In a recently released transmittal, CMS has addressed an issue that has been a thorn in the side for providers since the RAC demonstration project.
Transmittal 659 addresses the issue of reporting of recoupment for overpayment on the remittance advice (RA). A remittance advice is a notice of payments and adjustments sent to providers, billers, and suppliers. After a claim has been received and processed, a Medicare contractor produces the RA, which may serve as a companion to a claim payment (or payments) or as an explanation when there is no payment.
The issue and confusion surrounding remittance advice involved the inability to track RAC recoupments back to prior claims electronically, according to Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc.
"When RACs had made a denial and were entitled to recoup money, they would recoup it off of a future payment, but this amount was not tied back into a particular claim," says Hoy. "So it was difficult for providers to take that amount and offset it against a prior claim to keep their records correct."
This system, or lack thereof, would result in incorrect records. A RAC could be recouping against "Mrs. Smith's" claim, but the provider couldn't track it back, and a year down the road you'd be unable to look at "Mrs. Smith's" claim and know that the RAC actually recouped some part of that money, according to Hoy.
"It was a problem for people who received recoupments in the demonstration," says Hoy. "And now that RAC audits and denials are in full swing, providers have likely been asking for a fix from CMS."
Now, when a recoupment demand is made, the system will initially assign a control number at the claim level for the claim being recouped. This control number is later used on the RA when the money is actually offset from the provider's payment. This will presumably allow electronic posting of recoupments to individual claims through the use of the control number.
"If somebody takes money away from you, you have to track back to the original account it was applied to, and now you can do that much easier" says Hoy. "This is definitely something designed to benefit providers."
As part of the healthcare reform package approved last month, federal government agencies must expand the current recovery audit contractor program to Medicaid and Medicare Parts C and D no later than December 31, 2010.
One initial reaction of this announcement might have someone asking "Isn't that what Medicaid Integrity Contractors (MIC) are for?" Unlike RACs, MICs, which are part of the Medicaid integrity program, do not receive any portion of recoupment funds.
"It is unlikely that this will give providers any relief from the perceived inaccurate payments by the Part C plans as this does not appear to address those payments," says Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc. "The Part C RAC provisions appear to focus on CMS payments to Part C RAC contractors rather then their payments to providers."
On the Medicaid side, this will be difficult because instead of four main RACs, there could be 50 different Medicaid RACs, though it remains to be seen how this will be implemented. Perhaps there will be some aggregation of the states, but unlike Medicare, it will be difficult because each state has different Medicaid provisions.
During the RAC demonstration project, which only operated in New York, Massachusetts, Florida, South Carolina, and California, RACs successfully corrected more than $1 billion in overpayments from providers and underpayments refunded to providers. Experts say those figures will surely rise with the implementation of the permanent RAC program and expansion into Medicaid and Medicare Parts C and D.
The Medicare Appeals Council issued a decision on one of the many outstanding appeals from the RAC demonstration project, which ultimately resulted in a win for providers.
O'Connor Hospital in San Jose, CA, originally appealed four claims, three of which were found to be "fully favorable" to the provider, and were granted Medicare coverage for inpatient services by the Administrative Law Judge (ALJ). The fourth claim was denied coverage for inpatient hospitalization because the services were not considered to be reasonable and necessary, however, as stated in the decision, the ALJ found that the "observation and underlying care were warranted."
This is of particular interest because the RAC's revised initial determination on one particular claim stated that the provider had received an overpayment for the inpatient services, but the beneficiary met the criteria for outpatient observation, according to Debbie Mackaman RHIA, CHCO, regulatory specialist for HCPro, Inc.
"The ALJ decision was partially favorable to the provider and it stated that payment should be made under Medicare Part B for those services that cannot be made under Medicare Part A, and CMS went on to the appeal the decision," Mackaman says.
