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3/24/2014
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Auditing RACphobia
Lamon Willis, CPCO, CPC-I, CPC-H, CPC
AHIMA-Approved ICD-10-CM/PCS Trainer
Xerox Healthcare Consultant 1
Agenda
Overview of present industry landscape in
relation to auditing
Audit Entities and Contractors
Health Care Fraud Prevention Enforcement
Action Team (HEAT)
Medicare RACs
Connolly RAC Case Studies
Medicaid RACs
Lessons from RAC Audits
Summary
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Industry Overview 4
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Auditing on All Fronts
CMS and the OIG continue their resolve to
recover improper payments, overpayments, and
fraudulent payments from healthcare providers.
Coding and Billing will continue to be a critical
role as the auditing and documented services
for ICD diagnosis and procedure as well as
CPT-4 coding is verified and validated for
reimbursement.
The documentation of medical necessity that is
translated from clinical notes is all important.
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Legislation
Affordable Care Act provides an additional
$350 million over 10 years to ramp up:
anti-fraud efforts,
including increasing scrutiny of claims before
they've been paid,
investments in sophisticated data analytics,
more "feet on the street" law enforcement
agents and others to fight fraud in the health
care system.
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Software Analytics
These efforts build on our recently awarded
predictive modeling contract under which
CMS is using the kind of technology used by
credit card companies to stop fraud.
Since June 30th of this year CMS has been
using this technology to help identify
potentially fraudulent Medicare claims and
uncover fraudulent providers and suppliers,
flagging both for investigation and referrals
to law enforcement. 7
Software Analytics
This new tool allows CMS for the first time to
use real-time data to spot suspect claims
and providers and take action to stop
fraudulent payments before they are paid.
These efforts build on the many aspects of
the Affordable Care Act that are currently
working to bring down waste, fraud and
abuse in the health care system.
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Audit Entities – The Increase of Auditing Medicare Part A and B RACs
Medicare Part C and D RACs
Medicaid RACs
Medicaid Integrity Contractor (MIC)
Zone Program Integrity Contractor (ZPIC)
formerly Program Safeguard Contractor
(PSC)
Medicare Administrative Contractor (MAC)
OIG probe audits
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Audit Entities – The Increase of Auditing
Surveillance and Utilization Review
Subsystem (SURS)
Payment Error Rate Measurement (PERM)
Health Care Fraud Prevention and
Enforcement Action Team (HEAT)
Commercial / Managed Care
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The Medicare Recovery
Audit Contractors
(RACs)
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Demonstration Project Led to Full Roll Out of RAC
CMS deemed RAC a success > $1 Billion in
payment errors, $983 million in overpayments
was recovered.
Congress authorized the permanent RAC
program in 2006 and regulated that it be rolled
out nationwide by January 1, 2010. The present
administration reconfirmed the RAC roll-out in
the Patient Protection and Affordable Care Act.
The country has been divided into 4 RAC
regions.
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RAC Regions
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RAC Review Process
RAC
Healthcare
Provider
Mail Record Requests Pull, Verify and Mail
Medical Records
Make Overpayment
Determinations and Mail
Demand Letters
Research and Write
Appeals
! 45-day deadline
! 120-day deadline
5 Levels of Appeal 1 National averages as reported by the American Hospital Association, AHA RACTrac Nationwide Results, http://www.aha.org/aha/content/2011/pdf/Q4ractracresults.pdf (Feb 24, 2011)
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RAC Appeal Process
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2
1
Demand
Letter
Fiscal Intermediary (FI)
Appeal must be filed within 120 days
Appeal must be filed within 180 days
Qualified Independent Contractor (QIC)
Appeal must be filed within 60 days
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4 Medicare Appeals Council (MAC)
Appeal must be filed within 60 days
Administrative Law Judge (ALJ)
Appeal must be filed within 60 days
Federal District Judge (FDC)
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The Permanent RAC Program
Program Rules Demonstration Permanent Program
Look Back Period 4 years 3 years
Audit Focus Any reason Must show “just cause” and gain CMS
approval
Record Limit Unlimited per 45 days 1% Medicare claims; maximum 500
records per 45 days
RAC Payment 30% of overpayment
even if overturned on
appeal
12.5% overpayment and
underpayment but must survive appeal
Provider Payment Recouped upon RAC
denial
Recouped if not appealed within 30
days at level 1 or 60 days at level 2.
