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AHA Critical Access Hospital Member Call on

Medicare Recovery Audit Contractors

June 18, 2008

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Recovery Audit Contractors

• RAC Update• Legislative Update• RACTrac

OverviewOverview

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Recovery Audit Contractors

• Medicare Modernization Act (Rx bill)– 3-year demonstration project

• Recover overpayments and identify underpayments

• Payment made on a contingency fee basis• 3 states selected based on highest per

capita Medicare utilization: – California– Florida– New York

• Tax Relief and Health Care Act of 2006– Expanded to all states by 2010

BackgroundBackground

– South Carolina– Massachusetts+

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RAC Three-State Demo• Review last four years of provider

claims, including CAHs.• Use automated software programs to

identify potential payment errors• Types of Payment Review

– Duplicate payments – FI errors – Medical necessity– Coding errors

• Hospitals can appeal using the standard Medicare appeals process

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RAC Three-State DemoRAC 2004RAC 2004--06 Performance: 06 Performance:

CMS perspectiveCMS perspectiveRAC Identified Improper Payments

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RAC Three-State DemoFY 2007 RAC Performance: FY 2007 RAC Performance:

Overpayments Collected: $357.2m

Less Underpayments Repaid: - ($14.3m)

Less $ Overturned on Appeal: - ($17.8m)

($77.7m)Less Costs to Run Demo: -

BACK TO TRUST FUNDS $247.4 mSOURCE: CMS 2007 RAC Status Report

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Medicare RAC Demo ResultsRAC Demo Performance: RAC Demo Performance:

20052005--2008 2008 Overpayments Collected in 2004-2006:

= $68.6m

Overpayments Collected in 2007: = $357.2m

Total RAC Collections March 2005 to March 2008 = $980

million**SOURCE: RAC Data Warehouse, CMS presentation on 5/13/08, preliminary estimate

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Where did RACs find Overpayments?Most overpayments were collected from inpatient

hospital services for medical necessity and coding

SOURCE: RAC Data Warehouse, CMS presentation on 5/13/08

OutpatientHosp/IRF/SNF 14%

DME 1%Physician/Ambulance/Lab/Other 1.5%

InpatientHospital 84%

Incorrectly Coded 35%

Other17%

No/InsufficientDocumentation 8%

Medically Unnecessary 40%95% or more

from Hospitals

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RAC Target AreasCoding Targets:• Correct coding for debridement (excisional or not)

– DRG 263/MSDRG 573 and DRG 217/MS-DRGs 463, 464 and 465

• DRGs designated as complicated or having comorbidity with only one secondary diagnosis– DRGs 079, 416, 468, 475, 477 and 483

• Correct coding of discharge status for PAC transfer• Unit Coding

– grams vs. milligram, – number or procedures per day (e.g., appendectomy)

Medical Necessity Targets:• Inpatient admissions for procedures that are eligible for

outpatient surgery (eg. laparoscopy, cholecystectomy)• One-day stays

– Chest pain– Back Pain: DRG 243/MS-DRG 551

• Three-day stays to qualify for SNF care• Inpatient rehabilitation (joint replacement patients)

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RAC Impact on Hospitals

43.4%

Percent of Hospital FY 2007 Revenue Impacted by RACs

0%

10%

20%

30%

40%

50%

60%

70%

80%

No Offsets 0% to 2.5% 2.5% to 5% 5% to 10% > 10%

New York

Florida

California

60.4%

23.2%

31.8%

5.0% 1.4% 1.4%

70.4%

2.0% 0.5%3.9%

25.0%

5.2% 7.0%

18.2%

SOURCE: CMS 2007 RAC Status Report

Over 90% of hospitals in Connolly and HDI’s jurisdictions had their FY 07 revenue impacted by less than 2.5%

68% of hospitals in PRG’s jurisdiction had their FY 07 revenue impacted by less than 2.5%

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RAC Rollout Schedule• RAC Demo ended March 27• Demo evaluation report expected in late

May or early June• 4 new RACs announced early July• CMS/RACs to conduct outreach to

hospitals in first round of RAC rollout– 4-6 weeks if existing RAC– 8-12 weeks if new RAC

• RAC audits begin 4-6 weeks after CMS/RAC education with state hospital association

