COVID-19 and Hospitals: Padding the numbers or paying the costs?

ConnectLocal talks with Stephens County Hospital officials and examines the complicated matrix of hospital funding to see if there is any validity in claims of exaggerated COVID-19 figures

The idea of “Covid kickbacks” was born from an April 8 interview of Minnesota Republican Senator Scott Jensen on Fox News. Following Jensen’s interview and subsequent social media posts, online speculation flourished on whether hospitals were getting paid to exaggerate the numbers of COVID-19 cases and outcomes in order to collect on COVID-19-specific federal funding.

Jensen appeared on the show to discuss Centers for Disease Control and Prevention's (CDC) guidelines that changed the way COVID-19 deaths were reported.

"Ideally, testing for COVID-19 should be conducted, but it is acceptable to report COVID-19 on a death certificate without this confirmation if the circumstances are compelling within a reasonable degree of certainty. In cases where a definite diagnosis of COVID cannot be made but is suspected or likely (e.g. the circumstances are compelling with a reasonable degree of certainty) it is acceptable to report COVID-19 on a death certificate as 'probable' or 'presumed,” stated the revised CDC guidelines.

Previously, only deaths of patients who had tested positive for COVID-19 were being added to the tally of COVID-19 deaths.

"The idea that we are going to allow people to massage and sort of game the numbers is a real issue because we are going to undermine the [public] trust," Jensen told FOX News’ Laura Ingraham. "And right now as we see politicians doing things that aren’t necessarily motivated on fact and science, their trust in politicians is already wearing thin."

Jensen told Ingraham that under the CDC guidelines, a patient who died after being hit by a bus and tested positive for coronavirus would be listed as having presumed to have died from the virus regardless of whatever damage was caused by the bus.

While Jensen’s initial comments focused on COVID’s mortality figures, he did not identify fiscal gain as a motivating factor. “Fear is a great way to control people,” he said in response to a question about why hospitals would incorrectly attribute deaths to COVID-19.

Jensen did, however, suggest that hospitals had the potential to profit from treatment of patients identified as COVID-19 cases.

"Right now, Medicare has determined that if you have a COVID-19 admission to the hospital, you’ll get paid $13,000. If that COVID-19 patient goes on a ventilator, you get $39,000; three times as much,” Jensen stated, neglecting to mention that the payments fall under the Medicare program that traditionally reimburse hospitals – at a similar rate – for medical services provided.

In a later video released by Jensen on social media, he said that hospital administrators may be pressuring physicians to include all diagnoses, including “probable COVID-19,” on discharge or death certificates in order to get the higher Medicare allocation allowed under the Coronavirus Aid, Relief and Economic Security Act (CARES).

The funding Jensen refereed to are not the $30 billion initial CARES stimulus funds that were distributed to hospitals in lump-sum payments over the past week. Those funds – including the nearly $700,000 received by Stephens County Hospital, were allocated based on 2019 Medicare reimbursements, uninfluenced by COVID-19 diagnoses.

However, two areas of funding for hospitals are impacted by COVID-19 statistics: Regular Medicare reimbursements to hospitals, and distribution of the remaining $70 billion in CARES stimulus monies for hospitals.

Medicare Reimbursements:

According to a Centers for Medicare & Medicaid Services (CMS) guidance document, provisions included in the CARES)Act included a “Medicare add-on payment of 20 percent for both rural and urban inpatient hospital COVID-19 patients;”

Medicare payments to hospitals are only assessed for treatment of patients enrolled in Medicare. Medicare does not provide payment to hospitals for services rendered to patients who are not enrolled in Medicare.

“Generally, Medicare is available for people age 65 or older, younger people with disabilities and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant).” states HHS documentation.

Typically, Medicare pays hospitals for inpatient care per beneficiary discharge, using the Inpatient Prospective Payment System. According to CMS documentation and information provided to ConnectLocal by the nonprofit Kaiser Family Foundation (KFF), the base rate for each discharge corresponds to one of more than 700 different categories of diagnoses—called Diagnosis Related Groups (DRGs)—that are further adjusted for patient severity.

“DRGs that are likely to incur more intense levels of care and/or longer lengths of stay are assigned higher payments,” KFF documents state. Some hospitals receive added payments, such as teaching hospitals and hospitals with higher shares of low-income beneficiaries. In general terms, Medicare pre-determines a base payment rate for a given unit of service, such as a hospital stay, an episode of care, or a particular service; then, based on certain variables, such as the complexity of the patient receiving the service, Medicare adjusts its payment for each unit of service provided

“Payment is really based on the primary diagnosis, major complications and the procedure performed,” Stephens County Hospital CEO Mike Hester told ConnectLocal.

