Medicare Recovery Audit Contractors March 27

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Medicare Recovery Audit ContractorsMarch 27
31, 2008

• Kathy Reep
• Vice President, Financial Services
• Florida Hospital Association
• Marilyn Litka-Klein
• Senior Director, Health Finance
• MHA

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Legislative Authority

• Section 306 Medicare Modernization Act
• Requires Secretary of Health and Human Services
  to test the use of Recovery Audit Contractors
  (RAC) for identifying Medicare Part A and B
  underpayments and overpayments, and recovering
  the latter
• May compensate based on percent of recovery
• Previously prohibited for Medicare
• Report to Congress
• Six months after completion
• Recommendations for extending/expanding project

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Reasons for RAC Demonstration

• Medicare medical review and payment error rates
• Claimed effectiveness of RACs proprietary
  software
• Experience of states and other federal agencies
• Collection without additional Medicare cost

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Reasons for RAC Demonstration

• The RAC programs mission
• Reduce Medicare improper payments through the
  efficient detection and collection of
  overpayments
• identification of underpayments
• implementation of actions that will prevent
  future improper payments

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Demonstration States

• CMS selected the three states with the highest
  per capita Medicare utilization
• Florida
• California
• New York

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Demonstration Cont.

• November 2004 CMS issues two separate
  Statements of Work
• Medicare secondary payer (MSP)
• Non-MSP
• March 28, 2005 CMS awards RAC contracts
• Contracts expire March 27, 2008

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Non-MSP RAC Demonstration

• Included overpayments and underpayments
• Incorrect payment amounts
• Non-covered services
• Incorrectly coded services
• Duplicate services

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Non-MSP RAC Demonstration

• Excluded from RAC scope
• Services other than Medicare fee-for-service
• Cost report settlement process
• Incorrectly coded E M services
• No random claims selection
• No prepayment review

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Types of RAC Review

• Automated review
• Only where there is certainty that service is not
  covered, incorrectly coded, a duplicate payment
  or other claims related overpayment
• Complex medical review
• Must be used if there is probability, but not
  certainty, of overpayment, and medical records
  are needed to make that determination

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Medical Record Requests

• The RAC will send a medical record request letter
  to the provider containing the clinical rationale
  for each request
• Provider has 45 days to respond
• Lack of hospital response will lead to an
  administrative denial
• RACs have worked with providers who cannot meet
  the 45-day deadline
• RAC has 60 days to make determinations after
  receiving the records
• Extensions granted by CMS
• Provider has 15 days from date of demand letter
  before recoupment process begins

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FY 2006 Improper Payments(MSP and Claim RACs)
Overpayments Collected (in millions) Underpayments Paid Back (in millions) In The Queue (in millions) Total Improper Payments Identified (in millions)
68.6 2.9 232.0 303.5
Costs - 14.5

54.1 Back to the Trust Funds Back to the Trust Funds Back to the Trust Funds Back to the Trust Funds Back to the Trust Funds
Status Document For FY 2006 on
www.cms.hhs.gov/RAC
collected dollars in the bank (cases lost on
appeal have been backed out contingency fees
have NOT been backed out) in the queue
dollars determined by the RAC to be overpayments
but still in the collection process at the RAC or
carrier/DMERC/DME MAC/FI overpayment demand
letter has been sent to the provider in about
half the cases identified dollars collected
dollars in the queue costs RAC contingency
fees (12M) carrier/DMERC/DME MAC/FI costs
(1M) RAC Evaluation/Database (1.5M)
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FY 2006 Improper Payments by Type of Improper
Payment (Claim RACs Only)
RACs found 10.4M in underpayments from Jul 05
Aug 06
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FY 2006 Improper Paymentsby Provider Type (Claim
RACs Only)
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FY2007 Findings
(in Millions)

• Overpayments Collected 357
• Less Underpayments Repaid (14)
• Less Overturned on Appeal (18)
• Less Costs to Run Demo (78)
• BACK TO MEDICARE TRUST FUND ? 247 Million