Rebilling options Inpatient denials
could be re-billed as
outpatient from any
date
Inpatient denials can be re-billed as
ancillary services only and only within 1
year of the original payment
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Permanent RAC Status
FY10 FY11 –
Q1,
Q2,
Q3
Total
Overpayment
Collected in
millions
$75.4 $499.8 $575.2
Underpayment
Identified in
millions
$16.9 $92.7 $109.6
Total
Corrections in
millions
$92.3 $592.5 $684.8
0
100
200
300
400
500
600
700
800
FY10
3Q-2011
Total
In millions
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The Recovery is Increasingly Significant
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Challenges for Healthcare Providers
Reporting (financial exposure, denials,
appeal success)
Tracking correspondence and staying on
top of expected response times
Lack of Available Skilled Appeal Resources
Know-how to make arguments
Possess excellent writing skills
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Challenges for Healthcare Providers
Costs of Administration of the Program
The literature reports an average hospital’s cost
to appeal is $2000 per record. What about
physician?
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CMS RAC Report to Congress
FY 2010 was the first year in which the
Recovery Auditors began actively identifying
and correcting improper payments in the
national Recovery Audit program.
The RACs identified $92.3 million in both
overpayments and underpayments.
$75 million – overpayments (82%)
$16.9 million – underpayments (18%)
RACs send “demand letters” for $135.6
million in overpayments 22
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CMS RAC Report to Congress
Unavoidable systemic reasons for variations
in the demand amounts/collected amounts:
CMS regulation granting providers a 41-day grace
period prior to the initiation of collections.
Expiration/financial decline of providers, or possibly
their termination from the program.
Providers may be offered options for extended
repayment.
CMS may withhold future earnings on unrelated claim
submissions as an alternate means of collection.
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CMS RAC Report to Congress - Appeals
CMS has received fairly successful feedback
from an appeals perspective. Only 2.4% of all
2010 claims collected have been both
challenged and overturned on appeal.
Recent data also supports that the number of
claims overturned on appeal may decrease in
the future when CMS or the RAC takes either
participant or party status in a case; further
supporting the accuracy of the RAC
decisions. 24
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CMS RAC Report to Congress - Appeals
Providers have appealed 8,449 claims to date,
which constitutes 5% of all claims collected in
FY 2010. Of those, 3,902 claims 2.4% of all
collected claims were ruled in the providers’
favor, for a total overturned amount of $2.6
million.
Monitoring appeals activity is a key part of the
RAC program. CMS will continue to track the
RAC appeal rates.
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CMS RAC Report to Congress
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CMS RAC Report to Congress
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CMS RAC Report to Congress
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CMS RAC Report to Congress
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Connolly, the Region C RAC for VA, reviewed:
106 Part B Claims
Total of $13,977
Total corrected – 89 for $5,057 which were all
overpayments
There were no underpayments.
It would appear that this RAC is just getting
ramped up for Part B audits!
CMS RAC Report to Congress
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HDI, the Region D RAC reviewed:
11,854 Part B Claims
Total of $12,575,607.00
Total corrected – 53,764 for $5,185,348.
Overpayments - $5,087,783.00
Underpayments - $97,565.00
This RAC is heavily auditing Part B claims!
CMS RAC Report to Congress
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Medicare Part C and D RAC Mandate
Ensure that each Medicare Advantage (MA)
plan under Part C has an anti-fraud plan in
effect and review the effectiveness of each
such anti-fraud plan
Ensure that each prescription drug plan under
Part D has an anti-fraud plan in effect and to
review the effectiveness of each such anti-
fraud plan
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Medicare Part C and D RAC Mandate
Examine claims for reinsurance payments,
determine whether prescription drug plans
incurred costs in excess of the allowable
reinsurance costs permitted
Review estimates submitted by prescription
drug plans by private plans with high cost to
beneficiaries and compare such estimates
with the numbers of such beneficiaries
actually enrolled by such plans.
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The Medicaid Recovery
Audit Contractors
(RACs)
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Medicaid RACs – Result of the ACA
Medicaid RACs will contract with States and
territories to identify and collect overpayments,
and will be paid on a contingency fee basis by
the States.
States must have an adequate appeals process
for entities to challenge adverse Medicaid RAC
determinations.
Medicaid RACs are not intended to, and would
not, replace any State program integrity or audit
initiatives or programs.
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Medicaid RACs – Result of the ACA
CMS states that Medicaid RACs should “hire
certified coders unless the State determines
that certified coders are not required for the
effective review of Medicaid claims
(§455.508(c)).”
