Recovery Audit Contractors (RAC) Overview

This power point presentation was prepared to accompany the RRHIMA RAC presentation and in no way is a substitute for authoritative guidelines. The presenters make no representation or guarantee that the use of this material will prevent differences of opinions or disputes with Medicare/Medicaid or other third-party payers as to claims processing and reimbursement.

The presenters assume no responsibility for the consequences attributed to or related to any use or interpretation of any information or views contained in or not contained in this presentation

R&R Support Services, Inc.2

Today’s Compliance Environment Joining the fight against Fraud, Waste

& Abuse

President Barack Obama

Office of the InspectorGeneral (OIG)Daniel Levinson

U.S. Dept of Justice (DOJ)

CMS Recovery Audit Contractors (RAC)

Office of Mental Health (OMH)

NYS Attorney General & Medicaid Fraud Control Unit (MFCU)Eric Schneiderman

Office of the Medicaid Inspector General (OMIG)James Cox

Office of Alcoholism & Substance Abuse Services (OASAS)

Medicare 1965

Medicare Today

Purpose of Recovery Audit Contractor (RAC) ~Recovery Auditor

The Recovery Auditor detect and correct past improper payments so that CMS can implement actions that will prevent future improper payments:

Providers can avoid submitting claims that do not comply with Medicare rules

CMS can lower its error rate

Taxpayers and future Medicare beneficiaries are protected

Started as a Demonstration Project

Legislative Authority

Section 306 of the Medicare Prescription Drug Improvement and Modernization Act of 2003

Test the use of Recovery Audit Contractors (RACs) to identify Medicare Part A and B overpayments and underpayments and recoup overpayments

Started in 2006 3 year pilot 3 states – NY, FL, CA Ended March 31, 2008

Demonstration Project, continued…

RACs succeeded in correcting more than $1.03 billion in Medicare improper payments

Approximately 96 percent ($992.7 million) of the improper payments were overpayments collected from providers

Remaining 4 percent ($37.8 million) were underpayments repaid to providers

Overpayments Collected

CA - 32% FL - 6% NY – 8%

RAC Federal Agency The test went well, now it’s gone NATIONAL Permanent National Program

Tax Relief and Health Care Act of 2006, Congress required a permanent and national RAC program to be in place by January 1, 2010

NY = Region A RAC – Diversified Collection ServicesDCS Healthcare Perfomant Recovery INC.

Healthcare Reform MandatesExpansion to Medicaidby December 2010

RAC Process Now Three Types of Audits Identified Through Data Mining

Automated Automatic audits are conducted through software analysis of large

batches of claims

Do not require chart review

Semi-automated Automatic audits are conducted through software analysis of large

batches of claims

Require medical record review

Complex Require medical record review

Coding Validations Diagnosis-related Group (DRG) Validations Medical Necessity Reviews (MNR)

Appeals Process The process consists of five levels, each level having a time specific

deadline

Level one, also known as redetermination, is processed through the fiscal intermediary or the Medicare Administrative Contractor (MAC).

The provider has 120 days from the date of receipt of the initial claim determination to file an appeal for redetermination. The redetermination must be filed by day 30 of the demand letter date to avoid recoupment of the denial amount on day 41 from the MAC. The MAC has 60 days to make a determination.

Level two, also known as the reconsideration, is performed through a qualified independent contractor (QIC).

Providers have 180 days from the date of receipt of the redetermination decision to file a request for reconsideration by the QIC. The request must be filed by day 60 of receipt of the redetermination to avoid recoupment. Level two is the last stage where a provider can submit any additional information. The QIC has 60 days from the receipt of the reconsideration request to return a decision to the provider

Level three consists of an Administrative Law Judge (ALJ) hearing.

To present a case to the ALJ, the amount in controversy must be at least $140. Providers have 60 days from the receipt of the reconsideration decision to file a request for a hearing. At this point, CMS will recoup the overpayment plus interest, currently at a rate of 10.5%.

Level four consists of the Medicare Appeals Council.

Providers have 60 days from the receipt of the ALJ decision to file an appeal to the Medicare Appeals council.

Level five, the last level of appeal, is the Federal District Court.

