No More ‘Downcoding’

While Hays v. Sebelius may sound like a script from the popular TV show “Law and Order,” in reality it is a federal court case that has implications about how Medicare now reduces payments for covered items or services.

Effective Feb. 4, the changes were implemented following direction from CMS to the DME MACs that they may no longer make partial payment for claims based on “least costly alternative” (LCA) methodology. All local coverage determinations have hence been updated to remove the LCA language.

Medicare has historically used three methods to reduce payment for covered items or services. As a review they are:

1. Inherent Reasonableness. While not used recently, this is used when CMS determines that the statutorily determined payment amount for a covered item or service is “grossly excessive or deficient” and, therefore, not “inherently reasonable.” The limitation for reduction is 15 percent.
2. Comparison of average sales price (ASP), widely available market price and average manufacturer price (AMP). If HHS’ Office of Inspector General discovers the ASP exceeds the widely available market price or AMP by ~5 percent, then HHS can disregard the ASP when determining reimbursement rates. This practice is related primarily to pharmaceuticals.
3. Least Costly Alternative. Until now, this has probably been the most used methodology for reducing payment for DME. It allowed the DME MACs to determine that two or more covered items or services were clinically indistinguishable and, through the LCD, the MACs announced they would only pay for the least costly of the items.

It was under this provision that Ilene Hays, a Medicare beneficiary with COPD, entered the picture. Her physician had ordered Duoneb, a combination drug, as opposed to taking the two drugs albuterol and ipratropium bromide separately. All these medications were used through a nebulizer. Under the LCA methodology, all four DME MACs had determined that reimbursement for Duoneb would be based on allowance for the least costly alternative, which was separate doses of the two drugs. The case was heard in U.S. District Court (Hays v. Leavitt) in 2008, and the LCA as a payment determination was rejected.

The case then moved to the U.S. Court of Appeals in 2009 (Hays v. Sebelius.), where the earlier ruling was upheld. Shortly thereafter on April 19, 2010, CMS instructed all MACs and Part B carriers to suspend and remove any LCA provisions contained in the LCDs applicable to Part B drugs. Similar directions were issued to the DME MACs late in 2010 with an effective date of Feb. 4, 2011.

In our industry, the LCA was viewed as an “automatic downcode.” Often it was stated, “It won’t be denied, it will be downcoded.” That is no longer the case. The LCDs that have been updated recently reflect that the HME provider must bill what the patient qualifies for based on documented medical necessity. If the record does not reflect the need specific to the HCPC code, the claim will be denied. There is no more downcoding!

Suppliers who want to offer upgraded equipment (for example, a full-electric bed versus a semi-electric model), will need to designate they are allowing a free upgrade. Of course the mechanism for a “true upgrade” still exists when providing something beyond what the patient qualifies for.

To facilitate these changes, the DME MACs have released information on how to use the upgrade modifiers correctly. It is important to note that the claim will be billed based primarily on who is driving the decision that an upgraded item be provided. There are scenarios for when the physician orders the upgrade, the patient requests the upgrade or the supplier provides the upgrade as a convenience (i.e., all they have in stock that day is lightweight chairs).

Then of course, the next step is to determine whether the upgrade is to be charged to the beneficiary or updated for free. A table on the Jurisdiction C (Cigna) website at www.cignagovernmentservices.com/jc can be a quick guide. Click “News and Publications” on the left, then “News.” Scroll down under “January 2011” for “Revised – Use of Upgrade Modifiers” posted on Jan. 18.

Read more All Things Respiratory columns.