Medicare Recovery Audit Contractors. Chicago, IL August 1, 2008

Medicare Recovery Audit Contractors Chicago, IL August 1, 2008 1

Recovery Audit Contractors Demo Summary National Rollout AHA Strategy AHA RACTrac Overview 2

Recovery Audit Contractors Medicare Modernization Act (Rx bill) 3-year demonstration project Recover overpayments and identify underpayments Payment made on a contingency fee basis 3 states selected based on highest per capita Medicare utilization: California Florida New York Background + South Carolina Massachusetts Tax Relief and Health Care Act of 2006 Expanded to all states by 2010 3

RAC Three-State Demo Review last four years of provider claims Use automated software programs to identify potential payment errors Types of Payment Review Duplicate payments FI errors Medical necessity Coding errors Hospitals can appeal using the standard Medicare appeals process 4

RAC Demo Findings RAC Impact: March 2006 to March 2008 Overpayments Collected: $992.7 m Less Underpayments Repaid: - ($37.8 m) Less $ Overturned on Appeal: Less PRG IRF Re-review: - - ($46.0 m) ($14.0 m) Less Costs to Run Demo: - ($201.3 m) BACK TO TRUST FUNDS $693.6 m* 5

Where Did RACs Find Overpayments? Most overpayments were collected from inpatient hospital services for medical necessity and coding Incorrectly Coded 35% Other 17% Outpatient 4% SNF 2% Doc/Ambulance/ Lab/DME/Other 4% Rehab 6% Inpatient Hospital 85% No/Insufficient Documentation 8% 95% from Hospitals Medically Unnecessary 40% 6 Source: CMS, The Medicare Recovery Audit Contractor Program: An Evaluation of the 3-Year Demonstration, June 2008

RAC Target Areas Coding Targets: Correct coding for debridement (excisional or not) DRG 263/MSDRG 573 and DRG 217/MS-DRGs 463, 464 and 465 DRGs designated as complicated or having comorbidity with only one secondary diagnosis DRGs 079, 416, 468, 475, 477 and 483 Correct coding of discharge status for PAC transfer Unit Coding grams vs. milligram, number or procedures per day (e.g., appendectomy) Medical Necessity Targets: Inpatient admissions for procedures that are eligible for outpatient surgery (eg. laparoscopy, cholecystectomy) One-day stays Chest pain Back Pain: DRG 243/MS-DRG 551 Three-day stays to qualify for SNF care Inpatient rehabilitation (joint replacement patients) 7

RAC Impact on Hospitals Percent of Hospital Revenue Affected by RACs: Fiscal Years 2006 to 2008 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 75.1% 60.1% 53.2% 31.7% 26.3% 19.0% 6.2% 7.3% 2.9% 4.1% 1.4% 2.9% 2.6% 3.5% 1.1% No Offsets 0% to 2.5% 2.5% to 5% 5% to 10% >10% NY & MA FL & SC CA 8 Source: CMS, The Medicare Recovery Audit Contractor Program: An Evaluation of the 3-Year Demonstration, June 2008

RAC Impact on Hospitals Overpayments Collected by Quarter: $500 $450 $464.3 $400 in millions $350 $300 $250 $200 $150 $167.7 $146.6 $100 $50 $0 $0.7 $1.8 FY06 Q2 FY06 Q3 $33.0 $39.3 FY06 Q4 FY07 Q1 $52.3 FY07 Q2 $73.5 FY07 Q3 FY07 Q4 FY08 Q1 FY08 Q2 9 Source: CMS, The Medicare Recovery Audit Contractor Program: An Evaluation of the 3-Year Demonstration, June 2008

RAC Rollout Schedule RAC Demo ended March 27 Demo evaluation report released July 11 4 new RACs to be announced September 08 CMS/RACs to conduct outreach to hospitals in first round of RAC rollout 4-6 weeks if existing RAC 8-12 weeks if new RAC RAC audits begin 4-6 weeks after CMS/RAC education with state hospital association 10

CMS National Rollout Plan A D B C Summer 2008 Fall 2008 Jan 2009 or later 11 Although CA was a RAC demo state, California claims will not be available for RAC review from March 2008- Oct. 2008 due to a MAC transition

Hospital View Hospitals strive for accuracy in service, billing, and coding Hospitals support program integrity efforts Lots of overlap by auditors RACs bad behavior unacceptable 12

Multiple Medicare contractors perform the same oversight activities Medicare Oversight Activities by Type of Medicare Contractor Activity FIs* Carriers MACs** PSCs*** COB Contractor* NSC* DAC Contractor* Audit Reviewing cost reports for institutional providers Medical Review Reviewing claims to determine whether services provided are medically reasonable and necessary Secondary Payer Identifying primary sources of payment Benefit Integrity Identifying and investigating fraud and abuse and referring cases to law enforcement agencies Provider Education Communicating Medicare coverage policies, billing practices, and issues related to fraud and abuse Source: Avalere Health analysis and adaptation of Government Accountability Office. (September 2006). Medicare Integrity Program: Agency Approach for Allocating Funds Should Be Revised. Washington, DC. *FI = Fiscal Intermediary; MAC = Medicare Administrative Contractor; PSC = Program Safeguard Contractor; COB = coordination of benefits; NSC = National Supplier Clearinghouse; DAC = data analysis and coding. **By 2009, MACs will replace FIs and Carriers, which are being phased out of Medicare. ***Per the Medicare Modernization Act of 2003, PSCs will be replaced by Zone Program Integrity Contractors (ZPICs).

