1. PAYMENT DENIAL UPDATE By: Rebecca Corzine Tarr RN, MBA, CPA Executive Vice President and COO MedPerformance, LLC (813) 786-8974

2. Agenda  Introduction  Today’s Focus is on RACs, MACs, PROBEs  And  Denials  Underpayments & Take Backs  Appeals 2

3. RAC Update  CMS recovery audits on hold as contractors deal with huge backlog.  CMS is winding down its recovery audit program with its current contractors, placing the program effectively on hold, perhaps for several months, while it awards new contracts.  CMS has extended its contracts with its current four vendors until Dec. 31, 2015, for “administrative and transition activities.” The contracts were to end on Feb. 7.  This time period, while hospitals are not getting any (ADRs), could still be audited in the future.  The program currently has a three-year look-back period. 3

4. RAC Update – Continued  The deadline has passed for RACs to send a post-payment ADRs.  Medicare Administrative Contractors can no longer send a pre- payment ADRs to the Recovery Audit Prepayment Review Demonstration.  June 1 st is the last day for auditors to send improper payment files to Medicare Administrative Contractors for adjustment.  The appeals process has become so overloaded that HHS' Office of Medicare Hearings and Appeals recently began notifying hospitals that it won't be able to accept new appeals until the backlog clears.  Sixty-five administrative law judges are now receiving 15,000 claims per week, when they're only equipped to handle 2,000. That has meant a collective backlog topping 350,000 appeals.  Don’t let your guard down. 4

5. MAC vs. RAC Statistics  MAC conducted four widespread probes on the below MS-DRGs in response to medical record review findings identified by the recovery auditor (RA).  MS-DRG 074 Cranial & peripheral nerve disorders w/o MCC  RA error rate was 89.87 percent  MAC error rate was 7.77 percent  MS-DRG 092 Other disorders of nervous system w/CC  RA error rate was 14.29 percent  MAC error rate was 6.49 percent  MS-DRG 419 Laparoscopic cholecystectomy w/o C.D.E. w/o CC/MCC  RA error rate was 91.55 percent  MAC error rate was 2.74 percent  MS-DRG 491 Back & neck procedure except spinal fusion w/o CC/MCC  RA error rate was 91.98 percent  MAC error rate was 23 percent 5

6. New Rules – Be Careful  CMS communications are sometimes misleading and confusing.  Be careful interpreting current guidelines.  RAC may be on hold, but CMS, MAC, & Probe are not!  Focus today on what you need to do to get paid  Medical Necessity  Etc… 6

7. Two Midnight rule – “CMS-1599 F”  CMS-1599 F = Requirements for Inpatient Admission  Admission Order  Physician Certification  Medical Necessity  Expectation of a Two-midnight Stay 7

8. Two Midnight rule – “CMS-1599 F”  While CMS is saying to just have physician sign inpatient orders for 2 midnights, you still need to ensure medical necessity.  You must ensure that y0u have sufficient documentation.  You must have a consistent and 100% compliant method to get the CMS approved inpatient order, whether in CPOE or on paper.  You should audit to minimize your risk of future denials. 8

9. Two Midnight rule Denial Results MAC  Most Current Data Results  27% Denial Rate  Denial Reasons  37% missing, unsigned, invalid order  63% failed to document 2 midnight expectation  PROBE Results  30-60% based on sample size of 10 9

10. Results of Original Research Study  Observation & Inpatient Status: Clinical Impact of the 2- Midnight Rule  Retrospective descriptive study of all observation and IP encounters between 1/1/12 and 2/28/13 at Midwestern academic medical center  N = 36,193  Net loss of IP = 14.9%  Estimated revenue loss per case ~ $4,000  Same outcome even when IP only surgeries included  CMS’s claim that more patients will be IP not found to be correct 10

11. Not Just for Acute Care Providers  Denials are affecting all organizations along the continuum of care  Hospice  Home Health  DME  Inpatient Rehab  LTAC 11

12. Best Practices  Centralized Function  Multi-Disciplinary Team Consisting of:  RN/Case Managers  Physician Advisors  Coders  Billers  Revenue Integrity  Clerical  Systematic Methodology to approach appeal process 12

13. Best Practices - Continued  Flow charted process  Role Clarity  State of the Art Software System  Easy to use  Has powerful reporting capabilities  Alerts to ensure deadlines are met  Dollars at risk vs. dollars lost  Focus should be on determining the root cause and putting preventative measures in place  Requires support at highest level and process changes in many facets of the organization 13

14. Change Physician Behavior  Physicians are scientists  Provide hard facts and data  Evidenced based Medicine  Physicians do not like to be outliers  Leave emotion and finances out of discussions 14

15. The Appeal Process  Appeal process  Intentionally complex and deceptive process….  Hard deadlines  Labor intensive  Allow recoupment or risk interest 15

16. Questions/Comments? 16 Rebecca Corzine Tarr RN, CPA Executive Vice President and COO MedPerformance LLC 813-786-8974 beckytarr@me.com