The Axiom Advisor

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Medicare Sequestration Key Points

Clarifying how sequestration works and who to manage through the process.

Dear Clients and Colleagues,

Now that sequestration is here and it is impacting Medicare revenues and cash flow, we have been getting some questions about how it is working and how to manage through the process. In response, we have pulled together some key points to provide some more clarity.

  • The sequestration order reductions apply to all payments for services provided April 1, 2013 through March 31, 2014. It is based on dates of service, not dates a claim is submitted.
  • The amount by which the payments are being reduced is 2% of the amount Medicare actually pays. In other words, the net Medicare payment after co-insurance, deductibles and any applicable Medicare Secondary Payment adjustments. Basically, the net amount you get from Medicare is reduced by 2%. All fee schedules, Pricers, etc., are unchanged by sequestration; it's only the final payment amount that you receive from Medicare that is reduced.
  • For example if you bill a service with an approved amount (i.e. the full fee schedule amount) of $100 and Medicare would normally pay $80, then with the sequestration reduction, 2% of the $80 is not paid, resulting in a payment of $78.40 to you. Note, the 20% Coinsurance is not affected by sequestration and should be billed andcollected in full.
  • According to CMS, in the Medicare system you may see claim adjustment reason code (CARC) 223 to report the sequestration reduction on the Electronic and paper RAs. The verbiage from CMS for CARC 223 Is: "Adjustment code for mandated Federal, State or local law/regulation that is not already covered by another code and is mandated before a new code can be created."
  • On your RAs you may see these non-paid sequestered amounts showing up as Non- Covered/Denied. Remember that on Part B RAs, the sequestered amount can be mixed with other Non-Covered/Denied charges, so watch your books and payments carefully.
  • Providers are not expected to recover these sequestered funds and there is no need to track outstanding balances in your books. Therefore, it is our recommendation, once you have determined that your payment has been reduced correctly and pursuant to the publicized plan, you can make a contractual adjustment to the appropriate account. Once again, be sure that before you make adjustments that you have verified that the reduced amounts are correct.

We have seen a couple software systems that are working on changes to their programs to allow for expedited adjustments, so please check with your software vendor. If your system does not make these adjustments, you will probably need to do manual line item adjustments. This is a good time to double check that it was done correctly.

Hopefully this information will help you manage the sequestration process throughout the next 10 months and full reimbursement will resume April 1, 2014.

As always, you can contact Axiom with any questions you may have.