Today s Presenters & Agenda

EHR s Accelerated Compliance Training (ACT) Series: Updates on Regulatory Developments and Audit Activity February 25, 2015 Today s Presenters & Agenda Presenters: Ralph Wuebker, MD, MBA, Chief Medical Officer Thomas McCarter, MD, FACP, FCPP, Chief Clinical Officer Steven Greenspan, JD, LLM, Vice President, Regulatory Affairs Agenda: Review of the Two-Midnight Rule CMS Settlement Update Updates on the Audit Landscape 2015 OPPS: Certification and Recertification Key Takeaways Q&A 2

[Section Break Slide Insert Section Title] Review of the Two-Midnight Rule Conditions of Participation Title 42 of the Code of Federal Regulations, at Section 482.30 discusses the scope and frequency of review in subsection (c). (c) Standard: Scope and frequency of review. (1) The UR plan must provide for review for Medicare and Medicaid patients with respect to the medical necessity of (i) Admissions to the institution; (ii) The duration of stays; and (iii) Professional services furnished, including drugs and biologicals 4

Conditions of Participation Page 50913 of the Final Rule: "We did not propose and are not finalizing a policy that would allow hospitals to bill Part B following an inpatient reasonable and necessary self-audit determination that does not conform to the requirements for utilization review under the CoPs. From 50914: We reiterate that hospitals must follow our policies requiring physician involvement and concurrence in hospital decisions regarding patient status and the medical necessity of hospital inpatient admissions under the Condition Code 44 rules and the CoPs. 5 Conditions of Participation I'm still trying to sort out how the conditions of participation as it related to requiring some kind of review of appropriateness of admission ties into this. Are we still thinking that we need to have our case managers or utilization review specialist look at Medicare admissions and apply some type or criteria around medical necessity? Is that still even required at all? This is Dan Duvall. We actually have not made any changes, there have been no changes in the conditions of participation on the hospital utilization review programs, therefore, don't have any changes in what applies to them. Source: CMS Special Open Door Forum, September 26, 2013 6

Essential Requirements Ask Two Questions: Does my patient require medically necessary hospital care? Do I expect that care to span two or more midnights? If yes to both Inpatient admission is generally appropriate If no to either Treat as outpatient with or without observation Document key elements: Properly executed inpatient order via Medicare Order Form or CPOE For Inpatient: medical record documentation that describes the patient s condition, treatment plan, risk of being treated in an alternative setting For outpatient: diagnosis and outpatient treatment plan 7 Important to Remember The inpatient order MUST be signed by a licensed practitioner who has admitting privileges at the hospital The inpatient order must be on the chart PRIOR to discharge The ability to write this order is governed by CMS regulations, state/local law as well as hospital by-laws As a result, inpatient orders written by interns, residents or non-physician clinicians MAY require authentication 8

Important to Remember In today s world, the clinicians notes in the medical record are more than a communication vehicle for the clinical care team. Multiple entities, such as the hospital s case management and billing departments, as well as outside auditors such as Medicare contractors and the Department of Justice, can and will review the documented material in the record. Remember: If you do not document it then it never happened! 9 Important to Remember The two midnight expectation is based upon the likelihood that a patient will require medically necessary services that will span the course of 2 midnights starting from when services were first delivered. You do not need to state how long you expect the patient to remain in the hospital; only whether or not you expect the patient to remain in the hospital for 2 or more midnights FROM THE START OF MEDICAL SERVICES. Keep in mind those services could have been started in the Emergency Department, or another facility in case of transfers. CMS has not defined what constitutes medical services except to say that patient triage does NOT ALWAYS qualify if the patient was triaged to a waiting area. 10

Special Circumstances What if a patient is admitted as inpatient, but stays less than two midnights? Inpatient admission may still be appropriate if expectation was documented and reasonable, however: - Patient left AMA - Patient expired - Patient newly elected hospice care - Patient is transferred to another acute care hospital - Patient unexpectedly improved - Best Practice: physician clearly documents that unforeseen improvement 11 Documentation of Special Circumstances It is imperative that the record reflects the details of what happened for any case involving one of these special circumstances; especially in cases where the patient recovers sooner than initially anticipated. 12

