Hospital Claims Audits: How to Survive

1. Hospital Claims Audits: How to Survive Pamela E. Clarke Vice President of Healthcare Finance and Managed Care Delaware Valley Healthcare Council of HAP

2. Claims Audit Survival Presentation Outline • General Overview of Hospital Audits • Recovery Audit Contractors (RACs) • Medicare Administrative Contractors (MACs) • Medicare Prepayment Audits: Hip and Joint Replacements • Lessons Learned from MAC Audits • Suggested Audit Strategies • Future Considerations

3. Claims Audit Survival Types of Hospital Audits • Medicaid Bureau of Program Integrity- CGI audits • Medicaid RAC Audits • Medicare RAC Program • MACs

4. RACs • Centers for Medicare & Medicaid Services (CMS) instituted the Recovery Audit Contractors (RAC) program in accordance with the Medicare Modernization Act of 2003. • The RAC program is designed to extract waste from the Medicare system by identifying and recovering improper payments paid to healthcare providers. • The RAC program has been successful in reclaiming money through retrospective reviews of fee-for-service claims.

5. RACs • RACs are paid on a contingency fee basis, receiving a percentage of the improper payments they collect from providers. • RAC audits focus on site of care, upcoding, and medical necessity. • RAC auditors may review the last 3 years of provider claims and conduct medical record reviews.

6. RACs • RACs conduct automated reviews of Medicare payments to health care providers—using computer software to detect improper payments. • RACs conduct complex reviews of provider payments—using human review of medical records and other medical documentation to identify improper payments to providers.

7. RACs • RACs are private firms contracted by CMS to audit Medicare fee-for-service claims for: • Hospital inpatient and outpatient • Skilled nursing facility • Physician • Ambulance • Laboratory • Durable medical equipment

8. RACs • RACs look for improper payments such as: • Incorrect payment amounts; • Incorrectly coded services (including Medicare Severity diagnosis-related Group [MS-DRG] miscoding); • Non-covered services (including services that are not reasonable and necessary); and • Duplicate services. • Automated activity includes the traditional automated activity as described above as well as semi-automated review activity. These claims are denied in an automated manner if supporting documentation is not received timely.

9. AHA 2nd Q Review of RACs • 2266 hospitals have participated in the American Hospital Association RACTRAC since data collection began in January of 2010. • Participants continue to report dramatic increases in RAC activity: • Medical record requests are up 22% relative to last quarter. • The number of denials is up 24% relative to last quarter. • The dollar value of denials is up 21% relative to last quarter. • Nearly two-thirds of medical records reviewed by RACs did not contain an improper payment. • More than two-thirds of medical necessity denials reported were for 1-day stays where the care was found to have been provided in the wrong setting, not because the care was not medically necessary.

10. AHA 2nd Q Review of RACs • Hospitals reported appealing more than 40% of all RAC denials, with a 75% success rate in the appeals process. • Nearly two-thirds of all hospitals filing a RAC appeal during the 2nd Quarter of 2012 reported appealing short stay medically unnecessary denials. • Nearly three-fourths of all appealed claims are still sitting in the appeals process. • 55% of all hospitals reported spending more than $10,000 managing the RAC process during the second quarter of 2012, 33% spent more than $25,000 and 9% spent over $100,000.

11. AHA 2nd Q Review of RACs • Hospital staff are spending an increasing amount of time responding to RAC activity. • 58% of respondents indicated they have yet to receive any education related to avoiding payment errors from CMS or its contractors. • The most frequently cited RAC process problem is ‘not receiving a demand letter.’

12. Claims Audit Survival MAC Audits • The Recovery Audit Program Prepayment Review demonstration will allow MACs to conduct prepayment claim reviews to assist in lowering the improper payment rate and to identify potential fraud and abuse in Original Medicare. • CMS stated that the agency is encouraging collaboration between contractors, so that providers are not subject to review for the same topic or issue by two different contractors. • For claims denied through prepayment review, providers will have the right to appeal the denials. • CMS stated that claims reviewed as part of the demonstration project will be "off-limits" from future post-payment reviews from MACs and RACs.

13. Claims Audit Survival MAC Audits • Through the prepayment review demonstration project, a hospital will be eligible to receive an additional 400 requests for medical records every 45 days for prepayment review. • Physicians associated with hospitals may start to see an uptick in requests, as the auditors look for errors at the physician level and the facility level.

14. Claims Audit Survival MAC Audits-Knee Replacements • In order to meet the criteria for a total knee replacement procedure, all of the following must be documented in the patient’s medical record : • Documentation of pain at the knee, including the level of pain and worsening of pain • Pain that is increased with activity • Pain that is increased with weight bearing • Pain that interferes with activities of daily living • Pain with passive range of motion • Limited range of motion • Crepitus • Joint effusion

15. Claims Audit Survival MAC Audits- Hip Replacement • In order to meet the criteria for a total hip procedure, all of the following must be documented in the patient’s medical record: • Pain at hip • Pain increased with activity • Pain increased with weight bearing • Pain that interferes with activities ofdaily living • Pain with passive range of motion • Limited range of motion • Antalgic gait

16. Claims Audit Survival MAC Audits-Hip and Knee Replacements • An x-ray must be obtained and must have at least two of the following findings: • Subchondral cysts • Subchondral sclerosis • Periarticular osteophytes • Joint subluxation • Joint space narrowing

17. Claims Audit Survival MAC Audits-Case Example • Appeal decision by Novitas Solutions, Inc. is unfavorable. • A claim was submitted for a 4-day inpatient hospital stay and denied because the information submitted did not support the need for this service. • Hospital request for redetermination with submission of medical records. Case denied as not covered by Medicare. • Explanation: Total joint replacements require specific documentation re: patient’s condition prior to the joint replacement being performed.

