Characterizing the Medicare Recovery Audit Process

Transcription

1 industry thought leaders Characterizing the Medicare Recovery Audit Process from the RA Perspective A Discussion with John Paik, Senior Vice President, and Jeff Nelson, Vice President Performant Financial Corporation After a three-year recovery audit contractor demonstration in three states identified roughly $1 billion in Medicare overpayments, Section 302 of the Tax Relief and Health Care Act of 2006 made the Recovery Audit Program permanent and mandated its expansion to all 50 states by Each Medicare Part A and B recovery auditor (RA) is responsible for identifying overpayments and underpayments in approximately a quarter of the country. ManagedCare Oncology recently sat down with key decision makers from one such RA John Paik, senior vice president, and Jeff Nelson, vice president, of Performant Financial Corporation to discuss the recovery audit process and the role of contractors in containing and managing costs for the largest payor in the country, the Centers for Medicare & Medicaid Services (CMS). MCO: What was the impetus for the Recovery Audit Program and the rise of RAs? Mr. Paik: Obviously, there are a lot of key elements in health care delivery today in the public and the private sectors that are fraught with payment and budgetary challenges. As such, in both sectors, there is a category of services known as program integrity 16 managedcareoncology Quarter

2 that looks at financial accuracy, appropriateness and fraud in the health care system. This includes areas such as audit recovery, coordination of benefits, third-party liability, fraud and waste. The statistics surrounding this are pretty staggering. For example, the American Medical Association cites a 20 percent error rate among health insurers that represents an intolerable level of inefficiency, wasting an estimated $17 billion annually. Fraud alone is estimated to cost Medicare somewhere in the range of $60 billion to $90 billion annually, with another $48 billion in improper payments. So in general, there s a significant amount of waste in the system at a time when there are a lot of financial and budgetary pressures. RAs are not necessarily a new concept, and they re only one component of overall program integrity efforts implemented by CMS to manage costs. The Tax Relief and Health Care Act of 2006 mandated the enactment of RAs across the country. The main objective and task of these RAs is to audit retrospectively over three years for over- and underpayment of claims under Medicare. period for RAs, renewable each year. A number of program components were designed around CMS s desire to minimize provider abrasion and increase program transparency while maintaining a tighter audit/control over RA activity. This transparency included the RAs performing provider outreach in tandem with the CMS and Medicare administrative contractors (MACs) that adjudicate claims, and designing and hosting a website for each region that providers can access to review approved audit issues, sample letters and view the status of all complex reviews in process. All RAs were required to submit audit concepts to CMS prior to auditing. Upon reviewing paid claims, if there is an identified vulnerability, the RA develops what s known as an audit issue and submits relevant rationale and edit/audit parameters to CMS for approval in addition to sample medical records, fully audited claims and intended correspondence between the RAs and providers. CMS s desire was to maintain a level of consistency and quality across the four RAs and to ensure a high level of quality. CMS also instituted what is known as a discussion period to allow providers to present additional documentation in support of overturning the RA s assertion of an improper payment. The RAs use the additional documentation to reaudit the claim/case. Another component of the program to reduce provider burden is that the RAs may ask for records only once every 45 days so providers aren t inundated with requests, with the aggregate limit originally being 1 percent and recently increased to 2 percent of the prior year s claim volume for a provider, practice or institution. Anything beyond these request limits is a violation of the statement of work (SOW). Once the RA receives a record, it has no more than 60 days to respond with the results of the audit. In addition to these requirements, there is an RA data warehouse that was developed along the way as a single repository for relevant transactions. The RA warehouse Mr. Nelson: RAs arose via demonstration projects that spanned three years on a smaller scale. As a result of those efforts, legislation came to pass requiring RAs first in the fee-for-service Medicare program and later in Medicaid. MCO: Can you describe the specific functions of RAs and provide some of the program s parameters? Mr. Nelson: The program parameters were set up based on lessons learned during the demonstration projects mentioned previously. While the demonstration projects were a three-year effort, there is now a five-year contract managedcareoncology.com 17