The Order The decision regarding Inpatient or Outpatient should be based upon the medical facts available to the physician at the time of initial evaluation. Because this is based upon the physician s expectation, as opposed to a retroactive determination based on actual length of stay, the physician should not feel compelled to change an Inpatient order to Observation in cases where a patient recovered sooner than anticipated. Source: Questions and Answers Relating to Patient Status Reviews (Last Updated: 3/12/2014) 13 Exceptions to a Two-Midnight Expectation A patient may still be an inpatient without a 2 midnight expectation if: The patient is having a surgical procedure on Medicare s Inpatient Only List (IOL). The patient is receiving newly instituted mechanical ventilation for respiratory failure. Remember these cases still require a valid Inpatient order on the chart 14

Two-Midnight Rule Summary IP determination Patient requires medically necessary hospital services Physician has reasonable expectation of two or more midnight total hospital stay If less than 2 midnight expectation or uncertain- it s not inpatient IP Order Must be signed, dated and timed prior to discharge by a clinician with admitting privileges Must be signed, dated and timed prior to the start of surgery by a physician with admitting privileges for surgical cases on the Inpatient Only List Must have documentation consistent with two midnight expectation Avoid conflicting terms Use of inpatient and observation in same order IP order with a plan to discharge next day 15 Medical Necessity Documentation 16

[Section Break Slide Insert Section Title] CMS Settlement Update CMS Settlement Updates Hospital Appeals Settlement Updated 2/20/2015 What's New: The Centers for Medicare & Medicaid Services (CMS) is in the process of completing Round 1 of the settlement process. Round 2 validations have begun. Settlement participants are encouraged to see the revised "Critical Steps for Providers in the Appeals Settlement Process" found in the Downloads section below for additional Round 2 instructions. Round 2: Hospital will review the discrepancies from the first round validation process and resubmit a revised spreadsheet and Administrative Agreement for CMS validation within 2 weeks of receipt. If CMS has identical information to that submitted, the original agreement will be countersigned by CMS, and payment will be provided within 60 days. The included appeals will be dismissed. If discrepancies are identified, CMS and the hospital will conduct Round 2 discussions until both parties are in agreement, and a new agreement will be signed for payment. The impacted appeals will be dismissed. Source: http://www.cms.gov/research-statistics-data-and-systems/monitoring-programs/medicare-ffs-compliance- Programs/Medical-Review/InpatientHospitalReviews.html 18

[Section Break Slide Insert Section Title] Audit Landscape Audit Levels Expected to Increase 20

Systematic Gaming or Abuse Remember this language? CMS will instruct the Medicare Administrative Contractors (MACs) and Recovery Auditors that, absent evidence of systematic gaming or abuse, they are not to review claims spanning 2 or more midnights after admission for a determination of whether the inpatient hospital admission and patient status was appropriate. Source: Questions and Answers Relating to Patient Status Reviews (Last Updated: 3/12/2014) 21 Systematic Gaming, Abuse or Delays CMS will identify trends indicative of systematic gaming, abuse or delays, through data sources, such as that provided by: Comprehensive Error Rate Testing (CERT); First-Look Analysis for Hospital Outlier Monitoring (FATHOM); and Program for Evaluating Payment Patterns Electronic Report (PEPPER) Source: Questions and Answers Relating to Patient Status Reviews (Last Updated: 3/12/2014) 22

NGS Mobile Audits MAC contractor National Government Services (NGS) is bringing back mobile audits, starting in early February, for Jurisdiction JK Providers: Connecticut, Massachusetts, Maine, New Hampshire, New York, Rhode Island and Vermont. NGS will be performing an initial 10-claim-per-facility audit to determine whether medical necessity has been validated. NGS has received CMS approval to start reviewing the top DRGs that were formerly 1-2 day stays that they are now seeing as 3-5 day stays. These same issues are currently being reviewed by the CERT and the OIG. 23 NGS Mobile Audits The Top 10 DRGs identified by NGS are: 195 Simple pneumonia & pleurisy w/o CC/MCC 872 Septicemia w/o MV 96+ hours w/o MCC 192 Chronic obstructive pulmonary disease w/o CC/MCC 689 Kidney & urinary tract infections w/ MCC 684 Renal failure w/o CC/MCC 308 Cardiac Arrythmia & Conduction Disorders w/mcc (and DRGs 309-310) (AFIB) 602 Cellulitis w/ MCC 068 Nonspecific CVA & precerebral occlusion w/o infarct w/o MCC 293 Heart failure & shock w/o CC/MCC 312 Syncope and collapse 24

