CMS has the following three goals for reducing improper Medicare payments this year:

1. To reduce overall payment errors by $50 billion
2. To cut the Medicare fee-for-service error rate in half
3. To recover $2 billion in improper payments

These are ambitious goals, and to reduce payment errors and recover improper payments, CMS has initiated a number of projects. Medicare Administrative Contractors (MACs), the companies that provide claims administrative services for CMS, have begun targeting procedures with high documentation and indication error rates, and they are now auditing claims to reduce those rates. In selected jurisdictions, for example, some procedures have been found to have error rates of 70 percent or more.

At least three MACs have targeted major lower extremity total joint arthroplasty procedures (DRG 470), pointing to a failure to show medical necessity in the hospital record. This does not mean that the procedures were not medically necessary; instead, the problem could be that the failure of nonsurgical interventions was not documented in the hospital admission records.

Here’s where the unintended consequences come in. Some MACs are basing payment denials for DRG 470 claims on unpublished or poorly delineated coverage policies that were developed without specialty physician input. For example, one MAC was requiring that physicians document 12 weeks of physical therapy prior to joint replacement surgery. Such a requirement ignores the fact that many Medicare patients delay seeing an orthopaedic surgeon until their pain or functional limitations can no longer be ignored. Prolonged physical therapy would be of little help to these individuals, whose health would continue to deteriorate the longer they delayed surgery. Additionally, requiring such extensive preoperative therapy—particularly if it is inappropriate, given the patient’s condition—could exhaust a Medicare beneficiary’s benefits for postoperative physical therapy.

Awareness to action
Even though these audits are currently directed at hospitals and not individual physicians, members of both the AAOS and the American Association of Hip and Knee Surgeons (AAHKS) are seeing their impact. As a result, AAOS and AAHKS are working together to educate our members and to increase awareness of these unintended consequences among policymakers.

During the past several months, AAOS has taken the following actions:

• Conducted a “Medicare Audits: Everything You Wanted to Know but Were Afraid to Ask” symposium at the 2012 AAOS Annual Meeting
• Worked with members of Congress from affected districts on a letter to Marilyn Tavenner, CMS acting administrator, requesting an immediate suspension and review of Medicare audit programs related to DRG 470. The letter was signed by Reps. Michael Burgess, MD (R-Texas) and Dutch Ruppersberger (D-Md.) and 43 other members of Congress from both political parties and eight different states.
• Held a strategic discussion, led by David A. Halsey, MD, and Craig A. Butler, MD, MBA, on Medicare audits during the June Board of Directors meeting
• Appointed an AAOS Coverage Determinations Project Team under the leadership of David Templeman, MD
• Established a “Medicare Audits 101” webpage on the AAOS website to educate and keep members informed (www.aaos.org/medicare101). The webpage includes the following:
• an audit reporting tool to collect data on ‘improper payment’ collections or withholdings of more than $50
• a model coverage determination for total joint arthroplasty, drafted in conjunction with AAHKS and distributed to all MACs nationwide in the hope that they will consider adopting and publishing it before moving forward with audits
• an easy way for AAOS members to contact their Congressional representatives and request a suspension of Medicare audit programs related to DRG 470
• In conjunction with AAHKS and the Florida Orthopaedic Society, reviewed and suggested substantial revisions to a local coverage determination on documentation requirements for total joint procedures
• Engaged in direct communications with CMS and select carrier medical directors to build relationships and share information
• Through the leadership of Board of Councilors Chair Fred C. Redfern, MD, reached out to ensure that an orthopaedic surgeon is appointed to the contractor advisory committee (CAC) in every state and that the AAOS maintains regular contact with the orthopaedic CAC representative
• Developed a draft article and recommended publication of a documentation checklist that was submitted to CMS for possible publication in the Medicare Learning Network; as of this writing, CMS has not made a decision on publication
• Extended invitations to potential coalition partners, such as the American Medical Association, American College of Cardiology, American Hospital Association, AdvaMed (the device industry trade group), and state hospital and medical associations, that would have an interest in this topic
• Responded to requests from Congressional offices for more information on this issue

What’s next?
CMS is moving forward swiftly with demonstration programs intended to help curb improper payments, and the pressure to identify claims with documentation errors will be intense. Recognizing the unintended consequences of the CMS initiative, the AAOS—through its office of government relations, Council on Advocacy, and unity efforts with other orthopaedic organizations—will continue to expand our efforts to ensure that future decisions by CMS and MACs do not have negative unintended consequences for orthopaedic patients and their surgeons.

According to Dr. Templeman, orthopaedic surgeons who perform joint replacement procedures can take the following three important steps to ensure that claims for these procedures are not denied:

1. Document your treatments—especially nonsurgical treatments recommended early in the process—and the patient’s response to those treatments.
2. Make sure the documentation is included in the hospital admission history—not just in your office notes.
3. Read the model coverage determination so that you are familiar with the recommended criteria supporting the medical necessity of and the documentation requirements for total joint replacement.

I urge you to visit the AAOS Medicare Audits 101 webpage (www.aaos.org/medicare101), where you will find links to additional information, including the proposed model coverage determination, educational materials on Medicare audits, and our audit reporting tool. I also encourage you to be aware of the current audits by CMS that focus on documentation. Most improper payments are due to incomplete documentation. Orthopaedic surgeons must understand that documentation of medical necessity in the office record should also be stated in the hospital admission record for DRG 470 claims.

Terms you should know

• MAC—Medicare Administrative Contractor, a private company that performs claims administration for Medicare in one or more of the 15 Medicare claims administration regions.
• CERT—Comprehensive Error Rate Testing, an audit program designed to monitor the performance of MACs and ensure that they are handling claims properly.
• RAC—Recovery Audit Contractor, an independent medical collection agency that works for Medicare to recover overpayments from providers.
• LCD—Local Coverage Determination, a ruling established by the MAC defining what Medicare will cover in that specific region.
• NCD—National Coverage Determination, a ruling by CMS that applies to all MACs and RACs and defines the items and services considered reasonable and necessary for the diagnosis or treatment of an illness or injury, within the scope of a Medicare benefit category.
• CAC—Contractor Advisory Committee, a formal mechanism within each state to facilitate communication between physicians and the MAC; each CAC is supposed to have an orthopaedic representative.