Health Reform WK-EDGE States need to scrutinize Medicaid billing and utilize edits correctly
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Wednesday, April 27, 2016

States need to scrutinize Medicaid billing and utilize edits correctly

By Bryant Storm, J.D.

The effectiveness of Medicaid National Correct Coding Initiative (NCCI) coding edits is limited because not all states have fully implemented them or use them correctly. A review of state implementation of the NCCI edits, conducted by the HHS Office of Inspector General (OIG), identified that while the NCCI edits are helping all of the states to reduce improper Medicaid payments, more comprehensive implementation of the edits could lead to even greater cost savings (OIG Report, OEI-09-14-00440, April 18, 2016).

Edits. Under Section 6507 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), states were required to implement the NCCI edits by October 1, 2010. The NCCI edits are a program integrity tool designed to encourage proper coding by automatically denying fee-for-service Medicaid payments for services that do not meet Medicaid billing requirements. The NCCI edits deny payment for ineligible and incorrectly-coded services. The NCCI edits include (1) medically unlikely service edits and (2) procedure-to-procedure edits. A medically unlikely edit would deny payment for medically unlikely or impossible services, like multiple appendectomies on the same patient. The procedure-to-procedure edits prevent providers from obtaining payment for pairs of services that providers should not bill together on the same day.

ACA. The ACA and subsequent guidance dictated how states should implement the NCCI edits. Specifically, states were required to: (1) adopt a specific order for using the NCCI edits; (2) use updated edit files provided by CMS; (3) correctly time the updates of NCCI edit files; and (4) track estimated cost saving from the NCCI edits and report those estimates to CMS each quarter.

Method. The OIG surveyed all 50 states to identify state compliance with the NCCI mandates. The review required states to process 34 test claims to “spot check” use and implementation of the NCCI edits. The OIG analyzed states’: (1) NCCI edit implementation; (2) use of the edits; (3) order and update of edits; (4) cost savings estimates; and (5) use of edits on managed care claims.

Findings. At the time of the review, 10 states reported that they had not yet fully implemented the NCCI edit categories. Two of those states—Oklahoma and Illinois—had not implemented any edits and eight of the states had only implemented some of the edit categories. According to the OIG, the 10 states that did not fully implement the edits accounted for 20 percent of all national Medicaid spending in 2014. The remaining states reported that the NCCI edits had been fully implemented, a finding which was supported by the test edits. Officials in 48 states told the OIG that the NCCI edits had been helpful to promote proper coding and prevent improper payments.

Incorrect use. In 35 of the surveyed states, the medically unlikely edits were improperly used. For example, some states did not properly set up automatic denials for medically unlikely edits and other states did not accurately account for the date span of a provided service, leading to some denials for medically eligible services. Twenty-nine states improperly used procedure-to-procedure edits. The majority of states improperly using those edits did not follow program requirements regarding edit modifiers, which allow certain claims to bypass edits.

Costs. The majority of states—48 of them—failed to report cost saving estimates of the NCCI edits to CMS every quarter. Of those 48 states, 23 states reported cost savings for some but not all quarters and the other 25 states never reported cost savings. The OIG also discovered that only 11 states voluntarily used the NCCI edits to review managed care services.

Recommendations. The OIG recommended that CMS takes steps to: (1) ensure states fully implement the NCCI edits; (2) provide technical assistance to help states use the NCCI edits correctly; (3) issue guidance on how to estimate and report the NCCI related cost savings; and (4) examine whether the use of the NCCI edits on claims under managed care would be beneficial. CMS concurred with all four of the OIG’s recommendations.

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