Tools to Identify and Defend Patient Financial Services Vulnerabilities

Presentation at HFMA Region 2 Annual Fall Institute - Buffalo, NY

Thursday, October 14, 2010

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Disclaimer

This presentation is the property of Navigant Consulting, Inc. It should not be construed as professional advice on any specific facts or circumstances. The contents are intended for general educational and informational purposes only and may not be quoted or referred to in any publications or proceedings without the prior written consent of Navigant Consulting, Inc., to be given or withheld at our discretion. To request reprint permission for this presentation, please contact the Navigant Consulting, Inc. office of General Counsel, at (312) 573‐5600. The views set forth herein are the personal views of the authors and do not necessarily reflect the views of Navigant Consulting, Inc. Page 2

Introduction ▪ Description

» A common adage about information for insurance claims goes, “If you don’t need it to get paid, then it won’t be saved.” In this era of healthcare reform, this adage is no longer true and has created new risks specifically for Patient Financial Services. » Due to the many compliance and financial risks in play, PFS now needs to collect far more data beyond what is just required to submit a claim and must save that information long after it is paid. In this presentation, we will cover steps that Patient Financial Services should take to prevent money being taken back later by government auditors.

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Introduction ▪ Agenda

» Major Changes: The Alphabet Soup of Auditors » Current Focus: Documentation for better coding accuracy to support APR-DRGs » Other PFS compliance “check-list” to avoid post hoc revenue reductions » Leaning Forward: Data-mining from PEPPER Reports, Quality Indicators and other resources that you already have Page 4

Agenda

Major Changes: The Alphabet Soup of Auditors

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Major Changes: Alphabet Soup A Brief History

» The Joint Commission (JC) has been requiring hospitals to collect and submit data on core measures since 2001 » Now called the Hospital Quality Alliance, a collaborative effort between multiple organizations, JC, CMS, AHA, NQF » Measures are published on the CMS website under “Hospital Compare” and the JC’s website under “Quality Check” » Many current state and other payors collect and publish quality measures Page 6

Major Changes: Alphabet Soup How is Quality Measured?

▪ How does quality measurement relate to vulnerability of claims audits?

» Payments for claims are becoming increasingly dependent on quality outcomes for episodes of care ▪ Quality measures require much more collection and saving of data than what’s needed for submitting a claim » Yet, employees who collect data for quality measures do not require certifications, and may not have sufficient skills ▪ Several different types of quality measures » Process » Outcome » Patient-reported » Facility-reported Page 7

Major Changes: Alphabet Soup How is Quality Measured?

▪ Two very different ways of collecting quality data ▪ “Passive” data retrieval » Based strictly on administrative/coding data » Used for CMS mortality measures and several new measures for FY10 – readmission and AHRQ Patient Safety Indicators ▪ “Active” data capture and transmittal » Abstractor review a chart for specific data elements » Complex data rules that may change every six months » Allows for “scrubbing “ opportunities (for better or worse) ▪ Critical Access Hospitals are currently exempt from the Hospital Acquired Conditions payment provision and Present on Admission indicators Page 8

Major Changes: Alphabet Soup Growth of Retrospective Payment Auditors

▪ The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) restructured Medicare contractors » FIs – Fiscal Intermediaries » MACs – Medicare Administrative Contractors » MICs – Medicaid Integrity Contractors » MIG – Medicaid Integrity Group » PROs – Peer Review Organizations » PSCs – Program Safeguard Contractors » RACs – Recovery Audit Contractors » QIOs – Quality Improvement Organizations (re-purposed) » QICs – Qualified Independent Contractors » ZPICs – Zone Program Integrity Contractors Page 9

Major Changes: Alphabet Soup Inter-Connected Example

▪ ▪ The U.S. Department of Justice (DOJ) is dramatically increasing its compliance oversight activities of healthcare providers.

