Auditing RACphobia. Lamon Willis, CPCO, CPC-I, CPC-H, CPC AHIMA-Approved ICD-10-CM/PCS Trainer Xerox Healthcare Consultant

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1 Auditing RACphobia Lamon Willis, CPCO, CPC-I, CPC-H, CPC AHIMA-Approved ICD-10-CM/PCS Trainer Xerox Healthcare Consultant 1 Agenda Overview of present industry landscape in relation to auditing Audit Entities and Contractors Health Care Fraud Prevention Enforcement Action Team (HEAT) Medicare RACs Connolly RAC Case Studies Medicaid RACs Lessons from RAC Audits Summary 2 1

2 3 Industry Overview 4 2

3 Auditing on All Fronts CMS and the OIG continue their resolve to recover improper payments, overpayments, and fraudulent payments from healthcare providers. Coding and Billing will continue to be a critical role as the auditing and documented services for ICD diagnosis and procedure as well as CPT-4 coding is verified and validated for reimbursement. The documentation of medical necessity that is translated from clinical notes is all important. 5 Legislation Affordable Care Act provides an additional $350 million over 10 years to ramp up: anti-fraud efforts, including increasing scrutiny of claims before they've been paid, investments in sophisticated data analytics, more "feet on the street" law enforcement agents and others to fight fraud in the health care system. 6 3

4 Software Analytics These efforts build on our recently awarded predictive modeling contract under which CMS is using the kind of technology used by credit card companies to stop fraud. Since June 30th of this year CMS has been using this technology to help identify potentially fraudulent Medicare claims and uncover fraudulent providers and suppliers, flagging both for investigation and referrals to law enforcement. 7 Software Analytics This new tool allows CMS for the first time to use real-time data to spot suspect claims and providers and take action to stop fraudulent payments before they are paid. These efforts build on the many aspects of the Affordable Care Act that are currently working to bring down waste, fraud and abuse in the health care system. 8 4

5 9 Audit Entities The Increase of Auditing Medicare Part A and B RACs Medicare Part C and D RACs Medicaid RACs Medicaid Integrity Contractor (MIC) Zone Program Integrity Contractor (ZPIC) formerly Program Safeguard Contractor (PSC) Medicare Administrative Contractor (MAC) OIG probe audits 10 5

6 Audit Entities The Increase of Auditing Surveillance and Utilization Review Subsystem (SURS) Payment Error Rate Measurement (PERM) Health Care Fraud Prevention and Enforcement Action Team (HEAT) Commercial / Managed Care 11 The Medicare Recovery Audit Contractors (RACs) 12 6

7 Demonstration Project Led to Full Roll Out of RAC CMS deemed RAC a success > $1 Billion in payment errors, $983 million in overpayments was recovered. Congress authorized the permanent RAC program in 2006 and regulated that it be rolled out nationwide by January 1, The present administration reconfirmed the RAC roll-out in the Patient Protection and Affordable Care Act. The country has been divided into 4 RAC regions. 13 RAC Regions 14 7

8 RAC Review Process RAC Mail Record Requests Healthcare Provider Pull, Verify and Mail Medical Records! 45-day deadline Make Overpayment Determinations and Mail Demand Letters Research and Write Appeals! 120-day deadline 5 Levels of Appeal 1 National averages as reported by the American Hospital Association, AHA RACTrac Nationwide Results, (Feb 24, 2011) Demand Letter Appeal must be filed within 120 days Fiscal Intermediary (FI) Appeal must be filed within 180 days RAC Appeal Process Qualified Independent Contractor (QIC) Appeal must be filed within 60 days Administrative Law Judge (ALJ) Appeal must be filed within 60 days Medicare Appeals Council (MAC) Appeal must be filed within 60 days Federal District Judge (FDC) 16 8

