Current Regulatory Environment 6/5/2013. Compliance Audit Update Recent Developments and What to Expect in the Year Ahead. Agenda
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1 Compliance Audit Update Recent Developments and What to Expect in the Year Ahead Seattle HCCA June 14, 2013 John Valenta, Director Deloitte & Touche LLP Agenda Current regulatory environment Recent government audit activity OIG Hospital Compliance Reviews and other areas of audit and enforcement activity 2 Copyright 2013 Deloitte Development LLC. All rights reserved. Current Regulatory Environment 1
2 Many "Eyes" are watching Medicare Administrative Contractors (MAC) Medicare Recovery Auditors (formerly RAC ) Office of the Inspector General (OIG) Department of Justice (DOJ) Health Resources and Services Administration (HRSA) State Attorneys General Third Party Payors 4 Copyright 2013 Deloitte Development LLC. All rights reserved. Federal enforcement initiatives Fiscal Year (FY) 2012 in review For every dollar spent on health care-related fraud and abuse investigations in the last three years, the government recovered $7.90 Highest three-year average return on investment in the 16-year history of the Health Care Fraud and Abuse Control (HCFAC) Program In FY 2012, the government s enforcement efforts recovered a record $4.2 billion in taxpayer dollars, up from $4.1 billion in FY 2011 Recovery efforts have more than doubled in the past four years; $14.9 billion has been recovered up from $6.7 billion over the prior fouryear period Since 1997, the HCFAC Program has recovered more than $23 billion Source: The Department of Health and Human Services and The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year Copyright 2013 Deloitte Development LLC. All rights reserved. Federal enforcement initiatives Fiscal Year (FY) 2012 in review (cont.) HEAT (Healthcare Fraud Prevention and Enforcement Action Team): February: indictment and arrest of a Texas physician, office manager, and five owners of home health agencies (HHA); single, largest fraud case orchestrated by one doctor May: coordinated Strike Force teams across 7 cities, resulted in charges against 107 individuals for alleged participation in Medicare fraud involving over $450 million; highest amount of false billings in a single takedown in the Strike Force s history; HHS took other administrative action against 52 providers Source: The Department of Health and Human Services and The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal 6 Year 2012, released February 2013 Copyright 2013 Deloitte Development LLC. All rights reserved. 2
3 Federal enforcement initiatives are becoming preventive through use of technology Beginning in June 2011, CMS began screening all fee-for-service Medicare claims through the new Fraud Prevention System, which is similar to the technology used by credit card companies The Fraud Prevention System applies predictive analytic technology to claims prior to payment to identify aberrant and suspicious billing patterns. In its first year of implementation, the Fraud Prevention System: Generated leads for 538 new fraud investigations Provided new information for 511 existing investigations Triggered 617 provider interviews and 1,642 beneficiary interviews Source: Information on the fraud prevention accomplishments under the Affordable Care Act at 7 Copyright 2013 Deloitte Development LLC. All rights reserved. OIG Semiannual Report to Congress OIG Semiannual Report to Congress describes: Significant problems Abuses Deficiencies Investigative outcomes All relating to the administration of HHS programs and operations that were disclosed during the reporting period Recent edition addresses work completed during the second half of Federal FY 2012 (April 1, 2012 September 30, 2012) Source: 8 Copyright 2013 Deloitte Development LLC. All rights reserved. Expected recoveries are on the rise.. Per the OIG s Fall Semiannual Reports to Congress for the past three federal fiscal years, expected recoveries continue to rise. Year Expected Recoveries (in billions) $8.0 $7.0 $6.0 FY 2010 $4.9B Billions $5.0 $4.0 FFY 2011 $5.2B $3.0 $2.0 FFY 2012 $6.9B $1.0 $0.0 FY 2010 FY 2011 FY2012 Sources: OIG Semiannual Report To Congress (April 1, 2012 September 30, 2012); OIG Semiannual Report To Congress (April 1, 2011 September 30, 2011); OIG Semiannual Report To Congress (April 1, 2010 September 30, 2010) 9 Copyright 2013 Deloitte Development LLC. All rights reserved. 3
4 Rise in Whistleblower Activity Year Reports Made Total 697 Qui tam reports made have steadily increased since 2009 Settlements awarded from qui tam reports have skyrocketed to $670 million in 2012 Relator share awards have also increased dramatically with awards totaling $133 million in 2012 Millions $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 Qui Tam Settlements and Judgments Sources: 10 Copyright 2013 Deloitte Development LLC. All rights reserved. $ Settlements & Judgments Relator Share Awards RAC Activity is on the Rise As recently reported by the American Hospital Association (AHA) in their 4 th Quarter 2012 RACTRAC Survey, over 1,200 hospital survey participants across the country continued to report increases in RAC activity. According to this latest AHA quarterly report, relative to 1 st Quarter 2012 : Medical record requests are up 61% The number of denials is up 88% The dollar value of denials is up 69% 11 Source: AHA RACTrac Survey 4 th Quarter 2012 Copyright 2013 Deloitte Development LLC. All rights reserved. RAC activity and denials Different types and sizes of hospitals reported that they were subject to RAC review RAC activity was especially high among teaching hospitals and hospitals with 200+ beds Since Q1 2012, RAC Automated and Complex Denials have steadily increased $1.1 billion in denials were reported through the third quarter of 2012, up 26% from the second quarter Source: 12 Copyright 2013 Deloitte Development LLC. All rights reserved. 4