CMS requested to move the determination up to the fourth level of appeal, stating that the ALJ "erred by ordering Medicare payment for the observation and underlying care" because those services are not separately billable under Part A. Thus, this position was considered to be inconsistent with guidance set forth in CMS manuals, particularly the Medicare Benefit Policy Manual, Chapter 6, § 10.
Ultimately the Administrative Qualified Independent Contractor (AdQIC) was directed to the appeals council to coordinate with the MAC for payment to the provider for those separately billable Part B inpatient services, and thus offset any Part A overpayment. The appeals council also stated that it "will not take own motion review" of this case and that the ALJ's September 16, 2009, decision is binding.
There are many claims dating back to the RAC demonstration project that have yet to be resolved up through the five levels of appeal, but this decision provides optimism, according to Mackaman. The appeals process can be long and costly, with some appeals taking over two years to get to the highest level of appeal, for Judicial Review in the U.S. District Court. Winning an appeal at a lower level, such as with the ALJ, saves time and money for the many staff involved, potentially involving the provider's legal counsel, as well.
"This decision should give providers encouragement that the parties responsible for reviewing the cases are familiar with and follow CMS guidance in the manuals even though they are not bound by law to follow them," says Mackaman.
Providers may not be taking full advantage of the RAC discussion period, but as review results letters continue to arrive, that could change.
The RAC discussion period begins with the time that either the demand letter (automated reviews) or review results letter (complex reviews) is received through the time recoupment occurs, according to CMS. This period of time was implemented by CMS as a way for providers to have an open discussion about how a RAC may have made its determination and allow the provider to provide additional information.
The discussion period is a valuable resource for providers looking to avoid the appeals process, according to Debbie Mackaman RHIA, CHCO, regulatory specialist for HCPro, Inc.
"As a provider, if I receive a review results letter or demand letter, I would want to look at them in a timely manner and then start that discussion period as soon as possible since the clock is ticking," says Mackaman. "If you can provide additional information to support your position and potentially reverse the RAC’s decision, why wouldn’t a provider want to use that period of time?"
Making use of the discussion period may not be something all providers have fully embraced. However, if the RAC’s determination can be reversed during the discussion period, the associated costs are employees’ time to research and discuss, whereas the appeals process can be lengthy and expensive, especially when legal counsel becomes involved. In the end, using the discussion period is a low-risk move that can ultimately pay for itself.
For Carol Kendall, RHIA, RAC coordinator and compliance auditor at High Point Regional Health System in High Point, NC, taking advantage of the discussion period was well worth the effort. "We were able to overturn one DRG change, and saved a CC on another one that will still have a change related to a procedure code; definitely worth the call," she says.
The discussion period is a significant tool for providers to use, but it does have a number of items that need specific attention, in order for a result to be successful, Mackaman says. To start, any facility that is subject to RAC audits should have a RAC team in place. Forming a committee—whether new or existing employees—to deal with the RAC process is an essential part of any facility.
Checking the documentation is the next step, Mackaman says, to make sure all paper and electronic records in a hybrid environment are sent, and that the documentation is consistent.
Also, she suggests pre-reviewing the record prior to receiving the RAC response to save valuable time in anticipation of entering into the discussion period.
"One of the biggest things is timing and tracking, and making sure that as soon as the RAC response is received, you are responding, reviewing, and preparing to enter into that discussion period, when appropriate," says Mackaman.
Ultimately, providers want to properly defend their organizations against RACs and not find themselves with the need for a discussion period. However, in a field of highly detailed, complicated subject matter, perfection is a lofty concept.
The discussion period is essentially an olive branch extended from the RACs to providers that can be used to save money and learn from mistakes. Its purpose is to show the RAC that there is information that would help overturn a decision to recoup funds, and facilities that are not utilizing it or preparing themselves properly may be doing themselves a disservice.
"If facilities don’t have their RAC teams set up to monitor requests and responses in a timely manner, they are going to miss out on that opportunity," says Mackaman. "All providers should be aware of the purpose and the value of the discussion period."
The three-day payment window rule has remained unchanged since its implementation in 1998, yet much confusion still surrounds the issue.
