Update on CMS Recovery Audit Contractors and Emerging Issues

1. Update on CMS Recovery Audit Contractors and Emerging Issues Texas Association for Healthcare Administrators 2014 TAHFA Seminar Series Elaine Anderson, SVP and Chief Compliance Officer Texas Health Resources

2. Where are the RACs? ….A Welcome “Pause” Pause announced in Feb. – RACs must suspend all requests Does CMS finally see the system is broken? Will RAC 2.0 be any better? RACs have until June 1st to send improper payment documentation to MACs for adjustment. No new requests until CMS redefines program to make the process faster and “fairer” to providers. New 5 year contracts are being pursued

3. Why did CMS stop the RAC Train? Biggest reason………..tremendous backlog in appeals facing the Administrative Law Judges (ALJs) 65 ALJs face a workload of 15,000 new RAC appeals per week. Current backlog of over 350,000 claims – could take years to work through Some say this backlog could give providers a strong due-process claim against CMS.

4. How Long Will the “Pause” Last? CMS says: “some period of months” Speculation – 4 months to 2 years? But….CMS has every incentive to reform and reboot the RAC program ASAP In 2011 – RAC program returned $488 mil to Medicare No reason to believe claims during the “pause” will not be subject to future review. Post payment audits are almost certainly here to stay….we can only hope the process gets better. CMS has merely realized they need a better process…..so stay tuned.

5. AHA RACTract Stats • Over 2,000 hospitals report data • 40% of RAC denials get appealed...of those, 70% are overturned in favor of the provider. • Speculation…..many providers are not appealing when they should. Why? • Lack of well-trained staff to consistently and timely appeal to the highest level, if needed. • Fear of losing ability to rebill for Part B • Fear of going “head-to-head” with CMS

6. THR RAC Appeal Results??? THR manages the RAC/MAC audit processes centrally All denials found to be inappropriate are appealed 94% of all RAC denials to date have been appealed VAST MAJORITY of the appealed denials have been overturned to date But,tThe pipeline is full. Cases pending in appeal…..approximately 2,800!!!! Can the favorable overturn rate be sustained? Unknown.

7. 1 year Time Limit to Bill for Part B - What to do? • Appeal every inappropriate denial. Some will be overturned within the 12 month timeframe. • Track cases approaching 1 year. • Review and make a decision before the time limit • Continue appeal past the time limit (and lose ability to rebill for Part B), or • Pull weaker cases out of the appeal process and bill Part B within the 1 year timeframe. • Do the math…..what “win” rate do you need to exceed the $$ that will be lost due to losing ability for Part B billing.

8. CMS says 5 Changes for New RAC Contracts RAC must wait 30 days to allow for discussion before senidng the calim to the MAC for adjustment RAC must confirm receipt of discussion request within 3 days RAC must wait until the 2nd level of appeal is exhausted before they receive their contingency fee Revised ADR limits will be established an will be diversified across different claim types RAC will have to adjust the ADR limits in accordance with a provider’s denial rate.

9. UPICs….the next wave • While RACs “pause”, CMS has plans for new unified program integrity contractors (UPICs) • Next wave of overpayment gathers • UPICs are being assigned many tasks: • Preventing and detecting billing errors and fraud • Fending off appeals from providers • Identifying patient abuse • Working with law enforcement • Consulting with CMS regional offices, and • Coordinating data analysis with private payers

10. UPICs….the next wave Expected to use every administrative tool to take payments back or stop payments from being made Expected sometime in 2015- one vendor to run the program with 5 to 15 UPICs across the nation Will replace Zone Program Integrity Contractors (ZPICs), Medicaid Integrity Contractors and two other contractors Will aggregate data from public and private payers in one “data pool” to identify overpayments or fraud across payers Will blur the enforcement lines between federal programs and private payers.

11. What About the 2 Midnight Rule? Establishes two medically necessary midnights as the “benchmark” for admission decisions Prior – patient had to require “inpatient level care” at the time the order was written. Now there is no such thing as “inpatient services”….now CMS says if the patient requires 2 midnights in the hospital, counting the time already spent as an outpatient, they should be admitted as an inpatient

12. 2MN Rule-Enforcement Delayed? Admissions between October 1, 2013 and March 31, 2015 protected from admission medical necessity review except the probe and educate MAC audits But….CERT, ZPIC, OIG, etc. can recoup when they find noncompliant admissions as a part of their review process Also….MAC can select additional claims as determines appropriate as result of probe and educate audits RACs can do post payment reviews for admissions prior to March 31, 2015 if there is evidence of systematic gaming, fraud, abuse of delays in care

