1. Health Care RACs Are Here: Are You Prepared? March 3, 2009

2. 1 Introductions Holly Meidl Managing Director, Marsh Bill Hammock, RN, BSN, CMC, ACM Vice President, Marsh Stacey Donegan, CPC Vice President, Marsh R. Brent Rawlings, JD, MHA Attorney, McGuireWoods Elissa Moore, JD Attorney, McGuireWoods Jason Greis, JD Attorney, McGuireWoods Carol Burkhart, RN, MS, CNP, CPHRM Vice President, Marsh

3. Health Care Brief Background, Overview and Lessons Learned Bill Hammock, Nashville, TN Marsh

4. 3 Background, Overview and Lessons Learned Section 306 of the Medicare Modernization Act (MMA): –CMS to investigate Medicare claims payments using RACs under a three year demonstration project. California, Florida and New York were chosen for the demonstration project focusing on services provided from October 1, 2001 - September 31, 2005. Section 302 of the Tax Relief and Health Care Act of 2006: –RAC Program made permanent –Required Secretary to expand the program to all 50 states by no later than 2010. RACs are not intended to replace other review efforts: –Fiscal Intermediaries (FIs) –Part B and DME Carriers –Program Safeguard Contractors (PSC) –Benefit Integrity Support Centers (BISC) –Quality Improvement Organizations (QIO) –Office of Inspector General (OIG) –Comprehensive Error Rate Testing Program (CERT)

5. 4 Background, Overview and Lessons Learned As of March 27, 2008: RACs corrected > $1.03 billion in Medicare improper payments –Approximately 96% ($992.7 million) of the improper payments were overpayments collected from providers –4% ($37.8 million) were underpayments repaid to providers Return on investment: 318% in 2007 –Program cost: 22 cents for each dollar collected in 2007 CMS Payments to RACs –Contingency basis for all accurately identified/recovered overpayments –Percentage basis for all underpayments identified

6. 5 RAC may attempt to identify improper payments that result from any of the following: –Incorrect payment amounts –Non-covered services –Incorrectly coded services –Duplicate services –Medicare claims through the complex post payment review process where it is probable that a duplicate primary payment was made –Medicare claims through the complex post payment review process where it is probable that a Medicare Secondary Payer situation has occurred Background, Overview and Lessons Learned Source: Draft Combined SOW See www.cms.hhs.gov/rac

7. 6 The RAC may NOT attempt to identify improper payments arising from any of the following: –Services provided under a program other than Medicare Fee-for-Service –Cost report settlement process –Evaluation and Management (E&M) services that are incorrectly coded (CPT codes 99201-99499) –Claims more than 1 year past the date of the initial determination (medical necessity reviews) or more than 3 years past the date of the initial determination (other than medical necessity reviews) –Claims Identified with a Special Processing Number These are involved in a Medicare demonstration or have other special processing rules and are not subject to review by the RAC Background, Overview and Lessons Learned Source: Draft Combined SOW See www.cms.hhs.gov/rac

8. 7 Background, Overview and Lessons Learned No random selection of claims The RAC may not target a claim solely because it is a high dollar claim No prepayment review Source: Draft Combined SOW See www.cms.hhs.gov/rac

9. 8 Types of RAC audits: –Automated review – RAC makes a determination without evaluating the medical record Excessive unit audits – two or more identical surgical procedures for the same beneficiary on the same day Incorrect discharge status code – hospital codes the beneficiary as going home however a second claim from another provider shows the beneficiary was actually transferred to another hospital –Complex review – RAC makes a determination after evaluating the medical record Background, Overview and Lessons Learned

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11. Health Care Top Sources of RAC Initiated Overpayment Collections Stacey Donegan, Nashville, TN Marsh

12. 11 Background, Overview and Lessons Learned Most overpayments (85%) were collected from inpatient hospital providers, 6% from inpatient rehabilitation facilities (IRFs), and 4% from outpatient hospital providers. Most overpayments occur when providers submit claims that do not comply with Medicares coding or medical necessity policies.

13. 12 Top Sources of RAC Initiated Overpayment Collections Source: THE RAC PROGRAM: An Evaluation of the 3-Year Demonstration June 2008 See www.cms.hhs.gov/rac

14. 13 Top Sources of RAC Initiated Overpayment Collections Net of Appeals: Cumulative Through 3/27/08, Claim RACs Only Source: THE RAC PROGRAM: An Evaluation of the 3-Year Demonstration June 2008 See www.cms.hhs.gov/rac

15. 14 Top Sources of RAC Initiated Overpayment Collections (Net of Appeals): Cumulative Through 3/27/08, Claim RACs Only Source: THE RAC PROGRAM: An Evaluation of the 3-Year Demonstration June 2008 See www.cms.hhs.gov/rac