Treatment variables typically play a role in determining the amount of Medicare funds a hospital will receive for each patient. For example the Medicare payment for a patient that is on a ventilator for less than 96 hours will be less than the payment for a patient who is on a ventilator for more than 96 hours.

“Each diagnosis has a national base rate times a certain multiplier based on acuity (weights). Also, the wage index which is determined by wage data over time, is less for rural areas and is also a multiplier in the reimbursement calculation. It is a very complicated system of reimbursement,” Hester explained.

The location of the hospital also plays a role in determining Medicare receipts.

“We are designated rural, which has the lowest rates,” Hester said. "Medicare pays less than cost in Georgia."

There is no DRG Code that specifically mentions “COVID-19." However, there is a standard code used to classify COVID cases, according to Hester.

“If a patient has Covid 19 and (is enrolled in) Medicare, they are placed in DRG 179 (Respiratory Infections & Inflammations W/O Cc/Mcc), 178, (Respiratory Infections & Inflammations W Cc) or 177 (Respiratory Infections & Inflammations W Mcc). Most of the time the patient has pneumonia. The Covid would be sequenced first, followed by pneumonia. DRG 177 would be assigned, Weight 1.8912, which would be about $14,163 for our hospital,” Hester said.

“It gets a little more complicated with a ventilator - Ventilator less than 96 hours would be DRG 208 with pneumonia as principal. Wt, 2.4841 or $18,603.00. If the patient is on the ventilator greater than 96 hours with principal dx of pneumonia, DRG would be 207, weight 5.7356 or $42,953.00.

The 96-hour mark for ventilator use holds constant across diagnosis categories. For example “If a patient has principal dx of sepsis and on ventilator less than 96 hours, DRG 871 will be assigned and you would receive $13,976.00; If the patient has principal dx of sepsis and on the ventilator greater than 96 hours the DRG would be 870, Weight 6.3243 or $47,362.00,” Hester explained.

“To code Covid either as principal or secondary dx (diagnosis), a positive test result would be documented in the patient record, even though possible and probable diagnoses can be coded as if they are present. This keeps statistics accurate and shuts the door for potential fraud,” Hester explained.

When reviewing Jensen’s statement that "if you have a COVID-19 admission to the hospital you’ll get paid $13,000. If that COVID-19 patient goes on a ventilator, you get $39,000; three times as much,” the figures mentioned by Jensen roughly match the standard payments to hospitals for similar care, and are not an additional payment on top of normal Medicare payments.

The CARES Act did, however, provide for a 20 percent add-on to the inpatient prospective payment system (PPS) DRG rate for COVID-19 patients for the duration of the public health emergency.

"For discharges with (a COVID diagnosis code), CMS will apply an adjustment factor to increase the DRG weight by 20 percent when determining inpatient PPS operating payments,: states CARES Act documentation. Inpatient PPS claims for COVID-19 discharges on or after Jan. 27 that are received by CMS before April 21 will be automatically reprocessed to reflect the payment increase. Claims received on or after April 21 will be processed reflective of the 20 percent increase,” according to CARES act documentation."

According to the American Hospital Association, typical Medicare reimbursements to hospitals for services provided to Medicare patients fall below cost

“Both the supplies and resources needed to care for presumptive and positive Covid-19 patients adds a great deal of additional costs, so additional reimbursement is absolutely necessary for Covid patients as the resource demands increase dramatically over normal patient care,” Hester said.

“The 20 percent was added by Congress because hospitals have lost revenue from routine care and elective surgeries that they can’t provide during this crisis, and because the cost of providing even routine services to COVID patients has jumped,” agreed Joseph Antos at the American Enterprise Institute. “This is no scandal.”

"CMS directives have mandated that no deductibles or copays be assigned and charged to patients that have COVID related treatment, testing or a diagnostic visit,” Hester explained. “This adds an administrative burden to ensure bills do not improperly get sent to patients for a "patient liability" portion of the charges and that the uninsured are not billed for those services,” he said.

Remaining $70 billion in CARES stimulus monies

Hospital reimbursement for the treatment of uninsured COVID-19 patients could account for more than 40 percent of the $100 billion earmarked for hospitals in the latest coronavirus stimulus package, according to estimates from the Kaiser Family Foundation.