13. Probe, (Deny) and Educate Audits • Review a “small” sample of claims spanning 0 or 1 midnight after formal inpatient admission. 10 to 25 claims per hospital. • Determine compliance with new rules • If no issues, MAC will cease further such reviews • Based on results, CMS will conduct education during the following 3 months. • If moderate to significant concerns or major concerns…..additional probe reviews will be undertaken for admissions between January and September 2014. • Providers identified as having continuing concerns after the 6 month period- samples of 100 claims (250 for large hospitals) will be selected. • MACs are not to review claims spanning 2 or more midnights after formal inpatient admission for appropriateness of IP admission • Still have appeal rights for denied claims

14. Probe, (Deny) and Educate Audits • Pattern of denials are emerging • Inpatient order signed after discharge • Denials of 1 Midnight inpatient stays citing one or both of the following: • Lack of indication of a 2 midnight expected stay (front end) • Lack of documentation of an unexpected recovery (back end) • One IP midnight stays will continue to be target for aggressive auditing • One day stays……review pre-bill…..very few should be filed for Part A • Two midnights….but only one IP midnight…high probability for denial. It is unknown whether appeals will be effective at any level.

15. 2 Midnight Rule- things to consider Use electronic health record to put in a “hard stop” so discharge orders cannot be entered if the admission order has not been signed. Look for ways to garner appropriate physician documentation of “expected 2 midnight stay” Look for ways to raise physician awareness of need to document “unexpected faster recovery”. Review all 0 and 1 inpatient midnight stays prior to billing.

16. Post Discharge Provider Self Audits • Applies to determinations after discharge and results in billing IP “provider liable” and then bill for Part B • Must be pursuant to UR Committee Review (CoP 482.30(d)(historically applied to admissions and continued stay reviews) • Must consult attending and offer opportunity to present his/her views • 1 member if attending agrees or fails to present views • 2 members in other cases • Written notice must be given within 2 days to hospital/patient/attending • Cannot just send an email to the CBO to bill as Part B….must go through UR Committee process

17. Could Observation denials be coming? Auditors to date have paid little attention to obs There has always been a medical necessity requirement for obs Reimbursement was low….now is higher - $1,199 CMS has expressed concerns about increased number of obs patients and length of stay – a driver behind 2 MN rule Patients must still require “hospital level of care” for obs, but less than 2 midnights CMS has said – there should be no payment for IP or OP care when a patient can be safely discharged from the ED. RACs could choose to retrospectively review obs when the “pause” ends.

18. RAC/MAC/QIC Flip-Flop Denials Seeing cases where the RAC denied IP case for lack of indication for surgery. For example….saying the procedure was not indicated (unilateral knee replacement). Upon Appeal- MAC denies appeal saying there was no need for the service and also says the case should have been outpatient…not inpatient. ????? Appeal to QIC on both indication for surgery and IP status. QIC denies solely on the IP versus OP question. Now at ALJ level of appeal

19. OIG Medicare Compliance Reviews- Risk Areas Areas that OIG focuses on during OIG Medicare compliance reviews, although not necessarily all at once: • Outpatient claims paid greater than charges • Inpatient payments greater than $150,000 • Outpatient payments greater than $25,000 • Payments for hemophilia services • One-day stays at acute care • Major complication/comorbidity and complication/comorbidity • Payments for septicemia services • Payments for inpatient same-day discharges and readmissions • Payments for outpatient surgeries billed with units greater than one. (usually a clerical error) • Outpatient claims billed during DRG payment window • Inpatient manufacturer credits for replacement of medical devices • Outpatient manufacturer credits for replacement of medical devices • Post-acute transfers to SNF/HHA/another acute care/non-acute inpatient facility • SNF/HHA consolidated billing — outpatient services • Outpatient claims billed with modifier 59 (unbundling) • Inpatient claims paid greater than charges

20. OIG Compliance Reviews More Medicare compliance reviews are occurring, underscoring the HHS Office of Inspector General’s commitment to this new multi-faceted strategy for auditing hospitals. • OIG picks hospitals partly based on: • Their past performance on single-issue audits; • Where they stand compared to other hospitals’ billing volumes according to CMS’s Program for Evaluating Payment Patterns Electronic Report (PEPPER); and • Whether there is continued “poor performance” (e.g., Medicare administrative contractors and quality improvement organizations have been to hospitals and “tried to educate them,” for example, with little success).

21. Open Discussion