Preparing for RAC ? Strengthen Your Denials Management Process

1. Preparing for RAC? Strengthen Your Denials Management Process December 19, 2008 Practical, Innovative, Medical Management Solutions

2. PREPARING FOR “RAC ATTACK” Goal Develop a proactive attack plan to prevent financial risk for the organization Assemble a RAC Taskforce Interdisciplinary approach with core players: Utilization Review Medical Records Risk and Outcomes Director Patient Financial Services Director Information Technology Representative Physician Representative (in-house or contracted)

3. PREPARING FOR “RAC ATTACK” Determining the Action Plan • Establish line of authority for hospital wide RAC program • Use existing data to analyze/identify denial drivers • Perform in-house audits and determine hospital wide and system weaknesses • Establish process improvement plans • Develop an interdepartmental tracking system

4. PREPARING FOR “RAC ATTACK” In-House Physician Advisors PROS • Decrease hospital expense • No contingency fees • Existing internal peer relationships CONS • Increases existing physicians work load • Physician often not be specialized in denials management • Difficulty persuading others to embrace practice improvements • Limited ability to produce valuable educational reports and denial tracking reports

5. PREPARING FOR “RAC ATTACK” Results Achieved: Denials Outsourcing FYE 2005 - 29.54% of Total Cost denied - 21.00% overturned after in-house appeal FYE 2006 - 27.53% of Total Cost denied - 44.90% recovered utilizing physician appeal Summary Significant Denials Decrease: - 19.50% is the average recovery prior to program launch - 29.00% is the sustained recoveries since 2006

6. PREPARING FOR “RAC ATTACK” Demonstration Project RAC Statistics • 32% medical necessity denials • 42% incorrect coding denials • 9% insufficient clinical • 88% inpatient • 11% appealed • 5% overturned • 42% of hospitals had no denials issued

7. PREPARING FOR “RAC ATTACK” • Denials Increasing from Numerous Sources • CMS Denials • RAC Denials • Emergence of Medicare “Never Events” Denials • Increased Denials • Medicaid MCO’s • FFS Medicaid • Commercial Payors • Use RAC Preparations as Catalyst to Revamp your Denials Management Process

8. PREPARING FOR “RAC ATTACK” Key Components of an Effective Denials Strategy Primary Strategy - Proactive Prevention • Use data to identify key drivers of denials • Develop processes to mitigate these drivers thereby further reducing denials • Minimize denials through an effective Concurrent Review/Case Management and notification process Supporting Strategy - Denials Recovery • Aggressive appeals process recover denied dollars • Close the loop between approval and payment

9. PREPARING FOR “RAC ATTACK” Primary Strategy: Data Management • Audit existing data to identify opportunities for improvement including areas of RAC emphasis • Use audit results to develop processes that address identified areas of opportunity • Enhance existing UM/CM/SW processes based on audit findings • Develop educational sessions as needed • Re-assess and monitor impact of newly implemented processes

10. PREPARING FOR “RAC ATTACK” Using Data to Identify Opportunities Audit charts for each RAC area of emphasis • Objective chart review using CMS medical necessity criteria (InterQual) • Subjective chart review using physician medical judgment • Data capture and analysis of denial variables Analyze audited data and existing denials data • Diagnosis • Physician • Denial type • Delay reason

11. PREPARING FOR “RAC ATTACK” Denials Management Tracking and Audit Application

12. PREPARING FOR “RAC ATTACK” Building Processes to Minimize Denials • Obtain buy in from key stake holders to improve chances of success - Physicians, nursing, UM, IT • Prioritize process improvement to maximize returns • Select improvements with highest success rate - Broadest impact across all payor types - Simple implementation • Primarily systems enhancements • Minimal resource allocation - Enhance and strengthen existing processes

13. PREPARING FOR “RAC ATTACK” Building Processes to Minimize Denials Examples of Process Improvement Activities • Short stay denials • RAC emphasis • UM/CM/SW process enhancements - Improve communications with payors • Education - Use data to identify educational activities for staff - Employ external resources as needed

14. PREPARING FOR “RAC ATTACK” Short Stay Denials • Case manager assigned to ER to review admissions for select diagnosis based on audit results • Consult done in ER when possible prior to admission • Consider implementing rapid chest pain protocol • Educate ER staff on admissions criteria for commonly denied diagnosis

15. PREPARING FOR “RAC ATTACK” UM/CM Process Enhancements • Hold carriers to timely denial notification by denial log • Use log to eliminate denials for no clinical and to drive peer-to-peer process • Use denials audit results to focus case management and discharge planning activities • Work closely with payor case manager on complex cases

16. PREPARING FOR “RAC ATTACK” Education • Use denial audit results to guide educational initiatives • Physician and UM/CM/SW educational sessions based on frequently denied diagnosis • Hospitalist groups respond positively with impressive end results • Individual physician improvements more difficult to accomplish

