Medicare Recovery Audit Contractors (RACs) Preparing for RAC Audits

Presentation Outline I. Background I. Background A. What are the RACs? B. When are the RACs coming to Georgia? C. RAC Focus Areas C. RAC Focus Areas II. Case Studies II. Case Studies III. How to Prepare for RACs III. How to Prepare for RACs IV. GHA Initiatives IV. GHA Initiatives

What are RACs? Medicare Modernization Act of 2003 created a 3-year demonstration project Medicare Modernization Act of 2003 created a 3-year demonstration project Recover Medicare overpayments and identify underpayments—payment mistakes Recover Medicare overpayments and identify underpayments—payment mistakes RACs are paid on a contingency fee basis RACs are paid on a contingency fee basis 3 states selected for the demonstration project based on highest per capita Medicare utilization—NY, FL, and CA 3 states selected for the demonstration project based on highest per capita Medicare utilization—NY, FL, and CA

What are RACs? The Tax Relief and Health Care Act of 2006 required DHHS to make the RAC program permanent and nationwide by no later than January 1, The Tax Relief and Health Care Act of 2006 required DHHS to make the RAC program permanent and nationwide by no later than January 1, The RAC program does not detect or correct payments for Medicare Advantage plans (Medicare Part C) or for the Medicare prescription drug benefit (Medicare Part D) The RAC program does not detect or correct payments for Medicare Advantage plans (Medicare Part C) or for the Medicare prescription drug benefit (Medicare Part D)

Why Congress Believes RACs are Necessary… The Improper Medicare FFS Payments Report for November 2007 estimates that 3.9% of the Medicare dollars paid did not comply with one or more Medicare coverage, coding, billing, or payment rules. The Improper Medicare FFS Payments Report for November 2007 estimates that 3.9% of the Medicare dollars paid did not comply with one or more Medicare coverage, coding, billing, or payment rules. This equates to $10.8 billion in Medicare FFS overpayments and underpayments annually. This equates to $10.8 billion in Medicare FFS overpayments and underpayments annually.

RAC Demonstration During FY 2007, RACs identified and corrected $371 Million dollars of Medicare improper payments in the demonstration states During FY 2007, RACs identified and corrected $371 Million dollars of Medicare improper payments in the demonstration states Over 96% were overpayments Over 96% were overpayments About 85% of overpayments were from inpatient hospital providers About 85% of overpayments were from inpatient hospital providers About 6% of overpayments were from outpatient hospital providers About 6% of overpayments were from outpatient hospital providers

How Do RACs Choose Cases for Review? Data mining techniques Data mining techniques RACs used the findings of OIG and GAO reports to help target their review efforts RACs used the findings of OIG and GAO reports to help target their review efforts Comprehensive Error Rate Testing (CERT) reports Comprehensive Error Rate Testing (CERT) reports Experience and knowledge of RAC staff Experience and knowledge of RAC staff

Overpayments by Error Type in Demonstration Project 42% Incorrectly coded 42% Incorrectly coded 32% Medically unnecessary service or setting 32% Medically unnecessary service or setting 9% No/Insufficient Documentation 9% No/Insufficient Documentation 17% Other 17% Other

Average Overpayment Amounts FY 2007 Per Claim Per Provider Inpatient Hospital/SNF $10,618$549,447 Outpatient Hospital $273$38,136 Physician$160$834 DME$85$1,511 Total$11,136$589,928

Permanent RAC Program RACS can review claims for: RACS can review claims for: Inpatient hospital Inpatient hospital Outpatient hospital Outpatient hospital Skilled nursing facilities Skilled nursing facilities Physician, ambulance, and lab services Physician, ambulance, and lab services Durable medical equipment Durable medical equipment

Permanent RAC Program Look back period is 3 years Look back period is 3 years RACs cannot look for any improper payments on claims paid before October 1, 2007 RACs cannot look for any improper payments on claims paid before October 1, 2007 RACs can review claims during the current fiscal year RACs can review claims during the current fiscal year Each RAC must use certified coders Each RAC must use certified coders

