Update on CMS Recovery Audit
Contractors and Emerging Issues
TEXAS ASSOCIATION FOR HEALTHCARE ADMINISTRATORS
2014 TAHFA SEMINAR SERIES
ELAINE ANDERSON, SVP AND CHIEF COMPLIANCE OFFICER
TEXAS HEALTH RESOURCES
Where are the RACs? ….A Welcome “Pause”
 Pause announced in Feb. – RACs must suspend all
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requests
Does CMS finally see the system is broken?
Will RAC 2.0 be any better?
RACs have until June 1st to send improper
payment documentation to MACs for adjustment.
No new requests until CMS redefines program to
make the process faster and “fairer” to providers.
New 5 year contracts are being pursued
Why did CMS stop the RAC Train?
 Biggest reason………..tremendous backlog in
appeals facing the Administrative Law Judges
(ALJs)
 65 ALJs face a workload of 15,000 new RAC
appeals per week.
 Current backlog of over 350,000 claims – could
take years to work through
 Some say this backlog could give providers a
strong due-process claim against CMS.
How Long Will the “Pause” Last?
 CMS says: “some period of months”
 Speculation – 4 months to 2 years?
 But….CMS has every incentive to reform and reboot
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the RAC program ASAP
In 2011 – RAC program returned $488 mil to
Medicare
No reason to believe claims during the “pause” will not
be subject to future review.
Post payment audits are almost certainly here to
stay….we can only hope the process gets better.
CMS has merely realized they need a better
process…..so stay tuned.
AHA RACTract Stats
 Over 2,000 hospitals report data
 40% of RAC denials get appealed...of those, 70%
are overturned in favor of the provider.
 Speculation…..many providers are not appealing
when they should. Why?
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Lack of well-trained staff to consistently and timely appeal
to the highest level, if needed.
Fear of losing ability to rebill for Part B
Fear of going “head-to-head” with CMS
THR RAC Appeal Results???
 THR manages the RAC/MAC audit processes centrally
 All denials found to be inappropriate are appealed
 94% of all RAC denials to date have been appealed
 VAST MAJORITY of the appealed denials have been
overturned to date
 But,tThe pipeline is full. Cases pending in
appeal…..approximately 2,800!!!!
 Can the favorable overturn rate be sustained?
Unknown.
1 year Time Limit to Bill for Part B - What to do?
 Appeal every inappropriate denial. Some will be
overturned within the 12 month timeframe.
 Track cases approaching 1 year.
 Review and make a decision before the time limit
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Continue appeal past the time limit (and lose ability to rebill
for Part B), or
Pull weaker cases out of the appeal process and bill Part B
within the 1 year timeframe.
Do the math…..what “win” rate do you need to exceed the
$$ that will be lost due to losing ability for Part B billing.
CMS says 5 Changes for New RAC Contracts
 RAC must wait 30 days to allow for discussion before
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senidng the calim to the MAC for adjustment
RAC must confirm receipt of discussion request within
3 days
RAC must wait until the 2nd level of appeal is
exhausted before they receive their contingency fee
Revised ADR limits will be established an will be
diversified across different claim types
RAC will have to adjust the ADR limits in accordance
with a provider’s denial rate.
UPICs….the next wave
 While RACs “pause”, CMS has plans for new
unified program integrity contractors (UPICs)
 Next wave of overpayment gathers
 UPICs are being assigned many tasks:
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Preventing and detecting billing errors and fraud
Fending off appeals from providers
Identifying patient abuse
Working with law enforcement
Consulting with CMS regional offices, and
Coordinating data analysis with private payers
UPICs….the next wave
 Expected to use every administrative tool to take
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payments back or stop payments from being made
Expected sometime in 2015- one vendor to run the
program with 5 to 15 UPICs across the nation
Will replace Zone Program Integrity Contractors
(ZPICs), Medicaid Integrity Contractors and two other
contractors
Will aggregate data from public and private payers in
one “data pool” to identify overpayments or fraud
across payers
Will blur the enforcement lines between federal
programs and private payers.
What About the 2 Midnight Rule?
 Establishes two medically necessary midnights as
the “benchmark” for admission decisions
 Prior – patient had to require “inpatient level care”
at the time the order was written.
 Now there is no such thing as “inpatient
services”….now CMS says if the patient requires 2
midnights in the hospital, counting the time
already spent as an outpatient, they should be
admitted as an inpatient
2MN Rule-Enforcement Delayed?