Recovery Audit Contractors add to CMS redundancy and complexity Overlap Between Recovery Audit Contractors (RACs) and Other Contractors Recovery Audit Contractors (RACs) Medicare Administrative Contractors (MACs) Program Safeguard Contractors (PSCs) Comprehensive Error Rate Testing Program (CERT)* Hospital Payment Monitoring Program (HPMP)** Office of Audit Services Audits Annual Work Plan Projects Incorrectly Billed Claims Processing Errors Medical Necessity Incorrect Payment Amounts Non- Covered Services Incorrectly Coded Services Duplicate Services Sources: Centers for Medicare & Medicaid Services. CERT Overview. http://www.cms.hhs.gov/cert; Hospital Payment Monitoring Program. http://www.hce.org/medicare/mcarehpmp.html; Government Accountability Office. (September 2006). Medicare Integrity Program: Agency Approach for Allocating Funds Should Be Revised. Washington, DC; Fedor, F. (2005). Recovery Audit Contractors RAC Up Another Challenge for Providers. Healthcare Financial Management, 59(9), 52-56; Stockdale, H. (October 2007). Medicare Program Integrity: Activities to Protect Medicare from Payment Errors, Fraud, and Abuse. Washington, DC: Congressional Research Service; Office of the Inspector General. http://oig.hhs.gov/oas/oas/cms.html and http://www.oig.hhs.gov/publications/docs/workplan/2008/work_plan_fy_2008.pdf. * CERT contractors will have new responsibility for medical review of inpatient hospital payments once CMS completes its transition to its new system for review of inpatient hospital prospective payment system claims. ** The QIOs will no longer have responsibility for the functions previously included in the HPMP once CMS completes its transition to its new system for review of inpatient hospital prospective payment system claims.

AHA Strategy Push CMS for administrative changes Letters and continual discussions with CMS RAC improvements for permanent program Push Congress for legislative relief Advocacy STOP and Fix-it Capps-Nunes legislation (HR 4105) Member Education Collaboration and education with state, metro and regional hospital associations Member advisories and education RACTrac: Collect data and examples of egregious behavior 15

RAC National Rollout 16 CMS Response to RAC New Issue Review Problems CMS will review all new issues proposed for review by the RAC Notification of target areas on RAC website Validation Process Validation Contractor will review a random sample of each RACs completed reviews CMS will release an accuracy score for each RAC on an annual basis

RAC National Rollout CMS Response to RAC Problems Limits on the number of medical records a RAC can request per month Requirement for a web-based application by January 1, 2010 Required to have a medical director Yearly Scorecard of RAC performance 17

RAC National Rollout CMS Response to RAC Problems No contingency fee when denial is overturned at any level of appeal Three-year look-back period for review No claims with a payment date prior to October 1, 2007 will be reviewed, regardless of the actual start date for the RAC in a state. RAC 3-Year Review Window 10/1/07 10/1/06 10/1/08 10/1/09 10/1/10 18

New Medicare Appeals Guidelines 19 No funds recouped during first two stages of appeals process, if denial appealed within the first 40 days to the FI or first 60 days to the QIC Effective Date July 7, 2008 CMS has indicated October 2008 for implementation Transmittal updating timeline timing unknown In 2003, the MMA amended a section of the SSA to limit CMS s recoupment of certain overpayments under the Medicare program and it specifically provides a stay on recoupment during second level of appeals. Unfortunately this statute has not been fully implemented through regulation. Proposed Rule issued in September 2006 and no final rule has been issued. Transmittal 314 and subsequently 322 are the first in a series of Change Requests that are intended to fully implement the MMA provisions along with a pending final rule still to be issued.

