Medicare Recovery Audits (RAC) Presented by: Shannon McGee, Director Florida Hospital Patient Financial Services March 5, 2009

About Florida Hospital Operating in Orlando, FL since1908. Largest hospital within the Adventist Healthcare System Not for profit acute care hospital. More than 3,000 beds over 7 campuses operating under one Medicare provider. 111,200 admissions in Largest Medicare provider by admission in the U.S.

RAC Program Overview CMS was directed to conduct demonstration of audit recoveries under Medicare Modernization Act Section 306. RAC objective : Identify overpayments and underpayments by Medicare. Recover overpayments and return to Medicare Trust Fund. RACs are paid on a contingency basis for both overpayments and underpayments discovered on audit. RAC is to be permanent and nation wide by 2010 according to the Tax Relief Act of 2006, section 302.

RAC Program (continued) Audit Types: Complex – RAC requests medical records. Medical necessity not met, IP vs. OBS, IP vs. OP care, incorrect DRG. Automated – mostly OP services, duplicate or wrong units, charge errors, billing modifiers, discharge/transfer status.

Demonstration vs. Permanent RAC Demonstration No limit on chart requests 4 year look back, excluding current fiscal year. RAC must pay back contingency fee if overturned at FI/MAC level of appeal. RAC not required to hire certified coders or Medical Directors. CMS allowed billing TOB 13X for IP claims that could be billed as OP with “override” of timely filing limits. RAC reviews not audited for accuracy by independent contractor. Limited standardization of letters to providers. Permanent 10% average monthly Medicare claims with maximum of 200 charts per 45 days. 3 year look back with oldest date October 2007, including current fiscal year. RAC must pay back contingency fee when overturned at any level of appeal. RAC must hire certified coders and Medical Directors. CMS is disallowing billing TOB 13X unless it meets timely filing limits. RAC reviews will be audited for accuracy by CMS appointed contractor. Standardized letters required.

Florida Hospital’s RAC Experience Total Claims Audited = 7,672  Medical Necessity = 5,670  DRG = 1,279  Automated = 723 June – November 2007  Average 1,290 chart requests per month  Majority of claims adjudicated by RAC 4Q07 - 1Q08

Florida Hospital’s RAC Experience Appeal Statistics To Date Total Claims Reviewed by RAC 7,672 Total Denied Claims 3,030 (39.5%) Total Appealed 2,610 (86.1%) Win Rate on Appeal 1,633 (62.6%) RAC – 52 (2.0%) FI – 140 (5.4%) QIC – 1,420 (54.4%) ALJ – 21 (.8%) Pending Determination 973 (37.3%) FI – 154 (5.9%) QIC – 781 (29.9%) ALJ – 38 (1.5%)

Centralize Communication Designate a Coordinator  Receives and distributes RAC notices  Maintains distribution list  Maintains the tracking tool  Communicates with all disciplines concerning each phase of audit  Monitors follow up process to resolution of claims

RAC Committee Members  Executive Leadership  Revenue Management  Patient Financial Services  Compliance  HIM / Coding  Case Management  Denial Management  Medical Director  Compliance

Define Policies and Procedures Document Process Flow  Audit Notification  Time Limits  Claims Tracking  Appeals Resolution Write and Publish Formal Policy with sign- off from all disciplines.

Essential Data Elements for RAC Tracking Tool Patient Demographics HIC / Claim Number Hospital Account ID Medical Record ID Admit/Discharge/LOS Type of Service DRG Date of RAC Notice Audit (Batch) ID Type of Audit - Reason for Audit Date Records Sent / Tracking Number LOS Reimbursement Risk Reason for Denial Recoup Amounts/Dates Levels of Appeal Appeal Date each level Appeal Responses / Dates Dollars Returned on Appeal / Date Returned Underpayments

Summary: Preparing for RAC Multi-disciplinary engagement. Know your risks:  Inpatient 1 day stays  Medical Necessity  Incorrect discharge status  Coding deficiencies  SNF Placements / 3 day stay  Excess units charged Centralize communication. Form a RAC Steering Committee. Physician education. Define process flow and policies. Comprehensive Tracking of data. Establish a good rapport with your RAC. Communicate with other providers and local and national provider advocates.