Providers have 60 days from the decision issued by the Medicare Appeals Council to file an appeal to the federal district court. For requests filed on or before 12/31/2013, at least $1,400 remains in controversy. For requests filed on or after 01/01/2014, at least $1,430 remains in controversy.

The appeals process can be greater than two years per claim.

Appeals Process Continued…

Review and Collection Process

Complex Review

Automated Review

The Collection Process

How Does the RAC Ensure Accuracy

Each Recovery Audit team employs:

Certified coders Nurses Therapists A physician CMD

The CMS’ New Issue Review Board provides greater oversight

Recovery Audit Validation Contractor provides annual accuracy scores for each Recovery Audit organization

If a Recovery Auditor loses at any level of appeal, the Recovery Auditor must return its contingency fee

Advantages Some good qualities to the RACs

RACs work on a contingency basis, compensation is only made when results are realized.

CMS will assume no risk because the auditors are paid a percentage of what they recoup in improper payments.

Through the use of the RACs CMS will be able to identify denial patterns, abuse, or fraud in a rapid and efficient manner.

On the flip side, CMS must prevent the RACs sacrifice of accuracy for efficiency.

Disadvantages The denials management process is the final step in the RAC

process and the last window of opportunity for providers to keep the reimbursement they received for treating their patients

The appeals process can be costly and time consuming depending on the circumstances for each case

Each level involves tracking deadlines, preparing supporting documentation, customized appeal letters, and the submission of any additional evidence to support each case

It is up to the provider to ensure all the deadlines are met and the proper forms are submitted in a timely fashion for each level of appeal

The writing of appeal letters is very time consuming and takes both administrative and clinical staff away from their primary duties

In some cases, the help of an external contractor may be enlisted to help manage the appeals process – this is very costly

Disadvantages Continued…

The RAC process is compounded with new claims being requested every 45 days and the increasing number of unresolved denials in various stages of the appeals process

Monies are constantly being refunded or recouped electronically, hence making the tracking of each claim extremely difficult

The administrative and clinical burden this process has created in many instances seems unethical

For example, interest starts to accrue on day 31 of an unfavorable RAC decision, but automatic recoupment does not occur till day 41

If the provider does not pay close attention, they are essentially paying Medicare to treat the patient

The RACs have a rolling three year look back period, but providers can only rebill claims one calendar year from the date of service

Disadvantages Continued…

The decision to admit a patient is a complex medical judgment made by the physician only after a number of factors have been considered

Many of the medical necessity denials involve decisions made hastily by post audit reviewers with the advantage of the 20/20 hindsight of the patient’s complete medical visit

If a provider is denied for medical necessity due to inappropriate setting, CMS is looking to recoup all payments made to the facility for that patient’s treatment

The provider stands to lose all monies associated with that claim unless the appeals process is invoked

Keep in mind that in the course of treatment, that patient consumed resources from the treating facility

Who Cares? The high overturn rate in the Medicare appeals process is evidence to

the inappropriateness of many of these denials

Health care systems and providers are making sure they are doing everything possible to be prepared for this bombardment of audits and pre- and post-payment denials

It is crucial for providers to stay abreast of regulatory issues as they will continue to amplify in the coming years

Love or hate them, the RACs are here to stay

An ongoing process improvement plan should be implemented to effectively prevent any future denials.

This should include an improved utilization review process, routine auditing, and review of current admission protocols

Ongoing education should be provided to all hospital staff and physicians to demonstrate the importance of these issues

Though the appeals process is very lengthy, input from multiple disciplines will afford the opportunity for success in overturning the denials

April 2011 RAC Update - New Statement of Work

New RAC Statement of Work https://www.cms.gov/Recovery-Audit-Program/Downloads/090111RACF

inSOW.pdf

A contract signed by all four RACs:

More CMS oversight of RACs to increase program collections Semi-automated review Requires better organization of websites Requires appropriate notification of reasons for denials Guarantees a discussion period

Semi-automated Reviews

April 2011 RAC creates “Semi-automated” Reviews

Hybrid of the two primary techniques – two parts

The only exception being that identified claims only contain possible errors, rather than assumed errors, as in the previous automated review process

Data mining to identify billing aberrancies with a high index of suspicion of improper payment

Notification letter sent to the provider explaining the potential billing error and giving the provider 45 days to submit documentation to support the original billing

RAC Update—CMS RAC Report

CMS releases 2010 RAC annual report

$92.3 million in combined overpayments (82%) and underpayments (18%), $41.4 million were inpatient claims.