9 The Permanent RAC Program Program Rules Demonstration Permanent Program Look Back Period 4 years 3 years Audit Focus Any reason Must show just cause and gain CMS approval Record Limit Unlimited per 45 days 1% Medicare claims; maximum 500 records per 45 days RAC Payment Provider Payment 30% of overpayment even if overturned on appeal Recouped upon RAC denial 12.5% overpayment and underpayment but must survive appeal Recouped if not appealed within 30 days at level 1 or 60 days at level 2. Rebilling options Inpatient denials could be re-billed as outpatient from any date Inpatient denials can be re-billed as ancillary services only and only within 1 year of the original payment 17 Permanent RAC Status Overpayment Collected in millions FY10 FY11 Q1, Q2, Q3 Total $75.4 $499.8 $ In millions Underpayment Identified in millions Total Corrections in millions $16.9 $92.7 $109.6 $92.3 $592.5 $ FY10 3Q-2011 Total 18 9

10 The Recovery is Increasingly Significant 19 Challenges for Healthcare Providers Reporting (financial exposure, denials, appeal success) Tracking correspondence and staying on top of expected response times Lack of Available Skilled Appeal Resources Know-how to make arguments Possess excellent writing skills 20 10

11 Challenges for Healthcare Providers Costs of Administration of the Program The literature reports an average hospital s cost to appeal is $2000 per record. What about physician? 21 CMS RAC Report to Congress FY 2010 was the first year in which the Recovery Auditors began actively identifying and correcting improper payments in the national Recovery Audit program. The RACs identified $92.3 million in both overpayments and underpayments. $75 million overpayments (82%) $16.9 million underpayments (18%) RACs send demand letters for $135.6 million in overpayments 22 11

12 CMS RAC Report to Congress Unavoidable systemic reasons for variations in the demand amounts/collected amounts: CMS regulation granting providers a 41-day grace period prior to the initiation of collections. Expiration/financial decline of providers, or possibly their termination from the program. Providers may be offered options for extended repayment. CMS may withhold future earnings on unrelated claim submissions as an alternate means of collection. 23 CMS RAC Report to Congress - Appeals CMS has received fairly successful feedback from an appeals perspective. Only 2.4% of all 2010 claims collected have been both challenged and overturned on appeal. Recent data also supports that the number of claims overturned on appeal may decrease in the future when CMS or the RAC takes either participant or party status in a case; further supporting the accuracy of the RAC decisions

13 CMS RAC Report to Congress - Appeals Providers have appealed 8,449 claims to date, which constitutes 5% of all claims collected in FY Of those, 3,902 claims 2.4% of all collected claims were ruled in the providers favor, for a total overturned amount of $2.6 million. Monitoring appeals activity is a key part of the RAC program. CMS will continue to track the RAC appeal rates. 25 CMS RAC Report to Congress 26 13

14 CMS RAC Report to Congress 27 CMS RAC Report to Congress 28 14

15 CMS RAC Report to Congress 29 CMS RAC Report to Congress Connolly, the Region C RAC for VA, reviewed: 106 Part B Claims Total of $13,977 Total corrected 89 for $5,057 which were all overpayments There were no underpayments. It would appear that this RAC is just getting ramped up for Part B audits! 30 15

16 CMS RAC Report to Congress HDI, the Region D RAC reviewed: 11,854 Part B Claims Total of $12,575, Total corrected 53,764 for $5,185,348. Overpayments - $5,087, Underpayments - $97, This RAC is heavily auditing Part B claims! 31 Medicare Part C and D RAC Mandate Ensure that each Medicare Advantage (MA) plan under Part C has an anti-fraud plan in effect and review the effectiveness of each such anti-fraud plan Ensure that each prescription drug plan under Part D has an anti-fraud plan in effect and to review the effectiveness of each such antifraud plan 32 16

17 Medicare Part C and D RAC Mandate Examine claims for reinsurance payments, determine whether prescription drug plans incurred costs in excess of the allowable reinsurance costs permitted Review estimates submitted by prescription drug plans by private plans with high cost to beneficiaries and compare such estimates with the numbers of such beneficiaries actually enrolled by such plans. 33 The Medicaid Recovery Audit Contractors (RACs) 34 17

18 Medicaid RACs Result of the ACA Medicaid RACs will contract with States and territories to identify and collect overpayments, and will be paid on a contingency fee basis by the States. States must have an adequate appeals process for entities to challenge adverse Medicaid RAC determinations. Medicaid RACs are not intended to, and would not, replace any State program integrity or audit initiatives or programs. 35 Medicaid RACs Result of the ACA CMS states that Medicaid RACs should hire certified coders unless the State determines that certified coders are not required for the effective review of Medicaid claims ( (c)). States will be required to implement their RAC programs by January 1, States must hire a Contractor Medical Director MD or DO