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National Rollout Plan

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Hospital View• Hospitals strive for accuracy in

service, billing, and coding• Hospitals support program integrity

efforts• Lots of overlap by auditors• RACs’ bad behavior unacceptable

• Fiscal Intermediaries (FIs)• Carriers• Medicare Administrative

Contractors (MACs) • Program Safeguard Contractors

(PSCs)

• Comprehensive Error RateTesting Program (CERT)

• Hospital Payment MonitoringProgram (HPMP) (Run by QIOs)

• OIG Investigations

CMS Audits

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AHA Strategy• Push CMS for administrative changes

– Letters and continual discussions with CMS– RAC improvements for permanent program

• Push Congress for legislative relief– Advocacy – STOP and Fix-it– Capps-Nunes legislation (HR 4105)

• Member Education– Collaboration and education with state, metro

and regional hospital associations– Member advisories and education – RACTrac: Collect data and examples of

egregious behavior

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RAC National RolloutCMS Response to RAC

Problems• No contingency fee when denial is overturned at

any level of appeal• Three-year look-back period for review • No claims with a payment date prior to October

1, 2007 will be reviewed, regardless of the actual start date for the RAC in a state.

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CMS Response to RAC Problems

RAC National Rollout

• Staggered expansion of RACs• Requirement for a web-based

application by January 1, 2010 • Notification of target areas on

RAC website• No funds recouped during first

2 stages of appeals process, ifdenial appealed within 40 days

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If appeal within 40 days – NO

Recoupment

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CMS Response to RAC Problems with Medical Necessity Review

• Required to have a medical director• Limits on the number of medical

records a RAC can request per month• New issue review process• Audit of RAC performance

RAC National Rollout

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AHA Strategy• Push CMS for administrative changes

– Letters and continual discussions with CMS– RAC improvements for permanent program

• Push Congress for legislative relief– Advocacy – STOP and Fix-it– Capps-Nunes legislation (HR 4105)

• Member Education– Collaboration and education with state, metro

and regional hospital associations– Member advisories and education – RACTrac: Collect data and examples of

egregious behavior

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RAC LegislationH.R. 4105

The Medicare Recovery Audit Contractor Program Moratorium Act of 2007

• Rep. Lois Capps (D-CA) Rep. Devin Nunes (R-CA)• 87 Co-sponsors

(19Rs and 68Ds)• 1-year Moratorium• CMS Report• GAO Study

CBO Score: $1 billion over 5 years*Cosponsor list updated as of May 28, 2008

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House Ways and Means Committee

• Today: 10 members; 24% of committee

• National Program Rollout

Stage 1– Spring 2008: 5 members (+12% of committee)

Stage 2 – Fall 2008: 5 members (+12% of committee)

Stage 3 – Jan 2009: 21 members (+51% of committee)

Impact on Key Committees

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Senate Finance Committee• Today only Senator SchumerNational Program Rollout• Stage 1– Spring 2008:

– About one-half of committee: Baucus, Conrad, Bingaman, Kerry, Stabenow, Salazar, Hatch, Snowe, Kyl

• Stage 2 – Fall 2008:– One additional committee member: Ensign

• Stage 3 – Jan 2009:– Remaining committee members added:

Rockefeller, Lincoln, Wyden, Cantwell, Grassley, G. Smith, Bunning, Crapo, Roberts

Hill’s Awareness Growing in Stages

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Senate RAC LegislationDraft RAC Language• Sen. Bill Nelson (D-FL) potential sponsor• Awaiting Mid-May Demo Report• Potential Provisions Included:

– Moratorium– Eliminate Medical Necessity Review– Contingency Fee Method of Payment– Penalty for High Overturn Rate– Look-Back Period– Provider Education

• Small Business Subcommittee Hearing– Regulations, Healthcare, and Trade– Chairman Charlie Gonzalez (D-TX)

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Message to CMS and CongressSTOP and FixSTOP and Fix--itit• Slow down• Reduce or remove contingency

method of payment• Exclude medical necessity from RAC

review• Reduce look-back to 12 months• Centralized electronic tracking platform

of RAC denials and appeals • Exemption from “timely billing” rules• Improved CMS management and

transparency of RAC program– RAC and Provider education

• Bigger focus on UNDERpayments

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AHA Strategy• Push CMS for administrative changes

– Letters and continual discussions with CMS– RAC improvements for permanent program

• Push Congress for legislative relief– Advocacy – STOP and Fix-it– Capps-Nunes legislation (HR 4105)

• Member Education– Collaboration and education with state, metro

and regional hospital associations– Member advisories and education – RACTrac: Collect data and examples of

egregious behavior

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AHA Resources on RACs

SAMPLELETTER

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AHA RACTrac

www.AHARACTrac.orgComing soon!