5 Update on Recent Government Audit Activity Examples of recent Medicare program reviews Home Health Care Agencies - Claims With Questionable Billing* Characteristics One in every four home health agencies (HHA) exceeded a threshold that indicated unusually high billing (for at least one of six measures) Physicians - Increase in Use of Service Codes That Result in Higher Reimbursements From 2001 to 2010 physicians increased their billing of higher level, more complex and expensive Evaluation and Management (E/M) codes and reduced billing of lower level, less complex and expensive E/M codes in all 15 visits reviewed Between 2001 and 2010, payments for E/M services increased by 48 percent (from $22.7 billion to $33.5 billion) compared to 43 percent for Part B goods and services generally. Several factors contributed to the overall increases, including increases in the number of services provided, increases in the average payment rate for E/M services, and changes in physicians billing of E/M codes. Source OIG Semiannual Report To Congress (April 1, 2012 September 30, 2012) *Refers to claims that exhibit certain characteristics that may indicate fraud 14 Copyright 2013 Deloitte Development LLC. All rights reserved. Examples of recent Medicare program reviews Hospitals - Outpatient Payments Exceeding Charges* Line items exceeded billed charges revealed frequent errors; including incorrect units of services, incorrect codes, a combination of those, billing for unallowable services, and inadequate supporting documentation causing Medicare s payments for the services to be improper Millions of dollars in overpayments occurred in part because key Medicare systems did not have sufficient edits in place during these audit periods Part B Drugs Billing of Incorrect Units of Service (Herceptin)* Three reports (issued in July and August 2012) revealed most payments that contractors made to health care providers for full vials of Herceptin were incorrect Payments were improper because billing providers reported units of service for the entire content of one or more vials, each containing 440 milligrams of Herceptin, rather than reporting the units of service for the amount actually administered Providers supporting documentation was inadequate or providers could not store unused doses for later use. When this occurred, providers improperly billed Medicare for the entire vial, including waste. Source OIG Semiannual Report To Congress (April 1, 2012 September 30, 2012) *Medicare s supporting systems did not have sufficient edits in place during the audit period to prevent / detect the improper billings 15 Copyright 2013 Deloitte Development LLC. All rights reserved. 5
6 Billing Medicare for drug waste Coverage of discarded drugs applies only to single use vials Multi-use vials are not subject to payment for discarded amounts of drug When billing for waste associated with a single use vial, an itemized bill should be submitted with the claim to verify how the drug was supplied Hospitals are encouraged to schedule patients in such a way that the hospital can use the drug most efficiently However, if the hospital must discard the remainder of a single use vial after administering part of it to a Medicare patient, the provider may bill for the amount of drug discarded along with the amount administered Sources: Copyright 2013 Deloitte Development LLC. All rights reserved. Recent Skilled Nursing Facility Audits According to the March 4, 2013 issue of Report on Medicare Compliance A jury on Feb. 11 found a Skilled Nursing Facility (SNF) liable for substandard care to its patients and falsifying documents to appear to be in compliance with Medicare and state standards The case was filed by two whistleblowers who were former nurses Case closed at $28.1 million owed to the U.S. Government and the state A SNF and its parent company will pay the government $350,000 to resolve allegations of worthless care provided to the residents of its nursing facilities Sued by the Department of Justice Companies will retain an independent consultant with quarterly progress reports on quality of care improvement and both companies will be responsible the associated costs Source: Report on Medicare Compliance Volume 22, Number 9 March 4, Copyright 2013 Deloitte Development LLC. All rights reserved. Recent Inpatient Rehab Facility Audit Summary: Norwalk Hospital billed inpatient rehabilitation facility (IRF) claims that did not comply with Medicare documentation requirements. Findings: Improper payments calculated to equal: $2.7 million for 100 sampled claims $5.2 million for 225 IRF claims not in sample Conclusion: Medical records did not include sufficient documentation to support any required IRF elements. Outcome: OIG recommended the Hospital: Refund $2.7 million related to sampled claims Work with OIG to resolve $5.2 million in claims not sampled Identify other IRF claims that did not meet Medicare documentation requirements and refund overpayments Develop and implement new improved procedures Source: Copyright 2013 Deloitte Development LLC. All rights reserved. 6
