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2. Reading and Using the PEPPER Report Stephanie Kessler Partner, Senior Living Services Consulting Group Reinsel Kuntz Lesher Paula G. Sanders, Esquire Principal & Chair, Health Care Practice Post & Schell, PC LeadingAge October 20, 2014 1

3. Disclaimer “The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.” 2

4. http://www.hms.com/our_services/services_program_integrity.asp 3

5. Dear Compliance Officer: As the Medicare Administrative Contractor (MAC)... regularly monitors billing and claim submission data for unusual patterns and data aberrancies....As such, the enclosed data are intended to provide you with information based on your facility's claim submissions, and to serve as an educational tool to assist you in the evaluation of your billing patterns. A recent OIG data analysis on SNF RUG billing trends from 2006 to 2008 indicates that (1) SNFs increasingly billed for higher paying RUGs, even though beneficiary characteristics remained largely unchanged. (2) For-profit SNFs were far more 'likely than nonprofit or government SNFs to bill for higher paying RUGs. Based on these findings, OIG recommended that MACs strengthen monitoring of the SNF billing and conduct additional reviews of SNFs that bill high paying RUGs excessively.... We identified claims with the high paying RUG codes from your facility. Enclosed is a summary of the RUG claims billed by your facility as compared to the J12 average.... Though we recognize that not all of these claims may represent payment errors, we are asking, in, light of the OIG findings, for you to review the data closely and conduct a self audit of the associated claims. If you determine any claims were paid in error, you should submit the appropriate refund.... Scrutiny on Therapy: MAC Letter 4

6. PEPPER (Program for Evaluating Payment Patterns Electronic Report) Have you seen your PEPPER Report? – Reports were released May 5 th through 12 th 2014 – Effective April 2014, PEPPERs will only be accessed through a secure portal – To obtain the report, a form must be completed by the CEO, President or Administrator – Pepperresources.org – Go to Help/Contact Us and use the helpdesk icon or call 1-512-485-2201 5

7. Background TMF Health Quality Institute Identifies areas at risk for improper Medicare payments Supports CMS’ program integrity activities Compares SNF data in 6 target areas to Medicare data for other SNFs: – State – MAC jurisdiction – Nation 6

8. Background Data drawn from SNF UB-04s – Fiscal years 2010, 2011, 2012 Will be issued annually – Anticipated May Data access to Medicare Administrative Contractors (MACs) and Medicare Recovery Auditors (RAs) Not publicly available 7

9. Target Area Development Review of literature regarding SNF payment vulnerabilities Review of SNF prospective payment system (PPS) Analysis of claims data Coordination w/CMS experts OIG report finding 25% of SNF claims wrong 8

10. Target Areas Therapy RUGs w/High ADLs Nontherapy RUGs w/High ADLs Change of Therapy Assessment Ultrahigh Therapy RUGs Therapy RUGs 90+ Day Episodes of Care (EOC >90 days) 9

11. The Formulas Target AreaDefinition Therapy RUGs w/High ADLN= Days at RUX, RVX, RHX, RMX, RUC, RVC, RHC, RMC, RLB D= Days for all therapy RUGs Nontherapy RUGS w/High ADL (RUG III) N= Days at SSC, CC2, CC1, BB2, BB1, PE2, PE1, IB2, IB1 D= Days for all nontherapy RUGs Nontherapy RUGS w/High ADL (RUG IV) N= Days at HE2, HE1, LE2, LE1, CE2, CE1, BB2, BB1, PE2, PE1 D= Days for all nontherapy RUGs Change of Therapy AssessmentN= all assessment with AI second digit “D” D= all assessments Ultrahigh Therapy RUGsN= Days at RUX, RUL, RUC, RUB, RUA D= Days for all therapy RUGs Therapy RUGSN= Days at all therapy RUGS D= All therapy and nontherapy RUGs EOC >90 DaysN= EOC w/LOS >90 days D= all EOCs 10

12. Understanding Percents & Percentiles Percent shows SNF score for target area (N/D x 100) Percentile shows how SNF’s % compares to other SNFs in state, MAC, nation PEPPER shows percentage of SNFs with a lower target area percent OUTLIERS at risk for improper payment – >80 percentile and <20 percentile 11

13. TMF Risks & Interventions Target AreaAt or above 80 th PercentileAt or below 20 th Percentile Therapy or Nontherapy RUGs w/high ADL Risk: Overcoding of ADL status Intervention: Determine if amount of assistance with ADLs as reported on MDS is supported and consistent with documentation in med. record Risk: Undercoding of ADL status Intervention: Same Change of Therapy Assessment Risk: Problems delivering services as anticipated Intervention: Examine factors that lead to the need for the COT assessment (e.g., care planning, scheduling of therapy) Not applicable. Note: SNFs that are using the COT assessment infrequently or not at all may be targeted by MACs or RACs for review to establish whether therapy assessments are being completed as required 12

