The RACs Attack!

Recovery Auditors and

Critical Access Hospitals

The Big Picture

• Huge focus on “fraud, waste and abuse”• Contract audits provide high ROI• Audits are here to stay

– Bipartisan support!• Private payers also getting into the game• The Audit Era has begun

– RACs, MACs, ZPICs, OIG, DOJ, … and more

What does this mean for YOU?

• Must focus on reducing risks, not avoiding review

• Examine past services/records for identified risk areas

• Move forward with changes to reduce future risk (and possibly find opportunities)

Recovery Auditors

• Program established by statute• Process governed by Statement of Work• Four RACs operate regionally• Paid on a contingency fee basis• As of 12/2011, auditors had discovered:

– $1.27 billion in overpayments– $183.7 million in underpayments

General RAC Rules

• 3 year look-back period– Runs from date claim was originally paid to

• Date of medical record request (for complex)• Date of demand letter (for automated)• Original payment, whichever is sooner

• Must reimburse PPS hospitals (but not CAHs) for copies of records– But can include copy expenses in cost report

Staffing Requirements

• RNs or therapists• Certified coders• At least 1 FTE contracted Medical Director

– Must make him/her available to discuss a denial upon request of a provider

Required Customer Services

• Toll Free Number• Knowledgeable customer service staff• Quality Assurance Program • Website

– New Issue Listing!– Provider Contact Portal– Medical Record Tracking

3 Types of Audits

• Automated– Data mining using proprietary software

• Semi-automated– Opportunity to send records “if you disagree”

• Complex– Review of medical records required– Most are medical necessity reviews

Semi-Automated Review• Data mining identifies potential billing error

– Clinically unlikely or not evidence based• Notification/Information Letter sent

– 45 days to submit supporting documentation– Otherwise, demand letter issued

• Not subject to ADR limit

Complex Review

• Medical Record Request letter sent– 45 plus 10 days to respond– May up to ADR limit every 45 days

• 2% of prior year’s Medicare claims ÷ 8

• RAC reviews and sends review results letter– 60 day time limit

• MAC sends remittance advice/demand letter

Recoupments from CAHs

• Before final settlement of cost report– Remittance Advice sent– Improper payment identified in next Provider

Statistical and Reimbursement Report– Reconciled at final settlement of cost report

• After final settlement of cost report– Demand letter sent

Appeals

• Level 1 “Redetermination”– 120 days time limit– Must file within 30 days to avoid recoupment

• Level 2 “Reconsideration” by Qualified Independent Contractor– 180 day time limit– Must file within 60 days to avoid recoupment

Appeals, cont.

• After Level 2, cannot stay recoupment• Level 3, ALJ Decision

– 60 day time limit• Level 4, Medicare Appeals Council• Level 5, Federal Court

RACTrac

• Web-based survey designed to assess hospitals’ RAC activity and the resulting administrative burden

• Free participation for all hospitals• Quarterly data submitted online• Important tool for advocacy & information

sharing

National RACTrac Data

• 2220 hospitals have participated– Last quarter, 248 CAHs reported RAC activity

while 205 reported no RAC activity• $741 million in denied claims reported

– This amount nearly doubled in 1Q 2012

• Over ⅔ of medical records reviewed did not contain an improper payment

National Data, cont.

• Over ½ of medical necessity denials were one day stays where medically necessary care was provided in the wrong setting– 52% or $190 million

• Medical necessity is top reason for complex denials– In Region B, 69%– In Region C, 92%

National Data, cont.

• Region A had the highest number of medical record requests

• Region C had 64% of automated denials• All regions experiencing complex denials• 64% of denials appealed, 75% success rate

– Region B, 40% appealed w/ 84% success– Region C, 27% appealed w/ 79% success

CAH Audit Issues

• Must think differently about RACs • Consider all listed RAC issues and test to

see if they are applicable to CAHs• Overutilization as a key point• Complex review issues include DRG

validation & medical necessity– Medical necessity applies to CAHs even if

DRGs do not

CAH Audit Issues, cont.

• Don’t ignore DRGs just because “we don’t bill that way.”– RAC issues often listed by DRG, but ICDs are

included within each DRG.– These can apply to CAHs too

• Charge capture rules are the same for large and small hospitals!

Outpatient Billing Errors

• Many CAHs not turning on edits to process outpatient claims– Allows mistakes

• Examples of automated denials for CAHs– 2 initial 1st hours of drug administration billed

in ER, then in Observation– Respiratory therapy billing multiples of demo

& eval, rather than treatment

Protocols

• High risk area• Regardless of excellent protocol, still need

physician’s order– e.g., lab / radiology tests

• Include referenced protocols when submitted records for audit

Transfer to Swing & SNF Beds

• 3 day clinically appropriate stay required for Medicare coverage– Must have clinical reason

• No automatic recoupment against “innocent” party, but if you’re transferring to your own swing beds or SNF, you aren’t innocent.

Incomplete Records

• Emergency Room to Inpatient– Need ER record to support admission

• Direct admits from Clinic– May need clinic record to support admission

• Beware of the Hybrid Record– Information lost in “hand offs” between written

and electronic record

Documentation

• EMRs may present “cookie cutter” view of patients– Need specific patient issues included

• Treatment, outcomes and results of ordered services must be in clinical record– Crucial to answer the question “Why is this

patient still an inpatient?”

Physicians

• Employed physicians– Hospital is billing physician services, so must

monitor RAC physician issues too– No $$ on the line for deficient documentation,

so should be addressed in contract• For all doctors, employed and otherwise,

ongoing education and support is crucial

Teamwork is Critical

Image: Apple's Eyes Studio / FreeDigitalPhotos.net

Multi-Tasking Staff

• Charge capture and documentation leaders also care givers– “I have to take care of patients. I don’t have

time to worry about money.”• All must own the billing process. Without

the money, no patient care job.

Overpayments & False Claims

• False claims liability can arise if you:– know of an overpayment and– do not report and return it within 60 days after

it is identified (or the due date of any corresponding cost report, if applicable)

• Overpayment = funds received or retained by a person who, “after applicable reconciliation,” is not entitled to them.

If that’s not enough …

Feeling Overwhelmed?

Need Good Review Process

• Is there an order to support the service you are billing?

• Does the documentation in the record support the order?

• Does the itemized statement reflect what you said you did in the documentation?

• Does the UB match the 3 things above?

Prepare, prepare, prepare• Put together a good audit response team• Check all 4 RAC websites for new issues• Establish an efficient and effective process

for handling audits– Responsibilities at department & individual levels– Tracking methodology

• Train staff on audit process, tracking system and audit issues

• Bring physicians into the team• Track and trend to know your risks• Do proactive internal auditing • Consider targeted outside reviews• When weaknesses are identified, do rapid

and aggressive improvements• Beef up utilization review• Ongoing education and outreach

Use the PEPPER Reports

• Offers ready-made list of priority audit targets – areas identified as at-risk for improper payments

• Contains claims data statistics & shows where your hospital is an outlier

• Compares your data to national, jurisdictional, and state statistics

Don’t Forget the P.R.Issue

• If you have a denial, you also have to refund money to the patient.

• If you rebill, you may have to send another bill to the patient.

• Work on your letter to patients– Focus on commitment to quality and

compliance, not “oops, we goofed.”

Questions?