7 Selected OIG recoveries through January 2013 Source: Section 8L of the Inspector General Act, 5 U.S.C. App., requires that OIG post its publicly available reports on the OIG Web site. 19 Copyright 2013 Deloitte Development LLC. All rights reserved. Additional Areas of Audit and Enforcement Activity OIG Hospital Compliance Reviews 7
8 OIG Hospital Compliance Reviews Inpatient Risk Areas Short hospital stays (0 and 1 day) High-severity level MS-DRGs Same day discharge and readmission Transfers to post-acute care providers Transfers to inpatient hospice care Manufacturer medical device credits Claims paid amount in excess of claims charged amount Claims with payments greater than $150,000 Blood-clotting factor drugs Hospital acquired conditions and present on admission reporting Outlier payments 22 Copyright 2013 Deloitte Development LLC. All rights reserved. OIG Hospital Compliance Reviews Outpatient Risk Areas Observation outlier payments Facility E&M coding and new vs. established patient Manufacturer medical device credits Services billed with modifier 59 E&M services billed with surgical services (modifier 25) Claims paid amount in excess of claims charged amount Outpatient services billed during inpatient stays Thee-day payment window rule Surgeries billed with units greater than one Services billed during skilled nursing facility stays Outpatient dental services 23 Copyright 2013 Deloitte Development LLC. All rights reserved. Other OIG Risk Areas Other Risk-Areas identified in the OIG Work Plan and recent audits Inpatient psychiatric facility interrupted stays Inpatient psychiatric facility emergency department adjustments Skilled Nursing Facility payments for ultra high therapy Inpatient Rehabilitation Facility documentation requirements Outpatient brachytherapy reimbursement Outpatient claims billed using J codes Observation services during outpatient visits Hemophilia services and septicemia services Intensity modulated radiation therapy planning services Outpatient claim payments greater than $25, Copyright 2013 Deloitte Development LLC. All rights reserved. 8
9 Provider experiences with OIG Hospital Compliance Reviews Audit notice and initial request received via telephone call and facsimile OIG is typically onsite within 2-4 weeks after this notification The initial OIG request typically includes 200 or more records, with larger facilities typically being asked for 300 or more 66% Inpatient 33% Outpatient The OIG audit team is typically on-site for several weeks, but this can vary OIG typically expects the provider to review all of the records first and have the provider complete an OIG worksheet/audit tool The sample can be expanded while the OIG is on-site 25 Copyright 2013 Deloitte Development LLC. All rights reserved. Provider experiences with OIG Hospital Compliance Reviews (cont.) Disagreement on findings may go to the QIC for additional review (e.g. short-stay cases reviewed by a physician) In addition to agreeing or disagreeing with the findings, providers are asked to provide brief written corrective action plans to the OIG for each audit area Results of the OIG Hospital Compliance Reviews cannot be extrapolated as the samples are targeted, not random Depending on the error rates noted, the OIG may request that the provider conduct a follow-up self-audit of one or more areas using OIGapproved sampling methodology and extrapolation over the designated review period (e.g., modifier 25 reviews) 26 Copyright 2013 Deloitte Development LLC. All rights reserved. Short Stays / Medical Necessity 9
10 Short Stay Denials are Costly The issue of medical necessity and short-hospital stays is a primary area of focus by the Medicare Recovery Audit Program, the OIG, DOJ and even private payers Given the difference in payment between an inpatient case and an outpatient case, hospitals face significant compliance risk and the potential for lost revenue if they fail to correctly assess and bill patient status A complex denial costs hospitals $5,556 per Medicare claim Recently, a hospital reached a settlement worth over $8M with the U.S. government to settle allegations of unnecessary short-stay claims with Medicare and Medicaid. 28 Source: AHA RACTrac Survey November 2012 Copyright 2013 Deloitte Development LLC. All rights reserved. The Consequences of Short Stay Denials Retro denials can result in total recoupment of inpatient payment If within one-year timely filing period, hospitals may receive Part B ancillaries (limited ancillaries, such as diagnostic x-rays and laboratory tests, prosthetic devices, outpatient physical, speech, occupational therapy, etc.) May result in higher outpatient co-insurance (vs. inpatient deductible) for patients No coverage of self-administered drugs 29 Copyright 2013 Deloitte Development LLC. All rights reserved. The Impact on Patients Patients who are placed in observation status (yet remain in a hospital bed for one or more days) may face significantly higher out-of-pocket costs than if admitted Observation status also negates a patient s ability to qualify for Medicare SNF or rehab coverage If a patient s inpatient stay is denied by a hospital after discharge and the patient went to a SNF, this can invalidate the patients SNF Medicare coverage for post-acute care under Medicare Part A. 30 Copyright 2013 Deloitte Development LLC. All rights reserved. 10