States will be required to implement their
RAC programs by January 1, 2012.
States must hire a Contractor Medical
Director MD or DO.
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Medicaid RACs – Result of the ACA
The program requires the development of an
education and outreach program component,
including notification to providers of audit
policies and protocols and implement RAC
customer service measures including:
providing a toll-free customer service
telephone number in all correspondence sent
to providers and staffing the toll-free number
during normal business hours from 8:00 a.m.
to 4:30 p.m. in the applicable time zone.
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Medicaid RACs – Result of the ACA
The program will notify providers of
overpayment findings within 60 calendar
days.
The program will have a 3 year maximum
claims look-back period
The contingency fees for contractors will
probably range between 9% to 12% as the
Medicare RACs do presently, however there
is flexibility left to the States for this.
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Medicaid RACs – Result of the ACA
CMS estimates that it will take 60 hours per
case to resolve a Medicaid RAC audit on
appeal. Commentators of the final rule
suggested 100-120 hours minimum.
Medicaid Managed Care claims are excluded
from review by the RACs.
States must make referrals of suspected
fraud and/or abuse to the MFCU or other
appropriate law enforcement agency
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Medicaid RACs – Result of the ACA
RACs should not audit claims that have
already been audited or that are currently
being audited by another entity
All contingency fees paid are from
overpayments collected by the State.
RACs can request a waiver to opt out of the
program but this must be approved by the
Federal Government.
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Medicaid RACs – Result of the ACA
CMS estimates that the Medicaid RAC
program will impact the Medicaid program
$2.13 billion from 2012-2016, which includes
a net savings of $1.22 billion to the Federal
Medicaid program and $900 million to the
State Medicaid program.
CMS believes the over-payment recoveries
will offset the majority of program costs.
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The Tennessee Medicare
RAC – Connolly Healthcare
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Case Study 1
Issue: In a billing process known as unbundling,
the provider was billing two separate CPT codes for
MRI scans, one that represented the image without
contrast (e.g. CPT-74150 abdomen scan) and one
that represented the image with contrast (CPT-
74160) rather than the appropriate combined
“global” code (CPT-74170), which is an
image without contrast followed by the introduction
of additional images with contrast.
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Case Study 1
Findings: Through advanced data mining
techniques, Connolly was able to identify multiple
instances of unbundling. This was also applied to
other types of MRI and CT scans where unbundling
was taking place.
Financial Impact: Each unbundled claim
represented an overpayment of approximately
$1,500. The total impact in one year was nearly
$750,000.
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Case Study 1
Solution: The payer was instructed to set system
flags for potential CPT codes that might represent
unbundling.
Flagged claims could then be reviewed for
potential overpayments.
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Case Study 2
Issue: Provider was processing claims for cardiac
catheterization procedures where CPT G0269 was
billed on the claim.
The client was reimbursing CPT G0269 as an
ungrouped outpatient procedure when in fact the
payment of this “bundled” code is included in the
payment for the services to which they are
incidental.
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Case Study 2
Findings: Connolly used data mining techniques
and the coding knowledge of its staff to identify
claims where this code was present and
determined whether the contract and/or CMS
guidelines supported payment.
In 95% or better of the cases examined, while the
code was appropriately billed, it was not subject to
reimbursement.
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Case Study 2
Financial Impact: Recoveries were made in the
amount of $829,000 and Connolly brought the
claims to the client’s attention so future improper
payments could be mitigated.
Solution: Connolly recommended system
updates for the providers affected to ensure future
payments would be correct.
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Case Study 3
Issue: CPT coding for Electrocardiographic (ECG)
billing for monitoring longer than a 24 hour period
requires that the bundled code be submitted, not
the code for a single 24 hour period.
Findings: ECG services were being billed
incorrectly due to the way CPT codes were entered
in the provider’s system. Per CPT Coding Rules,
93236 should only be billed once within a 30 day
period. When this procedure is done multiple times
within a 30 day period, typically Code 93271 should
be used. 49
Case Study 3
Financial Impact: A Connolly auditor found that
CPT Code 93236, for a single day occurrence, was
submitted incorrectly by 16 different providers
during a timeframe of approximately one year,
resulting in over $1.2 million in overpayments.
Solution: Provider was informed of the issue and
instructed to set system flags for the correct
usage of specific CPT codes to mitigate future
errors.