3 is used as the system of record for the RA effort. CMS initially allowed only the RAs to audit automated issues. These are payment errors in which the RA has ascertained that an improper payment exists, such as the service is not covered or is improperly coded. CMS then allowed RAs to request records from providers to review coding/ clinical validation of coding issues and later to request records to perform medical necessity reviews. The new issue approval committee was initially cautious and required fairly extensive documentation in keeping with the overall approach of the program. While it may have appeared to move slowly, in hindsight it was the right thing to do. The overall program infrastructure was not fully established, and by moving more cautiously, it allowed most of the pieces to be established in time. Mr. Paik: CMS was very cognizant of the provider community and the burden this would put on it. The volume has been gaited to a certain pace by CMS because of hypersensitivity to the provider community. The process of managing the RAs has been transparent and consistent across all four RA contractors to make sure the processes are the same. There are very strict guidelines and requirements in the SOW to minimize provider burden, ensure accuracy and maximize transparency. MCO: How is the Recovery Audit Program funded? Mr. Nelson: The program is self-funded in that it is contingency-fee based and uses a relatively small percentage of the monies recovered to pay for operating costs, with the remainder going back into the trust fund. Politically, the program has an interest in Congress, and not only for the Department of Health and Human Services and CMS, but more broadly, I think this notion of looking at recovery audits in other areas of the government is starting to take hold. Mr. Paik: Budgets are limited right now in many areas of the government, so RAs are an excellent opportunity for states and the federal government to bring monies back into the system. There s no outlay for the government since the program is self-funded and based on contingency fees. This also gives the RAs incentives to be efficient operationally and to understand truly how to audit effectively for payment errors in Medicare. MCO: Can you provide some specific details on exactly how an RA audits claims data to find improper payments? Mr. Nelson: The general process is that the RA begins with three years of national claims history data for the particular region in which it operates. RAs, using known vulnerabilities, CERT reports and other publicly and privately available information, mine the data looking for suspected instances of improper payments. Typically, these are in the form of various probes in which data sets are returned, evaluated and refined, in an effort to identify only the highest likelihood of potential errors. These include both suspected under- and overpayments. There are four different means by which an RA can audit paid Medicare claims. The first of these is an automated review, in which the RA has ascertained that an improper payment for a service or miscoding has occurred. In these cases, whatever claim is being submitted is getting paid improperly. An automated audit has to be 100 percent correct, meaning that you run the data through and 100 percent of the time, based on the available claims data, the claim was paid incorrectly. A semiautomated review is based on the premise that it is highly likely that a claim was paid incorrectly; however, the provider may present documentation to the contrary within a 45-day period from notification of improper payment. Once documentation is received, the review morphs into a complex review (next review type). 18 managedcareoncology Quarter

4 For example, if five times the standard dose of a particular drug was administered, it is highly likely the claim was paid incorrectly; however, if the dosing was weight-based and the drug was administered to a large individual, the provider can submit the documentation supporting the dosage. Clinicians working for the RAs on the audit side determine the validity of the documentation submitted. A complex review involves requesting relevant portions of the patient s medical record to validate a claim; this can be either a coding type of audit or a medical necessity audit. A coding audit needs certified coders for verification, while a medical necessity audit needs a clinician to make the determination. The last type is extrapolation, which involves using statistical sampling techniques and extrapolating the findings in the sample set across a broader range of claims. For example, if there is a reason to believe a provider is consistently upcoding claims, the RA may perform data analysis and determine that a particular provider stands out against a peer group. The RA may then select and subsequently request a statistically relevant sample of claims and medical records and perform a complex review. In the case of respiratory failure, for example, it may be determined that the documentation is not supportive of respiratory failure but is of pneumonia or something less severe. Based on this statistically relevant sample, the RA may then extrapolate that a similar percentage of remaining records, having the same characteristics, were also improperly billed and paid. Therefore, by doing a smaller but statistically significant sampling and review of those claims, the RA can cover a broader base of improper payments. This means of review is not employed as often because it has to be strictly controlled in the sampling, the review and the extrapolation. And while most of these reviews are appealed, if the RA strictly follows the guidelines and is reasonable in the extrapolation, the findings are typically upheld, even though it may take as long as a year plus to resolve. MCO: What safeguards are in place to maintain positive provider relations and a fair appeals process? Mr. Nelson: RAs have customer service centers that are staffed to handle provider calls and inquiries. All the RAs have at least one medical director. We have three physicians working with us: one medical director, one physician who s working with us on what s known as doc-to-doc calls where providers can discuss the relevance and appropriateness of the claims being submitted, and another one representing the RA if the appeal is taken to the administrative law judge level. Whereas it used to be a one-sided presentation of the case in the event of an appeal, having physicians on staff increases the likelihood that the RAs are getting represented at this level. CMS today does not provide any of this representation. We also work very closely with the MACs from a clinical standpoint and a payment policy standpoint to make sure that we re interpreting policy the same way that they are and that we apply that interpretation appropriately to the audits that we perform. The MACs are the first line of appeal, and their decision should be independent. The RAs are almost an adjunct to the MACs by helping to implement payment policy through an audit process. The MACs are largely enforcing payment policy through the adjudication and payment of the claims. We have joint operating agreements with the MACs in our region and with qualified independent contractors, which is the next level of appeals. Mr. Paik: Having an efficient process in working with different stakeholders is really critical. Working efficiently and transparently with the provider community and the MACs is essential, because they are a critical nexus for the claims being audited and the claims that are going to be recovered for Medicare. managedcareoncology.com 19