2 Midnight Presumption Met = Safe from Audit? Stays that meet the 2 midnight presumption are not safe from medical review activities! Medicare review contractors will identify gaming by reviewing stays spanning 2 or more midnights after formal inpatient admission for purposes of: Monitoring and responding to patterns of incorrect DRG assignments Identifying inappropriate or systematic delays LACK OF MEDICAL NECESSITY Source: Questions and Answers Relating to Patient Status Reviews (Last Updated: 3/12/2014) 25 What Happens on April 1, 2015? The Probe and Educate period ends March 31, 2015. Recovery Auditors may review claims based on patient status. End of Probe & Educate Recontracting Existing RAs The MACs will no longer be limited to chart pull limits when reviewing claims for patient status.???????? 26

CMS RAC Recovery Amounts (Through FY2014) Total Corrections October 2009 September 2010 FY2010 $92.3 October 2010 September 2011 FY2011 $939.3 October 2011 September 2012 FY2012 $2,400.7 October 2012 September 2013 FY2013 $3,834.8 October 2013 September 2014 FY2014 $2,404.6 Total National Program $9,671.7 Total corrections through FY 2014 ~ $9.67 billion Approximately $8.925 billion in overpayments Sources: http://www.cms.gov/research-statistics-data-and-systems/monitoring-programs/medicare-ffs- Compliance-Programs/Recovery-Audit-Program/Recent_Updates.html 27 CMS RAC Recovery Amounts (Q4 FY2014 Only) Medicare Fee for Service National Recovery Audit Program Figures provided in millions (July 1, 2014 September 30, 2014) Quarterly Newsletter Overpayments Collected Underpayments Returned Total Quarter Corrections FY To Date Corrections Region A: Performant $8.38 $9.33 $17.71 $394.01 Region B: CGI $9.47 $13.75 $23.22 $319.62 Region C: Connolly $92.34 $22.79 $115.13 $1208.33 Region D: HDI $35.26 $1.65 $36.91 $482.61 Nationwide Totals $145.45 $47.52 $192.97 $2,404.57 Sources: http://www.cms.gov/research-statistics-data-and-systems/monitoring-programs/medicare-ffs- Compliance-Programs/Recovery-Audit-Program/Downloads/Medicare-FFS-Recovery-Audit-Program-4th-qtr- 2014.pdf 28

RAC Updates Regions 1,2 and 4 The new contracts for Recovery Auditor Regions 1, 2, and 4 remain under a pre-award protest which is expected to continue into late summer of 2015. Region 3 The procurement process continues for Region 3. Region 5 General Updates CMS awarded the Region 5 Recovery Audit contract to Connolly, LLC. Connolly will be the nationwide auditor responsible for the identification and correction of improper payments for DMEPOS and home health/hospice claims. Due to a post-award protest by Performant, CMS has delayed the commencement of work under the Region 5, Recovery Audit contract. It is anticipated that the award protest will be resolved in April 2015. Contract modifications allowing the current Recovery Auditors to restart some reviews has been completed for the four primary regions. Most reviews will be done on an automated basis, but a limited number will be complex reviews of topics selected by CMS. 29 RAC Program Improvements The following changes* will be effective with each new contract award beginning with the DME, Home Health and Hospice Recovery Audit contract awarded on December 30, 2014. Establish ADR limits based on provider denial rates Limit the Recovery Auditor look-back period to 6 months from the date of service for patient status reviews (so long as the hospital submits the claim within 3 months of the DOS) Recovery Auditors will have 30 days to complete complex reviews and notify providers of their findings (previously 60 days) Recovery Auditors must wait 30 days to allow for a discussion request prior to sending the claim to the MAC for adjustment and must confirm receipt of a provider s discussion request within 3 business days Recovery Auditors will not receive a contingency fee until after the second level of appeal is exhausted Recovery Auditors will be required to maintain an overturn rate of less than 10% at the first level of appeal and an accuracy rate of at least 95% *This is not an exhaustive list. The full list of program changes can be found here: http://www.cms.gov/research-statistics-data-and-systems/monitoring-programs/medicare-ffs-compliance- Programs/Recovery-Audit-Program/Downloads/RAC-Program-Improvements.pdf 30

