Medicare Recovery Audit Contractors (RACs)

1. Medicare Recovery Audit Contractors (RACs) Preparing for RAC Audits

2. Presentation Outline • I. Background A. What are the RACs? B. When are the RACs coming to Georgia? C. RAC Focus Areas • II. Case Studies • III. How to Prepare for RACs • IV. GHA Initiatives

3. What are RACs? • Medicare Modernization Act of 2003 created a 3-year demonstration project • Recover Medicare overpayments and identify underpayments—payment mistakes • RACs are paid on a contingency fee basis • 3 states selected for the demonstration project based on highest per capita Medicare utilization—NY, FL, and CA

4. What are RACs? • The Tax Relief and Health Care Act of 2006 required DHHS to make the RAC program permanent and nationwide by no later than January 1, 2010. • The RAC program does not detect or correct payments for Medicare Advantage plans (Medicare Part C) or for the Medicare prescription drug benefit (Medicare Part D)

5. Why Congress Believes RACs are Necessary… • The Improper Medicare FFS Payments Report for November 2007 estimates that 3.9% of the Medicare dollars paid did not comply with one or more Medicare coverage, coding, billing, or payment rules. • This equates to $10.8 billion in Medicare FFS overpayments and underpayments annually.

6. RAC Demonstration • During FY 2007, RACs identified and corrected $371 Million dollars of Medicare improper payements in the demonstration states • Over 96% were overpayments • About 85% of overpayments were from inpatient hospital providers • About 6% of overpayments were from outpatient hospital providers

7. How Do RACs Choose Cases for Review? • Data mining techniques • RACs used the findings of OIG and GAO reports to help target their review efforts • Comprehensive Error Rate Testing (CERT) reports http://www.cms.hhs.gov/CERT/CR/list.asp • Experience and knowledge of RAC staff

8. Overpayments by Error Type in Demonstration Project • 42% Incorrectly coded • 32% Medically unnecessary service or setting • 9% No/Insufficient Documentation • 17% Other

9. Average Overpayment Amounts FY 2007

10. Permanent RAC Program • RACS can review claims for: • Inpatient hospital • Outpatient hospital • Skilled nursing facilities • Physician, ambulance, and lab services • Durable medical equipment

11. Permanent RAC Program • Look back period is 3 years • RACs cannot look for any improper payments on claims paid before October 1, 2007 • RACs can review claims during the current fiscal year • Each RAC must use certified coders

12. Permanent RAC Program • Mandatory limits set by CMS on medical record requests • Mandatory discussion with the RAC Medical Director regarding claim denials if requested by providers • Frequent problem area reporting is mandatory • RACs must pay back contingency fee if their decision is reversed on any level appeal

13. Permanent RAC Program • Each RAC must have a web-based application that allows providers to customize addresses and contact information or see the status of cases • External validation process is mandatory and it is a uniform process

14. Permanent RAC Program • CMS will announce the permanent RACs for the four regions around July 31, 2008

16. RACs Focus on Hospitals • In the three demonstration states, 89% of improper payments were from hospitals

17. RAC Review Process • RACs use proprietary automated software programs to identify potential payment errors • Types of payment review • Duplicate payments • FI errors (i.e. claims paid using an outdated fee schedule) • Medical necessity • Coding errors • No documentation or insufficient documentation to support the claim

18. Types of RAC Reviews • Automated Review • Proprietary software algorithms used to identify clear errors that resulted in improper payments • Complex Review • Medical records requested to further review the claim RACs must use Medicare coverage, coding or billing policies in effect at the time when the claim was adjudicated

19. Automated Reviews • Excessive Units Audit—two or more identical surgical procedures for the same beneficiary on the same day at the same hospital • Use of incorrect discharge status codes • Medically unbelievable situations (i.e. prostate procedure on a female)

