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Aggressive Audits Are Here to Stay:

Radiology Practices Must Proactively


Prepare for New Enforcement Environment

A major government push to uncover most improper Medicare payments are to identify waste, errors and abuse,
reimbursement errors, fraud, waste due to errors, omissions or negligence uncovered improper payments of more
and abuse across the Medicare and and are not the result of fraud and than $1 billion during a three-year pilot
Medicaid programs continues to abuse.2 For example, CMS indicates that program.4 The initiative was launched
gain momentum. New audit initiatives inpatient hospital providers made up nationally in 2009 with four contractors:
aimed at reducing improper provider about 85% of RAC-collected
payments totaling about $24 billion overpayments in 2007. Approximately – Diversified Collection Services,
annually are being rolled out nationwide.1 42% of overpayments were coded http://www.dcsrac.com (Region A:
incorrectly; 32% were deemed medically Maine, N.H., Vt., Mass., R.I., Conn.
To meet this more rigorous enforcement unnecessary or an incorrect service; 9% N.Y., N.J., Md., Del., Pa.)
climate, physician groups should begin had insufficient documentation; and
– GCI, http://racb.cgi.com/Default.aspx
taking steps today to fully understand 17% were listed as other (see Figure1).3
(Region B: Ky., Ohio, Mich., Ind.,
the range of emerging federal and state Ill., Wis., Minn.)
programs. Procedures and safeguards Physicians, therefore, should not be
must be created to identify compliance overly concerned that improper – Connolly Consulting, http://www.
risk and limit practice exposure. Finally, payments will automatically result in connollyhealthcare.com/RAC/
practices should establish internal civil sanctions or criminal prosecution. pages/cms_RAC_Program.aspx
systems to respond promptly and Nevertheless, the rapid expansion of (Region C: Ala., Ark., Colo., Fla.,
appropriately if they’re contacted by federal and state healthcare enforcement Ga., La., Miss., N.C., N.M., Okla.,
auditing agencies. programs means that many, if not most, S.C., Tenn., Texas, Va., W.Va.)
practices can expect to face some form
By taking a proactive stance, practices of reimbursement scrutiny in the – HealthDataInsights, https://
can reduce the likelihood of costly and months and years ahead. racinfo.healthdatainsights.com/
disruptive compliance problems. They home.aspx (Region D: Mo., Kan.,
can also enjoy the peace of mind that Multiple Initiatives La., Neb., S.D., N.D., Wyo., Mont.,
comes with a rigorous and well-conceived Among the most visible and far-reaching Idaho, Utah, Ariz., Nev., Calif.,
approach to compliance. of the CMS programs is the Medicare Ore., Wash., Alaska, Hawaii)
Recovery Audit Contractors Program
The Centers for Medicare and Medicaid (RAC), www.cms.hhs.gov/RAC/. RAC, All of the contractors have now published
Services (CMS) has acknowledged that which relies on third-party contractors their initial targeted measures but continue
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to add new areas. Their Web sites should no means the only initiative under way. consistent with Medicare and
be regularly monitored as new measures Other major audit programs include: Medicaid coverage and coding
will continue to be added. policy. ZPICs perform data analysis
– Error Rate Reduction Plan (ERRP): aimed at identifying potential
Under the RAC program, analysis is ERRP detection and prevention problem areas, investigate potential
conducted and corrective plans are components include review of fraud and develop fraud cases for
developed to help prevent future medical records prior to payment civil and criminal referral.7,8
payment errors. The tools used to help by Medicare intermediaries.5 http://www.cms.hhs.gov/manuals/
prevent improper Medicare claims include: http://www.cms.hhs.gov/manuals/ downloads/pim83c04.pdf
downloads/pim83c12.pdf#10
– Data analysis – M
 edicaid Integrity Program
– C
 omprehensive Error Rate (MIP): The Deficit Reduction Act
– Provider education Testing (CERT): CERT relies on (DRA) provides for CMS’ first-ever
periodic review of sample claims national strategy to detect fraud
– Automated prepayment review to extrapolate the total number of and abuse in the joint state and
(auto-deny edits) improperly coded claims. Like many federal Medicaid program. A
of the CMS initiatives, CERT relies companion program, known as
– Pre-payment review (medical record on an independent contractor.6 Medicaid Integrity Contractors
review before a claim is paid) http://www.cms.hhs.gov/CERT/ (MIC), relies on external contractors
to perform audits, conduct data
– Post-payment review (medical – Zone Program Integrity mining and develop reporting tools
record review after a claim is paid) Contractors (ZPICs): CMS is across Medicaid.9
replacing its Program Safeguard http://www.cms.hhs.gov/
While the RAC program is currently Contractors with seven regional DeficitReductionAct/02_CMIP.asp
the primary enforcement focus for ZPICs. The ZPICs help ensure that http://www.cms.hhs.gov/Provider
many provider organizations, it is by payments are appropriate and Audits/Downloads/mipprovider
auditfactsheet.pdf

