‘Kink in the Cash Flow’: Rise in Nursing Home Payment Audits Tied to Managed Care

Some nursing homes are seeing “significantly more” audits tied to managed care and dual plan Medicaid claims in certain states – and potentially could see the same from Medicare too.

This is all on top of an improper payment probe the Centers for Medicare & Medicaid Services (CMS) is conducting for Patient-Driven Payment Model (PDPM) claims that started on June 5, in which CMS auditors plan to conduct reviews of five claims per skilled nursing facility (SNF). These audits, CMS said, will follow a pre-payment review process unless an operator can prove financial burden.

Operators expect these reviews to delay sequential billing and lead to more requests by CMS. And while the exact ripple effect remains to be seen for operators, who when faced with a CMS probe oftentimes need to “throw resources” at the probe to get out of it, it will certainly add burdens, according to industry leaders.

“We’re getting requests, significantly more than we ever have in the past for managed care,” said senior VP of Revenue Cycle for Covenant Living Communities and Services Elizabeth McLaren, referring to the increasing number of post-payment reviews. Covenant has SNFs in 11 states, and this trend is happening in all of those states.

Meanwhile, Lisa Chubb, chief clinical officer for Brickyard Healthcare, said the operator’s facilities in Indiana have been getting more post-payment Medicaid audits as well through the state over the past three to four years.

“With these [Medicaid] audits, it’s about making sure that your electronic health record is built in such a way that when your clinicians at the bedside are capturing the burden of care, it is meeting the documentation requirements that are very, very specific to capturing those reimbursable criteria levels,” said Chubb.

In terms of post-pay Medicare audits, Chubb said she has seen a return to baseline: “not anything extraordinary, not anything alarming.”

Audit process changes per state, market

The number of requests that come in for managed care audits is “noticeably different,” McLaren said, and not specific to one payer – although Covenant “hasn’t seen much” from traditional Medicare.

Traditional Medicare usually does more of a post-payment review, while Medicaid is also mostly post-claim reviews, McLaren told Skilled Nursing News (SNN).

Brandon Hagen, senior vice president, reimbursement and policy advisor with the Iowa Health Care Association (IHCA), said pre-pay audits are “pretty rare,” and are usually the result of a recoupment of funds after several post-pay audits.

“Ultimately … it very rarely results in some kind of claim correction, meaning that the care that was provided was appropriate and should have been paid. The unfortunate side is that it takes a significant time investment by the provider to pull all the data and records and submit it to the payer for that review,” he said.

Managed care has a “mix” of pre- and post-pay audits, McLaren said, but SNFs are seeing more pre-claim reviews with managed care than any other payer.

The timeline for receiving these audits can also add burdens for operators.

Hagen said association members in Iowa usually see post-pay reviews anywhere from one to five years after a claim was filed depending on the plan, and require good, quantitative information to be sent.

“A lot of times with pre-claims on the managed care side, what they’re looking at is what the authorization showed, and making sure that either the PDPM category matches, the per diem level matches, to make sure what the provider is going to be submitting is going to tie back to that,” said McLaren.

For comparison, McLaren said on the home health side there are a lot of different states that have a mandatory pre-claim review, including Illinois.

The process not only adds more paperwork, but payment is of course delayed.

For traditional Medicare, Chubb said she’s seeing pre-pay audits come in for Brickyard’s facilities, with the claim amount held until requested documentation is received. Once everything is approved, which she said is “very timely,” CMS releases the funds to the facility.

Snowball effect of 5-claim probe

McLaren said directives for the 5-claim probe are a bit confusing, with language in a CMS memo suggesting audits will be post-pay, while the agency said only post-pay audits will be allowed if a provider can demonstrate financial burden.

A transmittal from CMS said claims will be adjusted or denied if improper payment is identified.

“That to me reads that it has already been paid and they’re going to do a payment adjustment based on that review,” said McLaren. “I haven’t seen anything, or any instructions come out from CMS of how they’re going to make it a prepayment.”

Chubb hopes Medicare Administrative Contractors (MACs) fully understand the request for information (RFI) process as the probe is underway, and what items are coded on the MDS in the reimbursable category.

“Pointing them in the direction of where it can be found in the clinical record is going to be invaluable when it comes to capturing the burden of care for the audit,” said Chubb.

Covenant hasn’t received any 5-claim letters as of yet, just a notice from the MAC that this will be happening.

On top of process confusion the industry is still trying to figure out what a post-pandemic world looks like, a continuing staffing crisis and agency use, which would likely contribute to error rate testing.

“This is the first time all skilled nursing facilities were asked to submit post-payment documentation to support the payment received on five claims,” noted McLaren. “At least in the 25 years I’ve been in the industry. I don’t recall a time that they’ve ever had this.”

And, the five-claim probe appears to be the tip of the iceberg toward more audits. McLaren said if a provider is put into the Target Probe and Educate (TPE) cycle from the 5-claim review, CMS could select between 20 and 40 more claims for post-payment review.

It’s a “next round” for the agency to review PDPM claims, she said.

“They could really do three rounds,” said McLaren. “The MAC would review 20 to 40 claims. If you’re compliant, you get a year where you won’t be selected. But if some claims are denied, they will offer to do one-on-one education.”

Depending on the error rate for a facility, operators could be in a 45-day cycle with the TPE process, where the MAC will continue to review claims to make sure improvement is demonstrated.

“They can actually go so far as to do a 100% pre-payment review, depending on what your error rate is, as part of that TPE program,” added McLaren. “Depending on what you submit, and what that error rate is on those five claims, [5-claim] can turn into a bigger process, and can really put a kink in the cash flow as well, if you don’t improve your error rate from that point.”

In other words, if a facility fails to improve in three rounds of review, that places them in a pre-pay category, so to speak.

“It really does turn into something bigger and we’ve never really had that before. It was always a little bit more random or based on certain RUG categories before PDPM; now what we’re seeing is a little bit different,” said McLaren.

In terms of preparing for the five-claim probe, and pre- and post-pay claims overall, McLaren said operators must have the right processes in place for reviewing what has been submitted, making sure packets sent to CMS are comprehensive and submitted timely.

Such processes can help operators avoid triggering other audits and 100% pre-claim reviews.

Post-pay audits in managed care

Covenant has had to make sure from an HR perspective that they’re managing the overall amount of managed care post-pay audit requests, scouring email and being diligent about scanning physical mail.

“We’ve really refined our communication process, our timeline, and then our checklists,” said McLaren. “One thing that we’ve done is to make sure we’re signed up for the different insurance plans’ portals so we can submit all of this information electronically.”

The alternative is sending documentation to a CMS PO Box, with no one to sign for anything.

If a SNF operator is facing a 30-day window to submit documents, and that window is missed, claims can be completely denied and then the denial needs to be appealed – a back up in the timeline process causes a cash flow problem, an accounts receivable problem, and a billing problem, she said.

“Most of these claims you’d have to bill in sequential order,” noted McLaren. “If you bill your June claim and it gets paid, and you bill your July claim, and it gets paid, and then you miss a post-payment review, you may have an issue with July, you may have an issue with August; it compounds.”

Most insurance companies will take a payment back on the following remittance, she added. Payment for July claims could be impacted if a June claim was denied, for example, creating an immediate cash flow issue.

“Managed care, that’s where we’re seeing it,” said McLaren. “We do have a pretty good success rate from a post-pay review perspective. If we do have an issue, it’s because something was missing when we submitted it … maybe they missed a piece of documentation.”

If an operator gets to the point of an appeal, they need to wait for the review to finish before they can get those withheld funds back.