16. 15 Top Coding Issues: –Reporting excisional debridement (86.22) w/o adequate medical record documentation to meet the definition of excisional. –DRGs designated as CC or MCC with only one secondary diagnosis. –Correct coding of discharge status for post acute care transfer (discharge status codes) –Incorrect selection of principal diagnosis: Example: respiratory failure 518.81 was listed as the principal diagnosis but the medical record indicates that sepsis 038-038.9 was the principal diagnosis Example: hospital reported a principal diagnosis of 03.89 septicemia. Medical record shows diagnosis of urosepsis, not septicemia or sepsis; blood cultures were negative Top Sources of RAC Initiated Overpayment Collections

17. 16 Top Coding issues: –Unit Coding grams vs. milligrams Multiple procedures on one day (e.g., appendectomy, colonoscopy) blood transfusions: billing 1 service per pint rather than 1 service per transfusion session speech/hearing therapy: billing 1 service per 15 minutes rather than 1 service per session Neulasta: billing 1 service per mg when the definition of the code is 1 service per 6 mg vial Top Sources of RAC Initiated Overpayment Collections

18. 17 Top Medical Necessity Targets: –Inpatient admissions for procedures that are that do not require the inpatient setting (eg. laparoscopy, cholecystectomy) –One-day stays that do not qualify for admission (Observation or OP is appropriate) Chest pain: MSDRG 313 Back Pain: MSDRG 551 –Three-day stays solely to qualify for SNF care –Inpatient rehabilitation when the service is medically unnecessary (For example, following a single knee replacement) Top Sources of RAC Initiated Overpayment Collections

19. Health Care Tips on Preparing for RAC Audits and Risk Reduction Strategies Carol Burkhart, Chicago, IL Marsh

20. 19 Ben knows Best An ounce of prevention is worth a pound of cure. - Benjamin Franklin

21. 20 RAC Survival – No Silos Allowed Insanity: doing the same things over and over again and expecting a different result. Albert Einstein

22. 21 Preparing for the RAC Designate a multidisciplinary RAC Readiness Team and identify leadership –Accounting –Case Management –Coding –Compliance –Health Information Management –Leadership –Legal –Patient Financial Services –Physician Liaison –Risk Management –Quality Management –Utilization Review

23. 22 Preparing for the RAC Internally Review internal control systems Gatekeeping Audits (coding and financial) Perform data analysis High risk case types, PEPPER/CERT reports

24. 23 Education the RAC Team Understand the RAC team scope of work - medical records, coding issues, extension request deadlines, demonstration lessons, targets and trends, audit and appeals process

25. 24 Refine the Process and ID Resources Define the RAC Team Process Work Prioritize RAC requests by time remaining to respond, financial impact, issue trends Identify RAC targets and practices with high potential for denial Developing dashboard and defining metrics Evaluate external resources needed Legal, consultants/auditors, case management reengineering, HIM/coding, vendors)

26. 25 Identify Information Systems Issues Evaluate your current data systems – many software tools offer coding checks and alerts that are underutilized Adapt current coding and compliance software - automate prevention activities for high risk areas (i.e. automatic alerts for one day stays (excluding transfers, deaths, against medical advice)

27. 26 Communication is Critical Create central repository for all communication between facility and RAC Customize RAC correspondence address to avoid inadvertent, automatic denials Correct internal mail inefficiencies to prevent delays –Avoid potential appearance of non-compliance with medical record requests RACS (60 days) –No appeal rights after 45 days of records request date Develop effective RAC Team process communication

28. 27 RAC Work Team Review/Understand –Included and excluded claims –Look-back period –New issue validation requirements –Review types (automated and complex) Identify –Review OIG, GAO highlighted targets, CERT, PEPPER, demonstration reports and RAC trends Assess financial risk –Calculate necessary financial reserves based on internal audit and look-back period exposure

29. 28 Healthcare Information Management Develop efficient request for RAC records process –Keep master file of each request for permanent records and potential appeals –Submit entire record (no evidence entry after second level of appeal) –Augment (not alteration) of record as needed (e.g., surgeon documentation of medical necessity of inpatient cardiac implants)

30. 29 Healthcare Information Management Report unreasonable requests and limit violations to CMS Evaluate and improve medical record protocols –Copying, compilation, storage, retention –RACs-Anticipate increased volume, recoup authorized copying fees from RAC Send medical records electronically or certified mail/return receipt (do not fax!)