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FY2007 Findings Overpayments Collected by
Provider Type
SOURCE RAC Data Warehouse
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FY2007 Overpayments Collected by Error Type (Net
of Appeals
SOURCE Self-reported by RACs
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Appeals of RAC Determinations
State Number of Claim Overpayments Claims Appealed Claims Overturned
NY 94,000 2,900 1,600
FL 151,000 21,300 13,500
CA 113,000 16,400 2,900
But many more appeals filed after 9/30/07
As reported through 9/30/87
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Recoupment New Rules

• Effective July 1, 2008
• When overpayment identified by RAC, funds shall
  not be recouped for 30 days
• Allows hospital to submit appeal for
  redetermination first stage
• If overpayment upheld, funds recouped 60 days
  later, unless hospital appeals second stage
• Most appeals concluded during first three stages
  of appeal process
• CMS Transmittal 314 issued 2/1/08

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RAC Expansion Schedules
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Demonstration vs. Permanent RACs
Strategy Demonstration RACs Permanent RACs
RAC Medical Director Not Required Mandatory
Coding Experts Optional Mandatory
Under Tolerance Threshold 10.00 aggregate claims 10.00 minimal claims
AC Validation Process Optional Mandatory
RAC must payback the contingency fee if the claim overturned at any level of Appeal RAC must pay back contingency fee if the claim is overturned on the first level of appeal RAC must pay back if the claim is overturned on any level of Appeal
Standardized Letters to Providers Limited Mandatory
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Demonstration vs. Permanent RACs
Strategy Demonstration RACs Permanent RACs
Claims Reviewed Records from three prior fiscal years Claims with initial determination on or after October 1, 2007
Number of Records Requested No limit To be set by CMS
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Issues Identified

• Inpatient rehab services were medically
  unnecessary could have been provided in a less
  acute setting
• Admission for scheduled elective procedures
• Claims coded as CC - complications or comorbidity
  - with only one secondary diagnosis

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Issues Identified Cont.

• Inpatient only procedures be aware of annual
  changes
• Transfusion billing more than once per
  encounter
• DRG payment window outpatient procedures that
  must be included on I/P claim

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Automated RAC Review Results

• Neulasta - billed for 6 units, exceeded standard
  of 1 unit
• Multiple colonoscopies on same day
• O/P speech billed in 15 minute increments vs.
  session
• What is responsibility of fiscal intermediary who
  paid claim incorrectly?

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Three-Day Stays

• Denied by RAC as LOS extended to qualify
  beneficiary for Medicare Part A coverage in
  skilled nursing facility
• Observation days dont count toward the three-day
  requirement
• Unclear whether CMS will pursue recoupment from
  the SNF
• Medical back problems DRG 243/MS 551 DRG
• Medical record didnt support I/P admission
• Patients admitted for 3 days to qualify for SNF
  coverage

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Debridement

• DRG 263/MS-DRG 573
• Coding excisional debridement
• Not documented in chart, or
• RAC believes not justified by medical chart
• DRG 217/MS DRG 463, 464, 465
• RAC claims incorrectly coded as excisional
  debridement

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Surgeries

• RAC denying claims when procedure not found on
  Medicare I/P only list
• RAC claim physicians must document medical
  necessity for I/P status including
• Lab results, x-rays, failed O/P procedures
• RAC indicates documentation must become part of
  patients permanent record to justify I/P medical
  necessity

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Wrong Diagnosis Code

• Patient bill reported principal diagnosis of
  03.89 septicemia
• Medical record indicates diagnosis of urosepsis
  blood cultures were negative

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Wrong Principal Diagnosis

• Patient bill indicates respiratory failure
  (518.81) was principal when medical record
  indicates sepsis (038-038.9) was principal
  diagnosis
• Most common DRGs
• 475 respiratory system diagnoses
• 468 extensive OR procedures unrelated to
  principal diagnosis

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Discharge Status/Transfers

• Hospital bill indicates patient discharged to
  home
• Medical record indicates patient
• Transferred to another facility
• Discharged home with home care
• Hospitals paid lower transfer rate under these
  conditions

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PEPPER Reports

• Program for Evaluating Payment Patterns
• Electronic Report
• Developed by TMF Health Quality Institute for
  Centers for Medicare Medicaid Service
• Issued electronically on quarterly basis by QIO
  MPRO
• Data from CMS discharges for FY 2004, 2005,
  2006, 2007 (9/30/07)

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PEPPER Reports Cont.

