Audit Insights Blog

This blog provides tips, tools and information about all audits that affect the revenue of healthcare facilities, including Recovery Audit Contractor (RAC) audits. Audit Insights gives healthcare professionals a comprehensive look at healthcare audits, the risks they present and ways to effectively manage and understand the entire process.

DawnCrump120Dawn Crump, MA, SSBB, CHC, has been in the healthcare compliance industry for more than 18 years and joined HealthPort in 2013 as Vice President of Audit Management Solutions. Prior to joining HealthPort, Ms. Crump was the Network Director of Compliance for SSM. She has healthcare experience in education, organization development, quality improvement and corporate compliance. Trained as a six sigma black belt, Ms. Crump used this holistic, fact-based approach to establish audit tracking (RAC) programs. Her expertise includes coding and billing compliance as well as HIPAA compliance and government audit programs for acute care facilities. She is on the board of the Greater St. Louis Healthcare Finance Management Association chapter and is a member of the Health Care.

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  • Keys to Understanding Two-Midnight Rule Changes

    Sep 09, 2015
    The past 30 days have witnessed important RAC updates. And the next 30 days will bring even more activity as Congress’s moratorium on Recovery Auditor patient status reviews expires on October 1, 2015 and quality improvement organizations (QIOs) take on the task. With so much news, a new blog post was warranted. This post provides a quick summary of audit happenings—with a focus on the important two-midnight rule changes. 

    CMS releases fact sheet
    On July 1, 2015, the Centers for Medicare and Medicaid Services (CMS) released a fact sheet  with proposed updates to the two-midnight rule, specifically concerning when inpatient admissions are appropriate for payment under Medicare Part A.  Also for two-midnight cases, a record limit has been set of 50 records per year per facility, with a recommended turnaround time of 30 days. Concurrently, CMS notified the public of upcoming changes in its education and enforcement strategies. Those changes are slated to begin in October.

    Although the language of the still-in-flux rule remains vague and there’s still confusion surrounding it, CMS plans to deliver more formal education through the QIOs to help clarify the two-midnight rule. 

    QIOs begin patient status reviews
    Starting October 1, quality improvement organizations (QIOs) will conduct their first line of patient status reviews of providers to determine the appropriateness of Part A payment for short-stay inpatient hospital claims. If the QIOs see abusive patterns, they have the ability to send the results of those reviews to the Recovery Audit Contractors (RACs) for follow-up. These reviews were previously conducted by the Medicare Administrative Contractors (MACs). 

    From October 1 through December 31, short-stay inpatient hospital reviews conducted by the QIOs will be based on Medicare’s current payment policies. Beginning on January 1, 2016, QIOs and Recovery Auditors will conduct patient status reviews in accordance with any policy changes finalized in the Outpatient Prospective Payment System (OPPS) rule and effective in calendar year 2016. 

    Recovery auditors may conduct patient status reviews only for those providers that have been referred by the QIO as exhibiting: 

    •   Persistent noncompliance with Medicare payment policies
    •   High denial rates and repeated failure to adhere to the two-midnight rule
    •   Failure to improve performance after QIO educational intervention 

    Meanwhile, Recovery Auditors may continue to conduct reviews of claims for other reasons, including CMS-approved claim reviews for medical necessity and correct coding unrelated to patient status. These changes will not affect other auditors such as MAC and Comprehensive Error Rate Testing (CERT) reviews for overall errors and other audits conducted for the purpose of identifying fraudulent behaviors, such as Zone Program Integrity Contractor (ZPIC) reviews.

    Probe and Educate gets update
    MACs’ third round of Inpatient Probe and Educate reviews ends September 30, although some provider education may continue beyond this date. After October 1, 2015, MACs may continue to conduct CMS-approved claim reviews unrelated to patient status, such as coding reviews and reviews to determine medical necessity.

    More post-payment news
    Finally, CMS has instructed MACs and Qualified Independent Contractors (QICs) to limit claims to the reasons initially stated in post-payment reviews. For example, suppose a contractor denies a claim due to a diagnosis-related group (DRG) coding error. In the past, during the appeals process, a MAC might find that the coding was actually correct and then overturn the initial denial, but still issue an unrelated denial for a short-stay violation, or another discrepancy that was not initially flagged. Some providers say this happened a lot, while others say it didn’t occur that often. So the importance of this rule change is subjective. Some providers will be greatly affected, others less so. 

    Regardless, MACs and QICs can no longer change the reason for post-payment review once the process has begun.