31. 30 Track RAC Compliance Establish tracking system: all required information System data entry protocols and privilege (security, access control)

32. 31 RAC Tools – Sample Dashboard http://www.strategiestoperform.com/volume2_issue6/volume2_issue6_e_phased.html

33. 32 Educate, Educate Community Organizational stakeholders and departments impacted by the RAC program (aspects of documentation and coding) Medical staff –Concentrate on medical necessity documentation –RAC program, Medicare coverage, coding and documentation requirements, facility impact and necessary process changes

34. 33 Documentation Specialists and Coding Engage documentation specialists on medical necessity issues Develop a coding education and improvement plan based on internal audit results and data system evaluation (e.g., correct coding, charge entry when more than one service is performed) Review admissions, billing and documentation policies and procedures

35. 34 Care Management 7 day per week case management Preadmission review Effective gate keeping integration Concurrent review

36. 35 Quality/Performance Improvement Establish a permanent performance improvement program for audits, documentation and coding –Address over and underpayment issues and establish systemic solutions based on assessment and internal audits results Perform biannual audits –Monitor process improvement, assess new areas of RAC interest and potential exposure

37. 36 Update Stakeholders Develop process to keep current on RAC areas of interest, and provide news updates throughout the organization to all stakeholders Consideration of participation in AHA RAC Advocacy Survey –The American Hospital Association (AHA)s RACTrac, a Web-based national advocacy survey tool that will ask hospitals to report their RAC experience on a quarterly basis

38. 37 Risk Management RACS are part of ERM, total cost of financial risk to organization Crisis intervention plan with legal counsel and leadership in the event of a significant adverse finding

39. Health Care Appealing a RAC Overpayment Determination Brent Rawlings, Richmond, VA McGuireWoods Elissa Moore, Charlotte, NC McGuireWoods

40. 39 Steps in the Process 1.Initial RAC communication 2.Receipt of RAC requests 3.Responding to RAC requests 4.Notification of outcome 5.Appeals process

41. 40 Options in Responding to RAC Demand Letters –Do nothing –Refund overpayment –Request ERP –Appeal

42. 41 Decision to Appeal Will Depend Upon Certain Factors –Dollar amount of the overpayment –Substantive nature of the claim –Costs of appealing

43. 42 RAC Appeals Involve Overlapping Rules –Interest –Recoupment –Extended Repayment Plans (ERPs) –Medicare Administrative Appeals –Five Stages of the Medicare Administrative Appeals Process: 1) Redetermination 2) Reconsideration 3) Administrative Law Judge 4) Medicare Appeals Council 5) Federal District Court

44. 43 RAC Appeals Timeline

45. 44 Demonstration Project RAC Appeal Success Rates – 22.5% of RAC claims were appealed – 33.4% of those claims appealed were overturned – 7.6% of RAC claims overall successfully overturned on appeal Source: The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the 3-Year Demonstration, released Jan. 2009

46. 45 Practical Tips for Managing Appeals –Include deadlines for interest, recoupment, ERPs, and appeals in your processes and RAC tracking database. –Attempt to determine in advance some reasonable thresholds and parameters for what claims should be appealed –Attempt to determine in advance some reasonable thresholds for applying for an ERP and have documentation required to apply for ERPs –Prepare templates for filing redetermination and reconsideration stages of appeal –Look, listen, learn, and adapt

47. Health Care RACs: Opening the Door to Regulatory Scrutiny Jason Greis, Chicago, IL McGuireWoods

48. 47 RAC Data Mining Risk The RAC Data Warehouse will be accessible to multiple auditors –Quality Improvement Organizations (QIO) –Program Safeguard Contractors (PSC) –Medicare Integrity Program Contractors (MIPC) –Medicaid Integrity Contractors (MIC) –Medicaid Fraud Control Units (MFCU) –Office of the Inspector General (OIG) –Federal Bureau of Investigation (FBI) –Department of Justice (DOJ) –Private managed care and health insurers Appropriate Self-Disclosure is the Key to Success!

49. 48 Other Potential Risks Reputational harm Exclusion from participation in federal and state health care programs OIG Corporate Integrity Agreements Claims for recoupment from private payors Civil and criminal penalties for health care fraud

50. 49 Federal False Claims Act (FCA) A false claim is a claim for payment of services that were –not provided specifically as presented, or –for which the provider is otherwise not entitled to payment. –31 U.S.C. §§ 3729-3733

51. 50 FCA Recovery Efforts FY 07 - $1.8 billion in judgments and settlements Since 1997 - > $11.2 billion recovered for the Medicare Trust Fund Astronomical multi-million dollar FCA settlements have become common

52. Health Care The Big Picture [ Holly Meidl, Managing Director Nashville, TN Marsh]

53. 52 Checklist Identify what risks exist in your organization Improve case management and gate-keeping functions Improve clinical documentation processes now Develop a plan and execute the plan Communicate with medical staff, senior leadership and governing board

54. 53 Checklist Assemble your response team Select healthcare legal counsel for representation in RAC appeals Assign roles and responsibilities Develop tracking logs Educate leadership, physicians and board Review charge capture process, UM plan and annual UM plan evaluation

55. 54 RACs and Insurance Coverage Directors & Officers Liability Fines and Penalties Data Security

56. Health Care Questions Jason Greis, Esq. McGuireWoods LLP 312.849.8217 jgreis@mcguirewoods.com www.mcguirewoods.com Bill Hammock, RN, BSN, CMC, ACM The Global Healthcare Consulting Practice (615) 340-2409 William.Hammock@Marsh.com www.marsh.com