Medicare Compliance and

Private Payer Case Studies

Medicare Compliance


Four-hospital system in the Northeast with over 1000 beds.

NorthEast* sees 24,000 Medicare Fee-For-Service encounters per year.

NorthEast employs a team of four full-time equivalent Physician Advisors.

Case managers performed first level reviews on 100% of patients within 12-24 hours. All cases that did not meet inpatient level of care were referred to an internal Physician Advisor.



The Physician Advisor team performed reviews but had limited visibility as to whether:

  • all of the necessary cases were getting a review
  • the attending physician documentation concurred with the Case Manager or the Physician Advisor review
  • ultimate billing was consistent with the Case Manager or Physician Advisor review
  • outcomes were consistent across Physician Advisors and hospitals
  • outcomes were consistent with CMS/OIG benchmarks

Physician Advisors were spending a disproportionate amount of time with a small number of attending physicians.

Physician Advisors and Case Managers were feeling that they were spread too thin and required additional resources.

Versalus Health Solutions


Versalus Health performed a Compliance Baseline Assessment (CBA). The CBA showed that although NorthEast short-stay inpatient rate was generally in line with CMS/OIG expectations, the long-stay observation rate was significantly above targets. Moreover, while all hospitals followed the same process on paper, there was significant variance on short-stay and long-stay patterns across the hospitals.

Through Versalus’ assessment, Versalus was able to identify the following vulnerabilities

  • Appropriate revenue was being lost through long-stay Observation, and Inpatient-Only cases statused as Outpatient.
  • NorthEast was incorrectly processing Part B provider liable adjustments.
  • Certain attending physicians had a bias for Inpatient or Observation for specific types of cases.

As a result of implementing the Versalus solution, NorthEast’s Case Managers and Physician Advisors had greater visibility into their current practices and were provided key information so that they could refocus their efforts to ensure they are operating efficiently, focusing on higher priorities, and achieving their most appropriate outcomes.


Within three months of implementing the Versalus Health program, NorthEast eliminated the variation across hospitals, reduced its long-stay observation rate and improved Medicare compliance and financial performance. Outlier variation among attending staff was reduced.

The internal Physician Advisors continue to perform reviews, focusing on the highest risk cases. Because the process is now more efficient, the Physician Advisors have been able to devote more time to educate attending physicians—helping them improve documentation and instructing them on CMS rules. As the program progressed, variances continued to decrease, and the Physician Advisor team could focus on reviews involving Managed Care and Commercial Payers. The Physician Advisors demonstrated their value to the senior executives, who now have system-wide visibility and confidence regarding Medicare compliance and revenue integrity.

Interested in learning how your organization is doing relative to CMS/OIG guidelines?

Private Payers


West Health* is a five-hospital system in the West.

Three payers represented 76% of Managed Medicare and Commercial Volume.

Two payer contracts were modeled after Medicare rates and rate structure. The other one had a combination of case rate and per diem.

West Health’s Case Management team performed the same process for all payers: they applied screening criteria to 100% of cases within 12/24 hours. An external Physician Advisor firm reviewed any case that did not meet inpatient criteria.



West Health executive team had limited visibility regarding how each managed care contract was performing and whether revenue was left on the table. The organizations had beliefs regarding the performance of the different payers based on anecdotes:

  • Payer 1 was easy to work with; didn’t deny many cases and was believed to have the best rates.
  • Payer 2 would do as the UM team expected: denied some cases if they didn’t meet inpatient level of care screening criteria.
  • Payer 3 was the worst payer. They were challenging to work with and were driving the hospital denial rate up as they denied too many cases and required many appeals.
Versalus Health Solutions


Versalus Health conducted a Strategic Payer Assessment (SPA) and uncovered that there was significant performance variation across the 3 payer contracts:

  • Payer 1 had the lowest contract yield and the greatest opportunity to improve revenue in spite of the fact that their contract rates were inline with Medicare and the other payers. Payer 1 had very little denial activity but had a relationship with in-house hospitalists who were four times more likely to leave 2 to 4 midnight patients statused as observation relative to their peer physicians. Moreover, the hospitalists were much more likely to document to a lower CMI relative to the services rendered, which also eroded contract yield.
  • Payer 2 had contract rates that had very little difference in reimbursement between inpatient and observation for a 2 to 4 midnight medical stay. The organization was spending resources performing peer-to-peer and written appeals when there was no difference in reimbursement.
  • In spite of having the highest rate of denials, Payer 3 had the greatest contract yield because it had the most appropriate IP and OBS distribution and case mix index. Moreover most of the denials were on 0 and 1 day stays.

Leveraging Versalus, the system implemented a different operational and contracting strategy for each of the payers and established performance metrics for each payer.


West Health System realized greater than $5 million in revenue increase in the first year and has established contractual guardrails to hold the payers accountable to fair performance standards.  Moreover, their case management and physician advisors are now focusing on the issues with the greatest revenue opportunity.

Interested in learning how your Payers are performing?

Our Strategic Payer baseline assessment quantifies how payers perform relative to Medicare and each other and identify opportunities for revenue improvement.