    According to the CMS publication MLN Matters, “For redeterminations and reconsiderations of claims denied following a post-payment review or audit, CMS has instructed MACs and QICs to limit their review to the reason(s) the claim or line item at issue was initially denied. Post-payment review or audit refers to claims that were initially paid by Medicare and subsequently reopened and reviewed by, for example, a Zone Program Integrity Contract or (ZPIC), Recovery Audit, MAC, or Comprehensive Error Rate Testing (CERT) contractor, and revised to deny coverage, change coding or reduce payment. If an appeal involves a claim or line item denied on a prepayment basis, MACs and QICs may continue to develop new issues and evidence at their discretion and may issue unfavorable decisions for reasons other than those specified in the initial determination.” 

    This clarification and instruction applies to redetermination and reconsideration requests received by a MAC or QIC on or after August 1, 2015. It will not be applied retroactively.

    Stay tuned…keep informed
    As these changes go into effect, please keep abreast of news, changes and impact here—at HealthPort’s Audit Insights blog.
  • RAC changes offer glimpse into the future

    Aug 31, 2015

    Organizations that have been playing the audit game for a while are keenly aware of the correlation between the volume of denials and the number of future audit requests. Recent events serve to corroborate this relationship and underscore its increasing importance in successfully minimizing audit take-backs.  

    Back in the late 1890s, the Klondike Gold Rush propelled thousands of would-be miners, many with no experience, to set forth on a dangerously arduous arctic trek to find gold, based upon the simple fact that the precious metal had repeatedly been found there before. Similarly, auditors will likely focus future audits on areas where providers have shown a proclivity for past violations, as this increases the chances that transgressions will be discovered there again. Unless, of course, the organization proactively mitigates risk by addressing denial issues before they become chronic problems.

    CMS to increasingly target repeat violators

    In a May hearing before the Senate Special Committee on Aging explored the relationship between RAC audits and an increase in claims for hospital observation stays.  CMS officials stated they have already shifted the focus of RAC audits to providers with high levels of claims denials. They also stated that future RAC audits will increasingly target providers with higher claims denial rates.

    For providers, this means improving their existing audit systems helps the bottom line in the near term, while also reducing chances the provider will be singled out via future audits related to past transgressions.

    According to the American Hospital Association’s (AHA’s) most recent RAC Trac survey, hospitals continue to report widespread RAC process-related issues, including multiple problems with Medicare administrative contractors (MACs), delays and demand letters. Shifting even more of the focus of RAC audits to frequent violators could go a long way toward reducing the massive backlog of audit appeals CMS has accumulated. And the AHA approves of the shift.

    RACs make changes to reduce provider burden

    Meanwhile, in other recent RAC news:

    Effective June 4, 2015, CMS has withdrawn the requests for quotes (RFQs) for the next round of recovery auditor contracts. CMS plans to update the statement of work (SOW) and release new requests for proposals (RFPs) shortly. In the meantime, current recovery auditors will continue active recovery auditing through at least December 31, 2015.

    In mid-January 2015, CMS approved recovery auditors to begin reviewing outpatient therapy threshold claims (those over the $3,700 threshold) that were paid March 1, 2014 through December 31, 2014. In an effort to minimize provider burden, CMS set restrictions on the number of additional documentation requests (ADRs) that could be sent related to these claims, as shown here:

    • First ADR: can only request documentation for one claim
    • Second ADR: can request up to 10 percent of total eligible claims (total number of claims over the $3,700 threshold that were paid March 1, 2014 through Dec. 31, 2014)
    • Third ADR: up to 25 percent of remaining eligible claims
    • Fourth ADR: up to 50 percent of remaining eligible claims
    • Fifth ADR: up to 100 percent of remaining eligible claims

    At the previously referenced Senate hearing from May of this year, CMS deputy administrator and director Sean Cavanaugh said, “CMS believes that the improvements made to the next phase of the recovery auditor program will reduce provider burden and diversify the kinds of compliance issues recovery auditors investigate—improvements that will help ease the implementation of new payment policies. CMS looks forward to working with the Congress and others to find a path forward that achieves our shared goals.”

    These recent changes show the renewed willingness of CMS to work with providers on smoothing the RAC process. Here’s hoping we continue down this path of improved communication and cooperation for the benefit of providers and patients alike.

  • The Ugly Reality of Audits

    Jun 12, 2015

    When it comes to RAC and commercial audits, hospitals spend significant time and resources to monitor audit requests, respond to audits, and analyze audit results. Thirty-nine percent of hospitals report increased administrative costs associated with audits, according to the AHA RACTrac survey, fourth quarter 2014. These costs include having to hire additional employees, create an internal task force, and add administrative tasks to clinical staff members’ already overburdened workload.