20. RAC Focus Areas in Demonstration States • Excisional Debridement • Back Pain • Outpatient vs. Inpatient Surgeries • Transfer Patients • Inpatient Rehab, especially knee and hip replacements • Joint replacement patients and patients in inpatient rehabilitation facilities that should have been treated in a lower intensity setting such as a SNF • Wrong diagnosis or principal procedure codes

21. DRGs Scrutinized in Demonstration States • 079 Respiratory infections and inflammations age >17 w CC • 416 Septicemia age >17 • 468 Extensive OR procedure unrelated to principal diagnosis • 475 Respiratory System diagnosis with ventilator support • 477 Non-extensive OR procedure unrelated to principal diagnosis • 483 Tracheostomy with mechanical vent—96+ hours • 217 Wound debridement • 397 Coagulation disorders • 124 Circulatory disorders except AMI w Card Cath & Complex Diag • 076 Other respiratory system OR procedures w CC • 415 OR Procedures • 082 Respiratory Neoplasms • 148 Major Bowel Note: These DRGs are from the version 25 grouper. These are not MS-DRGs.

22. Outpatient Hospital Areas of RAC Focus • Colonoscopy • Speech Language Pathology Services • Infusion Services • Neulasta (boosts white blood cell counts to reduce chance of infection in patients undergoing chemotherapy)

23. Short Stay Claims • Validate whether the admissions met Medicare’s medical necessity criteria • One-day stays by chest pain patients were targeted by RACs in demonstration states • Many three-day stays were denied because they were inappropriately extended in order to qualify for Medicare Part A coverage of post-acute skilled nursing care

24. Some Case Examples from the Demonstration States

25. Excisional Debridements • Hospital coder assigned a procedure code of 86.22 (excisional debridement of wound, infection, or burn) • In the medical record, the physician writes “debridement was performed”

26. Excisional Debridements • Coding Clinic 1991 Q3 states “unless the attending physician documents in the medical record that an excisional debridement was performed (definite cutting away of tissue, not the minor scissors removal of loose fragments), debridement of the skin that does not meet the criteria noted above or is described in the medical record as debridement and no other information is available should be coded as 82.26 (ligation of dermal appendage).”

27. Excisional Debridements • The RAC determines that the claim was incorrectly coded and issues repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the payment amount for the correctly coded procedure.

28. Inpatient Rehabilitation • An inpatient rehabilitation facility (IRF) submitted a claim for inpatient therapy following a single knee replacement • Medical record indicated that although the beneficiary required therapy, the beneficiary’s condition did not meet Medicare’s medical necessity criteria for IRF care (HCFA Ruling 85-2 and Medicare Benefit Policy Manual Section 110)

29. Inpatient Rehabilitation • Entire claim was denied by RAC • The RAC determines that the service was medically unnecessary for the inpatient setting and issues repayment request letters for the entire claim

30. Wrong Principal Diagnosis • Principal diagnosis on claim did not match the principal diagnosis in the medical record • Example: Respiratory failure (code 518.81) was listed as the principal diagnosis but the medical record indicates that sepis (code 038-038.9) was the principal diagnosis

31. Wrong Principal Diagnosis • The RAC issued overpayment request letter for the difference between the amount for the incorrectly coded services and the amount for the correctly coded services • Most common DRGs with this problem: • DRG 475 Respiratory System Diagnoses • DRG 468 Extensive OR Procedure Unrelated to Principal Diagnosis

32. Wrong Diagnosis Code • Hospital reported a principal diagnosis of 03.89 (septicemia) • Medical record shows diagnosis of urosepsis, not septicemia or sepsis; Blood cultures were negative • Did not meet the coding guidelines for “septicemia”. Urinary tract infection causes the claim to group to a lower payment DRG

33. Wrong Diagnosis Code • RAC issued a repayment request letter for the difference between the payment amount for the incorrectly coded procedure and the correctly coded procedure