» These activities represent a stronger collaboration with the Health and Human Services Office of Inspector General (OIG) and state agencies to aggressively target specific types of paid claims for in-depth investigation. Until recently only the Attorney General could authorize issuance of a Civil Investigative Demand (CIDs) which may seek document production, responses to interrogatories, or sworn deposition testimony before litigation has actually commenced. » On March 24, 2010, however, the DOJ expanded the ability to issue a CID under the False Claims Act (FCA), by delegating that authority to U.S. Attorneys as well as the Assistant Attorney General for the Civil Division. Page 10

Major Changes: Alphabet Soup Inter-Connected Example

▪ This expansion of authority will provide DOJ leadership with the ability to more quickly issue CIDs, and signals a significant increase in the use of this potent pre-litigation discovery weapon in anti-fraud enforcement efforts. Currently, the DOJ is issuing CIDSs for information related to paid claims for Implantable Cardiac Defibrillators (ICDs - e.g., pacemakers) procedures.

▪ These CIDs are particularly challenging: » All of the medical records for a patient may not be stored in a central location.

» The Medicare National Coverage Determination’s “qualifying” requirements for ICDs create significant additional effort to compile a longitudinal understanding of a patient’s medical history. » The method of clinical measurement for certain diagnoses to establish the medical necessity for the ICD procedure may not be compliant.

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Agenda

Current Focus: Documentation for better coding accuracy to support APR-DRGs

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Short History of CMS DRG System of Reimbursement

▪ CMS DRG » The system was a derivative of the original HCFA (Health Care Financing Administration) DRG system developed at Yale » The system divided inpatient admissions into 23 Medical Diagnostic Categories (MDC) » It utilized ICD coding to determine the assignment of a DRG for an admission » New coding and DRG systems were implemented for both Medicare and non Medicare reimbursement in many states.

• R-DRG • • • • S-DRG AP DRG APS DRG APR DRG Page 13

CMS DRG reimbursement

▪ ▪ ▪ ▪ ▪ ▪ The CMS DRG was determined based the principal diagnosis A relative weight is assigned to each DRG based on the expected resource consumption For many CMS DRG the documentation of specific secondary diagnoses increased the relative value of the admission. This list was named “Complications and Comorbidities (CCs).” This is actually a misnomer The relative weight is multiplied by the hospital’s blended/base rate to determine the amount of reimbursement a hospital would receive for that particular admission A hospital’s blended rate is determined by: » The Medicare budget » The geographic location of the hospital » The hospital status (urban/rural) » Local labor costs The average relative weight of all admissions in a given time period is known as the Case Mix Index (CMI) Page 14

Severity DRGs

▪ Severity adjustment » begins with traditional diagnosis related groups (DRGs) » divides each DRG based on the clinical condition of each case and its relative resource use ▪ Severity adjustment is an attempt to better align payments with resource use.

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R-DRGs: The Birth of Severity DRGs

▪ The R-DRG system or refined DRG system » Levels of severity are assigned to secondary diagnoses » Each R-DRG is assigned a severity based on the severity of the secondary diagnoses along with the principal diagnosis » The highest severity rating of a secondary diagnosis determines the severity level » The system was never widely used but paved the way for the AP-DRG and APR-DRG systems Page 16

Definition of Severity

▪ Severity is defined as the degree of physiological decomposition of body systems.

» What does this mean?

• Severity describes how ill a patient is and what resources are required to treat a patient ▪ Risk of mortality is the likelihood of dying.

▪ Resource Intensity is the relative volume and types of diagnostic, therapeutic and bed services used in the management of a particular disease.

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How is Severity Measured?