    Yet, the same survey found that 55 percent of medical records reviewed don’t include an overpayment. In addition, hospitals are appealing denials only to find out that they are correct the majority of the time. This infographic says it all:


    Wasting Dollars

    The fourth quarter AHA data indicates that 69 percent of denials were overturned in favor of the provider. Even worse, 72 percent of appealed hospital Medicare Part A denials are fully overturned at the third level of appeal, according to AHA’s September 2014 RAC Administrative Burden Survey.

    Money tied up in RAC-related efforts continues to take its toll on organizations. Fifty-five percent of hospitals report that RAC audits and delays in the appeals process have created significant issues with the availability of capital resources, according to the September 2014 AHA survey. Forty-two percent say that RAC-related expenses have delayed other key priorities for the hospital.

    This means hospitals spend limited and valuable resources on auditing efforts rather than on critical patient care only to find out that their billing practices are compliant. Hospitals are never reimbursed for costs associated with staff time spent fulfilling an audit request. That’s why it’s important to stretch every audit management dollar as much as possible. But audit cost expenditures don’t stop with RAC. Other government and commercial payers have also jumped on the audit bandwagon leading to more cost and complexity for hospitals.

    Beyond RAC

    Providers have also experienced a deluge of audit requests as payers continue to measure the acuity of new patients entering the healthcare system thanks to the Affordable Care Act.

    Commercial payer audits, in particular, are on the rise. To complicate matters, these audits are typically fraught with communication problems that often result in duplicate audits and other issues, such as:

    • Inpatient requests sent to the clinic (indicating the difficulty plans may have in confirming the right setting of care)
    • Wrong date of birth or wrong demographic information for patient
    • Billing address versus place of service for provider
    • Missing provider names
    • Duplicates
    • Date ranges too limited for HEDIS reviews

    In general, providers must understand six specific audits to which they could be subject at any time. They are each summarized in my recent Healthcare Finance News article, available here and include Risk Adjustment and Medical Record Reviews (MRRs), Medicare Advantage Risk Adjustment Data Validation (RADV) ,Health Effectiveness Data & Information Set (HEDIS), DRG Payment Integrity Reviews ,Care and Quality Improvement Audits and the Five-Star Program.

    Visit HealthPort at HFMA ANI

    How can the revenue cycle ensure an audit response process that maximizes efficiency and minimizes financial impact to the organization as well as administrative impact to HIM and clinical staff?

    This question is the topic of HealthPort’s upcoming presentation at the HFMA National Institute, June 22-25, 2015. Visit us at Booth #719.

  • Improving communication with payers streamlines audits

    May 29, 2015

    Better communication between healthcare providers and payers helps to streamline the auditing process, while simultaneously reducing frustration, saving time and reducing costs. But there are a number of storms that must be bolstered against as we navigate toward clearer waters.

    Any communication problems that already existed between providers and payers have been exacerbated of late by a steady rise in the number of audits and record requests. Part of the difficulty for providers stems from the fact that they must field requests for many disparate types of information from myriad third-party payers, including national health plans and governmental agencies.

    Moreover, this information is often due at different times and requested under a wide variety of terms. These issues underscore the need for providers to educate themselves about the different types of audits.

    Three Tips for Providers

    Here are three best practices for providers to implement during the audit process to facilitate smoother payer-provider communications. These tips are part of a longer article that I recently co-authored with Jeannie Hennum, Senior Vice President of Sales and Account Management, ChartSecure at HealthPort, as published in HFM magazine

    1. Know which auditor is requesting information and exactly what documents should be provided to avoid revenue recoupment.
    2. Define where each piece of information is located (some may be in electronic systems while other documents will be paper-based), when information is due, and under what terms.
    3. All data from each request and submission should be entered into a centralized audit management software application, which helps providers manage requests, track audit activity, maintain a record of all documents sent and keep up with audit trends.

    Advice for Payers Too!

    From the payer perspective, when providers respond with inaccurate data regarding patient, procedure and/or place of service, the payer must dedicate additional man hours to track down the correct information. Frustration, phone calls and telephone tag are the result.

    Payers could smooth the process by making sure their request letters are as clear and succinct as possible. They should also recognize that payer audits aren’t the only medical record requests that hospital ROI staffs must process.

    A shift in perspective on both sides makes all the difference. Instead of viewing audits as a necessary evil, both parties should consider them a gateway for improving communication and long-term relations. 

    For more information, check out the full HFMA article on this topic here:

  • What the CGI lawsuit means for RACs

    Mar 25, 2015
    The U.S. Court of Appeals recently announced its decision in favor of CGI Federal Inc. in its ongoing lawsuit against the Centers for Medicare and Medicaid Services (CMS).