34. Neulasta • In the past, the billing code for the drug Neulasta (Pegfilgrastim) indicated that providers should bill 1 unit for each milligram of drug delivered • Several years ago, CMS changed the definition of the billing code to indicate that providers should bill 1 unit for each vial of drug delivered

35. Neulasta • The hospital billed for 6 units of Neulasta • The RAC determined that 5 units of service were medically unnecessary and issued a repayment request letter for the difference between the payment amount for 5 unnecessary vials

36. Colonoscopy • The hospital billed for multiple colonoscopies for the same beneficiary the same day • Beneficiaries never need more than one colonoscopy per day. The excessive services are not medically necessary. • The RAC issued overpayment request letters for the difference between the billed number of services and 1.

37. Outpatient Hospital Speech Therapy • The outpatient hospital billed for each 15 minutes of speech therapy • The code definition specifies that the code is per session, not per 15 minutes • The units billed exceeded the approved number of sessions per day. The excessive services billed are medically unnecessary • RAC issued overpayment request letters

38. Most Frequent Medically Unnecessary Errors

39. Coping with the RACs • Comply with RAC medical record requests. If you don’t submit them on time, the RAC automatically classifies the claim as an overpayment and makes a recovery. • Develop an internal tracking system for medical records requested for review by the RAC

40. One-Day Stays • Develop a system for clarifying unclear admission orders prior to admission • Implement the “admit to case management protocol” • Train utilization/case managers on how to determine medical necessity through the use of screening criteria

41. One-Day Stays • Involve Case Management/Utilization Review staff early in the process. • Provide Case Management/Utilization Review staff to perform initial review of medical necessity for admission while the patient is in the emergency department. • Place UR staff at every point of entry into the hospital (ED, day surgery, centralized admission center, etc.)

42. One-Day Stays • Develop condition-specific pre-printed order sheets that include the appropriate patient status. • Provide Case Management/Utilization Review staffing during weekends and after hours to ensure timely review for medical necessity.

43. One-Day Stays • Train hospital staff (nurses, ED staff, unit clerks, day surgery staff and CM/UR staff) on Medicare’s requirements for appropriate documentation of medical necessity, the use of observation, requirements for changing patient status and use of Condition Code 44.

44. One-Day Stays • Use documentation prompters, stickers on observation charts, and prompters and posters in physician dictation areas to remind physicians of appropriate use of outpatient observation. • Provide one-on-one education to physicians who consistently write unclear admission orders or consistently have inappropriate one-day stays.

45. Review Your PEPPER Reports • Program for Evaluating Payment Patterns Report (PEPPER) • Prepared by gmcf • Identifies claims patterns that are outliers relative to other hospitals in the state • “Top 20” list of DRGs that are prone to certain billing areas • Other problem areas which vary by state

46. Hospital Next Steps • Look at potential areas of risk • Establish single point of contact for RAC • Establish RAC committee—include key hospital stakeholders (finance, UR, Case Management, compliance, legal, medical records, etc.) • Review records before sending to RAC • Support your claim • Understand the parameters • For Providers • For the RAC

47. Hospital Next Steps • Plan to participate in the AHA’s RACTrac to report your hospitals experience with the RAC • www.AHARACTrac.org • Data will provide both the AHA and GHA the data they need to advocate on behalf of the hospitals and to identify trends in reasons for denials • Implement a system for charging RACs for copying costs of medical records (.12/page)

48. GHA Next Steps • Establish RAC Task Force • Establish relationship with RAC—once RAC is announced for our region • Facilitate information exchange between CMS, RAC, and hospitals • Monitor RAC activities with Georgia providers

49. GHA RAC Task Force • A multi-disciplinary cross-section of GHA members including CEOs, CFOs, legal counsel, compliance officers, case/utilization managers, medical records, and others • Task Force will provide guidance and feedback to GHA as we develop strategies and tools to assist members in dealing with RACs

50. RAC Resources • http://www.cms.hhs.gov/RAC/ • http://www.cms.hhs.gov/CERT/CR/list.asp