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Active Issues
Add-on codes without primary codes
Barium swallow units of service
Blood transfusion
Bronchoscopy services
Various drugs with units of service
IV hydration codes
Chemotherapy administration codes
Co-surgery not billed with modifier -62
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Active Issues
Date of death
Duplicate claims
Extracorporeal Photopheresis
Failure to Correctly Bill Codes on the
Medically Unlikely Edit List
Hospice Related Services (unbundling)
Left-sided Cardiac Catheterization
Multiple Surgery Reduction Errors: Single
Line Modifier 51 Underpayments 52
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Active Issues
National Correct Coding Initiative Edits
(Mutually Exclusive and Non-Mutually
Exclusive)
New patient errors
Once in a lifetime procedures
Pediatric codes exceeding age parameters
Untimed Codes (units of service errors)
53
The Tennessee Medicaid
RAC – HMS Holdings
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HMS BACKGROUND
Working with government healthcare programs
for almost 30 years.
They have 45 Medicaid Program Integrity
contracts and 16 Medicaid RACs.
They are also a Medicare Program Integrity,
Midwest Safeguard Contractor, a Medicare Zone
Program Integrity sub-contractor (ZPIC), a
Medicare Integrity Program Audit MIC, and also
a Medicare RAC.
No “issues” area on their website.
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Lessons
From
Medicare RAC
Audits
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Appeal Experience in the Demonstration Program
Work performed with 8 Massachusetts hospitals in 2007 in the RAC Demonstration Program
A total of 800 records were requested
385 denials ( 48%)
A total of 347 denials were appealed (90%). Nationally only 12.7% of RAC denials were appealed*.
• 77.3 % difference
A total of 323 appeals were won (93% success rate). Nationally 65% of appeals were won*.
• 28% difference
The appeal work returned $8.1 million to providers.
*The Medicare Recovery Audit Contractor (RAC) Program: Update to the Evaluation of
the 3-Year Demonstration, June 2010, CMS
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YOU CAN’T WIN UNLESS YOU TRY
APPEAL APPEAL APPEAL
Make sure you are appealing those which
you can.
Did you know that you cannot add
information after the QIC Level review?
Government has a mixed picture as to
whether providers are not appealing
because they are inaccurate or because of
resource requirement.
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Lessons Learned
Providers must have an automated tracking and
reporting tool
Providers will likely need help writing appeals
and managing the RAC process
Appeals should utilize precedent setting,
reasoned responses linked to Medicare
regulation.
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APPEALS CASES BACKED UP TWO YEARS
There is a backlog of 357,000 existing cases, and
HHS said it will not accept RAC appeals from
providers to administrative law judges (ALJ) –
the third level of appeal – for up to two years.
CMS suspending a large portion of RAC audits
until March 31, 2014.
Since payment for claims denied by a RAC are
recouped before the ALJ level of appeal, a
significant amount of hospital funds may be held
captive for years while the hospital waits for an
appeals hearing.
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APPEALS CASES BACKED UP TWO YEARS
CMS recently exacerbated appeals delays when it
inappropriately allowed RACs to double the
volume of audits.
The appeals process is extremely costly and many
providers have no resources to pursue Medicare
appeals.
After three years, CMS has not corrected chronic
operational problems within the RAC program.
Problems include overdue audit decisions; very
late issuance of key correspondence hospitals
need to manage Medicare payments and appeals;
and a high overturn rate for appealed RAC denials.
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APPEALS CASES BACKED UP TWO YEARS
Medicare rules grant physicians the authority
to decide whether a patient should be
admitted to a hospital.
In these rules, CMS recognizes that deciding
whether to admit a patient to a hospital is a
“complex medical judgment” that requires
the professional expertise of doctors.
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APPEALS CASES BACKED UP TWO YEARS
RACs hire auditors – typically nurses and
therapists – to subjectively evaluate paper
charts up to three years after the patient was
treated.
RACs are only required to hire one physician,
which leaves most second guessing to non-
physician auditors.
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Baby, Don’t
Fear The RAC
Audit
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Summary
RAC audits can be overcome and won by being
prepared ahead of time.
An attorney is not required to appeal before the
Administrative Law Judge (ALJ). You do need a
skilled auditor/astute research analyst.
Audits will continue under multiple fronts of
programs and legislation being implemented by
the federal and local governments of our country.
You should prepare for more.
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Summary
Invest in technology and professionals to be able
to keep the reimbursement you are legitimately
entitled to.
Review your current compliance program and
policies and procedures to include auditing.
Keep examples of all “wins” in audits for future
audit precedent. Make this information part of
appeals package.
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Questions?
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