In the most recent CMS Hospital Open Door Forum, the issue was the hot topic, with a number of callers asking for further clarification regarding the rule and the subsequent RAC denials that have come as a result.
Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc., has been speaking and teaching about this rule for a number of years and shed some light on this complicated issue. The three-day rule states that all diagnostic services provided three calendar days before the calendar day on which the patient is admitted are bundled and paid as part of the inpatient stay. However, the rule states that nondiagnostic preadmission services are only bundled if they are related to the inpatient stay.
Hoy says "related" is a key concept for providers to understand. CMS defines "related" to the admission as an exact match of all digits between the ICD-9 principal diagnosis code assigned for both the outpatient preadmission services and the inpatient stay. Thus, whenever Part A (inpatient) covers an admission, the hospital may bill nondiagnostic preadmission services to Part B as outpatient services as long as they are not related to the admission (exact match of diagnosis codes), according to the Medicare Claims Processing Manual.
Hoy says some providers have found it difficult to segregate inpatient and outpatient services that happen during the same encounter because they typically only register the patient once for each encounter.
"The hospital does not assign separate diagnosis codes for the inpatient and outpatient portions of the encounter, but rather codes the entire record as one encounter," she says. "This results in the outpatient services ending up on the inpatient claim because the facility can not determine which services should be billed separately."
Hoy provides an example: Say a patient comes in for a therapeutic cardiac catheterization procedure on an outpatient basis, and as a result of the procedure the patient is admitted to the hospital with a complication, such as an infection. Clinically, the catheterization is related to the inpatient admission for the complication.
However, the principal diagnosis code for the inpatient admission would be related to the complication and not the procedure, whereas the principal diagnosis code for the procedure would be the clinical reason for the procedure. In this case, the catheterization should be billed separately as an outpatient services, Hoy says.
Yet, if the hospital admitted the patient after the surgery and maintained one clinical record and registration for the patient, they have no way to identify this, she adds.
"The RACs are looking for these scenarios where the outpatient surgery was done for a reason unrelated to the inpatient admission, but the hospital nonetheless put everything on the inpatient claim," she says. "What they should have received was the medical DRG for the complication, but what they may have gotten was the DRG for cardiac surgery or for a procedure unrelated to principle diagnosis, much higher paying DRGs."
MACs creating additional obstacles
In addition to the complicated nature of separating out the individual claims, providers may have received inaccurate information from their Medicare Administrative Contractor (MAC). During the CMS Hospital Open Door Forum in January, a caller explained that a contractor advised that if services are clinically related that they must be combined on the inpatient claim regardless of whether the diagnoses match, which simply isn't true.
"Providers read the information and try to apply it correctly, but are then told by the MAC that they are wrong and that they must be grouped together," says Hoy. "The rule states that there has to be an exact match of the diagnosis code on the inpatient and outpatient claims and CMS confirmed that on the recent Open Door Forums."
Despite all the perplexity of the three-day payment rule window, there are a number of options for providers to avoid problems.
If a provider is receiving inaccurate information from a contractor, he or she can work with the Regional Office to get the contractor to apply the rule correctly to the claims. If the problem is an internal one, read the rule carefully in the Medicare Claims Processing Manual and make sure that the practice's policies are in compliance with the rule and that even though the practice may think it is being conservative by lumping everything into the inpatient claim, it's not how CMS looks at it, according to Hoy.
Two of the four RACs added Medically Unlikely Edits (MUE) to their list of CMS-approved issues earlier this year, which gives RACs a new set of issues to study, including physician services.
MUEs are units of service edits for HCPCS codes when a single provider/supplier render the services to a single beneficiary on the same date of service, according to CMS.
While physician services have not been the target of RACs since early in the demonstration project, the approval of MUEs by Connolly and HDI puts them back on the RAC radar. (CGI had approved the issue as well, but has since removed it.)
