Medicare Recovery Audit Contractors: Beyond the Demonstration

Kathy Reep Florida Hospital Association August 26, 2008

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 – At least two states with high Medicare utilization – May not use existing contractor – May compensate based on percent of recovery • Previously prohibited for Medicare – No more than three years – Report to Congress • Six months after completion • Recommendations for extending/expanding project

Reasons for RAC Demonstration

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

RAC Mission

• The RAC program’s mission is to reduce Medicare improper payments through the efficient detection and collection of overpayments, the identification of underpayments and the implementation of actions that will prevent future improper payments

Demonstration States

• CMS selected the three states with the highest per capita Medicare utilization – Florida – California – New York • Expanded program to include additional states as part of demonstration

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

The Process

• The RAC will send a medical record request letter to the provider containing the rationale for each request • Provider has 45 days to respond – No 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 • Follow appeals process for those cases in which provider disagrees with RAC determination

RAC Demonstration

• Excluded overpayments and underpayments – Services other than Medicare fee-for-service – Cost report settlement process – Incorrectly coded E & M services – Claims under one year or over four years old – No random claims selection – No prepayment review

Issues Identified

• Information in medical record did not support the claim – Debridement – Respiratory failure • Discharge status/transfers – claim indicates discharge to home but medical record indicates beneficiary was discharged to another hospital or home with home care • Claims with single secondary diagnosis designated as a complication or comorbidity

Issues Identified (continued)

• Wrong number of units billed – Neulasta – Speech therapy (initial evaluation) – Transfusions – Various procedures • Medical necessity – Inpatient rehab – Short stay admissions, including chest pain, congestive heart failure, and gastroenteritis – Admission for scheduled elective procedures • DRG payment window: outpatient procedures

Demonstration Results

RACs collected $980 million dollars , March 2005 – March 2008

Overpayments Collected by Provider Type

Outpatient Hosp/IRF/SNF 14% DME 1% Physician/ Ambulance / Lab/Other 1.5% Inpatient Hospital 84%

Overpayments Collected by Error Type

Other 17% No/Insufficient Documentation 8% Incorrectly Coded 35% Medically Unnecessary 40% SOURCE: RAC Data Warehouse

History – Demonstration Results Claim RACs Appeals Data

Provider Appeals of RAC-Initiated Overpayments Cumulative through 3/27/08 – Claim RACs Only Number of Claims with Overpayment Collections Claims Appealed By Provider to Any Level Appealed Claims with Decision in Provider's Favor Percentage of Overpayment Determinations Overturned on Appeal

Number Percent Number Percent

All Claim RACs

556,878 76,659

13.8%

25,384

33.1% 4.6%

Source: RAC Data Warehouse and data reported by Medicare claims processing contractors. Includes both completed appeals and those currently pending in the appeals process. These statistics are based on appeals that were known to the Medicare claims processing contractors on or before 3/27/08.

RAC Expansion

• Tax Relief Act of 2006, section 302: makes RAC program permanent and nationwide by no later than 2010

RAC Expansion Schedules – The Timeline Has Slipped

Avoid Interference with MAC Transition

• RAC black out period will allow new MACs to focus on claims processing activities – Blackout period: three months before MAC cutover date and three months after cutover date for a given state

Demonstration vs. Permanent RACs

Strategy Demonstration RACs Permanent RACs

RAC Medical Director Coding Experts Under Tolerance Threshold AC Validation Process Not Required Optional $10.00 aggregate claims Optional Mandatory Mandatory $10.00 minimal claims Mandatory RAC must payback the contingency fee if the claim overturned at any level of Appeal Standardized Letters to Providers RAC must pay back contingency fee if the claim is overturned on the first level of appeal Limited RAC must pay back if the claim is overturned on any level of Appeal Mandatory

Demonstration vs. Permanent RACs

Strategy

Claims Reviewed Number of Records Requested

Demonstration RACs

Records from three prior fiscal years No limit per SOW

Permanent RACs

Claims with initial determination on or after October 1, 2007 To be set by CMS

RAC Demonstration Report

• CMS to publicly release the contingency fee rates paid to RACs • CMS will publicly release each permanent RAC’s accuracy score • Provider outreach – CMS/RAC visits – Posting of issues on RAC Web sites with link to coding guidelines, CMS manuals, local policies, etc.

RAC Demonstration Report- Press Release

• When a new RAC begins to issue its first overpayment notification letters, it will be limited to “black-and-white” billing issues, such as duplicate claims and wrong fee schedule amounts

Other Issues for Consideration

• Issue of extrapolation in the Statement of Work • Impact of RAC reviews on voluntary disclosure and repayment • Reduced contingency fee for funds refunded pursuant to self-disclosure – Identified vulnerability must be included in their project plan

The Issues that Continue

• Contingency fee-based payments • Medical necessity determinations • Look back period • Ability to rebill denied claims • Move to electronic communications • Increased transparency; need for report card • Provider education

RAC Team

• Compliance • Health information management • Case management • Finance/revenue management • Charge master maintainer • Patient financial services • Medical staff • Clinical departments

Be Prepared!

• Need for data collection tool • RAC committee • Single point of contact • Know the rules – On you – On the RAC • Review records before sending to RAC – Support your claim • Look at potential areas of risk

Inpatient Claim Reviews

• Transition from QIO to FIs/MACs – QIOs to focus on quality improvement • Won’t do payment accuracy measurement on inpatient claims – FIs/MACs to start reviews this summer

Inpatient Claim Reviews

• Reviews can be post-pay back to 1/1/08 • Not random reviews – Targeted based on analysis • Pre- or post-payment basis • To use “clinical judgment” – No specific screening tool to be required – Will involve physicians as needed

Inpatient Claim Reviews

• No payment for copying costs • Appeal rights as with other denials – However, filed at initial level with contractor that reviewed the claim and issued denial • CERT contractor to also look at inpatient claims beginning with April 2008 claims

Questions?

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