Providers appealed 5% of claims collected in FY 2010, nearly one in two of those appeals resulted in decisions made in favor of the provider (2010 appeals still in the process are not factored in to these statistics).

RAC Accuracy Scores?

Update on RAC expansion to Parts C and D

Contains region and state specific overpayment amounts and top incorrect codes and errors.

CMS Identifies Total Improper Payment Figures;

Top RAC Issue Per Region

In the Q3 FY 2011 update, CMS identified $233.4 million in overpayments and $55.9 million in underpayments with a total correction amount of $289.3 million – more than $100 million more than in the previous quarter.

In addition to the figures, the report also contains the top RAC issue per region for Q3 FY 2011. The issues are as follows:

Region A:  Renal and urinary tract disorders (medical necessity)

Bill to Address RAC Issues Introduced in Congress

The bill, which has the endorsement of the American Hospital Association, among other professional organizations, is the Medicare Audit Improvement Act of 2012 (H.R. 6575). It was introduced by U.S. Representatives Sam Graves (R-MO) and Adam Schiff (D-CA) on October 17, 2012

RAC Act Legislation would establish a consolidated limit for medical record requests;

Improve auditor performance by implementing financial penalties and requiring medical necessity audits to focus on widespread payment errors;

The bill would improve recovery auditor transparency; restore due process rights under the Centers for Medicare & Medicaid Services’ (CMS) Part A to Part B Rebilling Demonstration;

Freedom of Information Act What software are they using? What revenue are they collecting? What audits are they succeeding on and where are their errors falling?

Allow denied inpatient claims to be billed as outpatient claims, when appropriate

The Obama Administration’s Expanded Efforts

To Fight Health Care Fraud

In a Fact Sheet released December 13, the Obama administration announced that it has recovered over $5.6 billion in fraudulent payments in fiscal year 2011. This is an increase of 167% over 2008.

The Affordable Care Act (ACA) contains new tools now being used to fight waste and fraud in Medicare and Medicaid. According to the CMS Fact Sheet released December 13, 2011, the ACA:

Increases the federal sentencing guidelines for health care fraud offenses by 20-50% for crimes that involve more than $1 million in losses.

Establishes penalties for obstructing a fraud investigation.

Makes it easier for the government to recapture any funds acquired through fraudulent practices.

Makes it easier for the Department of Justice to investigate potential fraud or wrongdoing at facilities like nursing homes.

Provides an additional $350 million over 10 years to ramp up anti-fraud efforts, including increasing scrutiny of claims before they have been paid, investments in sophisticated data analytics, and more “feet on the street” law enforcement agents and others to fight fraud in the health care system.

Expanded Efforts To Fight Health Care Fraud Continued…

Implements sophisticated predictive modeling techniques that “allow CMS for the first time to spot suspect claims and take action to stop fraudulent payments before they are paid.”

Increases coordination between states, CMS and law enforcement agencies at the Office of the Inspector General and the Department of Justice.

Deters fraudulent providers and suppliers from moving from state to state or between Medicare and Medicaid by requiring all states to terminate anyone from Medicaid who has been terminated by Medicare or by Medicaid in another state.

Requires CMS to work closely with the Office of the Inspector General on suspending payments to suspect providers and to provide the Office of the Inspector General and the Department of Justice with “improved real-time data access to enable investigators and law enforcement agents to more quickly detect and prosecute fraud schemes.”

The Senior Medicare Patrol program, led by the Administration on Aging, has educated over 4 million beneficiaries in group or one-on-one counseling sessions and has reached almost 25 million people through community education outreach events to identify and fight fraud.

Expanded Efforts To Fight Health Care Fraud Continued…

Has centralized claims data from a wide range of federal health care programs “making it easier for agency and law enforcement officials to identify criminals and prevent fraud on a system-wide basis.”

Establishes the DOJ/HHS interagency Health Care Fraud Prevention and Enforcement Action Team (HEAT) Task Force in cities with high rates of Medicare fraud.

