Title of Regulation: 12VAC30-95. Standards Established and Methods Used for Fee-for-Service Reimbursement (amending 12VAC30-95-5; adding 12VAC30-95-10).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 28, 2015.

Effective Date: February 13, 2015.

Agency Contact: Brian McCormick, Regulatory Supervisor, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-8856, FAX (804) 786-1680, TTY (800) 343-0634, or email brian.mccormick@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Sections 32.1-324 and 32.1-325 of the Code of Virginia authorize the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902 (a) of the Social Security Act (42 USC § 1396a) provides governing authority for payments for services.

Section 1902(a)(37) of the Social Security Act (the Act) and 42 CFR 447.45 set out federal requirements, applicable to all Medicaid programs, for the timely payment of providers' claims. All Medicaid programs must require providers to submit their claims for payment within 12 months of the date when the service was rendered as well as process clean claims for payment within certain time standards.

Purpose: The purpose of this action is to establish in regulation a set deadline for the resubmission of originally denied claims for reimbursement. This action is created in a chapter of the Virginia Administrative Code titled "Standards Established and Methods Used for Fee-for-Service Reimbursement" in which DMAS intends to place new regulations addressing often frequently contested provider reimbursement issues, such as the use of electronic signatures and electronic medical records. This action has no effect on the health, safety, or welfare of Medicaid individuals or citizens of the Commonwealth. This action is strictly administrative in nature and will enable DMAS and enrolled providers to maintain their accounts as current.

Rationale for Using Fast-Track Process: DMAS believes that the fast-track rulemaking process is the most efficient process for creating a final regulation with public input. DMAS does not anticipate any negative response to this action as it is expected to create greater stability and predictability for providers in managing their reimbursement funding and accounts with DMAS.

Substance: Currently, DMAS administers its federally required claims processing system consistent with § 1902(a)(37) of the Act and 42 CFR 447.45. This action does not propose to change any of these ongoing policies and procedures as the federal requirements do not permit it. This action proposes to set standards for the filing of providers' claims that were initially denied.

In SFY 2011, DMAS' monthly average number of all claim types (paper, electronic, point-of-sale, and encounters) was 4.8 million claims; in SFY 2012, this average was 4.8 million; and in SFY 2013, this average was 5.5 million.

The current claims processing system, upon being presented with a claim, verifies (i) the current eligibility of the Medicaid individual and the service provider; (ii) the provider's eligibility to perform the service (a podiatrist is not allowed to perform brain surgery, for example); (iii) the service does not exceed the agency's service limits and the service is logical for the individual's characteristics (a claim for a man's delivery of a baby, for example, would not be paid); (iv) the claim is not a duplicate nor does it conflict with one currently being processed for payment; and (v) the prior authorization documentation of the service if the agency requires it. Fee-for-service providers are allowed up to 12 months from the date that a service is rendered during which to submit their original claims for payment to DMAS. Claims that pass these initial checks are deemed to be "clean."

DMAS receives providers' claims in various forms and pays the following amounts to its claims processing fiscal agent to process them: paper claims (48¢), electronic claims (20¢), point-of-sale claims (21¢), and encounters (18¢). Most providers use electronic claims filing (FY 2011 93.8%, FY 2012 95.1%, FY 2013 97.7%). Point-of-sale claims are submitted by pharmacies. Encounter claims are submitted by managed care organizations, Logisticare (transportation claims), and DentaQuest (dental claims). As of FY 2013, a claims processing report showed the following average days to process the claims and average days to writing the providers' checks:

Type of Provider	Average Days to Process	Average Days to Write Check
Inpatient Hospital	8	17
Outpatient Hospital	11	21
Nursing Home	4	12
Practitioner	3	12
Transportation	1	10

Claims failing the standard "clean claim" checks are denied. Such denial notices are returned to the billing providers in their weekly remittance vouchers, which set out the reason for the denial. At this time, providers are expected to review their remittances and seek to make timely corrections of the errors (technical corrections of invalid identification numbers or invalid procedure code numbers, for example, or supplying background documentation, such as prior authorization documentation) in their claims. Such corrected claims are then resubmitted to DMAS for processing.

All providers do not do this, however. In the recent past, DMAS has experienced an increasing number of previously denied claim resubmissions, some as old as five years, from a variety of provider types. The following lists the types of provider that have been resubmitting very old claims for reconsideration and the amounts that DMAS has paid in SFY 2013:

Inpatient Hospitals	$15,924,817
Outpatient Hospitals	$1,669,613
Personal Care	$34,309
Practitioner	$1,574,625
Independent Laboratories	$94,347
Cross Over Claims (XVIII)	$309,009
Skilled Nursing Facility	$3,922
Transportation	$5,042

Practitioner (almost 50%) and Cross Over (Title XVIII) (33%) represent the two largest percentages of resubmitted previously denied claims. Inpatient/outpatient hospitals' resubmissions result in the largest expenditures ($15.9 million and $1.6 million, respectively) because these two services represent the highest cost services.