19 Medicaid RACs Result of the ACA The program requires the development of an education and outreach program component, including notification to providers of audit policies and protocols and implement RAC customer service measures including: providing a toll-free customer service telephone number in all correspondence sent to providers and staffing the toll-free number during normal business hours from 8:00 a.m. to 4:30 p.m. in the applicable time zone. 37 Medicaid RACs Result of the ACA The program will notify providers of overpayment findings within 60 calendar days. The program will have a 3 year maximum claims look-back period The contingency fees for contractors will probably range between 9% to 12% as the Medicare RACs do presently, however there is flexibility left to the States for this

20 Medicaid RACs Result of the ACA CMS estimates that it will take 60 hours per case to resolve a Medicaid RAC audit on appeal. Commentators of the final rule suggested hours minimum. Medicaid Managed Care claims are excluded from review by the RACs. States must make referrals of suspected fraud and/or abuse to the MFCU or other appropriate law enforcement agency 39 Medicaid RACs Result of the ACA RACs should not audit claims that have already been audited or that are currently being audited by another entity All contingency fees paid are from overpayments collected by the State. RACs can request a waiver to opt out of the program but this must be approved by the Federal Government

21 Medicaid RACs Result of the ACA CMS estimates that the Medicaid RAC program will impact the Medicaid program $2.13 billion from , which includes a net savings of $1.22 billion to the Federal Medicaid program and $900 million to the State Medicaid program. CMS believes the over-payment recoveries will offset the majority of program costs. 41 The Tennessee Medicare RAC Connolly Healthcare 42 21

22 Case Study 1 Issue: In a billing process known as unbundling, the provider was billing two separate CPT codes for MRI scans, one that represented the image without contrast (e.g. CPT abdomen scan) and one that represented the image with contrast (CPT ) rather than the appropriate combined global code (CPT-74170), which is an image without contrast followed by the introduction of additional images with contrast. 43 Case Study 1 Findings: Through advanced data mining techniques, Connolly was able to identify multiple instances of unbundling. This was also applied to other types of MRI and CT scans where unbundling was taking place. Financial Impact: Each unbundled claim represented an overpayment of approximately $1,500. The total impact in one year was nearly $750,

23 Case Study 1 Solution: The payer was instructed to set system flags for potential CPT codes that might represent unbundling. Flagged claims could then be reviewed for potential overpayments. 45 Case Study 2 Issue: Provider was processing claims for cardiac catheterization procedures where CPT G0269 was billed on the claim. The client was reimbursing CPT G0269 as an ungrouped outpatient procedure when in fact the payment of this bundled code is included in the payment for the services to which they are incidental

24 Case Study 2 Findings: Connolly used data mining techniques and the coding knowledge of its staff to identify claims where this code was present and determined whether the contract and/or CMS guidelines supported payment. In 95% or better of the cases examined, while the code was appropriately billed, it was not subject to reimbursement. 47 Case Study 2 Financial Impact: Recoveries were made in the amount of $829,000 and Connolly brought the claims to the client s attention so future improper payments could be mitigated. Solution: Connolly recommended system updates for the providers affected to ensure future payments would be correct

25 Case Study 3 Issue: CPT coding for Electrocardiographic (ECG) billing for monitoring longer than a 24 hour period requires that the bundled code be submitted, not the code for a single 24 hour period. Findings: ECG services were being billed incorrectly due to the way CPT codes were entered in the provider s system. Per CPT Coding Rules, should only be billed once within a 30 day period. When this procedure is done multiple times within a 30 day period, typically Code should be used. 49 Case Study 3 Financial Impact: A Connolly auditor found that CPT Code 93236, for a single day occurrence, was submitted incorrectly by 16 different providers during a timeframe of approximately one year, resulting in over $1.2 million in overpayments. Solution: Provider was informed of the issue and instructed to set system flags for the correct usage of specific CPT codes to mitigate future errors