Permanent RAC Program Mandatory limits set by CMS on medical record requests Mandatory limits set by CMS on medical record requests Mandatory discussion with the RAC Medical Director regarding claim denials if requested by providers Mandatory discussion with the RAC Medical Director regarding claim denials if requested by providers Frequent problem area reporting is mandatory Frequent problem area reporting is mandatory RACs must pay back contingency fee if their decision is reversed on any level appeal RACs must pay back contingency fee if their decision is reversed on any level appeal

Permanent RAC Program Each RAC must have a web-based application that allows providers to customize addresses and contact information or see the status of cases Each RAC must have a web-based application that allows providers to customize addresses and contact information or see the status of cases External validation process is mandatory and it is a uniform process External validation process is mandatory and it is a uniform process

Permanent RAC Program CMS will announce the permanent RACs for the four regions around July 31, 2008 CMS will announce the permanent RACs for the four regions around July 31, 2008

RACs Focus on Hospitals In the three demonstration states, 89% of improper payments were from hospitals In the three demonstration states, 89% of improper payments were from hospitals

RAC Review Process RACs use proprietary automated software programs to identify potential payment errors RACs use proprietary automated software programs to identify potential payment errors Types of payment review Types of payment review Duplicate payments Duplicate payments FI errors (i.e. claims paid using an outdated fee schedule) FI errors (i.e. claims paid using an outdated fee schedule) Medical necessity Medical necessity Coding errors Coding errors No documentation or insufficient documentation to support the claim No documentation or insufficient documentation to support the claim

Types of RAC Reviews Automated Review Automated Review Proprietary software algorithms used to identify clear errors that resulted in improper payments Proprietary software algorithms used to identify clear errors that resulted in improper payments Complex Review Complex Review Medical records requested to further review the claim Medical records requested to further review the claim RACs must use Medicare coverage, coding or billing policies in effect at the time when the claim was adjudicated

Automated Reviews Excessive Units Audit—two or more identical surgical procedures for the same beneficiary on the same day at the same hospital Excessive Units Audit—two or more identical surgical procedures for the same beneficiary on the same day at the same hospital Use of incorrect discharge status codes Use of incorrect discharge status codes Medically unbelievable situations (i.e. prostate procedure on a female) Medically unbelievable situations (i.e. prostate procedure on a female)

RAC Focus Areas in Demonstration States Excisional Debridement Excisional Debridement Back Pain Back Pain Outpatient vs. Inpatient Surgeries Outpatient vs. Inpatient Surgeries Transfer Patients Transfer Patients Inpatient Rehab, especially knee and hip replacements Inpatient Rehab, especially knee and hip replacements Joint replacement patients and patients in inpatient rehabilitation facilities that should have been treated in a lower intensity setting such as a SNF Joint replacement patients and patients in inpatient rehabilitation facilities that should have been treated in a lower intensity setting such as a SNF Wrong diagnosis or principal procedure codes Wrong diagnosis or principal procedure codes

DRGs Scrutinized in Demonstration States 079 Respiratory infections and inflammations age >17 w CC 079 Respiratory infections and inflammations age >17 w CC 416 Septicemia age > Septicemia age > Extensive OR procedure unrelated to principal diagnosis 468 Extensive OR procedure unrelated to principal diagnosis 475 Respiratory System diagnosis with ventilator support 475 Respiratory System diagnosis with ventilator support 477 Non-extensive OR procedure unrelated to principal diagnosis 477 Non-extensive OR procedure unrelated to principal diagnosis 483 Tracheostomy with mechanical vent—96+ hours 483 Tracheostomy with mechanical vent—96+ hours 217 Wound debridement 217 Wound debridement 397 Coagulation disorders 397 Coagulation disorders 124 Circulatory disorders except AMI w Card Cath & Complex Diag 124 Circulatory disorders except AMI w Card Cath & Complex Diag 076 Other respiratory system OR procedures w CC 076 Other respiratory system OR procedures w CC 415 OR Procedures 415 OR Procedures 082 Respiratory Neoplasms 082 Respiratory Neoplasms 148 Major Bowel 148 Major Bowel Note: These DRGs are from the version 25 grouper. These are not MS-DRGs.