According to a July 16, 2010 HHS New Release: “[The HEAT program] is making a significant difference. In FY2009, the Department of Justice (DOJ), including its 94 U.S. Attorneys’ Offices, HHS’s Office of the Inspector General, and the Centers for Medicare and Medicaid Services (CMS) worked together to file charges involving criminal health care fraud violations against more than 800 defendants, secure 583 criminal convictions, open 886 new civil health care fraud investigations, obtain 337 civil administrative actions against individuals and organizations who were committing Medicare Fraud, and recovered more than $2.5 billion in criminal, civil and administrative actions related to our joint health care fraud enforcement activities.”

The DOJ and HHS have established a new Web site to educate the public on Medicare fraud ( www.hhs.gov/stopmedicarefraud ) and have set up a hot line at 1-800-HHS-TIPS (1-800-447-8477) to report suspected Medicare fraud.

Creates new screening requirements for all Medicare, Medicaid, and CHIP providers and suppliers, including site visits and in some cases, FBI criminal background checks for high risk provider types.

Gives CMS the authority to suspend Medicare payments to providers or suppliers while investigating a credible allegation of fraud as well as authority to impose a temporary moratorium on enrolling new providers or suppliers in certain geographic areas when a pattern of claims suggests a high rate of abuse. States may use these same tools in their CHIP and Medicaid programs.

Requires a face-to-face physician/patient meeting for referrals to Medicare home health and Medicare hospice. On July 12, 2011, CMS published a proposal to expand the face-to-face requirement to Medicaid. Providers and suppliers who order and refer certain items or services for Medicare beneficiaries are required to enroll in Medicare and maintain documentation on those orders and referrals.

Requires providers and suppliers to establish compliance programs.

Establishes new compliance and ethics plan requirements for nursing homes.

Expanded Efforts To Fight Health Care Fraud Continued…

Corrections for Performant Hit $493.4M

Medical Necessity of Cardiology Procedures Top Issue For RACs In Region A and Unity

Medicare Fee-for-Service Recovery Audit Program

June 2013

Recovery Audit Contractors (RAC) Updates

2013

Region A: Performant

Recovery INC 2014

Region A:

?

Five RACS, Not Four Current RAC contracts are expected to expire in February 2014. The

deadline for RFP submittal was April 4, 2013. The new RAC contract period is to extend from 2014 to 2018

The most sweeping of all anticipated changes is that CMS will have recovery auditors in all four geographical RAC regions, as currently configured, with a fifth “nationwide” RAC responsible for identifying overpayments among home health hospice facilities and durable medical equipment (DME)

Under the plan, the four regional RACs no longer will handle improper payments for home health, hospice or DME.

All work must be completed by the current RAC contractors when the current contract expires

RAC Updates Continued… Another change to the RAC program is that CMS is requiring recovery

auditors to support the agency throughout the entire appeals process, including at the administrative law judge (ALJ) level. According to its 2013 Statement of Work (SOW), CMS writes: 

For any Recovery Auditor-identified improper payment that is appealed by the provider, the Recovery Auditor shall provide support to CMS throughout the administrative appeals process and, where applicable, (during) a subsequent appeal to the appropriate federal court. This includes participating or taking party status at the administrative law judge (ALJ) level of appeal in a minimum of 25 percent of the cases that reach this level

The time frame for completing claims reviews is cut in half, from 60 to 30 days, and the new program will give CMS more control to stop work with a contractor that does not follow guidelines

CMS has been under siege on two fronts recently:

First via the lawsuit filed in federal court on Nov. 1, 2012 by the American Hospital Association against the U.S. Department of Health and Human Services

Second, the recently proposed legislation by U.S. Rep. Sam Graves (R-Mo.) and Rep. Adam Schiff (D-Calif.), who introduced the Medicare Audit Improvement Act of 2013 (HR 1250) on March 19, 2013.

RAC Updates Continued…

CMS Ruling CMS-1455-NR and Proposed

Rule CMS-1455-P On March 13, 2013, CMS issued an Administrator's Ruling (CMS-1455-R) establishing that

when a Part A inpatient claim for a hospital inpatient admission is denied because the inpatient admission was not reasonable and necessary, the hospital may submit a Part B inpatient claim for services that would have been payable to the hospital had the beneficiary originally been treated as an outpatient rather than admitted as an inpatient.

