Medicare Advantage Shadow Billing: Are Providers Leaving Entitled Monies on the Table

This issue of IMA Insights seeks to provide a comprehensive discussion of "shadow billing" by hospital providers for their Medicare Advantage enrollees, focusing on the reimbursement and compliance implications that need to be considered. While information has been published either through government sources or through articles published in the healthcare arena, little is available that ties together the various facets of shadow billing. 

This lack of clear and detailed guidance should come as no surprise to the provider community. CMS is well aware that hospital providers have left millions of dollars on the table and they are in no hurry to help hospitals recover the monies that are rightfully theirs. Depending on the sophistication of a provider's systems and the strength of their internal processes, hospitals could be leaving hundreds of thousands to millions of dollars on the table every year.


"Shadow billing", synonymous with "no pay" or "information only" claims, is an unofficial term that refers to the process wherein hospitals submit claims to their Medicare Administrative Contractor (MAC) for inpatient services provided to Medicare beneficiaries who are enrolled in a Medicare Advantage (MA) plan. These claims are submitted, as per instructions from CMS through a series Transmittals, for the purpose of requesting supplemental Indirect Medicare Education (IME), Graduate Medical Education (GME), and Nursing Allied Health Education (NAHE) payments, and for the proper reporting of Medicare beneficiary days to be counted in the Medicare fraction of the Disproportionate Share Hospital (DSH) calculation.

Shadow Billing for MA patients by hospitals began with the passage of Balanced Budget Act of 1997 (BBA '97), wherein sections 4622 and 4624 of the Act, provided hospitals with additional payments for IME and GME costs for their patients enrolled in a Medicare managed care program. Initially the MA plans were responsible for reporting all of the claim "encounter" data to CMS. However, MA plans did such a sub-par job with reporting that the burden of submitting this encounter data was shifted to providers. Obviously, CMS felt they could force providers to submit the data that they were unable to get the MA plans to provide.

Prior to the passage of act, IME and GME payments to teaching hospitals were available only for traditional Medicare fee-for-service (FFS) patients. IME payments are made to account for the indirect costs of teaching interns and residents and are based on the ratio of the number of interns and residents per hospital bed. Hospitals typically receive their IME payment via a remittance advice as claims for Medicare beneficiaries are submitted and approved for payment. GME payments are intended to cover the direct cost associated with an approved teaching program and is paid based on the number of residents, the costs associated with training the residents and the hospital's Medicare patient load (percent of Medicare patients). Hospitals receive their GME payment via the cost report settlement. 

Subsequent to the passage of BBA '97, CMS released a series of Program Memorandum (PM)/Transmittals, beginning with PM A-98-2 issued July 1998, that detailed how providers were to request these supplemental payments. In February 2003, CMS issued PM A-03-007, which modified PM A-98-2, and provided additional payments to Non-IPPS teaching hospitals and hospital-based units additional payment for GME and NAHE costs. Hospitals and units excluded from IPPS and specifically identified in this transmittal are Rehabilitation hospitals and sub-units, Psychiatric Hospitals and sub-units, Long-term Care hospitals, Children's hospitals, and Cancer hospitals. Because these supplemental payments for IME/GME/NAHE are processed by Medicare Part A and not the MA plan, providers must submit a separate claim "shadow bill" to Medicare Part A through their respective MAC in approved Uniform Billing (UB) format.  Clearly, the instructions in each of these PMs provide for significant reimbursement opportunities for teaching facilities. 

CMS released a series of three Transmittals, (beginning in July 2007 and most recently in May 2010), requiring that non-teaching hospitals submit "no pay" claims for the MA beneficiaries they treat, but not for the purpose of requesting additional payments. The purpose of these Transmittals was to make sure that these MA days were captured so that they could be eventually captured in an acute care hospitals DSH calculation or in a rehab hospitals low income patient calculation. 

While each of these Transmittals clearly instructed hospitals to submit these no pay bills (i.e., shadow bills) for their MA patients, only Transmittal 696 issued May 5, 2010 contained provisions with any real consequence to providers for failing to complying with the instructions. In that Transmittal, CMS stated that they believed that many hospitals have not reported MA days and therefore were providing them with a final opportunity to do so. Further, the Transmittal required that hospitals attest in writing that they have either submitted all of their MA claims for the periods indicated (FY 2007 and 2008), or that they have no MA claims for those years. If, however, providers fail to file their MA claims and attestations, they will be considered not in compliance and with the instructions. As a result, CMS may instruct the MAC to use an SSI ratio of zero percent to calculate Medicare DSH payments, or take other actions. For those providers who receive DSH payments, failure to comply with this requirement could be very costly. It is worth noting that in each of these three Transmittals, teaching hospitals are specifically excluded because they are supposedly already submitting shadow claims based on prior CMS communications.