Consider: » Principal diagnosis » Secondary diagnosis assignment » “History of” statements in the patient’s record » Certain procedures (nonsurgical/OR procedures) » Certain demographics (age, discharge status) » Historical information, status codes, and social secondary diagnoses (v code) Page 18

3M Severity APR DRGs ™

▪ In the 3M APR DRG™ severity system » Each principal diagnosis is assigned to a DRG » There are four levels of severity and risk of mortality for each R DRG » There are four distinct relative weights assigned to each DRG severity level » The assignment of severity levels is determined by the secondary diagnoses and procedures coded » DRG severity assignment is based on a very complex logic which differs from DRG to DRG » The 3M APR DRG™ system is a “fairer” system of reimbursement but more complicated Page 19

3M Severity APR DRGs ™

▪ Secondary diagnoses in this system are the key elements in determining the severity level » These secondary diagnoses are not merely CMS CCs » They can in fact be historical information, status codes, and social secondary diagnoses (V codes) » Procedures can also influence the severity of the DRG with specific procedure-diagnosis combinations including treatments and non-OR procedures » Many of the DRG severity assignments are dependant on the age and sex of the patient Page 20

3M Severity APR DRGs ™

▪ The data from a patient’s medical record is placed into a complex grouper to determine the DRG, severity level and the risk of mortality ▪ In Maryland, this system is used to determine the reimbursements to several of the large Baltimore area hospitals ▪ Reimbursement to date is determined by the severity level but not the risk of mortality Page 21

3M Severity APR DRGs ™

ICD-9-CM Diagnosis and Procedure Coding  MDC assignment  Medical or Surgical designation  Secondary Dxs calculated for severity leveling  Non-operating room procedures calculated for severity leveling  Severity DRG assignment Page 22

3M Severity APR DRGs ™

Severity level 1- minor Severity level 2 - moderate Severity level 3 - major Severity level 4 - extreme Page 23

Secondary Diagnoses in 3M Severity APR DRGs ™

▪ The same rules apply to severity coding. It is thorough and complete coding.

▪ Any condition that is documented by a treating physician, and: • Clinically evaluated; or • Diagnostically tested; or • Therapeutically treated; or • Causes an increase LOS or nursing care.

▪ Note: In addition to being documented by the physician, only one of the

criteria above must be met in order for a condition to be considered a secondary diagnosis.

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CMS DRG vs. 3M Severity APR DRGs ™

▪ ▪ ▪

CMS DRG Focus

Principal Diagnosis » Acute Myocardial Infarction Secondary Diagnosis – cardiovascular complication » CHF Only one needed to change the DRG – paired DRG has a separate number

Severity DRG Focus

» Principal Diagnosis › Acute Myocardial Infarction » Secondary Diagnosis › › › › › › › › Hypertension Urinary Tract Infection Obesity Family History (secondary Dx) Malignant Hypertension Diabetes Mellitus Non-OR Procedures TPN » Each Severity DRG evaluates the individual severity levels of secondary diagnoses to determine the overall severity of the case .

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“CCs” and Their Impact on the 3M Severity APR DRGs ™

▪ Just because a diagnosis is listed as a “CC” or an MCC in the Medicare DRG system does not mean the condition will have a greater impact on severity in the 3M APR DRG system. Many secondary diagnoses listed as “CCs” have an APR DRG severity assignment of (1) or (2), while conditions not listed as “CCs” may have an 3M APR DRG severity assignment of (3) or (4)!

▪ The focus cannot be on prioritizing conditions listed as “CCs.” All secondary diagnoses meeting UHDDS should be captured.

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“CC” vs. Non-CC Secondary Diagnoses

Complicated and Comorbid Conditions:

» Hyper-osmolar Dehydration (2) » CKD stage IV (2) » Chronic Blood Loss Anemia (2) » A-flutter (2) » Secondary Neoplasm of Lung (2)

Non-CC Conditions

– Asphyxia (3) – – Phenylketonuria (PKU) (3) Disorder Urea Cycle Metabolism (3) – Glycogenosis (3) – Bulimia (3) – Myelopathy (NEC) (3) Page 27

3M Severity APR DRGs ™ Assignment Logic

▪ ▪ The material in these slides is derived in part from our own observation since the logic is proprietary Multiple Steps for the algorythm that assigns level of severity » Assignment to MDC by PDx » Assignment to Severity DRG within MDC by PDX and Procedure Code (Valid OR) » Rerouting (e.g. Chest pain with CAD as secondary dx groups to CAD) » Exclusion of related secondary diagnoses » Non-OR procedures, secondary diagnoses are used to calculate severity (promotions/demotions, age modifications) » Modifications based on class of diagnosis or procedure code » For newborn 8 weight ranges instead of 6 » Use of gestational age codes to classify » Newborns completely restructured!

