1. Revenue Integrity: Preparing for Contractor Combat East Tennessee Fraud Working Group Tennessee Hospital Association Fall Compliance Conference 2009 October 21, 2009 Sara Kay Wheeler King & Spalding LLP

2. 2 Overview Topics to Address: Contractor Overview Procurement Timeline Important Developments Practical Strategies Approach to Materials

3. Reality Issue: –Increased number of government contractors actively trying to identify Medicare and Medicaid overpayments and potential fraud Solution: –Organizations need effective processes to facilitate proactive and reactive steps to prepare for and manage contractor inquiries and disputes

4. Pressure on Claims Growing number of entities (federal agencies, state agencies and government contractors) reviewing federal healthcare provider reimbursement –Not limited to inpatient and outpatient hospital claims –Scrutiny will come from all directions Weapons becoming more powerful: –Enhanced federal false claims act –Newly introduced state false claims acts e.g., Tennessee Medicaid False Claims Act –Employee education requirements designed to encourage whistle blowing

5. Low Hanging Fruit Government agencies and contractors firmly believe there is massive fraud and abuse in the system –CMS estimates: $10.4 Billion “improper payments” in general Medicare program $18.6 Billion in “improper payments” in Medicaid program –OIG reports: $2.04 Billion in investigative receivables (FY 2006-2008) $1.22 Billion in audit disallowances (same time period) $16.7 Billion in savings (2008) –FBI projects: 3-10% of total health spending ($75-$250 billion in FY 2009) Reality: More pressure on gov’t to recover

6. Core Areas Core areas critical to ability to successfully manage this complex process –Government contractor landscape (players, current developments, etc.) –Effective strategies for analyzing internal and external audit findings –Administrative appeal processes –Federal and state litigation strategies –Compliance oriented processes to help organize effort –Fraud and abuse analyses

7. Contractor Landscape Older Contractors –FIs – Fiscal Intermediaries (Medicare Part A) –Carriers (Medicare Part B) –DMERCs – Durable Medical Equipment Regional Carriers –PROs – Peer Review Organizations –QIOs – Quality Improvement Organizations –Many others

8. Contractor Landscape Newer Contractors –MACs – Medicare Administrative Contractors –PSCs – Program Safeguard Contractors –ZPICs – Zone Program Integrity Contractors –RACS – Recovery Audit Contractors –MEDICs – Medicare Drug Integrity Contractors –RVCs – Recovery Audit Validation Contractors –QICs – Qualified Independent Contractors –MICs – Medicaid Integrity Contractors –MIG – Federal Medicaid Integrity Group (engages MICs)

9. Pharmacy Retail Contractors Currently: –MEDICs - Medicare Drug Integrity Contractors –MICs - Medicaid Integrity Contractors Eventually: –ZPICs - Zone Program Integrity Contractors (will replace the MEDICs)

10. 10 NATIONAL RAC LANDSCAPE Region A - Diversified Collection Services (DCS) Region B - CGI Region C - Connolly Consulting, Inc. Region D - HealthDataInsights, Inc.

11. MICs – Regional Organization Region 1 and 2: New York / Boston Region 3 and 4: Atlanta / Philadelphia Region 5 and 7: Chicago / Kansas City Region 6 and 8: Dallas / Denver Region 9 and 10: San Francisco / Seattle

12. Review of Provider MIC Zones Awarded AdvanceMed Corporation Thomson Reuters Umbrella Contracts Also Awarded to: ACS Healthcare Analytics IMS Government Solutions SafeGuard Services

13. Audit MIC Zones Awarded Health Management Systems (HMS) Booz Allen Hamilton Umbrella Contracts Also Awarded to: Fox & Associates Health Integrity IPRO

14. Education MICs Umbrella contracts have been awarded to: –Information Experts –Strategic Health Solutions Contracts expected to be awarded by September 2009

15. ZPIC Implementation CMS organized ZPIC procurement in cycles to establish 7 zones that align with MAC jurisdictions –Cycle 1 (Zones 4, 5 and 7) –Cycle 2 (Zones 1 and 2) –Cycle 3 (Zones 3 and 6) The ZPIC in each zone will perform benefit integrity functions for Medicare Parts A, B, C, D, DME, Home Health and Hospice, and Medi- Medi

16. ZPICs Health Integrity LLC (Zone 4) AdvanceMed Corporation (Zone 5)* SafeGuard Services LLC (Zone 7)

17. RAC Developments February 4, 2009 - RAC bid protest resolved; CMS proceeded with RAC implementation Provider outreach efforts underway

