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Preparing for RAC ?Strengthen Your Denials Management Process

December 19, 2008

Practical, Innovative, Medical Management Solutions



PREPARING FOR “RAC ATTACK ”

GoalDevelop a proactive attack plan to prevent

financial risk for the organization

Assemble a RAC Taskforce

Interdisciplinary approach with core players:

• Utilization Review

• Medical Records

• Risk and Outcomes Director

• Patient Financial Services Director

• Information Technology Representative

• Physician Representative (in-house or contracted)



PREPARING FOR “RAC ATTACK”

Determining the Action Plan

• Establish line of authority for hospital wide RAC program

• Use existing data to analyze/identify denial drivers

• Perform in-house audits and determine hospital wide and

system weaknesses

• Establish process improvement plans

• Develop an interdepartmental tracking system

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In-House Physician Advisors

PROS

• Decrease hospital expense

• No contingency fees

• Existing internal peer relationships

CONS

• Increases existing physicians work load

• Physician often not be specialized in denials management

• Difficulty persuading others to embrace practice improvements

• Limited ability to produce valuable educational reports and denial tracking reports




Results Achieved: Denials Outsourcing

FYE 2005 - 29.54% of Total Cost denied

- 21.00% overturned after in-house appeal

FYE 2006 - 27.53% of Total Cost denied

- 44.90% recovered utilizing physician appeal

Summary

Significant Denials Decrease:

- 19.50% is the average recovery prior to programlaunch

- 29.00% is the sustained recoveries since 2006




Demonstration Project RAC Statistics

• 32% medical necessity denials

• 42% incorrect coding denials

• 9% insufficient clinical• 88% inpatient

• 11% appealed

• 5% overturned

• 42% of hospitals had no denials issued

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• Denials Increasing from Numerous Sources

• CMS Denials

• RAC Denials

• Emergence of Medicare “Never Events” Denials

• Increased Denials

• Medicaid MCO’s• FFS Medicaid

• Commercial Payors

• Use RAC Preparations as Catalyst to Revamp your DenialsManagement Process

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Key Components of an Effective Denials Strategy

Primary Strategy - Proactive Prevention

• Use data to identify key drivers of denials

• Develop processes to mitigate these drivers thereby further reducing denials

• Minimize denials through an effective Concurrent Review/Case

Management and notification process

Supporting Strategy - Denials Recovery

• Aggressive appeals process recover denied dollars

• Close the loop between approval and payment

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Primary Strategy: Data Management

• Audit existing data to identify opportunities for improvement including

areas of RAC emphasis

• Use audit results to develop processes that address identified areas

of opportunity

• Enhance existing UM/CM/SW processes based on audit findings

• Develop educational sessions as needed

• Re-assess and monitor impact of newly implemented processes

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Using Data to Identify Opportunities

Audit charts for each RAC area of emphasis

• Objective chart review using CMS medical necessity criteria

(InterQual)

• Subjective chart review using physician medical judgment

• Data capture and analysis of denial variables

Analyze audited data and existing denials data

• Diagnosis

• Physician

• Denial type

• Delay reason

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Denials Management Tracking and Audit Application




Building Processes to Minimize Denials

• Obtain buy in from key stake holders to improvechances of success

- Physicians, nursing, UM, IT

• Prioritize process improvement to maximize returns• Select improvements with highest success rate

- Broadest impact across all payor types

- Simple implementation

•Primarily systems enhancements

• Minimal resource allocation

- Enhance and strengthen existing processes

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Building Processes to Minimize Denials

Examples of Process Improvement Activities

• Short stay denials

- RAC emphasis

• UM/CM/SW process enhancements

- Improve communications with payors

• Education

- Use data to identify educational activities forstaff

- Employ external resources as needed

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Short Stay Denials

• Case manager assigned to ER to review admissions forselect diagnosis based on audit results

• Consult done in ER when possible prior to admission

• Consider implementing rapid chest pain protocol

• Educate ER staff on admissions criteria for commonlydenied diagnosis

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UM/CM Process Enhancements

• Hold carriers to timely denial notification by denial log

• Use log to eliminate denials for no clinical and to drive peer-

to-peer process

• Use denials audit results to focus case management anddischarge planning activities