On April 22, 2020, HHS announced the release of the remaining $70 billion of the $100 billion Public Health and Social Services Emergency Fund appropriated in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The fund reimburses eligible healthcare providers for expenses and lost revenue attributable to the 2019 novel coronavirus (COVID-19). HHS released the first $30 billion on April 10,

According to HHS releases, allocations of that $70 billion will be made through five “buckets” of fund types, with approximate apportionment of $20 billion for general distribution to healthcare facilities and providers, $10 billion for hospitals determined to be in areas particularly impacted by COVID-19, $10 billion for rural health clinics and hospitals; $400 million for Indian Health Service facilities, and an unspecified portion for the treatment of the uninsured and possibly other further releases for Medicaid providers.

“Personally, I do not believe healthcare professionals are trying to commit fraud, as this is unethical and could result in jail time and massive fines that would not only affect the individual accused of such a crime, but would be detrimental to the facility,” Hester said in reply to questions about the implications of Jensen’s comments.”Also, it has been an ever changing environment and rules regarding Covid have fairly recently been published."

"Medicare audits records, so any patient diagnoses of Covid will be audited by Medicare (not every one, but a sample). The Medicare program has a strong audit program. My guess is, since it is such a new condition and diagnosis, people are still learning how to properly and completely document, code and bill for the services," Hester added. "Our volumes are extremely low, so it is an easy task for us; but for larger, busy facilities, it is very complicated and error will occur without anyone intentionally committing a crime.“



This alert summarizes the five new buckets of funding from the $100 billion in CARES Act allocation, and the actions providers must take in short order to receive these funds.

General Allocation ($50 Billion). The first $30 billion disbursed to providers (beginning April 10, 2020) was part of a $50 billion general distribution allocation. The disbursement of the additional $20 billion is detailed below.

1. Additional $20 Billion. HHS is releasing an additional $20 billion of this general allocation to Medicare enrolled healthcare facilities and providers based on eligible providers’ 2018 net patient revenue to augment providers’ previously disbursed allocation so the entire $50 billion general distribution is allocated in proportion to providers’ share of 2018 net patient revenue. If HHS has cost report data for providers on file, certain providers can expect to receive the first wave of funds beginning April 24, 2020. Even though some providers will receive automatic payments, providers must still verify their payment amounts by submitting revenue information. HHS Secretary Alex Azar implied in an April 22, 2020, press briefing that the new formula will “entail a significant rebalancing for many providers” and ensures that those providers with low Medicare patient populations receive adequate funding from this tranche. As the first tranche of funding targeted Medicare reimbursement data, facilities with low Medicare reimbursement (e.g., children’s hospitals, and safety net hospitals with high Medicaid reimbursements) received low payment amounts from the emergency fund. On the other hand, it is unclear if there will be any impact on the first $30 billion previously distributed based on the original Medicare data. HHS very likely will publish further guidance in the coming days. Like the original $30 billion fund allocation, HHS has required providers to sign an attestation confirming receipt of the additional funds and agreeing to the terms and conditions. As of this writing, HHS is directing providers to the same attestation portal and terms and conditions that were released for the first $30 billion tranche, though updates have been made to account for specifics to this tranche of funding. For example, the terms and conditions now include civil or criminal penalties for any deliberate omissions, misrepresentations, or falsifications of any information given to HHS. Providers can expect payments to be apportioned differently than the first tranche, as noted below.

a. Automatic Payments. Only some providers will automatically receive payments during this round of funding, contrasted to the first tranche of $30 billion, where all providers received the funds automatically. Those that have cost reports on file with CMS will be eligible for automatic receipt of payment based on the revenue data submitted in the CMS cost reports, while those who do not have cost report data on file will be able to submit additional information to receive the funds. b. All Other Providers. HHS has stated that providers who do not have sufficient cost reporting data are still eligible to receive funds so long as they submit their 2018 net patient revenue information, among other requested information, to HHS’ forthcoming portal. HHS will publish this portal on its website. Notably, for those providers who must submit additional information, payments will be processed on a rolling basis as information is validated. Though further guidance is necessary to understand HHS’ intent regarding payment distribution to these providers, it is possible not all providers will receive additional funds depending on when their applications are submitted and the revenue information is produced. It is also not clear if some providers are ineligible to submit such information. At a minimum, it appears that the same Medicare enrollment criteria as the first tranche will apply.

c. Fraud and Abuse Monitoring. Notably, HHS stated that recipients must submit sufficient documentation to ensure funds are used for healthcare-related expenses or lost revenue attributable to COVID-19. This use is also required for the original $30 billion distribution. In an April 22, 2020, media briefing, Secretary Azar highlighted that there will be “significant anti-fraud and auditing done” by HHS alongside the Office of Inspector General to prevent fraud and abuse. HHS will be closely monitoring to ensure that recipients comply with the terms and conditions of these programs, including the prohibition against balance billing for presumptive or actual COVID-19 patients.