    In this pre-award bid protest appeal, CGI challenged CMS’ terms of payment regarding requests for quotes (RFQs). CGI is one of four contractors, originally engaged by CMS to oversee its RAC program.

    According to the original 2008 contract terms, the contractors invoiced CMS for the contingency fee when the provider submitted its payment, usually 41 days after the demand letter. In 2014, CMS issued new RFQs prohibiting contractors from invoicing CMS until a provider’s rebuttal to the repayment request passed the second level of a five-level appeals process, which occurs 120-420 days after the demand letter. CGI’s position is that CMS’ new 2014 terms violate other federal statutes on payment of contractors for services rendered.

    The CGI challenge
    Instead of bidding on the 2014 RFQs as written, CGI filed a protest. One year and several legal battles later, a full blown return of the RACS is still on hold.

    According to the U.S. Court of Appeal’s March 10 decision, “Because the Court of Federal Claims correctly held that CGI qualified as an interested party at the time it filed its bid protest, but erred in holding that the payment terms do not violate the applicable regulations, we reverse and remand.”

    Because CMS’ revised payment terms “violate the prohibition against including contract terms inconsistent with customary commercial practice,” the decision reads, “we reverse the Court of Federal Claims grant of judgment on the administrative record to the government. We remand to the Court of Federal Claims for proceedings consistent with this decision.”

    Next moves: three possibilities
    What exactly does this decision mean? Keep in mind I am not an attorney. But I have been involved with RACs for more than six years, and understand the ebb and flow of revenue cycle regulation in healthcare. Here are three two possible next steps for CMS.

    Option 1: CMS will likely have to open the RFQs with the newly defined payment terms and allow CGI to bid with the other contractors, since CGI did not initially have its bid reviewed.

    Option 2: It also appears that CMS may be prohibited from delaying payment for any of the RAC contractors as defined in the proposed 2015 program improvements—to the dismay of healthcare providers. (I do not think that any of the contractors are going to mind if payment terms revert to 2008 standards.)

    How this impacts the RAC program
    I think current RACs will continue to audit on a limited scope until all new contracts are awarded. A new complete RFQs process could take us through the end of the year; however, perhaps CMS will limit the amount of challenges and make a clean start with RACs in 2016.

    So what’s the bottom line? RACs are not going away; but the CGI lawsuit means yet another delay in program improvements until the awarding of new contracts can be finalized.
  • Health Plan Audits Grab 2015 Spotlight

    Mar 06, 2015

    Six Important Audits for Providers to Know

    As I mentioned in my last blog post, knowledge is power when it comes to health plan and commercial payer audits. Providers are predicted to experience a deluge of audit requests in 2015 as plans and payers attempt to measure the acuity of their new patients.

    There are six specific audits to know and understand. They are each summarized in my recent Healthcare Finance News article, available here and include: 

    • Risk Adjustment and Medical Record Reviews (MRRs)
    • Medicare Advantage Risk Adjustment Data Validation (RADV)
    • Health Effectiveness Data & Information Set (HEDIS)
    • DRG Payment Integrity Reviews
    • DRG Payment Integrity Reviews
    • Care and Quality Improvement Audits
    • Five-Star Program
    Three Ways to Prepare

    As these health plan audits consume valuable HIM and audit team resources, there are three steps that providers can take to minimize the workload and operational impact.

    • Ramp-up resources in medical record/information release areas.
    • Educate your HIM and audit teams on all the various audits.
    • Conduct lunch-and-learn sessions with commercial audits to open the lines of communication and expand knowledge.

    Check back next month when I’ll turn my attention back to RAC audits and what’s ahead with governmental audits in 2015.

  • Building audit awareness

    Feb 25, 2015

    When it comes to commercial audits, a little education goes a long way.

    A recent HealthPort summit meeting between providers and payers opened the proverbial Pandora’s box of audit management. What did we find out? 

    We discovered that providers and payers speak different languages. And that a little education on both sides would go a long way towards improving audit communication, streamlining audit processes, and relieving paper pushing, telephone tag and email escapades. Here’s why.

    Lost in translation
    It’s no secret that relations are often strained between payers and providers. And it’s no surprise that this communication breakdown worsens as the number of audit requests increase. The solution is to use this most contentious of issues as a starting place for payers and providers to arrive at common terms. 

    Rationale for audit education
    Providers struggle with fielding myriad payer requests for information, while payers must regularly deal with incorrect data from providers. Efforts must be made on both sides to better understand the audit process, why these audits are conducted and how to provide correct information in a timely fashion. 