Clearly there are significant negative implications that providers face if they do not properly identify and shadow bill claims for the MA patients they treat. For teaching facilities, there are missed opportunities for optimizing your IME, GME, and NAHE reimbursement. For non-teaching facilities there is the issue non-compliance and the risk of losing your DSH reimbursement.
In today's environment, hospitals are under increased pressure to make sure that they identify and re-coup money that is rightfully theirs while balancing the challenges of dealing with a myriad of compliance issues. As discussed earlier, in order for hospital providers to submit shadow bills for their MA patients, they must submit a separate claim to their MAC (and not the MA plan). Accordingly this methodology places the onus on the hospital to ensure that the necessary information is provided on the claim, including specific information that must come from the beneficiary upon registration. Often all of the information needed to submit a shadow claim is not obtained during the registration process causing large buckets of claims to never be submitted. Further, providers must ensure that the claim includes the applicable condition codes and other necessary information so that the claim can be properly processed. For many teaching facilities, this issue is likely to have been on their radar screen for a while.  For the non-teaching facilities, that may not necessarily be the case. While many providers have addressed this issue by way of conducting retrospective reviews and incorporating internal processes to identify these claims prospectively, providers often fail to identify all of the eligible claims that they should be billing. Even in organizations that are doing retrospective reviews, simply missing 1% - 2% of these claims can result in significant lost revenues.

There are a variety of factors that may contribute to this dilemma including the fact that the regulatory guidance is complex and sometimes unclear; hospitals sometimes lack proper internal resources; there is often miscommunication or a lack of effective communication among key hospital departments (i.e., patient accounting, reimbursement, managed care, compliance, decision support, and finance); disparate systems often make it difficult to obtain all of the required data; time and competing initiatives; and turnover of staff leading to gaps in processes. So the challenge for providers is to develop and maintain processes and controls to identify MA patients, ensure proper data is collected and successfully bill shadow claims.

With regard to filing shadow bill claims, the conventional belief in the industry is that these claims must be filed according to the timely filing rules. On May 7, 2010, CMS issued new timely filing guidelines in Change Request (CR) 6960, which went into effect on January 1, 2010. In that issuance, CMS instructed Medicare contractors (based on provisions of the Patient Protection and Affordable Care Act (PPACA) to adjust their system edits to ensure the following changes for the processing of claims. Beginning January 1, 2010, claims must be filed within 12 months from date of service. This change is significant and dramatically shortened the amount of time a provider has to file a claim. For those providers who rely on retrospective reviews to ensure that they have captured all of the monies to which they are entitled, this change dramatically shortens the window of time with which to get these reviews completed.

Look for further editions of IMA Insights where we will discuss creative strategies to bypass the new timely filing rules.
Despite the numerous challenges that exist surrounding the issue of shadow billing for MA patients, there are many things within the control of the provider in order to address these challenges. More importantly, given the potential negative impact of not doing so, providers cannot remain complacent with this issue.

First, a comprehensive understanding of MA shadow billing requirements and the implications for your facility should be established. This will ensure that the appropriate departments in your organization are familiar with the requirements and continue to educate themselves accordingly. Second, establish a shadow billing task force with participation from all of the stakeholders previously mentioned. Third, conduct on-going reviews to ensure that you are capturing and shadow billing all MA patients you treat. Fourth, based on the results of your reviews, you may need to tighten existing internal processes and controls and create new ones as needed based on the results of your review. Part of your review should include a retrospective assessment.

Finally, stay in touch with your peers and industry experts and continually look in areas where you didn't look before (i.e., do you complete a 100% review traditional HMO claims to look for misclassified MA patients - another opportunity to capture shadow bills).

Opportunities exist for providers to re-coup additional reimbursement to which they are legally entitled and to make sure that they are in compliance with instructions set forth by CMS. It is clearly demonstrated that a financial opportunity exists for teaching facilities to recoup additional dollars as well as non-teaching facilities to ensure they are to the best of their abilities are capturing and attesting to shadow billing requirements.

In our experience, providers are successfully capturing between 92% - 99% of the claims that should be shadow billed. While this success rate appears strong on the surface, don't lose sight of the fact that even missing only 1% of these claims can result in the loss of over $1,000,000 - ANNUALLY!
We are pleased to have the opportunity to provide this information to you. If you have any questions, need assistance with evaluating your shadow billing process, or need assistance recovering lost IME/GME/NAHE monies, please do not hesitate to contact me at (215) 514-0951.

Best Regards,
Mario Feher 
IMA Consulting