1. Medicare Advantage Audits
July 14, 2010

2. Why audit MA utilization?
Implicit expectation in CMS Fraud, Waste and Abuse guidelines
No other review of billing accuracy prior to this audit engagement
In 2007 and 2008 precertification and pre-note were optional
Terms and Conditions allow retrospective audits

3. Terms and Conditions 2007-2008 Private fee-for-service product
No contracts between BCBSM and hospitals
Hospitals were considered “deemed”
Deemed provider requirements described in T&C
Hospitals must comply with all Medicare and other federal health care program laws, regulations and program instructions that apply to the services furnished to members, including inspections and audits.
Refer to BCBSM website for Terms and Conditions

4. Why outsource? To gain industry expertise Limit ramp up time
Selected Health Data Insights because they were the premier audit vendor for the CMS Recovery Audit Contractor (RAC) demonstration project.
HDI also selected for RACs in the western region
Handle the Payment Error Rate Measures (PERM) nationwide for Medicaid
Audit vendor for Humana and other commercials

5. What’s happened so far…
Two complex audit categories established
DRG validation
Short stay hospitalizations
Through June 2010, HDI has requested over 14,000 medical charts
Monthly requests to minimize resource impacts at hospitals
Volume of chart request varies by facility-averages 14.5% of annual inpatient admissions
Initial findings are consistent with RAC demonstration project findings
Facilities not providing medical records will receive a Technical Denial letter which denies the entire stay

6. When hospitals disagree with the findings
Appeals Process
1st level-internal to HDI
2nd level-external to Peer Review Organization of Michigan (PROM)
BCBSM tested the initial short stay results
22 randomly selected medical records were reviewed independently by a BCBSM Medical Consultant.
Our findings were consistent with HDI
BCBSM found that IS/SI not met
Level of care was not as an inpatient but at the “observation or outpatient” level. 

7. Concerns Voiced by Hospitals
Increased audit activity by all payers
High volume of medical chart requests
Confusion about InterQual vs. CMS guidelines
Want more rationale for findings on HDI reports
Prefer batch response to continuous updates
Process is different from RAC and other BCBSM audits

8. Understanding the differences
RAC audits versus this one
Timelines are different
Appeals – PROM versus CMS designated entities
Recoveries done after appeals not before
Not charging hospitals interest
Both follow CMS reimbursement policies

9. HDI Audit Timelines Medical Record Requests – submit within 45 days
HDI Findings – within 90 days
Hospitals may appeal 1st level – within 50 days
HDI response – within 45 days
Hospitals may appeal 2nd level within 20 days
HDI response - within 45 days

10. Outpatient Re-bill
When inpatient care is denied, hospitals can bill for ancillary services
Must generate a new outpatient paper claim
Follow CMS guidelines regarding services that can be re-billed (
Observation services and surgical procedures are not payable ancillary services
Reference the claim number of the short stay denial in the remarks section of the outpatient re-bill
Give paper copy re-bills to your provider consultant for processing
Submission of an electronic re-bill outside the timely filing limits will reject
Follow the CMS Limitation on Liability provisions for member liability