While physician services have not been a primary focus for the RACs, they have been targeted by MACs, CERT contractors, and the Office of Inspector General, says Peggy S. Blue, MPH, CPC, CCS-P, regulatory specialist at HCPro, Inc.
Blue gives an example of how physician services may be at risk. "For example, let's say a unit of drugs is 10 units, and there's a medically unlikely edit for 10, but a provider bills 100 units, it's going to trigger that MUE," says Blue. "The fact that MUEs are approved by CMS for the RACs to review means that this is an issue that can have claims reviewed, and they can go in and do audits on those claims."
There are a number of reasons that RACs haven't targeted physicians in the past. For one, RACs may have had less of a focus because the largest overpayments will come from Part A hospital billing, and not from physician services, Blue says.
"The big overpayments that RACs are going to find will be in a hospital, but it's probably a matter of time before they really start focusing on physicians."
In addition, physicians fall under Part B billing, and RACs receive 50% of the agreed upon contingency percentage for recovery efforts accomplished through the offset process of Part B claims, as opposed to 75% for Part A claims, according to Blue. However, despite the fact that physician audits will result in lower recoupment amounts, RACs can still target anywhere where there are problems, and physicians should be aware.
"It's something that's always in the back of a physician's mind, but at this point I'm not sure how it will immediately affect anything."
With that in mind, physicians should take the same preventive measures that facilities take against RACs. By making sure the billing is clean, the documentation is in order, and that the bill matches the documentation, this strategy should benefit physicians and prevent audits.
During the demonstration project, RACs chose not to apply the process of extrapolation, and while they have yet to use it during the permanent program, the fact remains that it is still a potential threat.
Understanding how the extrapolation process works will prove to be valuable to providers in the end.
Extrapolation is the use of sampling a specific set of statistics to project an overall error rate to determine overpayment amounts made to a facility. For RACs to use extrapolation, there must be a determination of sustained or high level of payment error, or documentation that past educational interventions have failed to correct the payment error, according to the Program Integrity Manual.
A RAC must then use a trained statistician, or someone with statistical expertise, to choose a valid random sample in the same manner that CMS carriers are instructed to do. The new issue review board must then approve the methodology for the extrapolation process to begin.
Unfortunately, the use of extrapolation can result in an inflated level of overpayment determinations. For example, if the RAC is reviewing how a facility billed drug units for Neulasta, and has determined that the facility has an 80% error rate on reviewed claims, it would be considered a high error rate, according to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.
"Based on that error rate, the RAC could develop a statistically sound sampling and project how many times the error 'probably occurred' on all paid claims from October 1, 2007 forward, and based the total overpayment amount on the sample rather than the actual claims," she says.
If the results of an extrapolation are not appealed by a facility, the RAC is entitled to keep its contingency fee based on the sampling. Because RACs have a limit on the maximum number of medical records that can be requested per 45-day period for complex reviews, providers need to be aware of RACs potentially using extrapolation to determine overpayment amounts.
If a facility has reason to believe it may have a high error rate with a particular RAC issue, it could complete its own extrapolation process, according to Mackaman.
"If the RAC performs an extrapolation and it is inconsistent with the facility's internal audit, an appeal could be considered," says Mackaman. "But keep in mind that if the internal audit is not in favor of the facility, the provider should consider what the next steps are regarding self-disclosure."
On top of running these reviews, facilities also reserve the right to appeal. Providers can: choose to appeal the methodology used in the findings; the sample section (overpayment amount) itself; the initial justification of performing the extrapolation; and the application of the findings, Mackaman says. Although RAC extrapolation is a complex process, facilities can still defend against it.
Overall, preparing for success against potential RAC extrapolation would be the same as preparing for RAC audits in general, she adds. Understanding the issues and performing your own internal audits to identify your potential error rates; keeping current with ongoing RAC activity; implementing a RAC team; and running concurrent reviews are some of the main aspects of diligent preparation against RAC audits that, in turn, will help defend against RAC extrapolation.