RAC Targets for 2015 Patient status reviews The moratorium on Recovery Auditors (RAs) performing patient status reviews ends on March 31, 2015. Beginning on April 1, 2015, RAs can begin performing patient status reviews; however, these will be limited to current claims as the RAs are prohibited from reviewing claims with dates of service of October 1, 2013 through March 31, 2015. RAs may pull zero and 1 day stays for claims from October 1, 2013 though March 31, 2015 but are not permitted to review for patient status. Medical necessity, NCD/LCD, documentation, and other approved issues all remain subject to audit scrutiny. There exists potential for RA review of inpatient hospital claims with stays of 2+ days, especially if hospital data demonstrates an increase in 2-day or greater inpatient hospital stays since the implementation of the 2-midnight rule. 31 [Section Break Slide Insert Section Title] 2015 OPPS Final Rule Certification and Recertification Requirements

2015 OPPS Final Rule CMS-1613-FC The 2015 Outpatient Prospective Payment System (OPPS) Final Rule effective January 1, 2015. Highlights include: Refinements to Comprehensive APC Policy Significant Packaging of Ancillary Services Changes to Inpatient Certification Requirements 33 What Does the Final Rule Say? [A]s we look to achieve our policy goals with the minimum administrative requirements necessary, and after considering previous public comments and our experience with our existing regulations, we believe that, in the majority of cases, the additional benefits (for example, as a program safeguard) of formally requiring a physician certification may not outweigh the associated administrative requirements placed on hospitals (79 FR 66997) [T]he physician order must be present in the medical record and be supported by the physician admission and progress notes in order for the hospital to be paid for hospital inpatient services (79 FR 66997) 34

2015 OPPS and Elements of Certification Documentation is Key: [T]he admission order, medical record, and progress notes will contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification (79 FR 66998) [T]he additional certification requirements now specified under 424.13(a)(2), (a)(3), and (a)(4) (that is, the reason for hospitalization, the estimated time the patient will need to remain in the hospital, and the plan of posthospital care, if applicable) generally can be satisfied by elements routinely found in a patient s medical record, such as progress notes (79 FR 66997) [W]e believe that evidence of additional review and documentation by a treating physician beyond the admission order is necessary to substantiate the continued medical necessity of long or costly inpatient stays (79 FR 66998) 35 Elements of Certification While a separately signed Physician Certification statement is no longer required, each Part A inpatient hospital claim must still have: An inpatient admission order (condition of payment) Signed/authenticated prior to discharge An expectation of a 2 midnight stay Documentation of medical necessity Discharge planning (where appropriate) 36

Changes to Physician Re-Certification Requirements A separately signed Physician Certification statement is now required to be submitted with each and every Inpatient Hospital claim under certain circumstances Required for Outlier cases: day outliers (20 days or more) cost outliers 37 Key Takeaways Auditors are Hunting Again MAC/RA OIG/DOJ Psych, Rehab, Defibrillators ZPIC/UPIC/SMRC NCD/LCD Reviews Appropriateness Documentation requirements Social admissions Greater than 3 midnight stays Custodial, delays in care, convenience Observation rates dramatically increasing Rates are even higher than initially predicted Unanticipated Commercial Impact Cert and Recertification 38

THANK YOU. Questions? Executive Health Resources (610) 446-6100 info@ehrdocs.com Visit FrictionFreeHealthCare.com 40

2015 Executive Health Resources, Inc. All rights reserved. No part of this presentation may be reproduced or distributed. Permission to reproduce or transmit in any form or by any means electronic or mechanical, including presenting, photocopying, recording and broadcasting, or by any information storage and retrieval system must be obtained in writing from Executive Health Resources. Requests for permission should be directed to INFO@EHRDOCS.COM.