Figure 1. 2007 RAC Overpayments – P


 ayment Error Rate
Measurement (PERM): This
initiative, which also relies on
independent contractors, was
implemented to measure improper
payment in the Medicaid program
and the State Children’s Health
Insurance Program (SCHIP).10
http://www.cms.hhs.gov/perm/

At the state level, emerging enforcement


trends include the creation of independent
Medicaid inspectors general, enactment
or enforcement of state false claims
acts, and new penal statutes.

Taken together, the various state and


federal programs represent the most
comprehensive governmental fraud,
waste and abuse efforts to date. The
creation of independent auditors and
increased staffing levels to support
the new efforts demonstrate that
enforcement is a top priority at CMS.
As a result, experts say, providers
Source: CMS RAC Status Document, FY 2007, Status on the Use of Recovery Audit Contractors (RACs) must become even more vigilant and
in the Medicare Program, February 2008, 13-14.
proactive in their compliance efforts.
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“In the long run, compliance is a lot less Leoce identified a number of lessons
expensive than attempting to prove your learned that are applicable to hospitals
innocence after an enforcement action and physicians and are relevant for any Enforcement Audit Focus-
has been launched,” said Joe Lineberry, enforcement program:
compliance officer, McKesson Revenue OIG, RACs
Management Solutions. “For physicians, – Communication is vital: Develop
hospitals and other providers, it is critical a team approach throughout - Payments for
that coders be fully informed about the revenue cycle management. diagnostic X-rays in
latest changes or directives. Ignorance is Individuals from patient financial
no defense.” services, case management and hospital emergency
health information management departments (volume)
Preparing for the Inevitable must be actively engaged in the
Key steps for preparing to meet process of chart reviews and should - Place of service errors
compliance investigations and inquiries be ready to submit appeals within
include establishing internal protocols to specific time frames.
(facility vs. nonfacility)
better identify and monitor areas that
may be subject to review. In addition, – Identify your problem areas: In - Evaluation and
rigorous compliance programs for many cases, you won’t know what management services
documentation and coding should be area the RAC is data mining for
during global surgery
implemented. Practices should also errors. Look for request patterns. Is
ensure that all services provided are the auditor reviewing coding errors, periods
compliant with Stark regulations and medical necessity or some other
other rules. issue? Stay informed by contacting - Areas with a high
providers and hospital associations density of Independent
Enforcement information, articles and willing to share their experiences.
documents – such as the annual Office of Diagnostic Testing
Inspector General Work Plan – should be – Stay consistent with your action Facilities (IDTFs)
continually monitored. Any audit request plan: Establish a well-defined (utilization, volume,
letters should be tracked to glean process for conducting primary and ordering)
additional, unpublished information. secondary medical necessity reviews
RAC and other enforcement program at all points of entry. Document
Web sites should be monitored to identify outcomes in an action plan and - Enrollment standards
new areas of focus and to determine re-educate to ensure compliance. for IDTFs (technologists,
which areas may affect the physician equipment, supervision)
practice. Groups should investigate – Use technology: Technology is
and confirm the scope of any audit, your greatest asset in a RAC audit.
including how many codes are affected, The electronic health record can - Physician reassignment
the dollar value and what percent has assist in expediting accessibility, but of benefits (fraudulent
been found to be overpaid in order it must be supplemented with a use of NPIs)
to determine the total potential risk. universal tracking method.11
Finally, groups should be prepared
to work with payors to resolve issues Timely Response Is Critical - Payment for services
and be ready to promptly repay any Because many of the federal and ordered or referred by
confirmed Medicare overpayments. state investigative programs, including excluded providers
