2011 Medical Professional 2011 Medical Professional Liability SymposiumLiability Symposium

Chicago, IL ~ March 24 & 25, 2011

THE WRECK OF THE RAC: THE WRECK OF THE RAC: LESSONS LEARNED FOR ALLLESSONS LEARNED FOR ALL

THE WRECK OF THE RAC: THE WRECK OF THE RAC: LESSONS LEARNED LESSONS LEARNED

FOR ALLFOR ALLModerator:Fay A. Rozovsky, JD, MPH, DFASHRM, President, The Rozovsky Group

Panelists:Elizabeth Baskett, MPA, Senior Associate Director for Policy,

American Hospital Association

Patrick J. Hurd, Esq., Senior Counsel, LeClair Ryan

Alice Johansson, Senior Vice President, Product Manager, Managed Care, IronShore

RAC 101RAC 101

• The Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractor (RAC) permanent program was implemented for Medicare parts A & B nationwide on January 1, 2010.

• RACs conduct post-payment audits of Medicare Parts A & B claims.

• There are four RAC regions nationwide, with four separate RACs operating in each region of the country.

• The Affordable Care Act of 2010 expanded the RAC program to Medicare Parts C & D and to Medicaid.

• Implementation of Medicare Parts C & D and Medicaid RACs has been delayed until later this year.

• Although extremely similar, RACs are not to be confused with other payment integrity auditing programs such as the MACs, ZPICs, CERT, DOJ, etc.

RACs Identify Hospital RACs Identify Hospital Billing Billing MistakesMistakes

• RACs are not fraud busters, they audit hospitals to find billing mistakes

• Improper payments include: incorrect payment amounts; incorrectly coded services (including Medicare Severity diagnosis-

related group (MS-DRG) miscoding; non-covered services (including services that are not reasonable

and necessary); and duplicate services.

• RACs conduct two types of audits:

Automated reviews—using computer software to detect improper payments.

Complex reviews—using human review of medical records and other medical documentation.

Hospitals Nationwide Are Hospitals Nationwide Are Experiencing RAC AuditsExperiencing RAC Audits

Percent Reporting RAC Activity vs. No RAC Activity by Type of Participating Hospital, through 4th Quarter 2010

Source: AHA. (February 2011). RACTrac Survey. AHA analysis of survey data collected from 1,852 hospitals reporting RAC activity. 1,454 reporting activity, 398 reporting no activity through December 2010. Full report accessible at: www.aha.org/aha/issues/RAC/ractrac.html

Hospitals Nationwide Are Hospitals Nationwide Are Experiencing RAC DenialsExperiencing RAC Denials

Dollar Value of Automated and Complex Denials by RAC Region for Reporting Hospitals, through 4th Quarter 2010, Millions

Source: AHA. (February 2011). RACTrac Survey. AHA analysis of survey data collected from 1,852 hospitals reporting RAC activity. 1,454 reporting activity, 398 reporting no activity through December 2010. Full report accessible at: www.aha.org/aha/issues/RAC/ractrac.html

RAC Process for Complex RAC Process for Complex ReviewReview

• Hospitals are required to send RACs medical records upon request.

• RACs have 60 days to review the record and send a review results letter to hospitals.

• If a RAC determines an improper payment was made, the RAC will send a demand letter to the hospital indicating the amount of Medicare payment they intend to recoup.

• The hospital can either allow the recoupment or appeal the RAC decision using the regular Medicare appeals process.

• The appeals process is lengthy and administratively burdensome. Not all inappropriate RAC decisions are appealed.

• AHA RACTrac survey of 1,854 hospitals indicates that 23% of hospitals appealed at least one RAC decision and the RAC decision was overturned 86% of the time.

The Wreck of RACsThe Wreck of RACsUnderwriter’s erspectiveUnderwriter’s erspective

• Regulatory Coverage

Back in the day

vs.

Today

The Wreck of RACsThe Wreck of RACsUnderwriter’s PerspectiveUnderwriter’s Perspective

• Is a RAC audit an underwriting ‘red flag’?

Does it necessarily mean that the organization has done something wrong/bad?

• Geography• Type of organizations/patients• Types of errors• Changing landscape

The Wreck of RACsThe Wreck of RACsUnderwriter’s PerspectiveUnderwriter’s Perspective

• Questions your underwriter may ask

What is your organization doing to minimize the likelihood of a RAC audit?

What sorts of plans does your organization have in place to respond to a RAC audit?

What financial resources does your organization have should a RAC audit result in a significant settlement?

The Wreck of RACsThe Wreck of RACsUnderwriter’s PerspectiveUnderwriter’s Perspective

• Is there insurance available for RAC audits?

D&O policy regulatory sublimits

Defense policies for small organizations

Option Agreement

Strategies to ReduceStrategies to ReduceRACs Risks - IRACs Risks - I

Education For All

Education For All

Implement SoundBusiness PracticesImplement Sound

Business Practices

Clinical PersonnelMedical StaffCoding BillingComplianceInternal AuditExternal Audit

Coding & BillingThe “answer” person“It is better to ask than be sorry”Verification processSolid documentation

Strategies to ReduceStrategies to ReduceRACs Risks - IIRACs Risks - II

• Homage to the Internal Audit Team!• …and The RACs/PI Rounding Team.

Analyzing

Counseling

Improving Documentation

Practices

Strategies to Reduce RACs Strategies to Reduce RACs Risks - IIIRisks - III

Identify High Risk (Cost) ProceduresIdentify High Risk (Cost) Procedures

Loss Prevention(Education)

Loss Prevention(Education)

Surveillance & Monitoring

Surveillance & Monitoring

ERM Style DataCorrelation

ERM Style DataCorrelation

EvaluateEvaluate

Prompt ActionPrompt Action

Take a systems approach to RACs Risks

Strategies to Reduce RACs Strategies to Reduce RACs Risks - IVRisks - IV

• Documentation• Substantiate billing/coding• Correlation to Med Mal• Correlation to Compliance Issues• Defensible?• Preempt Adverse Publicity• Lessons Learned

Use Good Risk Management SkillsUse Good Risk Management Skills

QUESTIONS?

THE WRECK OF THE RAC: THE WRECK OF THE RAC: LESSONS LEARNED LESSONS LEARNED

FOR ALLFOR ALLModerator:Fay A. Rozovsky, JD, MPH, DFASHRM, President, The Rozovsky Group

Panelists:Elizabeth Baskett, MPA, Senior Associate Director for Policy,

American Hospital Association

Patrick J. Hurd, Esq., Senior Counsel, LeClair Ryan

Alice Johansson, Senior Vice President, Product Manager, Managed Care, IronShore