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What is AHA RACTrac?

• Web-based survey that will collect RAC experience data from hospitals

• Financial impact (Overpayments and Underpayments)• Automatic and complex denials information (numbers and dollars)

• Trends in types of services being reviewed and broad reasons fordenial

• Appeals information• Administrative burden

• Some questions will be running totals – For example: Total number of automatic claim denials to date ______ $________Total number of medical records requested to date ______ $________

• Others will be based on the quarter in which we ask the question– For example Select the reasons cited by the RACs for complex claim denial for this quarter Rank order the denial reasons experienced by number of complex claim denials for this

quarter (Greatest number ranked #1 reason etc.)

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What is AHA RACTrac?

• Unit of analysis is the hospital (and their units)General Medical/Surgical Hospitals (including CAH’s)

This would include units in that hospital (rehab, SNF etc.)Free-standing Long-Term Care HospitalsFree-standing Psychiatric HospitalsFree-standing Inpatient Rehabilitation Hospitals

AHA will NOT collect information from hospital owned freestanding SNFs at this time

• Quarterly data collection to begin after the permanent program rolls out and audits begin

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Why AHA RACTrac?

• Internally tracking RAC audit activity is essential for minimizing financial risk, identifying areas for improvement and surviving the RACs. – RACTrac provides a basic tool to get you started in

organizing your data• Data on the impact of the RACs on hospitals is essential

for AHA to be successful in our advocacy efforts. • Hospital participation in RACTrac will provide AHA and

the State Hospital Associations the data they need to advocate on your behalf.

• Participation in RACTrac will allow AHA to identify trends in reasons for denials across the RAC regions or at the national level. This information can be used to educate the field.

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AHA RACTrac Goals

• Ensure data integrity and security• Provide hospitals with a basic guide for

internally tracking RAC activity• Make it simple for hospitals to report data

to AHA for use in advocacy activities• Use data collected from hospitals to

educate the field about trends in RAC audit activity and to advocate on their behalf

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•Challenge: Need for information vs. data collection burden

•Risk: If too complex, members won’t use it, one size fits all approach is not appropriate at this time

•RACTrac is NOT a claim level data collection tool •RACTrac will NOT collect data from the demonstration

•RACTrac will provide a basic claim-level Excel template that can be rolled up and uploaded into RACTrac should the hospital choose to utilize this feature

A Delicate Balancing Act….

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AHA RACTrac

RACTrac SURVEYCollect RAC

Experience Data

RACTrac SURVEYCollect RAC

Experience Data

Report RAC

Experience

Report RAC

Experience

Claim Level Guide

Claim Level Guide

.

SummaryUpload

File

SummaryUpload

File

Internal Hospital System

Internal Hospital System

RAC Contact Database

Email to Hospital RAC

Contacts

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Vendors in the Marketplace

• AHA is currently working with several vendors who have developed claim level RAC audit tracking tools and would like to make their tools RACTrac “compliant.”

• Ask your vendor – Is your tool AHA RACTrac “compliant?”

• AHA will work with others in order to ensure that its easy for you to report data back to AHA

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National Rollout and Timeline

• www.AHARACTrac.org COMING SOON!• Estimated national release of RACTrac is

currently scheduled for summer 2008– RACTrac Claim level tracking guide – RACTrac Member Advisory– AHA News and News Now– Letters and Emails to all CEOs Following

Member Advisory with Security Codes for Registering in RACTrac

– RACTrac Webinar Series • Data collection to officially begin – fall or

winter 2008 - TBD

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Prepare for RACs Today!

• Establish internal RAC team • Interdisciplinary Team: Coders, Finance,

Clinical, Utilization Review, Case Management• Identify RAC point of contact for internal and

external RAC communications• Develop a central tracking mechanism for all

RAC correspondence• Incoming and Outgoing

• Conduct a self audit to identify potential problems• Participate in RAC trainings

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QUESTIONS

General RAC QuestionsRACinfo@aha.org

RACTrac Questions Alyssa Keefe, AHAakeefe@aha.org

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AHA Critical Access Hospital Member Call on

Medicare Recovery Audit Contractors

June 18, 2008