• 28 Newborn Severity DRGs Page 28

Impact of Documentation: CMS vs. Severity

Data element Patient Diagnoses Patient history Patient’s family history Patient social status “Simple” procedures System “logic” Documentation Coding Under CMS…

Limited key diagnoses impact Impacts in limited instances No impact No impact No impact Simple, can be calculated

manually

Limited key pieces of documentation impacts DRG Inclusion of key diagnoses & procedures can ensure correct CMS DRG assignment without being a “complete representation” of all care the patient received.

Under APR Severity

Most diagnosis may impact Impacts in some cases Impacts in some cases Impacts in some cases Impacts in some cases Complex, can not be calculated manually need software in general

Accurate and comprehensive

documentation should be collected Complete documentation has the potential to impact DRG

Any diagnosis and procedure

and/or combinations of diagnoses and procedures can impact DRG assignment. Coding should be “all inclusive”. Page 29

Impact of Severity Methodologies

▪ Severity-based DRG logic tends to increase CMI at tertiary care/Academic Medical Centers (AMCs), decrease CMI at rural/community hospitals ▪ Cost-based weights tend to “compress” previously charge-based weights » Lower weights for tertiary care services such as cardiac surgery, neurosurgery, transplant services » Higher weights for community hospital cases such as general medicine, obstetrics and general surgery Page 30

Impact of Severity Methodologies

▪ Individual hospital impacts can vary significantly depending on several variables: » Mix of Clinical Services » Quality of Documentation » Quality of Coding » Quality of Abstract Data Page 31

Observations from Maryland

▪ APRs implemented statewide on July 1, 2005 » Statewide case mix increasing at close to 5% • State has placed a 2% “Governor” or cap on case mix growth – 0 – 1% = 80% – 1 – 2% = 50% – – 2 – 4% = 25% >4% = 10% • Average annual CMS increase is approximately 1.5% • Maryland experienced a “learning period” as hospitals became accustom to coding for APR – Increases in depth of coding – Increased interest in CDI programs – Increased record audit process • Those hospitals that started preparing early fared the best.

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Strategy for Physician Documentation

▪ Every diagnosis and procedure must be clearly documented in the record using terminology which is standard for ICD-9-CM codes.

▪ The Querying process must be more comprehensive since there will be an increase in the queries generated.

▪ The best practice is to have the same documentation standards for all systems – thorough and complete will satisfy all systems.

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Clinical Documentation Improvement Physician Education and Training

▪ Education critical success factors were peer-to-peer education i.e. physician to physician, placing education in the context of practice experience of the presenter, participation of the physician during the presentation.

▪ Education can be specific to the clinician’s specialty .

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Documentation Clarification using a Clinical Documentation Specialist- The Physician Query

▪ A question asked to clarify a patient’s diagnosis, provide more detail, or document the clinical significance of an abnormal test result.

▪ To clarify unclear, incomplete, illegible, or inconsistent documentation.

▪ Based upon clinical evidence in the patient’s record.

▪ Respond to a query by documenting appropriate information in the medical record.

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Keys to Documentation Improvement

▪ Robust Clinical Documentation Improvement Program ▪ Clinical Documentation Specialists ▪ Concurrent and Retrospective Queries ▪ Physician Education ▪ Chart Audits ▪ Coder Staffing Improvements and Education ▪ Coder Quality and Productivity Measures ▪ Technology ▪ Data, Data and More Data Page 36

Agenda

Other PFS compliance “check-list” to avoid post hoc revenue reductions

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Other PFS compliance “check-list” to avoid post hoc revenue reductions » »