Outpatient Hospital Areas of RAC Focus Colonoscopy Colonoscopy Speech Language Pathology Services Speech Language Pathology Services Infusion Services Infusion Services Neulasta (boosts white blood cell counts to reduce chance of infection in patients undergoing chemotherapy) Neulasta (boosts white blood cell counts to reduce chance of infection in patients undergoing chemotherapy)

Short Stay Claims Validate whether the admissions met Medicare’s medical necessity criteria Validate whether the admissions met Medicare’s medical necessity criteria One-day stays by chest pain patients were targeted by RACs in demonstration states One-day stays by chest pain patients were targeted by RACs in demonstration states Many three-day stays were denied because they were inappropriately extended in order to qualify for Medicare Part A coverage of post-acute skilled nursing care Many three-day stays were denied because they were inappropriately extended in order to qualify for Medicare Part A coverage of post-acute skilled nursing care

Some Case Examples from the Demonstration States

Excisional Debridements Hospital coder assigned a procedure code of (excisional debridement of wound, infection, or burn) Hospital coder assigned a procedure code of (excisional debridement of wound, infection, or burn) In the medical record, the physician writes “debridement was performed” In the medical record, the physician writes “debridement was performed”

Excisional Debridements Coding Clinic 1991 Q3 states “unless the attending physician documents in the medical record that an excisional debridement was performed (definite cutting away of tissue, not the minor scissors removal of loose fragments), debridement of the skin that does not meet the criteria noted above or is described in the medical record as debridement and no other information is available should be coded as (ligation of dermal appendage).” Coding Clinic 1991 Q3 states “unless the attending physician documents in the medical record that an excisional debridement was performed (definite cutting away of tissue, not the minor scissors removal of loose fragments), debridement of the skin that does not meet the criteria noted above or is described in the medical record as debridement and no other information is available should be coded as (ligation of dermal appendage).”

Excisional Debridements The RAC determines that the claim was incorrectly coded and issues repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the payment amount for the correctly coded procedure. The RAC determines that the claim was incorrectly coded and issues repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the payment amount for the correctly coded procedure.

Inpatient Rehabilitation An inpatient rehabilitation facility (IRF) submitted a claim for inpatient therapy following a single knee replacement An inpatient rehabilitation facility (IRF) submitted a claim for inpatient therapy following a single knee replacement Medical record indicated that although the beneficiary required therapy, the beneficiary’s condition did not meet Medicare’s medical necessity criteria for IRF care (HCFA Ruling and Medicare Benefit Policy Manual Section 110) Medical record indicated that although the beneficiary required therapy, the beneficiary’s condition did not meet Medicare’s medical necessity criteria for IRF care (HCFA Ruling and Medicare Benefit Policy Manual Section 110)

Inpatient Rehabilitation Entire claim was denied by RAC Entire claim was denied by RAC The RAC determines that the service was medically unnecessary for the inpatient setting and issues repayment request letters for the entire claim The RAC determines that the service was medically unnecessary for the inpatient setting and issues repayment request letters for the entire claim

Wrong Principal Diagnosis Principal diagnosis on claim did not match the principal diagnosis in the medical record Principal diagnosis on claim did not match the principal diagnosis in the medical record Example: Respiratory failure (code ) was listed as the principal diagnosis but the medical record indicates that sepis (code ) was the principal diagnosis Example: Respiratory failure (code ) was listed as the principal diagnosis but the medical record indicates that sepis (code ) was the principal diagnosis