5 MCO: What are some of the critical components factoring into the success of an RA? Mr. Paik: Other factors driving the success of RAs include (1) critical team members who understand Medicare policy, rules and regulations and (2) technologies that can effectively analyze lots and lots of claims data. We have more than 100 nurses, nurse coders and physicians on staff. Our medical directors serve a critical function for interfacing with the provider community, and they also bring the critical expertise that allows the RAs to develop algorithms and the types of audits necessary. Medicare has a lot of different populations and a lot of rules that need to be followed; for this reason, RA employees must be knowledgeable about Medicare guidelines. We receive billions of rows of claims data from CMS monthly. Our team needs to have the technology and data-processing horsepower to analyze this data to identify vulnerabilities and payment errors. The Medicare program also has an RA validation contractor who reviews an accuracy sample of claims. This scrutiny highlights the level of expertise and Medicare knowledge necessary for a particular RA to be successful. MCO: What does the future look like for the Recovery Audit Program and specifically for RAs? Mr. Paik: RAs will continue to improve their processes and expand their library of medical audits, increasing the savings to the Medicare program. CMS continues to partner with each RA to identify efficiencies and areas to save additional monies. Most recently, CMS has begun efforts to expand audits into a prepayment environment. That is, reviewing claims before they are paid so that RAs do not need to chase money after it has been paid. I don t think postpay audits will go away. Prepay audits will be another approach to comprehensively ensure appropriate payments in the Medicare program. To this end, a prepay demonstration project is planned to begin in summer RAs will be required to audit Medicare claims in a prepayment environment, before a claim is adjudicated. There are challenges with this type of audit, including the limitation of technologies that can process claims data within the adjudication time frame and the implications associated with delaying payments to providers whose claims have been pended for evaluation. For this reason, the prepayment demonstration has been limited to a small subset of claims and geographies to understand these challenges and ensure that providers are not overburdened. Mr. Nelson: Pushing the audit process earlier in the cycle from a payment standpoint makes sense to the payor (CMS). However, the relative absence of electronic medical records in the current payment process makes this concept more cumbersome in that it still relies on the request and submission of various components of the medical record. I believe CMS will continue looking at demonstration projects in this area to see what works well and what doesn t. Testing and thoughtful evaluation of feedback in this manner is the reasonable way to go. MCO: Would you consider your efforts to be successful thus far? How do you measure your success? Mr. Paik: The amount of overpayments recovered by RAs has increased annually since the program s inception. This is likely due in part to the RAs becoming more efficient in their auditing processes and also as a function of being allowed to expand the universe of claims to be audited. Mr. Nelson: According to the most recent report, there were $939 million in corrections nationwide in 2011, and for the first two quarters (CMS FY 2012 Q1 and Q2) more than $1 billion in corrections were identified. In addition, the number of appeals is also significantly increasing, but the appeal overturns generally are not. What you have is, essentially, other third parties coming in and representing these providers on their own contingency base, which represents a cost to the program but is an appropriate step to maintain the provider rights. However, there is a disincentive if the appeal is ultimately upheld and the provider has not paid an overpayment back to Medicare; the provider pays interest on the amount. Ultimately, we want to do the best job we can to be as accurate as possible and let the case stand on its own with very minimally overturned appeals. The documentation we provide should stand on its own with no ambiguity. In addition to monies recovered, this is one means by which we measure our success. 20 managedcareoncology Quarter