1. AAPM&R Annual Assembly Boston, Massachusetts RAC Audits: Who’s Looking at You and Why Peter W. Thomas, JD Principal, Powers Pyles Sutter & Verville, PC Peter.Thomas@ppsv.comPeter.Thomas@ppsv.com (202) 466-6550 Friday, October 2, 2015 1

2. Overview Status of RACs Backlog of Appeals Reform Efforts 2

3. Status of RACs Now called Recovery Auditors or “RAs” Supposed to begin operating under new contracts in early 2014 Bid award challenged because of proposed changes to program (specifically, intention to withhold payment until after QIC level of appeal) Challenge was successful and CMS ordered to rescind contracts 3

4. RAs—Now and in the Future RAs continue to audit on limited basis with contract extensions lasting through end of 2015 CMS recently announced intention to issue new Request for Proposals Unclear which proposed changes CMS will include in new bid request Proposed changes at issue include discussion period changes and revised ADR limits (based on denial rates) 4

5. Impact of New RA Contracts Additional Documentation Requests (ADR) limits for IRFs should be impacted – ADRs broken down by provider type within “single entity” campuses (e.g., inpatient, outpatient, IRF, etc.) – ADR limit set with reference to a provider’s denial rate – IRFs with high denial rates due to patient mix and/or documentation issues (i.e., technical denials) may see an increase in permissible ADR requests CMS has committed to the ADR limits for physicians remaining at current levels (i.e., not increased) at the outset of new RA contracts: Unclear whether physician ADR limits will also be adjustable based on denial rates 5 Group/Office SizeMax Requests per 45 days 50 or more50 records 25-4940 records 6-2425 records 5 or fewer10 records

6. PM&R-Related Services Potentially Under Review Automated Review (No ADRs on these claims) – Nerve conduction studies – Evaluation and Management (E&M) codes – Place of serve Complex reviews (ADRs are requested) – 100% review for any claim that exceeds outpatient therapy caps – Joint injections without fluoroscopy 6

7. Backlog of Appeals Approximately 921,000 appeals pending at ALJ level as of July 2015 OMHA workload capacity is approximately 75,000 appeals per year Average processing time of appeals decided so far in 2015 is 631.5 days New ALJ teams added but not enough to have meaningful impact on backlog Electronic tracking system (AASIS) established by OMHA, to be transitioned to electronic appeal filing and management system (ECAPE) in future 7

8. Pilots and Demonstrations OMHA has established several pilots and demonstrations to assist in expediting appeals – Statistical Sampling pilot – Allowing for decision on the record by senior attorney – Settlement conference facilitation CMS has also allowed for a settlement with hospitals relating to inpatient vs. outpatient determinations (i.e., “short stays”) 8

9. “Short Stay” Hospital Settlement Also referred to as the “68% Settlement” Acute care hospitals given option to settle pending “short stay” appeals for 68% payment All settled appeals removed from ALJ backlog – 1,900 hospitals involved with settlement – Resolved 300,000 appeals (removed from backlog) – $1.3 billion in payments from Medicare to hospital providers 9

10. Impact of “Short Stay” Hospital Settlement Newest appeals backlog numbers account for dropped appeals and remain near 1 million Other provider and supplier groups have approached CMS about similar settlement opportunities Size of payment prompted concern from Congress and indications of an inquiry, which may have dampened CMS’ willingness to consider such approaches Requests and negotiations for an IRF settlement have stalled without favorable resolution 10

11. Reform Efforts CMS issued MLN Matters article SE 1521 - “Limiting the Scope of Review on Redeterminations and Reconsiderations of Certain Claims” Limits ability of contractors to change the reason for a denial mid-appeal MACs and QICs routinely change the reason for denial when ruling on a claim denial appeal Major frustration for providers and undercuts the purpose of multiple levels of review 11

12. Reform Efforts MLN Matters SE1521 (con’t) For redeterminations and reconsiderations of claims that are received on or after August 1, 2015, MACs and QICs must limit their review to the reason (or reasons) the claim or line item at issue was initially denied Exceptions Claim denials based on failure to submit requested documentation Claims denied on a pre-payment basis Likely to result in more thorough review of claims but may also reduce need to proceed to ALJ 12

13. Reform Efforts  Example: Initial Denial: Claim originally denied because PAS missing IRF appeals and shows that PAS is present and complete Redetermination: MAC issues redetermination denying claim because intensive therapy not medically necessary IRF appeals and shows Three Hour Rule satisfied and intensive therapy services justified Reconsideration: QIC issues reconsideration decision denying claim because patient did not require physician supervision at least three days per week IRF must now appeal to ALJ, despite addressing two different reasons for denial at lower levels of review 13

14. Reform Efforts Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015 Referred to as AFIRM Act Extensive revision of audit and appeals procedures Highlights include: Increased budget for OMHA Creation of Medicare Magistrates to assist at ALJ level Remand for appeals introducing new evidence Implementation of discussion period at all levels of appeal Reforms to calculating and reporting appeals statistics Does not eliminate RA contingency fee payments Currently under development by the Senate Finance Committee 14

15. Questions? For assistance with audit and appeals issues, or for questions, please contact: Peter W. Thomas, JD, Principal Powers Pyles Sutter & Verville, PC 202-466-6550 Peter.Thomas@ppsv.com