RAC, rely on independent contractors
Lynn Leoce, corporate director of Case who are compensated based on the
Management for Adventist Health System, funds they recover, the new wave of
- Duplicate payments
said that the key to success in overcoming inquiries are likely to be aggressive and for global/TC billing in
a RACs audit is “developing an internal sustained. Moreover, given the diversity hospital; picked up by
program that [can] meet the demands of investigative programs, initial queries RAC Region D
of the audits while also identifying may be difficult to recognize due to
and eliminating problem areas a lack of familiarity with the program - HealthDataInsights
identified during chart audits, including and/or its contractor.
record-keeping and billing.” Adventist’s - Expect additional
two Florida divisions, with a total of It is therefore vital that providers doing contractors as well
17 hospitals, experienced RAC audits as business with government payors
part of the RAC demonstration project. develop plans to respond promptly and
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appropriately when initially contacted for information is escalated into a By repeatedly reinforcing to employees
by an enforcement entity. First, they full-blown audit, investigation or the importance of timely responses,
need to be sure the contractor for their unannounced site visit. providers can meet the required time
area has the correct contact person and frames for responding to auditor
appropriate address on file. Additional Promptly funneling all investigative inquiries while expediting the investigative
strategies can include staff training and requests to a centralized authority encounter and minimizing its disruption
the creation of procedures to ensure within the organization – be it the legal to ongoing operations.
that all regulatory queries and or compliance departments, or both –
communications – whether they arrive can also serve to mitigate potential Appealing RAC Results
via the postal service, e-mail or telephone – problems at the outset of an inquiry. If an alleged payment violation identified
are immediately routed to the appropriate For example, investigators may have in a RAC audit can’t be confirmed, or
compliance group or individual. In addition, questions about a specific action or the alleged overpayment is incorrect or
timely responses must be generated in charge that, upon the surface, appears unfounded, providers should consider
accordance with previously determined suspicious. However, informed managers appealing. It is important to remember
internal policies and guidelines. or decision-makers within the organization that a claim denial or a finding of
may be able to provide a ready and overpayment resulting from a RAC audit
Sending the Wrong Signal reasonable explanation for the apparent can be appealed through the standard
Failing to respond to investigative anomaly, thus satisfying investigators Medicare appeals process.12
inquiries due to uncertainty or and quelling further inquiry.
confusion about who should answer According to CMS, of the 525,133
and in what fashion could have Devising a System overpayment claims, 22.5% were
undesirable consequences. Tight Mechanisms for ensuring a timely appealed with 34% ruling in the
deadlines could easily be missed. response to investigative inquiries provider’s favor and, of those, 7.6% were
Alternatively, investigators might obviously will vary depending on the overturned (see Figure 2). Importantly, a
get the impression that the provider size and complexity of the provider provider win at any level in the appeals
organization simply isn’t taking the organization. In all cases, employees process reduces the RAC contractor
query seriously. It may also conclude should be trained to forward external contingency payment to zero.13
that a nonresponse is evidence investigative communications immediately
of a poorly run organization or, to the appropriate internal individual or For example, Adventist Florida hospitals
even worse, an attempt to stall the department, regardless of the method, (excluding the Orlando facility and its
probe. The net result may be that origin or content of the query. campuses) appealed 43% of the 4,954
what began as a routine request

Source: RAC invoice files, RAC Data Warehouse, and data reported by the Administrative Qualified
Independant Contractor (AdQIC) and Medicare claims processing contractors.
5

