAC determines that the services didn't meet Medicare's medical necessity criteria for Part A inpatient care, according to Frequently Asked Question (FAQ) 9462.

In the O'Connor case, the Administrative Law Judge (ALJ) at the third level of appeal gave a "partially favorable decision" to a hospital regarding a RAC denial of a Part A claim for inpatient hospitalization services for one beneficiary. The ALJ denied Part A coverage because inpatient hospitalization services weren't reasonable and necessary, but found that "the observation and underlying care are warranted."

CMS referred the case to the Medicare Appeals Council, asserting that "the ALJ erred as a matter of law by ordering Medicare payment for ‘the observation and underlying care' provided to the beneficiary because those services are not separately billable under Part A."

However, the Medicare Appeals Council "does not agree that the case contains an error of law." The Council cited references from several on-line program manuals to point out the inconsistencies in CMS' position. Section 10 in Chapter 6, "Hospital Services Covered Under Part B," of the Medicare Benefit Policy Manual "clearly indicates that payment may be made for covered hospital services under Part B, if a Part A claim is denied for any one of several reasons," says the Council.

The Council also appears to be more relaxed in interpreting how hospitals can meet claim processing and timely filing requirements, citing Section 50 in Chapter 3, "Inpatient Hospital Billing," of the Medicare Claims Processing Manual: "If a provider fails to include a particular item or service on its initial bill, an adjustment bill(s) to include such an item(s) or service(s) is not permitted after the expiration of the time limitation for filing a claim. However, to the extent that an adjustment bill otherwise corrects or supplements information previously submitted on a timely claim about specified services or items furnished to a specified individual, it is subject to the rules governing administrative finality, rather than the time limitation for filing." Further, Section 50.1.7 in Chapter 1, "General Billing Requirements," of the same manual "makes clear that the claim need not take any particular form to be valid," says the Council.

CMS officials have no comment on the O'Connor decision itself, but do tell FierceHealthFinance that "at this time, CMS does not expect to change the current re-billing requirements."

To learn more about the Medicare Appeals Council's decision:
- read the O'Connor decision

To learn more about CMS' current policies on hospital re-billing:
- read CMS FAQ 9462