Currently, DMAS has no regulatory time limits for providers to resubmit previously denied claims. Some providers have resubmitted claims for dates of services as old as five years after the original claim. Also, some providers have resubmitted (multiple times) claims that have already been denied. DMAS has observed an increase in this activity over the last several years. DMAS is proposing to allow providers up to an additional 13 months, from the initial denial date of the original claim, to resubmit claims that have been corrected or supply additional documentation for DMAS reconsideration. By establishing a 13-month deadline for the resubmission of previously denied claims, DMAS is maximizing flexibility for providers while implementing a process to set reasonable limits on open provider accounts. Revised (previously denied) claims that are resubmitted later than the suggested time frame will be denied.

DMAS is providing for two exceptions, as set out in 12VAC30-95-10 E, to this new limitation: (i) if a provider's claim was retracted by a third party payer, DMAS will consider the date of the retraction notice by the third party payer as the beginning date of the initial 12-month timely filing period and (ii) in situations of retroactive eligibility, DMAS will consider the date of the notification of delayed eligibility from the local department of social services as the beginning date of the initial 12-month timely filing period. Both of these situations are outside of the fee-for-service providers' abilities to control so that to refuse payment of such claims would be inappropriate.

Issues: The primary advantage of this action to DMAS and Medicaid fee-for-service providers is that it creates a predictable deadline for both DMAS and Medicaid fee-for-service providers in which both entities can finally and fully close out open accounts. This enhances the ability of providers and DMAS to efficiently administer their funds and accounts.

Fee-for-service providers that are in the habit of delaying their remittance reconciliations for years on end are not expected to agree with this regulation. Providers who have the practice of repeatedly resubmitting previously denied claims in hopes of finally being paid are also not expected to agree with this regulation. Pharmacies and managed care organizations will not be affected by this action because they use, respectively, point-of-sale claim submission and encounter claims. All fee-for-service providers will be affected by this proposal.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed regulation 1) establishes a 13-month deadline in which Medicaid providers may resubmit previously denied claims for reconsideration by the Department of Medical Assistance Services (DMAS), and 2) incorporates the federally mandated 12-month time period (from the date of service) for providers to submit their original claims for services rendered.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The proposed regulation establishes a 13-month deadline in which Medicaid providers may resubmit previously denied claims for reconsideration. Currently, there is no regulatory time limit for providers to resubmit previously denied claims.

Fee-for-service providers are allowed up to 12 months from the date that a service is rendered in which to submit their original claims for payment. Upon being presented with a claim, DMAS performs several checks including verification of Medicaid eligibility of the individual and the service provider; provider's eligibility to perform the service (a podiatrist is not allowed perform brain surgery, for example); compliance with service limits and consistency with the individual's characteristics (a claim for a man's delivery of a baby, for example, would not be paid); whether the claim is a duplicate or conflicts with one currently being processed for payment; and compliance with the prior authorization of the service if it is required.

Claims that pass these initial checks are deemed to be "clean." Claims failing the initial checks are denied. Such denial notices are returned to the billing providers in their weekly remittance vouchers, which set out the reason for the denial. According to DMAS, some providers have re-submitted claims for dates of services as old as five years after the original claim. Also, some providers have re-submitted claims which have already been denied multiple times. DMAS reports an increase in this activity over the last several years.

In fiscal year 2013, DMAS has paid $15.9 million to inpatient hospitals, $1.7 million to outpatient hospitals, $1.6 million to practitioners, $309,009 to cross over providers, $94,347 to independent laboratories, $34,309 to personal care providers, $5,042 to transportation providers, and $3,922 to skilled nursing facilities for the claims that were resubmitted.

Having no deadline in claim resubmission has the effect of both DMAS and providers dealing with open accounts sometimes for years at a time. The proposed regulation introduces a 13-month deadline in which Medicaid providers may resubmit previously denied claims for reconsideration. The proposed time limit appears to be reasonable when compared to private industry practices. DMAS reports that some health insurance entities allow only a single 12-month period for providers to submit their claims with re-submissions not permitted. Some other entities are reported to allow only 180 days for providers to submit their claims.

The proposed 13-month time limit is expected to bring closure to old accounts. With the proposed time limit, providers will have incentives to resubmit failed claims within the 13-month window and do a better job in addressing the reason for the original denial. Thus, providers are expected to dedicate more resources to the denied claims within the proposed 13-month time frame which would force DMAS to do the same. Also, since this action will bring an end to the denied claims that would have been resubmitted multiple times, DMAS and providers are likely to realize some administrative savings. Finally, the proposed time limit may reduce a provider's chance of recovering a denied claim and may have a negative impact on their revenues while reducing the Medicaid expenditures at the same time.

The proposed regulation also incorporates the federally mandated 12-month time period (from the date of service) for providers to submit their original claims for services rendered. This policy has already been enforced in practice. Thus no significant effect is expected from this change other than improving the clarity of the regulations.

Businesses and Entities Affected. The proposed claim resubmission time frame applies to 118,437 fee-for-service providers currently enrolled.

Localities Particularly Affected. The regulation applies throughout the Commonwealth.

