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Health First Colorado contractors outline post-payment medical-necessity audit; providers press for pre-bill fixes and rebilling options
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Summary
HMS described post-payment reviews that will check whether inpatient claims meet Health First Colorado medical-necessity standards. Providers pressed for clearer rules on dialysis exclusions, observation-stay duration and more ability to self-audit or rebill short stays, while the state urged portal uploads instead of mailed records.
HMS staff told a provider advisory board that the Department will begin post-payment reviews of acute inpatient claims to verify whether medical records support inpatient-level care under Health First Colorado rules, and providers used the session to press for changes to rebilling and pre-billing audits.
"The reviews are gonna target claims to review if the medical record supports the inpatient hospital services," said Teresa Genetti, a registered nurse with HMS, describing the contractor's approach and the plan to use minimum care guidelines and clinical judgment. She said physicians and nurses trained in Colorado rules will review records and that preliminary findings will be sampled and vetted by company physicians before notices are issued.
Why it matters: the audits could identify potential overpayments and lead to recovery. Providers said implementation details — which cases get reviewed, how long observation status may last and whether hospitals can convert inpatient bills to observation or outpatient before denial — will affect clinical workflow and revenue.
Providers raised three central concerns. First, clinicians asked whether certain dialysis-related admissions are excluded from review. "We actually have an exclusion written into our side of it to not even look at those charts," one participant said, noting a CMS rule on end-stage renal disease; Dr. Braun described scenarios where a patient who missed dialysis and presents with "a potassium of 9" may require inpatient-level care and asked how those cases will be treated.
Second, several clinicians questioned new wording about observation stays. The draft said observation "should rarely exceed 48 hours," which prompted debate about whether exceeding 48 hours automatically converts a case to inpatient status. One department-aligned clinician acknowledged the language is "poorly worded" and said the intent is not to create an automatic inpatient trigger at 48 hours; rather, documentation of specific medical necessity would be needed to justify inpatient care.
Third, providers asked for more ability to perform pre-billing self-audits and to rebill claims as observation or outpatient without waiting for an adverse audit finding. HMS and department staff described technical and regulatory limits: hospitals generally cannot retroactively change the clinician's inpatient order once a patient has been discharged, and Medicaid/Medicare rules differ. An HMS speaker said, "We are self auditing, and we are doing that. We just can't add observation charges to those self audits," explaining the contractor can recapture outpatient services in rebilling workflows but cannot retroactively alter inpatient orders in many cases.
Commercial payers vary. Providers and a hospital representative said some commercial contracts (Aetna, United, Humana in several examples) permit post-denial rebilling or a flat-rate approach for converted observation claims; government payers are less flexible. "We can do it on the commercial ones, but the government payers, we can't," one provider said.
Operational notes and training: Megan, the meeting moderator, and HMS staff urged providers to upload records into the HMS portal or SFTP rather than mailing paper charts. "We should not be receiving boxes of paper medical records of patients," Megan said, noting mailed batches have reached external review locations and create both duplication and privacy risk. HMS said it will publish a Colorado RAC 101 training on the provider portal and schedule live complex-session trainings.
What’s next: staff said they will continue refining the audit language (several participants proposed renaming the effort from "place of service audit" to "medical necessity/patient status audit") and will follow up with policy teams about whether pre-billing self-audits and more flexible rebilling could be accommodated under Medicaid rules. The next quarterly provider advisory meeting is scheduled for June 4; stakeholder engagement meetings were listed through November.