    Moreover, commercial plan audits often parallel provider-conducted audits. So the more educated the provider is about what data needs to be retrieved, the greater the possibility that information can be gathered once and used many times for several different purposes.

    The more payers and providers understand about audits, the easier it becomes to eliminate redundancies and lean the process. In this instance, knowledge really is power.

    What’s next?
    Visit my blog next month to begin decoding the most common types of payer audits and generating greater audit awareness among your team. 
  • RACs are Back: Latest News to Know

    Sep 30, 2014

    During my recent (and rare) vacation in early August, an update to the RAC program was released by CMS. Then again in early September came more RAC news. In my recent guest post on EMR & HIPAA, I outline the two key points to know about the recent RAC updates: 

    • A limited restart of the RAC program is underway. These will mostly be automated reviews, but there will be some requesting of records and a limited number of complex reviews conducted in defined target areas (spinal fusions, outpatient therapy services, durable medical equipment, prosthetics, orthotics and supplies, and Medicare-approved cosmetic procedures). 

    • CMS has opened a window for some hospitals to request partial payment settlements on claims currently pending appeals. But there are several key stipulations! Read more here. 

    While CMS remains hopeful that the new round of RACs will be awarded this fall, there are three ways that providers can ramp up their audit programs based on these two news announcements. Check out the full guest post on EMR & HIPAA to learn more. 

  • CMS Restarts Parts of the RAC Program

    Aug 06, 2014
    HealthPort always maintains a keen eye on the changes related to RACs. Yesterday’s news of a partial RAC restart comes as no surprise. Although there is progress, it is limited to certain claims and does not include any inpatient hospital patient status reviews during the restart period. The announcement is a clear reminder that RACs are not going away. Documentation improvement and audit program preparation is still key. Stay tuned for my in-depth blog post next week on this latest CMS announcement.
  • Reconciling RACs return

    Apr 25, 2014

    Making the most of your RAC break

    Are you having RAC withdrawal? Me neither!

    Per a Feb. 18, 2014 announcement, recovery audit contractors (RACs) are sending hospitals no new record requests. Post-payment requests stopped on Feb. 21 and pre-payment requests stopped on Feb. 28. What’s going on? 

    Well, the RACs are not going away. But forward-thinking providers can use this brief respite to improve their own audit practices.

    Why the hiatus?

    The goal of this pause is to allow for RAC region restructuring changes and give time for appeals to catch up, according to the Centers for Medicare and Medicaid Services (CMS).

    Right now, CMS’ tentative plans call for RACs to begin requesting records again in June 2014. However, there is no evidence that there won’t be additional delays and/or last minute changes.

    In the meantime, CMS teams will spend the next three months analyzing data and looking for new RAC audit targets. As soon as CMS gives RACs the green light to re-issue ADRs, expect the floodgates to open. Expectation for providers: It will be sometime in 2014, but later than June when ADR volumes actually ramp back up.

    Questions for providers

    Proactive providers will use this time to revisit their audit data and fine-tune their processes. Here are eight questions to consider while reviewing your processes:

    1. How many dollars and cases are still in appeals?
    2. Where are these cases in the appeals process? 
    3. Can you rebill any of these cases?
    4. What were your most common denials? 
    5. How can you improve internal processes (documentation/coding/billing) to reduce future audits, especially if you didn’t seek appeals?
    6. Can you re-engineer your tracking software tools/reports to dig deeper and drill down into your historical audit data?
    7. How are you tracking all this data? It’s time to evaluate your tracking and monitoring mechanisms – and get rid of your spreadsheets! 
    8. How much is your RAC program costing you? 

    New changes expected

    There will be changes once the RAC program re-launches. We expect these three areas to see change. 
    • More outpatient record requests: expect more requests for outpatient/physician/clinic records. NOTE: RACs are not required to reimburse for anything but inpatient medical records. 
    • New calculations for denial rate: It is unclear how, when and under what guidelines new denial rates will be calculated. 
    • The discussion period will be more formal with receipt confirmations from the RAC’s and delays in demand notifications. 

    Five steps to take

    Here are five items to consider during the RAC reprieve help fine tune your audit program and be well-prepared for the journey ahead. 
    1. Track all time frames and monitor ADR limits across claim types.
    2. Clean up some of the denial risk and reorganize audit areas to be more efficient. 
    3. Make sure your audit management process is efficient, standardized and lean.
    4. Connect with your AHA local and state associations to keep abreast of announcement and push for improvement in the RAC program. 
    5. Compare commercial and managed care plans with other auditors.

    Use this time to be proactive and get ready for RACs’ inevitable return.

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