Specifically, the hospital may submit a Part B inpatient claim for more services than just those listed in Section 10, Chapter 6 of the MBPM to the extent additional reasonable and necessary services were furnished.

Hospitals also may bill separately for outpatient services furnished in the three-day payment window (or one-day payment window for non-IPPS hospitals) prior to the inpatient admission as the outpatient services that they were on an outpatient Part B claim.

Hospitals may only submit claims for Part B inpatient and Part B outpatient services that are reasonable and necessary in accordance with Medicare coverage and payment rules and must maintain documentation to support the services for which they are rebilling.

The Part B inpatient and Part B outpatient claims that are filed later than 1 calendar year after the date of service are not to be rejected as untimely by Medicare’s claims processing system as long as the corresponding denied Part A inpatient claim was filed timely in accordance with 42 CFR 424.44.

CMS Finalizes Rebilling PolicyFinalizes proposed limitations on rebilling certain inpatient denials Monday, August 5, 2013

The Centers for Medicare & Medicaid Services (CMS) on Aug. 2 finalized its policy on rebilling Medicare Part A claims denied by Medicare contractors, including recovery audit contractors (RACs), as part of its fiscal year 2014 hospital inpatient prospective payment system (PPS) final rule. CMS made few changes to its March 13 proposed rebilling policy. Specifically, the final rule:

Limits rebilling to claims that are within one year of the date the service was provided (as proposed);

Prohibits rebilling of “services that require an outpatient status,” including outpatient visits, emergency department visits and observations services (as proposed); and

Restricts the scope of administrative law judge review to whether a claim is reasonable and necessary under Part A (as proposed).

HANYS Files Brief in AHA RAC Lawsuit

DETAILS:

The American Hospital Association (AHA) filed its case last fall to challenge the Centers for Medicare and Medicaid Services (CMS) policy that effectively prohibits rebilling Medicare Part B when a Part A claim is denied by a Recovery Audit Contractor (RAC). After CMS issued Interim Rule 1455, which allows rebilling for a temporary period that ends when regulations reinstating the prohibition take effect, AHA amended its case to challenge CMS' proposed regulations.

Last month, the government asked the federal court to dismiss AHA's lawsuit on two grounds. The government contends that the hospital co-plaintiffs in the case have not pursued claims through the entirety of the administrative appeals process and therefore are seeking court intervention prematurely. The government also claims that the case is inappropriate because it challenges CMS' proposed rule, not a final rule.

HANYS' Board Authorizes RAC Lawsuit; Member Participation Essential

“AHA's legal papers present powerful legal arguments to rebut the government's assertions. Rather than repeat AHA's legal presentation, HANYS' brief focuses on real-world issues hospitals face. Using data supplied by member hospitals, we point out that the appeals process has become absurdly slow and is now riddled with unending cycles of delay, obstruction, and backward-moving processes.”

“We also emphasize that the system quickly wrings repayments from providers and retains these dollars for years as appeals grind to a virtual halt. However, those few appeals that are decided by administrative law judges are overwhelmingly in hospitals' favor, accentuating the fundamental unfairness of the entire process.”

HANYS thanked those members that quickly provided invaluable information that was cited in our brief.

HANYS' Board Authorizes RAC Lawsuit; Member Participation Essential

On January 18, the HANYS Board of Trustees unanimously authorized filing litigation to challenge many features of the Medicare Recovery Audit Contractor (RAC) program. The Board's authorization was conditioned on widespread member participation in the case and further refinement of legal arguments.

HANYS urges all members that have received RAC denials to join this lawsuit as a unified force to fight RAC program abuses.

Two Midnight Rule

CERT

ZPICS

RAC

MAC

OIG OMIG

MFCU

Transmittal 505CMS Manual System Department of Health & Human Services (DHHS) Pub 100-08 Medicare Program Integrity Centers for Medicare & Medicaid Services (CMS) Date: February 5, 2014 Change Request 8425 EFFECTIVE DATE: March 6, 2014 IMPLEMENTATION DATE: March 6, 2014

The MAC, Recovery Auditor, and ZPIC have the discretion to deny other related claims submitted before or after the claim in question. If documentation associated with one claim can be used to validate another claim, those claims may be considered “related.” Claims may be “related” in the following EXAMPLE situations:

An inpatient claim and associated documentation is reviewed and determined to be not reasonable and necessary and therefore the physician claim can be determined to be not reasonable and necessary.