11 The Impact on Patients A CNN Money article told the story of a retired teacher who spent five days in a hospital bed after a fall only to learn that her subsequent rehabilitation was not covered by Medicare. The rehab care was not covered because she was kept in observation status. This patient s story underscores how this issue is causing confusion, frustration and dissatisfaction within the industry for hospitals and their patients See 31 Copyright 2013 Deloitte Development LLC. All rights reserved. Leading Practices to Consider for Compliance Review short stays prior to submitting claim to Medicare Correct short stay claims that do not meet for medical necessity Verify the patient s status in the billing system matches the patient status ordered Maintain an active Utilization Review Committee (URC) Continually monitor short-stay denials from both pre-payment and post-payment reviews Ensure adequate Case Management support to pre-screen for medical necessity at key points of admission (e.g. the ED, for transfers in and for elective surgeries) Enlist the help of one or more physician champions to serve as the physician advisors 32 Copyright 2013 Deloitte Development LLC. All rights reserved. 340B Drug Pricing Program Compliance and Enforcement 11
12 340B Compliance and Enforcement Impact of healthcare reform on 340B a rapidly changing environment Recertification requirements includes additional requirements and new application process HRSA to increase audit activities Expanded access, including increased use of contract pharmacies, has led to increased risks 34 Copyright 2013 Deloitte Development LLC. All rights reserved. Enhanced Oversight The Affordable Care Act amended the 340B statute to require HRSA to develop procedures to enable and require Covered Entities to regularly update information (at least annually) Goal is to ensure program integrity, compliance, transparency, and accountability by requiring Covered Entities to ensure accuracy of the information in the 340B database HRSA has emphasized the importance of maintaining current and accurate information in its database of Covered Entities Used by manufacturers to screen Covered Entities Publicly available at HRSA recommends listing all sites that will utilize 340B drugs HRSA requires registration of all contract pharmacy arrangements 35 Copyright 2013 Deloitte Development LLC. All rights reserved. HRSA Audits of Covered Entities All Covered Entity types may be audited In FY 2012, HRSA began conducting both random and targeted audits of Covered Entities, 51 audits were completed Random audits focus on program types with higher risk, due to volume of purchases, complexity of program administration, or use of contract pharmacies Targeted audits may be triggered by whistleblowers, manufacturers, or self-reporting 36 Copyright 2013 Deloitte Development LLC. All rights reserved. 12
13 HRSA Audits of Covered Entities (cont.) Focus areas of HRSA audits: Verification of eligibility Review of policies and procedures and how they are operationalized Review of internal controls to prevent diversion and duplicate discounts Review of contract pharmacy compliance Test of 340B drug transaction records on sample basis Results of HRSA audits are posted 37 Copyright 2013 Deloitte Development LLC. All rights reserved. Manufacturer Audits of Covered Entities Manufacturers are also authorized to audit 340B Covered Entities regarding compliance with drug diversion and duplicate discount requirements Manufacturers must submit an audit work plan to OPA prior to conducting audits Genentech audit 38 Copyright 2013 Deloitte Development LLC. All rights reserved. Health Care Reform: New Sanction Authority for 340B Violations Potential Sanctions: Forfeiture of 340B discounts to the manufacturer Monetary penalties: applicable interest for being aware of violations and not reporting to the OPA, and intentional violations Disqualification from the program for systematic and egregious violations Possible referral to OIG or other federal agencies for further review Disqualification and prohibited re-entry in the 340B program 39 Copyright 2013 Deloitte Development LLC. All rights reserved. 13