Wrong Principal Diagnosis The RAC issued overpayment request letter for the difference between the amount for the incorrectly coded services and the amount for the correctly coded services The RAC issued overpayment request letter for the difference between the amount for the incorrectly coded services and the amount for the correctly coded services Most common DRGs with this problem: Most common DRGs with this problem: DRG 475 Respiratory System Diagnoses DRG 475 Respiratory System Diagnoses DRG 468 Extensive OR Procedure Unrelated to Principal Diagnosis DRG 468 Extensive OR Procedure Unrelated to Principal Diagnosis

Wrong Diagnosis Code Hospital reported a principal diagnosis of (septicemia) Hospital reported a principal diagnosis of (septicemia) Medical record shows diagnosis of urosepsis, not septicemia or sepsis; Blood cultures were negative Medical record shows diagnosis of urosepsis, not septicemia or sepsis; Blood cultures were negative Did not meet the coding guidelines for “septicemia”. Urinary tract infection causes the claim to group to a lower payment DRG Did not meet the coding guidelines for “septicemia”. Urinary tract infection causes the claim to group to a lower payment DRG

Wrong Diagnosis Code RAC issued a repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the correctly coded procedure RAC issued a repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the correctly coded procedure

Neulasta In the past, the billing code for the drug Neulasta (Pegfilgrastim) indicated that providers should bill 1 unit for each milligram of drug delivered In the past, the billing code for the drug Neulasta (Pegfilgrastim) indicated that providers should bill 1 unit for each milligram of drug delivered Several years ago, CMS changed the definition of the billing code to indicate that providers should bill 1 unit for each vial of drug delivered Several years ago, CMS changed the definition of the billing code to indicate that providers should bill 1 unit for each vial of drug delivered

Neulasta The hospital billed for 6 units of Neulasta The hospital billed for 6 units of Neulasta The RAC determined that 5 units of service were medically unnecessary and issued a repayment request letter for the difference between the payment amount for 5 unnecessary vials The RAC determined that 5 units of service were medically unnecessary and issued a repayment request letter for the difference between the payment amount for 5 unnecessary vials

Colonoscopy The hospital billed for multiple colonoscopies for the same beneficiary the same day The hospital billed for multiple colonoscopies for the same beneficiary the same day Beneficiaries never need more than one colonoscopy per day. The excessive services are not medically necessary. Beneficiaries never need more than one colonoscopy per day. The excessive services are not medically necessary. The RAC issued overpayment request letters for the difference between the billed number of services and 1. The RAC issued overpayment request letters for the difference between the billed number of services and 1.

Outpatient Hospital Speech Therapy The outpatient hospital billed for each 15 minutes of speech therapy The outpatient hospital billed for each 15 minutes of speech therapy The code definition specifies that the code is per session, not per 15 minutes The code definition specifies that the code is per session, not per 15 minutes The units billed exceeded the approved number of sessions per day. The excessive services billed are medically unnecessary The units billed exceeded the approved number of sessions per day. The excessive services billed are medically unnecessary RAC issued overpayment request letters RAC issued overpayment request letters

Most Frequent Medically Unnecessary Errors

Coping with the RACs Comply with RAC medical record requests. If you don’t submit them on time, the RAC automatically classifies the claim as an overpayment and makes a recovery. Comply with RAC medical record requests. If you don’t submit them on time, the RAC automatically classifies the claim as an overpayment and makes a recovery. Develop an internal tracking system for medical records requested for review by the RAC Develop an internal tracking system for medical records requested for review by the RAC

One-Day Stays Develop a system for clarifying unclear admission orders prior to admission Develop a system for clarifying unclear admission orders prior to admission Implement the “admit to case management protocol” Implement the “admit to case management protocol” Train utilization/case managers on how to determine medical necessity through the use of screening criteria Train utilization/case managers on how to determine medical necessity through the use of screening criteria

One-Day Stays Involve Case Management/Utilization Review staff early in the process. Involve Case Management/Utilization Review staff early in the process. Provide Case Management/Utilization Review staff to perform initial review of medical necessity for admission while the patient is in the emergency department. Provide Case Management/Utilization Review staff to perform initial review of medical necessity for admission while the patient is in the emergency department. Place UR staff at every point of entry into the hospital (ED, day surgery, centralized admission center, etc.) Place UR staff at every point of entry into the hospital (ED, day surgery, centralized admission center, etc.)