Projected Impact on Employment. Affected providers are expected to dedicate more resources to the denied claims within the proposed 13-month time frame which would force DMAS to do the same. So, an increase in demand for labor within the 13-month time frame to resubmit and process denied claims may be expected. However, providers may reduce their demand for labor after the 13-month time frame as they will no longer be able to resubmit claims.

Effects on the Use and Value of Private Property. To the extent the proposed claim resubmission time limit reduces the recovery of revenues from previously denied claims, providers may see a negative impact on their profits and consequently on their asset values. On the other hand, expected administrative savings from no longer dealing with old accounts will likely provide some administrative savings and offset some of the expected revenue losses and negative impact on asset values.

Small Businesses: Costs and Other Effects. The proposed time limits apply to 118,437 fee-for-service providers most of which are small businesses. The costs and other affects on affected entities are same as discussed above.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There is no known alternative method that minimizes adverse impact while accomplishing the same goals.

Real Estate Development Costs. The proposed amendments are unlikely to affect real estate development costs.

Legal Mandate.

General: The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order Number 14 (2010). Section 2.2-4007.04 requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the report should include but not be limited to:

• the projected number of businesses or other entities to whom the proposed regulation would apply,

• the identity of any localities and types of businesses or other entities particularly affected,

• the projected number of persons and employment positions to be affected,

• the projected costs to affected businesses or entities to implement or comply with the regulation, and

• the impact on the use and value of private property.

Small Businesses: If the proposed regulation will have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include:

• an identification and estimate of the number of small businesses subject to the proposed regulation,

• the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents,

• a statement of the probable effect of the proposed regulation on affected small businesses, and

• a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation.

Additionally, pursuant to § 2.2-4007.1, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules (JCAR) is notified at the time the proposed regulation is submitted to the Virginia Register of Regulations for publication. This analysis shall represent DPB's best estimate for the purposes of public review and comment on the proposed regulation.

Agency's Response to Economic Impact Analysis: The agency has reviewed the economic impact analysis prepared by the Department of Planning and Budget regarding Standards Established and Methods Used for Fee-for-Service Reimbursement (12VAC30-95). The agency concurs with this analysis.

Summary:

This regulation (i) establishes a 13-month deadline in which Medicaid providers may resubmit previously denied claims for reconsideration by the Department of Medical Assistance Services and (ii) incorporates the federally mandated 12-month time period from the date of service for providers to submit their original claims for services rendered.

12VAC30-95-5. General Applicability; general definitions.

A. The requirements of this chapter shall operate in addition to the provider requirements set out in other chapters of the Virginia Administrative Code, including but not limited to 12VAC30-50 through 12VAC30-90.

B. The following words and terms when used in 12VAC30 shall have the following meanings unless the context clearly indicates otherwise:

"ASAM" means the American Society of Addiction Medicine.

"ICD" means (i) for claims with dates of service on or prior to September 30, 2015, the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) Volumes 1, 2, and 3, OptumInsight, Inc., and (ii) for claims with dates of service on or after October 1, 2015, the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) and Procedure Coding System (ICD-10-PCS) pursuant to 45 CFR 162.1002, OptumInsight, Inc.

12VAC30-95-10. Timely claims filing.

A. Definitions. The following words and terms as used in this section shall have the following meanings unless the context clearly indicates otherwise.

"Claim" means the term as defined in 42 CFR 447.45 and includes a bill or a line item for services, drugs, or devices.

"Submit" or "file" means actual, physical receipt by the Department of Medical Assistance Services (DMAS) that is documented in DMAS records.

B. Consistent with 42 CFR 447.45, providers shall submit all claims to DMAS no later than 12 months from the date of service for which the provider requests reimbursement. In the absence of the two exception conditions set out in subsection E of this section, all claims otherwise submitted to DMAS after this 12-month time limit shall be denied.

C. In cases where the actual receipt of a claim by DMAS is undocumented, the burden of proof shall be on the provider to show that the claim was actually, physically received by DMAS. Proof by the provider that a claim was mailed, transmitted, or conveyed to DMAS by any method shall not constitute proof of receipt. The provider shall confirm actual receipt of a claim by DMAS within 12 months from the date of the service reflected on a claim.

D. If a claim for payment under Medicare has been filed in a timely manner, DMAS may pay a Medicaid claim for the same service within six months after the provider receives notice of the disposition of the Medicare claim.

E. Exceptions.

1. For cases in which a provider's claim was retracted by the third party payer, DMAS shall consider the date of the retraction notice by the third party payer as the begin date of the initial 12-month timely filing period.

2. For cases of retroactive Medicaid eligibility, DMAS shall consider the date of the notification of delayed eligibility from the local department of social services as the begin date of the initial 12-month timely filing period.

F. If DMAS denies a provider's original claim for reimbursement, the provider may resubmit the claim for reconsideration, together with any and all documentation to support the previously denied claim. All supporting documentation shall be filed at the time of the claim resubmission. DMAS shall not reconsider any resubmitted claim where:

1. The previously denied claim was not originally submitted within 12 months of the date of service, or

2. The denied claim was not resubmitted to DMAS within 13 months of the date the original claim was initially denied.

G. Once DMAS determines that a resubmitted claim cannot be paid and takes a denial action, it shall not be submitted again.