overpayments identified by the RAC 6. Centers for Medicare and Medicaid Services,
during the demonstration project and What Can You Do? Comprehensive Error Rate Testing, Overview,
http://www.cms.hhs.gov/CERT/.
have been successful in overturning 24%
of the appeals as of October 31, 2008. - Assess current risk 7. Michael Apolskis, “CMS Selects Zone Program
Appeals are still in process for 19% Integrity Contractors,” Blog, October 5, 2008,
of the RAC-identified overpayments.14 http://medicareupdate.typepad.com/
Therefore, a rigorous appeals stance is - Create and implement medicare_update/2008/10/the-centers-f-1.html.
a vital tool for defending against and procedures and 8. R - Zone Program Integrity Contractor (ZPIC,
deterring ongoing audits of any type.
safeguards Solicitation Number: RFP-CMS-2007-0027,
https://www.fbo.gov/index?tab=core&s=opp
An Ounce of Prevention ortunity&mode=form&id=fe7dfb031088cc14f
Perhaps the most important step physicians - Ensure all services 5502d0e88903c8b.
can take in reducing the risk of an audit
provided are compliant 9. Centers for Medicare & Medicaid Services
is to reduce or remove the incentive for Center for Medicaid & State Operations
a contractor to pursue the practice in and documented in the Medicaid Integrity Group, “Comprehensive
the first place. That means eliminating patient’s record Medicaid Integrity Plan of the Medicaid
overpayments and noncompliance. By Integrity Program FY 2006 – 2010,” July 2006,
http://www.cms.hhs.gov/DeficitReductionAct/
establishing an effective, proactive plan Downloads/CMIP%20Initial%20July%202006.pdf.
that identifies and resolves issues before - Continually monitor
the auditor shows up, groups can enforcement 10. Payment Error Rate Measurement-Overview,
mitigate potential risk. http://www.cms.hhs.gov/PERM/.
information
Finally, it is worth remembering that 11. Lynn Leoce, “Teamwork and Technology:
Keys to Surviving the RAC Audit,” Performance
audits can affect not only organizations - Investigate and confirm Strategies 2, no. 6 (February 2008).
but also individual employees. Lewis the scope of any audit
Morris, chief counsel to the Inspector 12. Andrew B. Wachler and Jessica L. Gustafson,
General stated, “The Office of Inspector “Recovery Audit Contractors and Medicare
General strongly believes that, in addition - Resolve confirmed Audits: Successful Strategies for Defending
Audits,” RBMA Bulletin (September-
to holding corporations accountable issues before the October 2008).
for healthcare fraud, individuals who
caused the fraud should also be held auditor shows up 13. Ibid.
accountable. Healthcare executives
and compliance officers have a vital 14. Leoce, “Teamwork and Technology.”
responsibility to ensure the compliance 1. The Medicare Recovery Audit Contractor
of the organizations that they serve.”15 Program: An Evaluation of the 3-Year 15. Office of Inspector General, “OIG Enters
Demonstration, Report, Centers for Medicare into Civil Monetary Penalties Settlement
and Medicaid Services, U.S. Department of with Former Hospital Executive Director,”
In summary, the permanent RAC Health and Human Services, June 2008, page 6, Press release, Office of Inspector General,
program will focus annually on new http://www.cms.hhs.gov/RAC/Downloads/ Department of Health and Human Services,
areas where there is a high potential RAC_Demonstration_Evaluation_Report.pdf. October 5, 2009.
for claim or medical necessity errors.
Focus on the previous areas will not go 2. Centers for Medicare and Medicaid Services,
“Overview of Medical Review (MR) and
away, and their continued monitoring Benefit Integrity (BI) Programs,” Medicare
will remain important. However, more Program Integrity Manual, Chapter 1, page 6.
areas will be added and will require the
same evaluation of audit risk. The need 3. Centers for Medicare and Medicaid Services,
for performance analytics, evidence-based “CMS RAC Status Document, FY 2007: Status
on the Use of Recovery Audit Contractors
clinical documentation, effective utilization (RACs) In the Medicare Program,” February
management activities, medical records 2008, pages 13-14.
supporting claim submissions and
efficient tracking of the denial and 4. The Medicare Recovery Audit Contractor Program.
appeal process will be ongoing. Scrutiny
will only continue to increase as the 5. Centers for Medicare and Medicaid Services,
“The Comprehensive Error Rate Testing
government and payors look for ways Program,” Medicare Program Integrity
to take cost out of the healthcare Manual, Chapter 12 and Section 12.3.9,
system. With any audit, the goal will http://www.cms.hhs.gov/manuals/downloads/
be to proactively improve processes to pim83c12.pdf.
avoid potential future take-backs.
Learn More
Centers for Medicare & Medicaid Services, RAC Permanent Program
www.cms.hhs.gov/RAC/

RAC Expansion Schedule


www.cms.hhs.gov/RAC/Downloads/RAC%20Expansion%20Schedule%20Web.pdf

American Hospital Association on the RAC Program


www.aha.org/aha/issues/RAC/index.html

Healthcare Financial Management Association on the RAC Program


www.hfma.org/library/reimbursement/medicare/RAC.htm

The RAC Report


http://ezines.hcpro.com/publication/archives/11202009_6895.html

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