Medicare Advantage Audits July 14, 2010

Why audit MA utilization? Implicit expectation in CMS Fraud, Waste and Abuse guidelines No other review of billing accuracy prior to this audit engagement In 2007 and 2008 precertification and pre-note were optional Terms and Conditions allow retrospective audits

Terms and Conditions 2007-2008 Private fee-for-service product No contracts between BCBSM and hospitals Hospitals were considered “deemed” Deemed provider requirements described in T&C Hospitals must comply with all Medicare and other federal health care program laws, regulations and program instructions that apply to the services furnished to members, including inspections and audits. Refer to BCBSM website for Terms and Conditions www.bcbsm.com/ma/terms_and_conditions.shtml

Why outsource? To gain industry expertise Limit ramp up time Selected Health Data Insights because they were the premier audit vendor for the CMS Recovery Audit Contractor (RAC) demonstration project. HDI also selected for RACs in the western region Handle the Payment Error Rate Measures (PERM) nationwide for Medicaid Audit vendor for Humana and other commercials

What’s happened so far… Two complex audit categories established DRG validation Short stay hospitalizations Through June 2010, HDI has requested over 14,000 medical charts Monthly requests to minimize resource impacts at hospitals Volume of chart request varies by facility-averages 14.5% of annual inpatient admissions Initial findings are consistent with RAC demonstration project findings Facilities not providing medical records will receive a Technical Denial letter which denies the entire stay

When hospitals disagree with the findings Appeals Process 1st level-internal to HDI 2nd level-external to Peer Review Organization of Michigan (PROM) BCBSM tested the initial short stay results 22 randomly selected medical records were reviewed independently by a BCBSM Medical Consultant. Our findings were consistent with HDI BCBSM found that IS/SI not met Level of care was not as an inpatient but at the “observation or outpatient” level. 

Concerns Voiced by Hospitals Increased audit activity by all payers High volume of medical chart requests Confusion about InterQual vs. CMS guidelines Want more rationale for findings on HDI reports Prefer batch response to continuous updates Process is different from RAC and other BCBSM audits

Understanding the differences RAC audits versus this one Timelines are different Appeals – PROM versus CMS designated entities Recoveries done after appeals not before Not charging hospitals interest Both follow CMS reimbursement policies

HDI Audit Timelines Medical Record Requests – submit within 45 days HDI Findings – within 90 days Hospitals may appeal 1st level – within 50 days HDI response – within 45 days Hospitals may appeal 2nd level within 20 days HDI response - within 45 days

Outpatient Re-bill When inpatient care is denied, hospitals can bill for ancillary services Must generate a new outpatient paper claim Follow CMS guidelines regarding services that can be re-billed (http://www.cms.hhs.gov/manuals/Downloads/bp102c06.pdf) Observation services and surgical procedures are not payable ancillary services Reference the claim number of the short stay denial in the remarks section of the outpatient re-bill Give paper copy re-bills to your provider consultant for processing Submission of an electronic re-bill outside the timely filing limits will reject Follow the CMS Limitation on Liability provisions for member liability