RACs, ZPICs, OIG, CERT: Are You Safe?

1. RACs, ZPICs, OIG, CERT: Are You Safe? JoNell Moore, Principal jmoore@eidebailly.com 701.239.8690 Eide Bailly LLP

2. Agenda • RAC activity • Items under review by RACs • Impact of ZPIC, OIG, CERT reviews • Items to consider for successful appeals • Miscellaneous issues • Q & A

3. RAC Race • 1,631 PPS hospitals have reported RAC activity through March 2013 • 81% of hospitals less than 200 beds reported RAC activity • 96% of hospitals with more than 200 beds reported RAC activity • Record requests have increased by 47% since 4th quarter 2012

4. RAC Race • From RAC website: • Question: Will Critical Access Hospitals (CAH) be subject to Recovery Audit Contractors (RAC) review? If so, how will the funds be recouped? • Answer: Yes, Critical Access Hospitals are subject to RAC review. Any adjustments will be reflected on the final PS&R. If the cost report has already had a final settlement, the amount will be demanded and then offset against future claims if not paid in full by the provider.

5. RAC Race • 278 CAHs nationwide have reported RAC activity (automated reviews) For both PPS and CAH: • Nearly 2/3 of records reviewed did not include an overpayment • Nearly 3/4 of hospitals with RAC activity reported receiving at least one underpayment determination

6. RAC Race • 62% of medical necessity denials were for 1 day stays where “the care was provided in the wrong setting, not because the care was medically unnecessary”

7. RAC Race • Automated review – computer determines • Complex review – human review of a medical record • Semi-automated review – 1) use the computer to detect errors; 2) notification letter sent to provider but allows 45 days to submit records • Individual claim determination – complex review performed by RAC in the absence of a written Medicare policy, article, or coding statement

8. RAC Race • 40% of RAC denials were appealed with 72% success rate in overturning the appeal • However, nearly 3/4 of all appealed claims are still sitting in the appeal process • Most of these appeals are for short stay medically unnecessary denials • Value of appealed claims is $1.1 billion • $169.4 million overturned denials

9. RAC Race • Average dollar value of an automated denial was $576 • Average dollar value of a complex denial was $5,704

10. RAC Race RAC’s focusing on: • CAHs & PPS • Short stays • Telemetry documentation • Medical necessity for joint replacements • Medical necessity for CTs • Drug units • Lumbar facet blockades • Incorrect place of service • Global surgery periods • Billing the correct units of drugs

11. RAC Race Skilled Nursing Facilities • RAC’s reviewing: • “unbundling errors”---specifically the billing of therapy • high utilization of “ultra-high therapy” RUGs • three-day qualifying stays • SNF consolidation requirements • physician certifications • billing of CT scans • ambulance transports during SNF stays

12. RAC Race RAC’s Reviewing: • Stents and Syncope & Collapse (top MS-DRG’s denied in terms of dollar impact) • 59% of hospitals with underpayment determinations due to incorrect MS-DRG’s • 20% due to incorrect discharge disposition

13. RAC Race • RAC’s to review first Home Health claims • Automated review of partial episode payments (PEP’s) • New issues proposed for RAC reviews include: • Low utilization payment adjustments (LUPA’s) • High rates of therapy utilization episodes • High number of subsequent episodes (recertifications)

14. RAC Race • For smaller facilities they are allowed to request up to 35 records per 45 days • For larger facilities they are allowed to request 400 records per 45 days • CMS reserves the right to exceed the limits at their discretion • For Skilled Nursing Facilities - a “record request” is for the full EPISODE of care - all medical records for all claims for services from admission to discharge • Starting to see physician payment denied if hospital payment is denied (Trailblazer, Highmark, First Coast)

15. RAC Race • Congressmen Sam Graves (R-MO) and Adam Schiff (D-CA) re-introduced the Medicare Audit Improvement Act • Written to rectify problems identified with RACs

16. ZPICs • Zone Program Integrity Contractor • Program Safeguard Contractors • Medicare Integrity Program Contractors • Identify potential fraud pre- or post- pay • Medicare Parts A, B, C, D – currently, a focus on physicians, DME suppliers, physical therapy, Long Term Care