Appeal RAC denial within 40 days to stop recoupment. Interest Accrues Appeal RAC denial within 60 days to stop recoupment. If provider loses at QIC level, recoupment will commence and interest will be owed. 20

AHA Strategy Push CMS for administrative changes Letters and continual discussions with CMS RAC improvements for permanent program Push Congress for legislative relief Advocacy STOP and Fix-it Capps-Nunes legislation (HR 4105) Member Education Collaboration and education with state, metro and regional hospital associations Member advisories and education RACTrac: Collect data and examples of egregious behavior 21

RAC Legislation H.R. 4105 The Medicare Recovery Audit Contractor Program Moratorium Act of 2007 Rep. Lois Capps (D-CA) Rep. Devin Nunes (R-CA) 100 Co-sponsors (23Rs and 77Ds) 1-year Moratorium CMS Report GAO Study Senate Bill?? 22 *Cosponsor list updated as of July 22, 2008

Message to CMS and Congress STOP and Fix-it it Slow down Reduce or remove contingency method of payment Exclude medical necessity from RAC review (or more physician involvement) Reduce look-back to 12 months Centralized electronic tracking platform of RAC denials and appeals Exemption from timely billing rules Improved CMS management and transparency of RAC program RAC and Provider education Bigger focus on UNDERpayments 23

AHA Strategy Push CMS for administrative changes Letters and continual discussions with CMS RAC improvements for permanent program Push Congress for legislative relief Advocacy STOP and Fix-it Capps-Nunes legislation (HR 4105) Member Education Collaboration and education with state, metro and regional hospital associations Member advisories and education RACTrac: Collect data and examples of egregious behavior 24

AHA Resources on RACs SAMPLE LETTER VISIT AHA WEBSITE www.aha.org/rac 25

AHA Resources on RACs Upcoming Member Advisories Medicare Appeals Process and how RAC program works Upcoming AHA Summer Call Series Appealing RAC Denials RAC Coding Strategies Maximize RAC Compliance/Minimize RAC Risk 26

27 RACTrac

RACTrac Goals PRIMARY purpose is to support advocacy efforts Tell the Hospital Story RACTrac will help the field better understand the nature of RAC activities 28

Why RACTrac? Study Shows Inappropriate Medicare Payment Denials Reduce Access to Inpatient Medical Rehabilitation Services 29

63% of claims that have completed their appeals process have been overturned Claims Data from 72 Inpatient Rehabilitation Facilities, July 2007 2200 Claims where initial FI review is complete 20% Approved 652 Claims where the appeals process up to level 3 is complete 12% Claims never appealed or withdrawn by the provider 25% Denial Upheld or Time Expired Before Appeal Could Move Forward 80% Denied 63% of denials overturned on appeal 30 More than $25 Million in Medicare Payment Withheld from IRFs Nearly $6 Million Returned to IRFs

What is RACTrac? Web-based survey collecting RAC experience data from hospitals DATA COLLECTION TO BEGIN POST RAC AUDITS Solicitation via email and fax Quarterly data collection (open and close time period) Unit of analysis is the hospital i.e. ONE Medicare provider number per data entry General Med/Surge (including CAH s) LTAC Inpatient Rehabilitation Psyche Collect summary information on RAC experience to date Overpayments (automated and complex) Underpayments Appeals information Administrative Burden 31

RACTrac will give us trends in RAC activity Sample Talking Point: 80% of hospitals experienced denials in their inpatient services in Quarter 1 Hospitals cited medical necessity as their top reason for RAC denials in Quarter 1 Total dollars reported to have been recouped by hospitals responding in RAC TRAC to date is $XXX million or $XXX per hospital. 32

AHA RACTrac Survey (www.aharactrac.org) Data Entry on website Data Upload (CSV file) AHA Claim Level Excel Template (& CSV File) Vendor Provided CSV file 2 Ways to Report RAC Experience Data to AHA RACTrac 33

Vendors in the Marketplace AHA is currently working with several vendors who have developed claim level RAC audit tracking tools and would like to make their tools RACTrac compatible. Ask your vendor Is your tool AHA RACTrac compatible? AHA will work with others in order to ensure that its easy for you to report data back to AHA List of vendors available at www.aha.org/rac Under RACTrac 34

Top 5 Reasons to Report to RACTrac Internally tracking RAC audit activity is essential for minimizing financial risk, identifying areas for improvement and surviving the RACs Data on the impact of the RACs on hospitals is essential for a successful advocacy effort. Participation in RACTrac will provide AHA and the State Association the data they need to advocate on your behalf. Participation in RACTrac will allow AHA to identify trends in reasons for denials across the RAC regions or at the national level. This information can be used to educate the field. RACTrac provides a basic tool to organize your data 35

National RACTrac Rollout and Timeline www.aharactrac.org COMING SOON! Estimated national release of RACTrac is currently scheduled for summer 2008 RACTrac Claim level tracking guide RACTrac Member Advisory AHA News and News Now Letters and Emails to all CEOs Following Member Advisory with Security Codes for Registering in RACTrac RACTrac Webinar Series Data collection to officially begin post RAC audits 36

Prepare for RACs Today! Establish internal RAC team Interdisciplinary Team: Coders, Finance, Clinical, Utilization Review, Case Management Identify RAC point of contact for internal and external RAC communications Develop a central tracking mechanism for all RAC correspondence Incoming and Outgoing Conduct a self audit to identify potential problems Participate in RAC trainings Know the rules for you and for the RACs and remember the program is a WORK IN PROGRESS! 37

QUESTIONS Alyssa Keefe Senior Associate Director, Policy Questions on RACs RACinfo@aha.org 38