 Admissions between October 1, 2013 and March 31,
2015 protected from admission medical necessity
review except the probe and educate MAC audits
 But….CERT, ZPIC, OIG, etc. can recoup when they find
noncompliant admissions as a part of their review
process
 Also….MAC can select additional claims as determines
appropriate as result of probe and educate audits
 RACs can do post payment reviews for admissions
prior to March 31, 2015 if there is evidence of
systematic gaming, fraud, abuse of delays in care
Probe, (Deny) and Educate Audits
 Review a “small” sample of claims spanning 0 or 1 midnight
after formal inpatient admission. 10 to 25 claims per
hospital.
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Determine compliance with new rules
If no issues, MAC will cease further such reviews
Based on results, CMS will conduct education during the following 3
months.
If moderate to significant concerns or major concerns…..additional
probe reviews will be undertaken for admissions between January
and September 2014.
Providers identified as having continuing concerns after the 6 month
period- samples of 100 claims (250 for large hospitals) will be
selected.
MACs are not to review claims spanning 2 or more midnights after
formal inpatient admission for appropriateness of IP admission
 Still have appeal rights for denied claims
Probe, (Deny) and Educate Audits
 Pattern of denials are emerging
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Inpatient order signed after discharge
Denials of 1 Midnight inpatient stays citing one or both of the
following:
Lack of indication of a 2 midnight expected stay (front end)
 Lack of documentation of an unexpected recovery (back end)
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One IP midnight stays will continue to be target for aggressive
auditing
One day stays……review pre-bill…..very few should be filed for Part
A
 Two midnights….but only one IP midnight…high probability for
denial. It is unknown whether appeals will be effective at any level.
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2 Midnight Rule- things to consider
 Use electronic health record to put in a “hard stop”
so discharge orders cannot be entered if the
admission order has not been signed.
 Look for ways to garner appropriate physician
documentation of “expected 2 midnight stay”
 Look for ways to raise physician awareness of need to
document “unexpected faster recovery”.
 Review all 0 and 1 inpatient midnight stays prior to
billing.
Post Discharge Provider Self Audits
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 Applies to determinations after discharge and results in
billing IP “provider liable” and then bill for Part B
 Must be pursuant to UR Committee Review (CoP
482.30(d)(historically applied to admissions and continued stay reviews)
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Must consult attending and offer opportunity to present his/her
views
1 member if attending agrees or fails to present views
2 members in other cases
Written notice must be given within 2 days to
hospital/patient/attending
 Cannot just send an email to the CBO to bill as Part
B….must go through UR Committee process
Could Observation denials be coming?
 Auditors to date have paid little attention to obs
 There has always been a medical necessity requirement for
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obs
Reimbursement was low….now is higher - $1,199
CMS has expressed concerns about increased number of obs
patients and length of stay – a driver behind 2 MN rule
Patients must still require “hospital level of care” for obs, but
less than 2 midnights
CMS has said – there should be no payment for IP or OP care
when a patient can be safely discharged from the ED.
RACs could choose to retrospectively review obs when the
“pause” ends.
RAC/MAC/QIC Flip-Flop Denials
 Seeing cases where the RAC denied IP case for lack
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of indication for surgery. For example….saying the
procedure was not indicated (unilateral knee
replacement).
Upon Appeal- MAC denies appeal saying there was
no need for the service and also says the case should
have been outpatient…not inpatient. ?????
Appeal to QIC on both indication for surgery and IP
status.
QIC denies solely on the IP versus OP question.
Now at ALJ level of appeal
OIG Medicare Compliance Reviews- Risk Areas
Areas that OIG focuses on during OIG Medicare compliance reviews, although not necessarily all at
once:
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Outpatient claims paid greater than charges
Inpatient payments greater than $150,000
Outpatient payments greater than $25,000
Payments for hemophilia services
One-day stays at acute care
Major complication/comorbidity and complication/comorbidity
Payments for septicemia services
Payments for inpatient same-day discharges and readmissions
Payments for outpatient surgeries billed with units greater than one. (usually a clerical error)
Outpatient claims billed during DRG payment window
Inpatient manufacturer credits for replacement of medical devices
Outpatient manufacturer credits for replacement of medical devices
Post-acute transfers to SNF/HHA/another acute care/non-acute inpatient facility
SNF/HHA consolidated billing — outpatient services
Outpatient claims billed with modifier 59 (unbundling)
Inpatient claims paid greater than charges
OIG Compliance Reviews
More Medicare compliance reviews are occurring,
underscoring the HHS Office of Inspector General’s
commitment to this new multi-faceted strategy for
auditing hospitals.
• OIG picks hospitals partly based on:
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Their past performance on single-issue audits;
Where they stand compared to other hospitals’ billing volumes
according to CMS’s Program for Evaluating Payment Patterns
Electronic Report (PEPPER); and
Whether there is continued “poor performance” (e.g., Medicare
administrative contractors and quality improvement organizations
have been to hospitals and “tried to educate them,” for example,
with little success).
OPEN DISCUSSION