Charge master consistency vis a vis pricing strategies » Ambulatory Payment Classifications (APCs) for outpatient claims use information assigned by charge masters and from clinical coding in its grouping process » Pricing strategies that involve edits to charge master entries should be monitored for the potential impact on the compliance for claims paid by government agencies Compliance for Correct Coding Initiative edits and bridge routines » The ICD-9 to ICD-10 conversion is, in practical terms, just around the corner » Bridge routines may become a common practice for this conversion and yet create challenges for compliance with the Correct Coding Initiative Page 38

Other PFS compliance “check-list” to avoid post hoc revenue reductions

» » Discounts and vendor contracts vs. kick-backs » Medical device manufacturers are subject to increasing regulatory scrutiny for their consulting relationships » Medical devices reimbursed on a paid claim to a hospital should be monitored for their risk of re-payment in the event of a government investigation of kick-backs to a physician consultant Extended record retention » Information that is not part of the medical record but useful to support a paid claim must also be retained for extended periods » Example: Laboratory order forms Page 39

Agenda

Leaning Forward: Data-mining from PEPPER Reports, Quality Indicators and other resources that you already have

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Understanding Your PEPPER Reports

» Provides hospital-specific statistics for MS-DRGs and discharges viewed by CMS as being at potential risk for payment errors » Outlines hospital-specific data and comparative target area statistics for the state, jurisdiction, and nation » Helps a hospital’s auditing and monitoring activities » » Identifies where a hospital is an outlier for risk areas Identifies areas of potential overpayments and underpayments ▪ Current PEPPER Reports are available for download at: » www.pepperresources.com

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Understanding Your PEPPER Reports Changes in Target Areas

8 9 10 11 1 2 3 4 5 6 7

Continuing

Stroke/ICH Resp Inf Simp Pne 30-day Readm 1DS Chest Pain 3-day SNF Med Back 1DS Med DRGs Sepsis 1DS Excl Trans CC/MCC

Former

Stroke/ICH Resp Inf Simp Pne 30-day Readm 1DS Chest Pain 3-day SNF Med Back 1DS Medical Sepsis 1DS Excl Trans CC/MCC 12 13 14 15

[Discontinued] [Discontinued] [Discontinued] [Discontinued]

1DS Hrt Fail 1DS Eso/gastro 1DS Nutri/meta d/o 1DS Renal Failure » The Current PEPPER Reports make comparisons based on percentile rankings for three comparison groups: • State, MAC/FI jurisdiction, Nation Page 42

Sample PEPPER Report – Hospital’s Reported Claims

Tim e Periods

Q4 FY 2006 Q1 FY 2007 Q2 FY 2007 Q3 FY 2007 Q4 FY 2007 Q1 FY 2008 Q2 FY 2008 Q3 FY 2008 Q4 FY 2008 Q1 FY 2009 Q2 FY 2009 Q3 FY 2009

Target Area Discharge Count (Num erator)

41 32 33 20 32 31 22 27 34 38 34 39

Denom inator Count

54 43 47 33 47 38 35 38 46 45 41 44

Percent Target Area Average (Num erator / Denom inator) Length of Stay (ALOS) Denom inator Average Length of Stay (ALOS)

75.9% 74.4% 70.2% 4.2

5.7

3.7

3.6

4.8

3.2

60.6%

68.1%

81.6%

62.9% 71.1% 73.9%

84.4% 82.9% 88.6%

3.7

4.5

4.9

4.5

4.3

5.1

4.4

4.5

4.4

4.2

3.0

4.0

4.2

3.4

3.6

4.3

4.0

4.1

Target Average Target Sum Medicare Paym ent Medicare Paym ents

$8,658 $12,460 $9,054 $354,996 $398,714 $298,790 $9,251 $8,944 $9,629 $9,179 $10,432 $9,204 $9,989 $10,009 $9,458 $185,026 $286,196 $298,490 $201,939 $281,676 $312,932 $379,590 $340,321 $368,851 Target area discharge for FY 2008 and beyond (numerator) count = total discharges for MS-DRGs 061, 062, 063, 064, 065 and 066 (see Definitions worksheet for complete target area definitions) Page 43