One-Day Stays Develop condition-specific pre-printed order sheets that include the appropriate patient status. Develop condition-specific pre-printed order sheets that include the appropriate patient status. Provide Case Management/Utilization Review staffing during weekends and after hours to ensure timely review for medical necessity. Provide Case Management/Utilization Review staffing during weekends and after hours to ensure timely review for medical necessity.

One-Day Stays Train hospital staff (nurses, ED staff, unit clerks, day surgery staff and CM/UR staff) on Medicare’s requirements for appropriate documentation of medical necessity, the use of observation, requirements for changing patient status and use of Condition Code 44. Train hospital staff (nurses, ED staff, unit clerks, day surgery staff and CM/UR staff) on Medicare’s requirements for appropriate documentation of medical necessity, the use of observation, requirements for changing patient status and use of Condition Code 44.

One-Day Stays Use documentation prompters, stickers on observation charts, and prompters and posters in physician dictation areas to remind physicians of appropriate use of outpatient observation. Use documentation prompters, stickers on observation charts, and prompters and posters in physician dictation areas to remind physicians of appropriate use of outpatient observation. Provide one-on-one education to physicians who consistently write unclear admission orders or consistently have inappropriate one-day stays. Provide one-on-one education to physicians who consistently write unclear admission orders or consistently have inappropriate one-day stays.

Review Your PEPPER Reports Program for Evaluating Payment Patterns Report (PEPPER) Program for Evaluating Payment Patterns Report (PEPPER) Prepared by gmcf Prepared by gmcf Identifies claims patterns that are outliers relative to other hospitals in the state Identifies claims patterns that are outliers relative to other hospitals in the state “Top 20” list of DRGs that are prone to certain billing areas “Top 20” list of DRGs that are prone to certain billing areas Other problem areas which vary by state Other problem areas which vary by state

Hospital Next Steps Look at potential areas of risk Look at potential areas of risk Establish single point of contact for RAC Establish single point of contact for RAC Establish RAC committee—include key hospital stakeholders (finance, UR, Case Management, compliance, legal, medical records, etc.) Establish RAC committee—include key hospital stakeholders (finance, UR, Case Management, compliance, legal, medical records, etc.) Review records before sending to RAC Review records before sending to RAC Support your claim Support your claim Understand the parameters Understand the parameters For Providers For Providers For the RAC For the RAC

Hospital Next Steps Plan to participate in the AHA’s RACTrac to report your hospitals experience with the RAC Plan to participate in the AHA’s RACTrac to report your hospitals experience with the RAC Data will provide both the AHA and GHA the data they need to advocate on behalf of the hospitals and to identify trends in reasons for denials Data will provide both the AHA and GHA the data they need to advocate on behalf of the hospitals and to identify trends in reasons for denials Implement a system for charging RACs for copying costs of medical records (.12/page) Implement a system for charging RACs for copying costs of medical records (.12/page)

GHA Next Steps Establish RAC Task Force Establish RAC Task Force Establish relationship with RAC—once RAC is announced for our region Establish relationship with RAC—once RAC is announced for our region Facilitate information exchange between CMS, RAC, and hospitals Facilitate information exchange between CMS, RAC, and hospitals Monitor RAC activities with Georgia providers Monitor RAC activities with Georgia providers

GHA RAC Task Force A multi-disciplinary cross-section of GHA members including CEOs, CFOs, legal counsel, compliance officers, case/utilization managers, medical records, and others A multi-disciplinary cross-section of GHA members including CEOs, CFOs, legal counsel, compliance officers, case/utilization managers, medical records, and others Task Force will provide guidance and feedback to GHA as we develop strategies and tools to assist members in dealing with RACs Task Force will provide guidance and feedback to GHA as we develop strategies and tools to assist members in dealing with RACs

RAC Resources