• Work closely with payor case manager on complex cases

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Education

• Use denial audit results to guide educational initiatives

• Physician and UM/CM/SW educational sessions based on

frequently denied diagnosis

• Hospitalist groups respond positively with impressive endresults

• Individual physician improvements more difficult to

accomplish

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Secondary Strategy Denials Recovery

Ensure processes are in place to maximize denied claims

recovery

•Develop strong appeals capabilities

• Ensure aggressive payment follow through

• Ensure strong data capture and reporting capabilities

• Use data to identify areas of opportunity to enhance the

entire process

• Close the loop on denials prevention CQI

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Advantages of Physician Led Appeals

• Recognized as clinical expert vs other clinicians

• Able to challenge payers and provide clinical conviction

• Peer-to-peer review shown to prevent 15% of denials

• RAC auditors must provide a physician for peer-to-peer when requested

• Select payors now require a physicians’ name on theappeal




The Appeal Process

Types of Appeals

• Informal peer-to-peer as soon as denial is identified, 1 day of denial

• First Level appeal with medical records, 15 to 180 days depending on

payor

• Second Level for some payors – typically 30 to 90 days• Third Level – for some payors – typically 30 to 90 days

• External appeals - usually through the MIA or CMS

Complexity of Appeals

Multiple payors Multiple rules Multiple levels Multiple time frames

Multiple regulators

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Automation and

Data Management

Research & Approval

Strategy Development

MCO Submission

Appeal Response

Determination Process

Payment Management

Process

Denial Process &

Intervention Reporting

MCO Process ManagementDenial Mitigation through Education

A Staged Approach to Appeals Management

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Identifying the Denial

• The EOB is the gold standard and should be crossreferenced with other denial sources to ensure denials arecorrectly identified

• For carriers with a short appeal response timeframe thedenial must be identified before the EOB is received

• Most denials are identified through the denial letter sentfrom the payor or phone calls

• Payor’s daily log is a good source for identifying denials

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The Medical Necessity Argument

• Critical components necessary for success

• Timeliness is critical and requires a complex and efficient

process to meet the varying requirements of numerous insurers.

• Medical necessity knowledge is key to a successful appeal and

often requires the leadership and input of a UM trained physician

• Intimate knowledge of criteria sets (Milliman, InterQual etc.)

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Managing The Appeal Response Process

• All appeals documentation must be:

- Sent by certified mail

- Tracking option activated

- Follow-up calls to facilitate return of late appeals

• Payors fail to return 35% of initial appeals for a variety of reasons• Depending on the insurer, only 35% to 60% of appeals are

completed within the required 30 days

• Process difficult to monitor without an appeals tracking system

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• Once an appeal response is received a decision

must be made on next steps

• If approved, clearly payment must be pursued

• If denied:

• Should a Level 2 or 3 be pursued?

• Should the account be closed?

• Should an external review be filed?

• Between 10% to 25% of Level 2 or 3 appeals canbe overturned

• Significant medical necessity knowledge is neededto assess which appeals warrant a Level 2 or 3

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From Approval to Payment

• Assign accountability for payment follow-up

• Close the loop between approval andpayment

• Follow-up with payor to ensure 100% of approvals are paid

• Pay close attention to TPA’s

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Data Management, Reporting andPerformance Improvement

• Provide monthly results to key players

• Status reports provide updates on theappeals process

• Actionable reports drive the CQI process

• Monitor impact of process improvementactivities with tracking and trending of data

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Summary

• Preparation is key

• Minimize operational disruptions … its just another denial

• RAC demonstration – 42% of facilities had zero denials

• Use the opportunity to enhance your denials managementprocess … and come out ahead

• Reporting and continuous process improvement are

critical

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Case Management Covenants, LLC

Case Management Covenants is a Maryland based

healthcare consulting services company specializing indenial management, appeal management and RAC audit

preparation services.

Key Staff Contacts

President: Olakunle Olaniyan, M.D. – still a practicing physicianand former managed care VP and CMO.

Chief Operations Officer: Iskla “Chris” Brown - nurse executivewith many years experience in healthcare accreditationorganizations, commercial and government health insuranceentities.

Vice President, Business Development: Doug Allen – a strategicplanning professional with significant experience in both thecommercial and non-profit healthcare sectors.

410-715-4913

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