26 Active Issues Add-on codes without primary codes Barium swallow units of service Blood transfusion Bronchoscopy services Various drugs with units of service IV hydration codes Chemotherapy administration codes Co-surgery not billed with modifier Active Issues Date of death Duplicate claims Extracorporeal Photopheresis Failure to Correctly Bill Codes on the Medically Unlikely Edit List Hospice Related Services (unbundling) Left-sided Cardiac Catheterization Multiple Surgery Reduction Errors: Single Line Modifier 51 Underpayments 52 26

27 Active Issues National Correct Coding Initiative Edits (Mutually Exclusive and Non-Mutually Exclusive) New patient errors Once in a lifetime procedures Pediatric codes exceeding age parameters Untimed Codes (units of service errors) 53 The Tennessee Medicaid RAC HMS Holdings 54 27

28 HMS BACKGROUND Working with government healthcare programs for almost 30 years. They have 45 Medicaid Program Integrity contracts and 16 Medicaid RACs. They are also a Medicare Program Integrity, Midwest Safeguard Contractor, a Medicare Zone Program Integrity sub-contractor (ZPIC), a Medicare Integrity Program Audit MIC, and also a Medicare RAC. No issues area on their website. 55 Lessons From Medicare RAC Audits 56 28

29 57 Appeal Experience in the Demonstration Program Work performed with 8 Massachusetts hospitals in 2007 in the RAC Demonstration Program A total of 800 records were requested 385 denials ( 48%) A total of 347 denials were appealed (90%). Nationally only 12.7% of RAC denials were appealed* % difference A total of 323 appeals were won (93% success rate). Nationally 65% of appeals were won*. 28% difference The appeal work returned $8.1 million to providers. *The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of the 3-Year Demonstration, June 2010, CMS 58 29

30 YOU CAN T WIN UNLESS YOU TRY APPEAL APPEAL APPEAL Make sure you are appealing those which you can. Did you know that you cannot add information after the QIC Level review? Government has a mixed picture as to whether providers are not appealing because they are inaccurate or because of resource requirement. 59 Lessons Learned Providers must have an automated tracking and reporting tool Providers will likely need help writing appeals and managing the RAC process Appeals should utilize precedent setting, reasoned responses linked to Medicare regulation

31 61 APPEALS CASES BACKED UP TWO YEARS There is a backlog of 357,000 existing cases, and HHS said it will not accept RAC appeals from providers to administrative law judges (ALJ) the third level of appeal for up to two years. CMS suspending a large portion of RAC audits until March 31, Since payment for claims denied by a RAC are recouped before the ALJ level of appeal, a significant amount of hospital funds may be held captive for years while the hospital waits for an appeals hearing

32 APPEALS CASES BACKED UP TWO YEARS CMS recently exacerbated appeals delays when it inappropriately allowed RACs to double the volume of audits. The appeals process is extremely costly and many providers have no resources to pursue Medicare appeals. After three years, CMS has not corrected chronic operational problems within the RAC program. Problems include overdue audit decisions; very late issuance of key correspondence hospitals need to manage Medicare payments and appeals; and a high overturn rate for appealed RAC denials. 63 APPEALS CASES BACKED UP TWO YEARS Medicare rules grant physicians the authority to decide whether a patient should be admitted to a hospital. In these rules, CMS recognizes that deciding whether to admit a patient to a hospital is a complex medical judgment that requires the professional expertise of doctors

33 APPEALS CASES BACKED UP TWO YEARS RACs hire auditors typically nurses and therapists to subjectively evaluate paper charts up to three years after the patient was treated. RACs are only required to hire one physician, which leaves most second guessing to nonphysician auditors. 65 Baby, Don t Fear The RAC Audit 66 33

34 Summary RAC audits can be overcome and won by being prepared ahead of time. An attorney is not required to appeal before the Administrative Law Judge (ALJ). You do need a skilled auditor/astute research analyst. Audits will continue under multiple fronts of programs and legislation being implemented by the federal and local governments of our country. You should prepare for more. 67 Summary Invest in technology and professionals to be able to keep the reimbursement you are legitimately entitled to. Review your current compliance program and policies and procedures to include auditing. Keep examples of all wins in audits for future audit precedent. Make this information part of appeals package

35 Questions? 69 35