14 Ways to help achieve Compliance/Prepare for Audits 340B Covered Entities should have a 340B compliance plan in place Ensure all employees involved in the program are trained and understand the compliance plan Covered entities (and any contract pharmacy) must maintain accurate records documenting compliance with 340B program requirements Records are subject to audit by a OPA or by a manufacturer Procedures and systems controls designed to ensure compliance with rules regarding diversion and duplicate discounts should be developed and regularly reviewed/updated Covered entities should have a complete audit trail from purchase to pick-up by the patient 40 Copyright 2013 Deloitte Development LLC. All rights reserved. Ways to help achieve Compliance/Prepare for Audits (cont.) Pay special attention to mixed-use settings where inpatients and outpatients receive drugs (e.g., ER or oncology clinic) and to the relationships and drug distribution within a health care system in which some entities are 340B Covered Entities and some are not Covered entities should establish procedures to periodically audit their own records and the records of contract pharmacies Make sure to keep information on the OPA Covered Entity database current Consider privileged compliance review/audit 41 Copyright 2013 Deloitte Development LLC. All rights reserved. Medical Record Copying and Cloning Risks 14
15 Risks of Copying and Cloning Medical Records A New York Times article Medicare Bills Rise as Records turn Electronic sites the rise in Medicare payments related to the use of electronic medical records Conducted a study that found hospitals received $1B more in Medicare payments in 2010 than they did 5 years ago Electronic Health Records (EHR) have the ability to: Automate generation of patient histories Cut and paste or cloning examination findings for multiple patients Lead to up-coding of clinic visits Sources: Risks of Copying and Cloning Medical Records - NGS said to deny payment for treatments using cloned documentation 10/9/12 Source: 43 Copyright 2013 Deloitte Development LLC. All rights reserved. Risks of Copying and Cloning Medical Records (cont.) For Fiscal Year 2013, the OIG will place focus on identical information found in Electronic Health Records due to the potential for inaccurate documentation that may lead to incorrect billing Providers may be considered as engaging in fraudulent activity and subject to the False Claims Act if the medical record contains an inaccurate reflection of care given Sources: Risks of Copying and Cloning Medical Records - NGS said to deny payment for treatments using cloned documentation 10/9/12 Source: 44 Copyright 2013 Deloitte Development LLC. All rights reserved. New Cloning Study and Concerns New study has been published in the journal Critical Care Medicine focusing on progress note plagiarism at a Cleveland medical center 82% of residents and 74% of attendings progress notes contained 20% or more information that was copied 66% of residents and 94% of attendings copied from their previous day notes Concerns Impacted patient care as a result of reusing old and/or out of date information indecipherable medical records as a result of reusing old and/or out of date information Shift in progress notes as a mean for billing purposes rather than the ordinal use of communication Improper billing by providers Source: 45 Copyright 2013 Deloitte Development LLC. All rights reserved. 15
16 Recommendations for Compliance Officers Seek to gain an understanding of EHR tools available at your facility Shadow physicians in multiple work settings to assess how services are provided and notes are created Encourage clinicians to summarize diagnostic test findings into notes rather than copying and pasting the whole report Actively contribute to the EHR training plans and educate trainers on key compliance concepts Source: AAMC Compliance Officers Forum Appropriate Documentation in an EHR: Use of Information That Is Not Generated During the Encounter for Which the Claim is Submitted: Copying/Importing/Scripts/Templates 46 Copyright 2013 Deloitte Development LLC. All rights reserved. Recommendations for Compliance Officers (cont.) Participate in provider training courses to ensure that the information is accurate and to be available as a compliance resource Attend vendor courses and meetings to gain an understanding of the software Continually test and audit with live data to reveal risk that are not otherwise apparent Source: AAMC Compliance Officers Forum Appropriate Documentation in an EHR: Use of Information That Is Not Generated During the Encounter for Which the Claim is Submitted: Copying/Importing/Scripts/Templates oninanehr.pdf 47 Copyright 2013 Deloitte Development LLC. All rights reserved. Contact Information and Speaker Biographies 16
17 Contact Information and Bios John Valenta, Director Deloitte & Touche LLP John has over 24 years of experience in the healthcare and life sciences industries and advises clients on regulatory and compliance issues as well as financial, risk management, and other operational issues. He has extensive consulting experience on issues related to compliance, government regulations, government program reimbursement, enterprise risk management, internal controls and other financial and operational issues. John has assisted organizations with performing risk assessments, compliance program effectiveness assessments, developing policies and procedures, providing education and evaluating the organizational structure of the compliance and internal audit functions. He has led numerous compliance reviews of areas including physician contracting/compensation, RAC Audit preparedness, coding for short stays and various HIPAA Privacy issues. 49 Copyright 2013 Deloitte Development LLC. All rights reserved. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation. Copyright 2013 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited 17
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