• Reported data includes
• DRGs that are part of a pair
• 1 day stays
• DRG 89 vs. 88 and 90
• 3 day stays, transfer to SNF
• 7 day readmissions
• Comparisons to statewide experience

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Michigan Top 1-Day LOS FY2007
DRG 1 day Stay Disc Total Disc Avg. LOS
558 PTCA with drug stent 4,200 5,900 1.6
556 PTCA w non-drug stent 1,400 2,000 1.8
479 Other vascular 1,100 1,600 1.8
557 PTCA w drug-eluting stent w major cv dx 1,000 3,600 3.7
534 Extracranial procedures w/o CC 1,000 1,400 1.6
Source Medicare PPS Inpatient Hospital Data,
ending 9/30/07
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Michigan Top Medical 1-Day LOS FY2007
DRG 1 day Stay Disc Total Disc Avg. LOS
143 Chest Pain 3,500 8,100 2.1
127 Heart failure Shock 1,600 26,000 4.9
182 Esophagitis w CC 1,300 9,000 4.0
138 Cardiac arrhythmia w CC 1,200 8,500 4.0
088 COPD 1,100 15,000 4.5
141 Syncope collapse w CC 1,000 5,700 3.4
524 Transient ischemia 1,000 4,600 2.9
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Source Medicare PPS Inpatient Hospital Data,
ending 9/30/07
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US Most Frequent Medically Unnecessary Admissions
DRG Paid Claim Error Rate
143 Chest Pain 20
243 Medical Back Prob 15
182 Esoph. Gastroent 12
296 Nutr Misc Meteb Disorders 11
125 Circulatory Exc AMI 10
120 Other Circulatory 10
294 Diabetes gt35 9
141 Syncope Collapse 8

All DRGs 1.3
Source CMS 11/07 Improper Medicare Payments
Reports
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Unresolved RAC Audit Issues

• Provider Education
• Despite several requests from hospital industry,
  no comprehensive document of all identified
  issues is available to prevent errors from
  occurring in future.
• CMS released RAC status document Feb. 2008 with
  some information
• In Jan. CMS indicated future RACs would be
  responsible for posting error information on
  their own web-sites

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Unresolved Cont.

• RAC responsibilities
• Currently paper correspondence with hospitals
• Hospital data submissions lost at RAC
• No electronic system for hospital to monitor
  records under review
• Contingency fee payments
• Increased recoveries add to RAC earnings
• Sometimes the cost/effort to appeal exceeds the
  hospital benefit
• Medical necessity determinations
• Will there be consistent application among the
  RACs or will this vary?

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Unresolved Cont

• Hospital rebilling efforts
• Standard process for hospital to rebill ancillary
  procedures if applicable
• Cash flow delay between RAC take back and payment
  for rebilled services
• Implications for Medicare and Hospital discharge
  count for admissions deemed medically unnecessary
• Other payment implications not yet identified

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Suggested Hospital Actions

• Self Assessment of RAC Risk
• Review PEPPER reports to identify unusual
  patterns
• Audit claims to ensure medical necessity
• Utilize cross department team to identify root
  causes for identified errors
• Communicate results to key hospital and medical
  staff
• Implement protocol changes to correct root causes

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Suggested Hospital Actions Cont.

• Utilization Review and Case Management
• Develop watch list of error-prone DRGs-short-stay
  and outlier cases
• Review 1-day stays to validate medical necessity
• Expand case management to 7 x 24
• Ensure medical record justifies billed status
• Ensure physicians clearly understand the
  admission and documentation requirements
• If it isnt written it cant be coded

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Hospital Next Steps

• Look at potential areas of risk
• Identify single point of contact for RAC
• Establish RAC committee of key hospital
  stakeholders
• Understand the parameters
• For providers
• For the RAC
• 5. Review records before sending to RAC
• Support your claim

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MHA Next Steps

1. Establish relationship with RAC once announced
2. Facilitate information exchange between CMS, RAC
   and hospitals
3. Monitor RAC activities with Michigan providers

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Questions?

• Marilyn Litka-Klein
• Senior Director, Health Finance
• Michigan Health Hospital Association
• Phone [phone]
• email mklein_at_mha.org

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