14. TMF Risks & Interventions Target AreaAt or above 80 th PercentileAt or below 20 th Percentile Ultra High Therapy RUGs Therapy RUGs Risk: Improper billing for therapy services Intervention: Determine if therapy provided was reasonable, medically necessary and that amount of therapy reported on MDS is supported by documentation in the medical record Not Applicable EOC > 90 daysRisk: Provided services beyond the point that they were necessary Intervention: Determine if continued care was appropriate and required a skilled level of care. Review appropriateness of plans of care and discharge plans Not Applicable 13

15. Top RUGs Report: FY 2012 Number of RUG days billed % of RUG days to total days % of EOC with RUG billed to total EOC SNFs ALOS for RUG Examine top RUGs for all EOC and top RUGS with EOC >90 days 14

16. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit Therapy RUGs with High ADLs Increasing or decreasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80th percentile Your Target Percent is below the national 20th percentile 15

17. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit Nontherapy RUGs with High ADLs Increasing or decreasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80th percentile Your Target Percent is below the national 20th percentile 16

18. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit Change of Therapy Assessment Increasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80th percentile 17

19. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit Ultrahigh Therapy RUGs Increasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80th percentile 18

20. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit Therapy RUGs Increasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80th percentile 19

21. Action Plan What next? – Start your internal audit. Target AreaWhen you should audit 90+ Day Episodes of Care Increasing Target Percents over time resulting in outlier status Your Target Percent is above the national 80 th percentile 20

22. TMF Recommendations for High Target Area Percents Review medical record – Services appropriate and necessary – Documentation supports the level of care and services Regular meetings prior to billing (DON, MDS Coordinator, Therapy Director, Business Office Manager and others) to verify all aspects of care, documentation and/or billing meet all Medicare regulations 21

23. Incorporating PEPPER Use your resources Refer to the user’s guide Educate Be proactive and preventative 22

24. Practical Considerations: Can You Protect Your Internal Reviews? 23

25. Protecting Confidentiality Attorney related privileges may be successfully invoked if it is shown that: – Legal advice was sought in anticipation of litigation – Relationship was treated as confidential – Third party investigators hired by counsel similarly treat communications in confidential manner Retention of outside counsel may strengthen position 24

26. Protecting Confidentiality Consultants/Accountants – no legal privilege for reports generated independently by consultants Privilege may attach if outside counsel retains the consultant The larger the audit team, the more difficult it will be to maintain the confidentiality of the audit records and reports 25

27. Liability for Contractors: False Claims ( 9/2014) Maryland non-profit SNF: $1.3 million Iowa management company & 2 SNFs: $3,255,000 Allegation: “claims were false because they sought inflated amounts of...reimbursement based on …unreasonable and unnecessary …therapy that was dictated by financial considerations rather than patient needs.” 26

28. Liability for Contractors: False Claims Presumptive placement in highest RUGs level until shown patients could not tolerate therapy Planning number of minutes to meet minimum minutes necessary for highest RUG level Arbitrarily shifting minutes between therapy disciplines to hit targeted RUG levels 27

29. Liability for Contractors: False Claims Reporting estimated or rounded numbers of minutes instead of actual number of minutes provided Failing to provide adequate oversight of therapy company Failing adequately to address warning signs 28

30. 29 Pointer: Review Your Contracts What are your obligations regarding notice of claims? An audit may not be the same as a claim denial Define cooperation obligations When is your claim final? Do you have to complete the entire appeals process? What are you entitled to recover? Who is ultimately responsible?

31. A PEPPER CASE STUDY 30

32. Incorporating PEPPER Who is getting/reviewing PEPPER? What if PEPPER shows problematic areas? How will you conduct reviews? Expectation of ongoing compliance activities and training – Remember, “PEPPER is an educational tool…” 31

33. Incorporating PEPPER PEPPER is a roadmap from the government to help you identify potentially vulnerable or improper payments – USE THIS ROADMAP Incorporate the risk areas as part of your CQI, QAPI, or compliance programs Implement or adjust the Medicare Part A Triple Check Process accordingly 32

34. QUESTIONS? Paula G. Sanders Post & Schell, PC 17 North Second Street – 12th Floor Harrisburg, PA 17101 717-612-6027 psanders@postschell.com Stephanie Kessler Reinsel Kuntz Lesher LLP 3501 Concord Road – Suite 250 York, PA 17402 717-885-5724 skessler@rklcpa.com 33