Sample PEPPER Report - Trends in Percentile Comparisons

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Sample PEPPER Report - Changes in Percentile Comparisons

Summary

Change from Q4 FY 2006 to Q3 FY 2009

From Q4 FY 2006 Hosp Proportion Jurisdiction Median State Median National Median

75.9% 70.9% 66.7% 71.0%

To Q3 FY 2009

88.6% 71.4% 69.0% 72.4%

Percentage Point Change

12.7

0.5

2.3

1.4

Note: Data for hospitals with fewer than eleven discharges in the numerator of a target area have been suppressed due to confidentiality requirements.

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Sample PEPPER Report Comparative Risks

A series of PEPPER Target Areas were analyzed • ABC has several PEPPER target areas with high percentiles and volume, which may alert the RAC to potential vulnerabilities 100 90 80 70 60 50 40 30 20 10 0 0 1,000

Performance For Selected PEPPER Target Areas

CC/MCC - MED 2,000 3,000 4,000 5,000 CC/MCC - PROC ONE DAY STAY - MED ONE DAY STAY - PROC 3 DAY STAY TO SNF STROKE RESP INF SIMPLE PNEUMONIA MEDICAL BACK SEPSIS

Cases

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Matching Claims From a Hospital’s IT System - Specifications for Claims Included in PEPPER

Inclusion/Exclusion Criteria

Acute care providers only Claim facility type of "Hospital" Include claim service classification type of "Inpatient" Claim with valid medical record number Medicare claim payment amount greater than zero Final action claim Exclude Health Maintenance Organization claims Exclude cancelled claims

Data Specifications

Third position of the CMS Certification Number = "0" UB04 Form Locator (FL) 4 Type of Bill, second digit (Type of Facility) = 1 (Hospital) or 4 (Religious Nonmedical (Hospital)) UB04 FL 04 Type of Bill, third digit (Bill Classification) - 1 (Inpatient Part A) UB04 FL 03a or 03b is not null (blank) The hospital received a payment amount greater than zero on the claim (Note that Medicare Secondary Payer claims are included) The patient was discharged; exclude claims status code "still a patient" (30) in UB04 FL 17 Exclude claims submitted to a Medicare Health Maintenance Organization Exclude claims cancelled by the Fiscal Intermediary Medicare Administrative Contractor Page 47

Creating Other Percentile-Based Comparisons

» » Quality Indicators are also publicly available on government web sites and can be used to identify target risk areas.

» However, they are not distributed in the same manner of trends and multi-grouped rankings.

A hospital or system can make additional comparisons using the MedPAR data set that underlies the PEPPER reports. Navigant has developed proprietary algorithms in order to: » Replicate PEPPER Reports with current hospital trends after matching claims from an IT system » » » Consolidate multiple hospitals of a system into one Report Define additional Target Areas not in current PEPPER Reports Redefine comparisons based on percentile rankings to self-selected comparison groups Page 48

Speakers

▪ B. Bo Martin, PhD, CFE » Bo is a Director in Navigant's Healthcare Dispute Compliance and Investigations national practice. He consults with counsel and clients in the healthcare industry to resolve payment challenges under Medicare and Medicaid programs, worker's compensation and other federal and state programs, and private contracts between payers and providers.

» Contact: [email protected]

or (312) 583-6921 Page 49

Speakers ▪ Ian Diener, MD, MBA, FAAFP

» Ian Diener is a Director in Navigant Consulting’s healthcare practice and is involved with all aspects of the physician documentation improvement implementation and facility reimbursement projects and presentations. Dr. Diener is very active in the coordination of the inpatient severity auditing process. He is also involved in software development and clinical coding tool development. Dr. Diener’s clinical background coupled with his managerial business systems experience contributes to a unique blend of expertise in project leadership. » Contact: [email protected]

or (570) 643-1650 Page 50

Questions….

Thank You!

Q&A Page 51