A diagnostic test claim and associated documentation is reviewed and determined to be not reasonable and necessary and therefore the professional component can be determined to be not reasonable and necessary.

The list of examples is not an exhaustive list and claims may be “related” in other scenarios.

If “related” claims are denied automatically, MACs shall count these denials as automated review. If the “related” claims are denied after human intervention, MACs shall count these denials as routine review.

The MAC, Recovery Auditor, and ZPIC are not required to request additional documentation for the related claims before issuing a denial for the related claims.

Process Management

Denials Management Coordinator

RAC Tracking Software

RAC Dashboard

RAC Response Team

Physician Involvement

RAC Response Team Members

Utilization Management Health Information Management Patient Financial Services Physicians Reimbursement Corporate Compliance

Duties Conduct Risk Assessment for CMS approved projects Identify potential population under review Conduct audit to determine if any vulnerabilities exist Develop corrective action plan if applicable Communication/Education/Controls Continued Monitoring

What Can We Do About It Educate physicians on appropriate level of care from the onset of patient

encounter

Start small—outpatients can progress to inpatients with appropriate diagnosis and intensity of service

Provide tools to registration and scheduling staff to raise awareness of inpatient only list for Medicare

Explore IT solutions to alert registration staff of possible variance from appropriate patient status at time of scheduling/registration

Educate providers to improve documentation regarding medical necessity and severity of illness

Educate patients on their appropriate level of care

Medical Short Stay Obstacles

Medicare does not follow any established criteria

Patients differential diagnoses does not always match the principal diagnosis determined after diagnostic workup—red flags on claims review—constipation as principal diagnosis.

Documentation does not support medical necessity

Documentation does not support intensity of service

Misconception that patient receives better treatment as inpatient status

Surgical Short Stay Obstacles

Physicians drive admission type (current state)

Procedure does not warrant inpatient hospitalization

Lack of awareness of inpatient only list (Medicare only)

Variability among payers

Patient Perceptions — ”I was an inpatient because I stayed the night!”

Patient out of pocket responsibilities varies by inpatient or outpatient status

Unity’s Steps To Improve Patient

Status Assignment Use appropriate screening criteria

Screening criteria is nationally accepted, evidence based, and approved by fiscal intermediary, MAC, and Quality Improvement Organization

Apply screening criteria to 100% of Medicare cases

Refer cases that require a second-level physician review to a physician advisor (EHR)

UR staff members stick to the screening criteria

Violation of the Conditions of Participation if we go outside the screening criteria

Education to the UR Staff on proper screening criteria application

Make sure all new staff is properly trained

More than one physician on staff who is capable of performing a second-level review

Electronic Medical Record Order Sets

HUGS – Market Share Review

% CHANGE December 2013 VS. 2012

INPATIENT MEDICAL

INPATIENT SURGICAL

NEWBORN ED VISITS

AMBULATORYSURGERIES

SMH (4.3) 0.4 7.9 (5.3) 11.9

RGH (7.5) 5.5 8.2 (7.8) 4.9

HH (3.5) (15.2) (8.1) (7.5) 19.1

UNITY (0.8) 17.7 (5.6) 2.8 6.3

NNH (11.2) 11.8 27.8 (8.2) 9.5

FFT (27.6) (13.2) 26.2 (10.0) 7.5

COMMUNITY (6.7) 0.6 1.8 (5.8) 9.2

% CHANGE YTD December 2013 VS. 2012

INPATIENT MEDICAL

INPATIENT SURGICAL

NEWBORN ED VISITS AMBULATORYSURGERIES

SMH 0.7 (5.9) (2.5) 0.7 4.5

RGH (0.7) (1.8) 0.9 (0.4) 1.5

HH 1.9 (0.4) (3.9) (1.3) 0.4

UNITY (2.0) (0.5) 9.5 6.6 0.7

NNH (17.3) (2.8) 2.6 (10.4) 9.7

FFT 11.6 (5.1) 14.2 (7.7) 4.1

COMMUNITY 0.2 (3.1) 0.6 (0.2) 3.1

Appeals Process Continues

Respond timely to all deadlines

Continue To Analyze Results Internally

Educate

Appeal Early

Appeal Appropriately