17. ZPICs • Divided into 7 zones • Review claims, conduct data analysis • Patient phone interviews, questionnaires • Unannounced visits • Physician licensure validation • Review of cost reports • Target providers with prior infractions

18. ZPICs • Audits can also be triggered by: • Complaints reported to the OIG, hotline or by fraud alerts • Referrals from MACs, other contractors or law enforcement • Review a small number of claims and extrapolate the amount of overpayment

19. ZPICs • No time limit on how far they can go back to audit • Often go back multiple years • Often considered the “most dangerous weapon in the Medicare arsenal” by the legal community

20. CMS Proposed UPIC’s • Proposed new integrity contractor • Folds ZPIC’s and MAC’s into UPIC’s (Unified Program Integrity Contractor) • Both Medicaid and Medicare integrity activities • RAC’s will remain in place

21. OIG Activity • Office of Inspector General • Established 1976 • Protects the integrity of the Department of Health & Human Services • Protects the health and welfare of beneficiaries • Largest inspector general’s office in the Federal Government with 1,700 employees

22. OIG Activity • Oversight of Medicare and Medicaid • Along with oversight of: • Centers for Disease Control and Prevention • National Institutes of Health • Food and Drug Administration

23. OIG Activity • 6 components • Immediate Office of Inspector General • Office of Audit Services • Office of Evaluation and Inspections • Office of Management and Policy • Office of Investigations • Office of Counsel to the Inspector General

24. OIG Workplan • Released each fall (October typically) • Swingbed analysis comparing reimbursement in a CAH versus a SNF • Review of hospices (82% of hospice claims for beneficiaries in nursing facilities did not meet coverage requirements) • Review of physician E&M codes, global surgery periods, modifiers • Review of sleep studies

25. CERT Reviews • Comprehensive Error Rate Testing Contractors • Randomly selects claims submitted for payment each day (post pay only) • Requests medical records to identify billing patterns • Categorizes errors as: insufficient documentation, medical necessity, incorrect coding, or other Continued…

26. CERT Reviews • Improves system edits • Updates coverage policies and manuals • Conducts provider education • Used by CMS and the RACs to determine what areas to review

27. Cases • Harmon County Healthcare Authority (HCHA) and Dr. Abraham, Hollis, OK • Submitted claims that violated Anti-kickback Statute and Stark due to a contract with Dr. Abraham that provided “excess and unreasonable payment” that included” • Free rent for office space • Free billing and staff personnel • Reimbursement of uncollected accounts receivable • Duplicative per encounter payments for ER services • Improper payment of locum tenens physician services

28. Cases • HCHA agreed to pay $550,000 • Dr. Abraham agreed to pay $1,000,000

29. Cases • Coon Rapids, MN man charged with stealing prosthetics and medical supplies from Minnesota Medical Center Fairview • Stole the prosthetics and supplies to sell on eBay • “Used false pretenses” to persuade patients to give him prosthetics they were not using • Not sentenced yet

30. Cases • Last 4 months the OIG has released 11 audit reports regarding hospital billing patterns for outpatient drugs • $12 million in overpayments • Related to incorrect application and reporting of billing unit multipliers (billable units) • Herceptin, Remicade, Lupron

31. Cases • Yennier Capote Gonzalez convicted of 5 counts of fraud, 2 counts of aggravated identity theft, and 1 count of money laundering • Used the address of a Tennessee barn to bill claims after stealing the identify of a physician • Restitution of $19,296 and 5 ½ years in prison

32. Cases • Optometrist Jeffrey Sponseller, Augusta, GA billed $800,000 in fraudulent claims • Claimed he saw 177 patients for 45 minutes each in a day • Five years in prison, $250,000 fine, and restitution of the $800,000

33. Cases • Illinois physician, Mahmoud Yassin, altered a progress note to show an in-office exam that had not taken place after an FBI agent subpoenaed patient records • 10 years in prison, fine of $250,000 and a “special assessment” of $100 • 3 years of ‘supervised release’ after prison

