1. THE WRECK OF THE RAC: LESSONS LEARNED FOR ALL Chicago, IL ~ March 24 & 25, 2011

2. THE WRECK OF THE RAC: LESSONS LEARNED FOR ALL Moderator: Fay A. Rozovsky, JD, MPH, DFASHRM, President, The RozovskyGroup Panelists: Elizabeth Baskett, MPA, Senior Associate Director for Policy, American Hospital Association Patrick J. Hurd, Esq., Senior Counsel, LeClairRyan Alice Johansson, Senior Vice President, Product Manager, Managed Care, IronShore

3. RAC 101 • The Centers for Medicare & Medicaid Services (CMS)Recovery Audit Contractor (RAC) permanent program was implemented for Medicare parts A & B nationwide on January 1, 2010. • RACs conduct post-payment audits of Medicare Parts A & B claims. • There are four RAC regions nationwide, with four separate RACs operating in each region of the country. • The Affordable Care Act of 2010 expanded the RAC program to Medicare Parts C & D and to Medicaid. • Implementation of Medicare Parts C & D and Medicaid RACs has been delayed until later this year. • Although extremely similar, RACs are not to be confused with other payment integrity auditing programs such as the MACs, ZPICs, CERT, DOJ, etc.

4. RACs Identify Hospital Billing Mistakes • RACs are not fraud busters, they audit hospitals to find billing mistakes • Improper payments include: • incorrect payment amounts; • incorrectly coded services (including Medicare Severity diagnosis-related group (MS-DRG) miscoding; • non-covered services (including services that are not reasonable and necessary); and • duplicate services. • RACs conduct two types of audits: • Automated reviews—using computer software to detect improper payments. • Complex reviews—usinghuman review of medical records and other medical documentation.

5. Hospitals Nationwide Are Experiencing RAC Audits Percent Reporting RAC Activity vs. No RAC Activity by Type of Participating Hospital, through 4th Quarter 2010 Source: AHA. (February 2011). RACTrac Survey. AHA analysis of survey data collected from 1,852 hospitals reporting RAC activity. 1,454 reporting activity, 398 reporting no activity through December 2010. Full report accessible at: www.aha.org/aha/issues/RAC/ractrac.html

6. Hospitals Nationwide Are Experiencing RAC Denials Dollar Value of Automated and Complex Denials by RAC Region for Reporting Hospitals, through 4th Quarter 2010, Millions Source: AHA. (February 2011). RACTrac Survey. AHA analysis of survey data collected from 1,852 hospitals reporting RAC activity. 1,454 reporting activity, 398 reporting no activity through December 2010. Full report accessible at: www.aha.org/aha/issues/RAC/ractrac.html

7. RAC Process for Complex Review • Hospitals are required to send RACs medical records upon request. • RACs have 60 days to review the record and send a review results letter to hospitals. • If a RAC determines an improper payment was made, the RAC will send a demand letter to the hospital indicating the amount of Medicare payment they intend to recoup. • The hospital can either allow the recoupment or appeal the RAC decision using the regular Medicare appeals process. • The appeals process is lengthy and administratively burdensome. Not all inappropriate RAC decisions are appealed. • AHA RACTrac survey of 1,854 hospitals indicates that 23% of hospitals appealed at least one RAC decision and the RAC decision was overturned 86% of the time.

8. The Wreck of RACsUnderwriter’s erspective • Regulatory Coverage • Back in the day vs. • Today

9. The Wreck of RACsUnderwriter’s Perspective • Is a RAC audit an underwriting ‘red flag’? • Does it necessarily mean that the organization has done something wrong/bad? • Geography • Type of organizations/patients • Types of errors • Changing landscape

10. The Wreck of RACsUnderwriter’s Perspective • Questions your underwriter may ask • What is your organization doing to minimize the likelihood of a RAC audit? • What sorts of plans does your organization have in place to respond to a RAC audit? • What financial resources does your organization have should a RAC audit result in a significant settlement?

11. The Wreck of RACsUnderwriter’s Perspective • Is there insurance available for RAC audits? • D&O policy regulatory sublimits • Defense policies for small organizations • Option Agreement

12. Strategies to ReduceRACs Risks - I Education For All Implement Sound Business Practices Clinical Personnel Medical Staff Coding Billing Compliance Internal Audit External Audit Coding & Billing The “answer” person “It is better to ask than be sorry” Verification process Solid documentation

13. Strategies to ReduceRACs Risks - II • Homage to the Internal Audit Team! • …and The RACs/PI Rounding Team. Improving Documentation Practices Analyzing Counseling

14. Strategies to Reduce RACs Risks - III Take a systems approach to RACs Risks Identify High Risk (Cost) Procedures Prompt Action Loss Prevention (Education) Evaluate Surveillance & Monitoring ERM Style Data Correlation

15. Strategies to Reduce RACs Risks - IV Use Good Risk Management Skills • Documentation • Substantiate billing/coding • Correlation to Med Mal • Correlation to Compliance Issues • Defensible? • Preempt Adverse Publicity • Lessons Learned

16. QUESTIONS?

17. THE WRECK OF THE RAC: LESSONS LEARNED FOR ALL Moderator: Fay A. Rozovsky, JD, MPH, DFASHRM, President, The RozovskyGroup Panelists: Elizabeth Baskett, MPA, Senior Associate Director for Policy, American Hospital Association Patrick J. Hurd, Esq., Senior Counsel, LeClairRyan Alice Johansson, Senior Vice President, Product Manager, Managed Care, IronShore