17. PREPARING FOR “RAC ATTACK” Secondary Strategy Denials Recovery Ensure processes are in place to maximize denied claims recovery • Develop strong appeals capabilities • Ensure aggressive payment follow through • Ensure strong data capture and reporting capabilities • Use data to identify areas of opportunity to enhance the entire process • Close the loop on denials prevention CQI

18. PREPARING FOR “RAC ATTACK” Advantages of Physician Led Appeals • Recognized as clinical expert vs other clinicians • Able to challenge payers and provide clinical conviction • Peer-to-peer review shown to prevent 15% of denials • RAC auditors must provide a physician for peer-to-peer when requested • Select payors now require a physicians’ name on the appeal

19. PREPARING FOR “RAC ATTACK” The Appeal Process Types of Appeals • Informal peer-to-peer as soon as denial is identified, 1 day of denial • First Level appeal with medical records, 15 to 180 days depending on payor • Second Level for some payors – typically 30 to 90 days • Third Level – for some payors – typically 30 to 90 days • External appeals - usually through the MIA or CMS Complexity of Appeals • Multiple payors  Multiple rules • Multiple levels  Multiple time frames • Multiple regulators

20. PREPARING FOR “RAC ATTACK” A Staged Approach to Appeals Management Automation and Data Management Research & Approval Strategy Development MCO Submission Denial Mitigation through Education MCO Process Management Denial Process & Intervention Reporting Payment Management Process Appeal Response Determination Process

21. PREPARING FOR “RAC ATTACK” Internal Appeals Process • A strong appeals process is critical in developing a successful denials mitigation program. • The components of a successful appeals process include: - Identifying the denial as soon as possible - Collecting medical necessity information - Generating the appeals letter - Managing the payor’s appeal response process - Appeal response determination process - Payment management process - Data management, reporting and performance improvement

22. PREPARING FOR “RAC ATTACK” Identifying the Denial • The EOB is the gold standard and should be cross referenced with other denial sources to ensure denials are correctly identified • For carriers with a short appeal response timeframe the denial must be identified before the EOB is received • Most denials are identified through the denial letter sent from the payor or phone calls • Payor’s daily log is a good source for identifying denials

23. PREPARING FOR “RAC ATTACK” The Medical Necessity Argument • Critical components necessary for success • Timeliness is critical and requires a complex and efficient process to meet the varying requirements of numerous insurers. • Medical necessity knowledge is key to a successful appeal and often requires the leadership and input of a UM trained physician • Intimate knowledge of criteria sets (Milliman, InterQual etc.)

24. PREPARING FOR “RAC ATTACK” Managing The Appeal Response Process • All appeals documentation must be: - Sent by certified mail - Tracking option activated - Follow-up calls to facilitate return of late appeals • Payors fail to return 35% of initial appeals for a variety of reasons • Depending on the insurer, only 35% to 60% of appeals are completed within the required 30 days • Process difficult to monitor without an appeals tracking system

25. PREPARING FOR “RAC ATTACK” • Once an appeal response is received a decision must be made on next steps • If approved, clearly payment must be pursued • If denied: • Should a Level 2 or 3 be pursued? • Should the account be closed? • Should an external review be filed? • Between 10% to 25% of Level 2 or 3 appeals can be overturned • Significant medical necessity knowledge is needed to assess which appeals warrant a Level 2 or 3

26. PREPARING FOR “RAC ATTACK” From Approval to Payment • Assign accountability for payment follow-up • Close the loop between approval and payment • Follow-up with payor to ensure 100% of approvals are paid • Pay close attention to TPA’s

27. PREPARING FOR “RAC ATTACK” Data Management, Reporting and Performance Improvement • Provide monthly results to key players • Status reports provide updates on the appeals process • Actionable reports drive the CQI process • Monitor impact of process improvement activities with tracking and trending of data

28. PREPARING FOR “RAC ATTACK” Summary • Preparation is key • Minimize operational disruptions … its just another denial • RAC demonstration – 42% of facilities had zero denials • Use the opportunity to enhance your denials management process … and come out ahead • Reporting and continuous process improvement are critical

29. Case Management Covenants, LLC Case Management Covenants is a Maryland based healthcare consulting services company specializing in denial management, appeal management and RAC audit preparation services. Key Staff Contacts President: Olakunle Olaniyan, M.D. – still a practicing physician and former managed care VP and CMO. Chief Operations Officer: Iskla “Chris” Brown - nurse executive with many years experience in healthcare accreditation organizations, commercial and government health insurance entities. Vice President, Business Development: Doug Allen – a strategic planning professional with significant experience in both the commercial and non-profit healthcare sectors. 410-715-4913