18. RAC Developments (cont’d) Issues to monitor –RAC discussion period –Efforts to limit recoupment CMS Code 432 versus Code 469 –RAC licensing of Milliman Care Guidelines e.g., HealthDataInsights and Connolly –Ability to rebill claims denied by the RAC –CMS rules and guidelines regarding exclusion and suppression of claims from RAC Data Warehouse

19. MIC Developments Efforts to improve provider outreach (announced during July 15, 2009 Open Door Forum) –Hosting of Open Door Forum Conference Calls –Publishing of documents to assist providers FAQs on Medicaid Integrity Program Procurement timelines Audit A-Z –Look for documents: www.cms.hhs.gov/MedicaidIntegrityProgram –Addressing provider questions submitted through Medicaid Integrity Program mailbox: medicaid_integrity_program@cms.hhs.gov

20. MIC Developments (cont’d) Division of Fraud Research & Detection –Director: Jim Gorman –Received data subsets from all states –Loaded into database in California –Running queries and algorithms –Analyzed data for 50% of states –Expects to finish analysis for remaining states by end of 2009 –Medicaid managed care data is a “work in progress” because there is state variation with respect to data reporting requirements Source: July 15, 2009 CMS Open Door Forum

21. MIC Developments (cont’d) Division of Field Operations –Director: Robb Miller –Actively screening data for the entire country by end of year –Actively conducting audits in 17 states –500 audits currently underway (70 of which are in Texas) 44% of audits are of hospitals 29% of audits are of long term care facilities 21% of audits are of pharmacies Source: July 15, 2009 CMS Open Door Forum

22. RACs and MICs Compared RACs –Provider outreach mandatory –Review period – set –Time to produce records – 45 days ( possible extensions ) –Number of records – limited –Appeal process – consistent across regions MICs –Provider outreach not mandatory –Review period – not set –Time to produce records – shorter ( possible extensions ) –Number of records – no limit –Appeal process – mirrors state Medicaid appeal process

23. MIC Appeal Process Audit MIC contacts provider Provider produces records Audit MIC analyzes info Audit MIC generates draft audit report and submits to CMS MIG CMS MIG reviews and sends to state Medicaid agency State may make comment Audit MIC sends draft report to provider Provider has 30 days to review and provide comments Additional review by CMS MIG CMS MIG issues final audit report to state Medicaid agency for "execution” –CMS MIG can also refer to law enforcement at this time State issues demand to provider regarding alleged overpayment which triggers appeal procedures

24. Preparedness Infrastructure –Contractor committee(s) –Information management Records collection Control Production HIPAA –Document and records hosting –Chain of responsibility –Management of overlapping deadlines Other Activities –Governance considerations –Pre-audit testing –Data mining –Contractor intelligence E.g., HMS website for MIC audits

25. Comprehensive Analysis and Related Strategies Critical to proactively assess interactions with government contractors OIG expects $2.4 billion in recoveries for health programs in FY 2009

26. Comprehensive Analysis and Related Strategies (cont’d) Example: RACs –Potential RAC outcomes not limited to overpayments –RAC Statute… “A recovery of an overpayment…under [the RAC Statute] shall not be construed to prohibit the Secretary [i.e., OIG] or the Attorney General [i.e., DOJ] from investigating and prosecuting, if appropriate, allegations of fraud or abuse arising from such overpayment.” –RAC Statement of Work requires RAC to report instances of potential fraud immediately to the CMS Project Officer –Enforcement agencies expect RACs to make referrals

27. Comprehensive Analysis and Related Strategies (cont’d) Exposure –With certain limitations, RACs can audit a small sample of a provider’s records and extrapolate any overpayment finding to the provider’s patient population. RACs will receive their full contingency fee for extrapolated claims. See CMS FAQs No. 9405. FCA Liability

28. Ancillary Documents Relevant to Revenue Integrity Discussion Yellow Book Audit Standards –See http://www.gao/govaud/ybko1.htm Comprehensive Medicaid Integrity Plan (FYs 2009-2013) Medicaid Integrity Program A-Z Comprehensive Integrity Review Schedule Example: MIC Audit-Entrance Conference Agenda Example: MIC Audit-Institutional Provider In- Take Questionnaire

29. 29 Thank you Questions and Answers 29 6460459/v1 Sara Kay Wheeler Partner King & Spalding LLP 1180 Peachtree St., NE Atlanta, GA 30309-3521 Phone: (404) 572-4685 E-mail: skwheeler@kslaw.com