18. Claims Audit Survival MAC Audits-Case Example • To meet criteria for joint replacements, medical record (MR)must include documentation to identify how the patient’s right knee pain interfered with ADLs, range of motion and weight bearing. • MR needs to include tx such as medications, physical therapy or external joint supports that may have been tried. • MR needs to include an x-ray to support the disease process. • X-ray result must have at least 2 of the following findings: • Subchondral cysts • Subchondral sclerosis • Periarticular osteophytes • Joint subluxation • Joint space narrowing

19. Claims Audit Survival MAC Audits-Case Example • MR indicated that patient had increasing right knee pain that limited range of motion. • MR revealed that patient had tried conservative measures such as Mobic, Synvisc injections and ambulating with a cane, with little relief. • X-ray provided evidence of bone on bone disease of the right knee. • MR did not include a second type of evidence to support the disease process such as subchondral cysts, subchondral sclerosis, periarticular osteophytes, or joint subluxation. • Therefore joint replacement procedure and hospital stay cannot be allowed.

20. Claims Audit Survival Lessons Learned • MR documentation must clearly demonstrate that a patient has end-stage joint disease and should include evidence of prior failed conservative therapy. • It is important to note that general physician declaration statements such as “failed outpatient therapies” or “bone on bone” are insufficient to support the indications for joint replacement. • Information in the MR must include details such as therapy from/to dates, specific treatments, therapies and/or drugs used.

21. Claims Audit Survival Lessons Learned • History of patient’s illness from the onset until present including patient’s response and appropriateness (or inappropriateness) of medical management choices for the patient. • Describe the patient’s deterioration, the impact on Activities of Daily Living (ADLs) and any activity restrictions. • Current symptoms and functional limitations due to disease. • It is important to document details about pain, such as the quality, level and what affects it (e.g., movement).

22. Claims Audit Survival Lessons Learned • Clearly document the patient’s use of medications, such as analgesics or anti-inflammatory agents. • Document participation in flexibility and muscle strength exercises, including supervised physical therapy, use of assistive devices or weight reduction, and use of joint injections including dates of administration and length of time effective. • Document the patient’s response to each type of therapeutic treatment. If any treatments are contraindicated, document the rationale for why it is not appropriate for this patient.

23. Claims Audit Survival Lessons Learned • Joint examination with objective findings consistent with historical details. • Describe the details of the joint examination to include range of motion, crepitus, marginal osteophytes, etc. • Include the detailed results of radiographs. • Cases will be denied for lack of admission history and physical or for neglecting to include the physician order for inpatient treatment.

24. Claims Audit Survival Suggested Audit Strategies • To protect against prepayment denials one hospital established a specific policy and procedure that required all the necessary documentation to be collected and reviewed prior to scheduling the procedure. • Hospital staff training should include education for the patient access representatives and pre-admission testing department. • Hospitals need to communicate with physician practices what is required for prepayment audits from a policy and procedure standpoint. • Implement a checklist for physician offices that includes all of the required documentation for the prepayment audits. • Hospitals may need to obtain records from both specialists and primary care physicians to document the full history.

25. Claims Audit Survival Suggested Audit Strategies • Hospitals might proactively obtain previous diagnostic and therapeutic records from the surgeon and other pertinent practitioners. These records include pertinent physician history and physical, progress notes, “consultations,” physical and occupational therapist evaluations and therapy notes, radiologic reports, and relevant therapeutic procedure (such as joint injection) notes. • One large orthopaedic practice decided to designate a MR coder who would review all the documentation prior to sending it to the hospital. • Physician office staff could tag information in the MR so that the auditor can more easily find it. • Send copies of the x-rays with the MRs so that the auditors can clearly see the degeneration of the hip or knee.

26. Future ConsiderationsSupport Advocacy Efforts • Medicare Audit Improvement Act of 2012 introduced by Reps. Sam Graves (R-MO) and Adam Schiff (D-CA) would improve the RAC program and the MACs by: • Establishing a consolidated limit for medical record requests • Improving auditor performance by implementing financial penalties • Requiring medical necessity audits to focus on widespread payment errors • Improving recovery auditor transparency

27. Future ConsiderationsSupport Advocacy Efforts • Medicare Audit Improvement Act of 2012 would improve national audit programs by: • Allowing denied inpatient claims to be billed as outpatient claims when appropriate • Requiring physician review for Medicare denials • Contact your representative today and urge him or her to co-sponsor the bill (H.R. 6575).

28. More Future Considerations • It may be worth the industry considering whether or not a better approach to the medical necessity review process would be to institute a pre-certification process rather than pre-payment reviews. • It is important for the dialogue to continue between CMS, the MACs, the physician community and the hospitals so that all of the stakeholders are confident that the best systems are in place to provide appropriate, quality, reimbursable services for the patients that need treatment.

29. Sources: Novitas Solutions, Inc. Total Joint Replacement-Understanding Documentation Requirements for Inpatient Admission, Provider Bulletin, July 24, 2012. https://www.novitas-solutions.com/bulletins/all/news-07242012.html American Hospital Association. The American Hospital Association’s RACTrac Initiative. Exploring the Impact of the RAC Program on Hospitals Nationwide, Results of AHA RACTrac Survey, 2nd Quarter 2012, August 22, 2012. http://www.aha.org/advocacy-issues/rac/ractrac.shtml Trailblazer Health Enterprises, LLC. Joint Replacement Documentation, Notice ID: 14362, March 14, 2012. http://www.trailblazerhealth.com/tools/notices

30. Contact: Pamela E. Clarke VP, Health Care Finance and Managed Care Delaware Valley Healthcare Council of HAP (215) 575-3755 pclarke@dvhc.org