Targeted Allocations. HHS allocated funds for certain targeted areas, as detailed below.

2. Allocation for “Hot Spots” — COVID-19 High-Impact Areas ($10 Billion). An additional $10 billion will be allocated to hospitals in areas acutely hit by the COVID-19 outbreak. Unlike the initial round of $30 billion that was based on a provider’s share of Medicare reimbursements, this allocation targets regions where the impact from COVID-19 is greatest. For example, hospitals serving COVID-19 patients in New York are expected to receive a large share of these funds based on their share of COVID-19 patients. Also unlike the initial round in which funds were automatically deposited in providers’ accounts, hospitals will be required to apply for a portion of the funds, through the HHS COVID-19 Portal established by HHS’ vendor TeleTracking, before midnight, Pacific time, April 23, 2020. In submitting the application, hospitals will need to gather and provide the following information:

  • Tax Identification Number

  • National Provider Identifier

  • Total number of intensive care unit beds as of April 10, 2020

  • Total number of admissions with a positive diagnosis for COVID-19 from Jan. 1 to April 10, 2020|

Hospital site administrators should have received an email from HHS regarding the TeleTracking validation and registration page, which is accessible by email invitation only. Hospitals must submit this data before the deadline of midnight, Pacific time, April 23, 2020, as a prerequisite to receive future payments, although submitting the data neither guarantees a hospital’s eligibility nor receipt of any amount from this distribution. If hospitals have questions about the authentication or registration process, they should contact TeleTracking’s technical support team at 877-570-6903. HHS will use the data it receives from hospitals to inform how these funds will be distributed and determine what facilities will qualify for the future distribution. Secretary Azar announced that the distribution will also take into consideration the challenges facing facilities serving a significantly disproportionate number of low-income patients, as reflected by their Medicare Disproportionate Share Hospital Adjustment.

3. Allocation for Treatment of the Uninsured. An unspecified portion of the $100 billion CARES Act fund will be allocated to a program administered by Health Resources & Services Administration (HRSA) to reimburse healthcare providers who enroll in the program and submit claims for COVID-19-related treatment of uninsured patients. The Families First Coronavirus Response Act also appropriates $1 billion to reimburse providers for conducting COVID-19 testing. Healthcare providers who have provided treatment for uninsured COVID-19 patients with dates of service or admittance on or after Feb. 4, 2020, can request claims reimbursement through the program electronically and will be reimbursed at Medicare rates, subject to available funding and timely filing requirements. Providers can register for the program on April 27, 2020, and begin submitting claims in early May 2020 with payments expected to begin in mid-May. Providers can expect that the program will require (1) enrolling as a provider participant, (2) checking patient eligibility, (3) submitting patient information, (4) submitting claims and (5) receiving payment via direct deposit. Providers should also be aware that the program contains certain attestations for providers, including that the provider must have verified the patient’s uninsured status, the provider must accept the defined program reimbursement as payment in full, the provider must not balance bill the patient, and the provider must agree to the program terms and conditions and may be subject to a post-reimbursement audit review. These attestations are consistent with the “strings attached” to the general funding, prohibiting providers from out-of-network balance billing of patients, as discussed in a previous McGuire Woods legal alert. More detailed information on the program, qualifying expenses and services covered under the program, and claims reimbursement is available on HRSA’s website.

4. Allocation for Rural Providers ( $10 Billion). As early as the week beginning April 27, rural health clinics and hospitals will receive distributions from the $10 billion allocated to rural providers. HHS stated that distributions will be based on operating expenses using a methodology that will distribute payments proportionately to each facility and clinic. This $10 billion allocation is in addition to the $165 million HRSA awarded on April 22, 2020, to support rural hospitals and telehealth resource centers.

5. Allocation for Indian Health Service ( $400 Million). As early as the week of April 27, $400 million will be allocated for Indian Health Service (IHS) facilities and distributed based on operating expenses for these facilities. The CARES Act also provided more than $1 billion to IHS to prevent, prepare for and respond to the COVID-19 pandemic. It directed a minimum of $450 million for distribution to IHS directly operated programs, tribal health programs and urban Indian organizations; up to $65 million for electronic health record stabilization and support; and the remaining allocated at the discretion of the IHS director for COVID-19 response activities, with up to $125 million transferred to the IHS facilities account for COVID-19-related facilities activities.

Future Allocations. Although skilled nursing facilities, dentists and providers that solely take Medicaid were not specifically addressed in the earlier round of funding, and may not be fully made whole by the updated $20 billion general allocation described above, HHS continues to promise further funding through a later, separate allocation from remaining amounts from the $100 billion fund.

(Source: McGuire Woods)


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