34. Cases • Fairfax Nursing Center, Fairfax, VA (SNF) • Violated False Claims Act by submitting claims for non-reimbursable therapy (excessive, not necessary, duplicative, performed without clear goals) • Two therapists were whistleblowers • SNF agreed to pay $700,000 to resolve • Whistleblowers received $122,500 collectively

35. Cases • GlaxoSmithKline paid more than $3 billion for unlawful promotion of drugs, failure to report safety data, and false pricing • Merck Sharp & Dohme paid $950 million for unlawful promotion and marketing of the pain killer Vioxx • McKesson Corporation paid $190 million for inflation of pricing information resulting in Medicaid overpaying for these drugs

36. Appeals • Administrative Law Judge (ALJ) level of appeal (3rd level) is the best level at which to receive a favorable decision • Very unlikely to get a favorable decision at the Redetermination level or the Reconsideration level • Overturn rate at the ALJ level may be due to: a) it operates independently from CMS; b) there is an independent review of each case; c) the provider has the opportunity to present live testimony

37. Appeals • A provider should request from the ALJ a copy of the “Medical Panel Review Form” that the QIC created during the reconsideration denial • This document will contain the rationale of the denial by the QIC as well as their credentials • Recent development: Medical Directors are allowed to participate in the ALJ hearings although cannot ‘act as a physician and render clinical opinion’

38. Appeals • ALJ has the discretion to render a favorable decision “on the record” without a hearing • Therefore, very important to have a complete record, solid medical and regulatory arguments documented • If there is a hearing, the provider submits a hearing memorandum (all the documentation, arguments, rationale, medical reasoning, regulations, etc.)

39. Appeals • RAC Informational Letters----informs you they intend to pursue an overpayment or underpayment • Need to research and determine if you agree • Gather information to defend the claim • Wait to receive a RAC demand letter from your FI/MAC

40. Appeals • New study by OIG stated that ALJs are overturning too many appeals which resulted in a crackdown by CMS • ALJs are now being rotated • Statistical arguments by the providers are very effective • Appeals must be signed or thrown out

41. Appeals • Effective argument includes “how could we have known” • Need to document impact of chronic illnesses to justify therapy or for an inpatient admission • Appeals for Medicare Advantage claims go to different department in CMS • ALJs have the discretion to stray from the NCDs, LCDs for “good cause”

42. Appeals David Glaser of Fredikson & Bryon states: • Be careful with verbiage in appeal letters • Refer to “reviews” versus “audits” • Refer to “failing to support the code billed” versus “overcoded” • Do not use the words “abuse” or “fraud” • Refer to “refund” versus “overpayment” • Refer to specific education in corrective action plan without making promises

43. Survival • Top tips for surviving RAC reviews: • Clean up your electronic and hybrid records before submitting to the RACs • Review your standing orders to ensure compliance • Number the pages, highlight pertinent areas when submitting for review • Understand the internal cost for managing the RAC process – depending on health system size, may range from $10,000 to $100,000 plus

44. Survival • Education, Education, Education (include physicians) • Monitor what is happening in the ‘RAC attack’, websites, articles • Conduct some internal reviews on billing, coding, documentation, payments, ‘paperwork’ requirements • Review your compliance plan, policies, procedures • Learn about the appeals process

45. Survival • Watch for association updates • Engage some external reviews of the coding and documentation • Review denial process and subsequent claim submission • Review documentation for both nursing and practitioners individualized documentation

46. Survival • Review of policy and adherence to policy for appropriate patient status • Track denials and review causes • Review the work of the Utilization Review staff/case management/discharge planners--software, criteria • Is Emergency Dept criteria for selecting E&Ms being followed

47. Survival • Review forms and completion of the forms (admissions, HIPAA, therapy certifications) • Review discharge status • Perform self reviews of billing, coding, documentation • Monitor PEPPER reports • Review physician documentation to support medical necessity • Review physician orders

48. Survival • Review criteria for 1-day stays • Review criteria for observation stays • Review Medicaid denials • Treat weekend days just like any other • Avoid copying and pasting templates • Begin discharge planning ASAP • Use the word “because” in documentation

49. Miscellaneous Issues • Supervision Ruling • Therapy Caps • Cyber Insurance • RAC Insurance • Senior Medicare Patrol

50. Questions?