National Healthcare Compliance Audioconference: Medicare RAC Audit Update Don May American Hospital Association May 13, 2008

$$?? CMS View FY 2007 RAC Performance: BACK TO TRUST FUNDS $247.4 m Overpayments Collected: $357.2m Less Underpayments Repaid: - ($14.3m) Less $ Overturned on Appeal: ($17.8m) Less Costs to Run Demo: ($77.7m) BACK TO TRUST FUNDS $247.4 m $$??

Hospitals strive for accuracy in service, billing, and coding Hospitals support program integrity efforts Lot’s of overlap by auditors RACs’ bad behavior unacceptable

Medicare coding problems and providing unnecessary care (wrong setting) were the key target areas of RACs 9% No/Insufficient Documentation 17% Other 42% Incorrect Coding 32% Medically Unnecessary ?? SOURCE: Self-reported by RACs

Percent of Hospital FY 2007 Revenue Impacted by RACs 80% 70.4% 70% New York 60.4% Florida 60% California 50% 43.4% 40% 31.8% 30% 23.2% 25.0% 18.2% 20% 7.0% 10% 5.0% 5.2% 3.9% 1.4% 1.4% 2.0% 0.5% 0% No Offsets 0% to 2.5% 2.5% to 5% 5% to 10% > 10% SOURCE: CMS 2007 RAC Status Report

CMS Has Responded to Some Concerns RAC Program Improvements No Contingency Fee when Denial is Overturned at Any Level of Appeal Required to Have a Medical Director 3-year Look-back Period for Review No claims with a payment date prior to October 1, 2007 will be reviewed, regardless of the actual start date for the RAC in a state. Use of Staggered Expansion of RACs Limits on the Number of Medical Records a RAC can Request per Month Requirement for a Web-based Application by January 1, 2010 No funds recouped during first 2 stages of appeals process, IF denial appealed within 30 days

Work with CMS for more RAC program changes Push Congress for legislative relief Advocacy – STOP and Fix-it Capps-Nunes legislation (HR 4105) Member Education Collaboration and education with state hospital associations Member advisories and education sessions RACTrac: Collect data and examples of egregious behavior

The Medicare Recovery Audit Contractor Program Moratorium Act of 2007 HR 4105 Rep. Lois Capps (D-CA) Rep. Devin Nunes (R-CA) 77 co-sponsors 1-year Moratorium CMS Report GAO Study

STOP and Fix-it Slow down Reduce or remove contingency method of payment Exclude medical necessity from RAC review Reduce look-back to 12 months Centralized electronic tracking platform of RAC denials and appeals Exemption from “timely billing” rules Improved CMS management and transparency of RAC program Bigger focus on UNDERpayments

Establish internal RAC team Interdisciplinary Team: Coders, Finance, Clinical, Utilization Review, Case Management Identify RAC point of contact for internal and external RAC communications Develop a central tracking mechanism for all RAC correspondence Incoming and Outgoing Conduct a self audit to identify potential problems Participate in RAC trainings