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Problems Plague Medicare's Method for Measuring Payment Errors

WASHINGTON, June 8, 2012 /PRNewswire-USNewswire/ -- The American Association for Homecare reported in this week's Mobility Matters publication that the U.S. Department of Health and Human Services (HHS) has uncovered serious flaws in the methodology used to calculate the error rate on payments for services and products provided to Medicare patients.

In a March 9 study, the HHS Office of Inspector General (OIG) concluded that improper fee-for-service Medicare payments reported to Congress for fiscal years 2009 and 2010 should have been reduced by about $2 billion each year. The reason for the discrepancy is that thousands of denied claims cited as improper payments were later overturned and paid during the appeals process.

The Comprehensive Error Rate Testing (CERT) program, which annually calculates the Medicare error rate on payments, monitors how often the Centers for Medicare and Medicaid Services (CMS) denies payments to hospitals and providers because it was determined that proper reimbursement and coverage criteria weren't used.  The government acknowledges that CERT was designed to measure Medicare billing errors – not fraud or abuse. 

The Mobility Matters article said the OIG study is significant because the findings underscore the extent of the flaws in the CMS reimbursement and documentation policies.  Under the current process, CMS is denying reimbursement claims for home medical equipment, such as oxygen therapy, hospital beds, and power wheelchairs, unless certain guidelines are met.

Clearly, however, the number of successful appeals at three different levels – Medicare Administrative Contractor, Qualified Independent Contractor, and Administrative Law Judge – demonstrates that other authorities disagree with the way CMS and its contractors are reviewing claims. One major problem is the lack of a consistent and reasonable standard: providers find that the policy guidelines are routinely applied differently in different regions of the country, and can even vary within the same region or claims office. The full Mobility Matters article can be downloaded here.

"The OIG report reinforces the fact that the documentation process for Medicare reimbursements must be addressed in a substantial way," said Tyler Wilson, president of the American Association for Homecare.  "These claim denials are killing legitimate businesses. Providers are paying for products and services that are medically necessary for Medicare beneficiaries. Then, largely for technical reasons, the reimbursements for providers are being denied, and they must go through a lengthy and costly appeals process to receive payment."

Furthermore, Wilson said, "Confusing rules and red tape in Medicare are making it harder for patients to get a wheelchair or other types of medically required equipment and services that helps them to remain safe and independent at home."

Wilson cited the cash flow shortfalls caused by these payment delays as well as excessive government audits as major reasons why many providers are going out of business or deciding to no longer provide certain products to Medicare patients.  

Denied claims are a particular problem for power wheelchair providers.  Requirements for documenting medical necessity for mobility equipment has changed many times over the last decade, confusing physicians, clinicians, providers and Medicare beneficiaries. Power wheelchair providers said nearly 90 percent of their claim denials are reversed by Administrative Law Judges, but the payment delays and administrative costs associated with making appeals place an unfair financial burden on their businesses.

Three years ago, a CMS report provided insight on the agency's approach to reimbursement claims and cited recent changes to payment guidelines.  In the report, the agency demonstrated how unreasonable they have made some of the guidelines. The Mobility Matters article details some of the arbitrary guidelines, such as prohibiting claim reviewers from considering all available information if physician medical records were incomplete or missing, insisting that a physician's handwriting be completely legible, and not allowing claim histories to be used as a basis for a new claim on behalf of patients.   

While claim reviewers are denying claims based on these and other irrational guidelines, they are frequently overturned in appeals. To make the error rate more accurate and not provide Congress with erroneous information, the OIG has recommended that CMS adjust its methodology to include denials overturned on appeal.

But Wilson said the home medical equipment sector is looking for more substantial change, saying CMS must address the factors creating the unjustified claim denials.  Wilson, for instance, noted that CMS is considering an electronic template that would vastly improve the documentation process for power wheelchairs.  And he said that if CMS designs an adequate process for prior authorization, it would also strengthen the integrity of the Medicare program.

"What's clear is the underlying problems contributing to the error rate must be addressed," Wilson said.  "It's absurd for the private sector to have to pay such a steep price because the government can't implement reasonable reimbursement guidelines."

The American Association for Homecare represents durable medical equipment providers and manufacturers who serve the medical needs of millions of Americans who require oxygen equipment and therapy, mobility devices, medical supplies, inhalation drug therapy, and other medical equipment and services in their homes. Members operate more than 3,000 homecare locations in all 50 states.  Please visit

SOURCE American Association for Homecare
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