Home Health News

Benjamin Franklin did not have Recovery Audit Contractors in mind but he was certainly prescient when he proposed his famed 1:16 effectiveness ratio: “An ounce of prevention is worth a pound of cure.”

Wise home care and hospice owners and other executives will have already begun a policy review and clinician training effort. Improving documentation practices is the best way to reduce the number of future payment denials. But what if patient charts already completed and filed have errors and omissions? You cannot go back and edit them so they may be vulnerable to attack from at least four state and federal agencies.

It is for this reason that you must prepare your agency in the event your prevention efforts came upon Franklin’s advice too late and fall under that other adage, the one about closing the barn door after the horse escapes.

Therefore, this newsletter will devote some of its virtual ink to studying the appeals process from time to time, starting with this general overview.

Little or nothing new
Fortunately, the advent of the new RAC program will not introduce a new, parallel appeal system. Studying the current one will adequately prepare you for the new layer of payment denials that will arrive with the RACs.

To develop this summary, we spoke with a consultant who spends all of his time guiding home care agencies through FI and QIC payment denial appeals. Michael McGowan, senior consultant with Continuous Quality Improvement Systems, was trained as a nurse and served for a while as OASIS coordinator for the state of California. However, his expertise in the courtroom have led more than one Administrative Law Judge to ask him if he is sure he is not an attorney.

With an appeals turnover rate above 85%, his understanding of the process appears to be without question. While most experienced agency owners and administrators will already be familiar with what we explain here, it is always good to review the basics from time to time.

Step One: RHHI
Currently, claims submitted to your Fiscal Intermediary are subjected to an immediate computer edit. While most claims are paid automatically, some may be set aside for further review. When the RAC program gets going, this will be known as an Automated Audit.

FI computer edits look for errors as simple as missing data and as complicated as comparisons with national and regional average utilization rates. Excessive service levels, overuse of certain ICD9 codes and V codes and, of course, higher than average dollar amounts will cause the computer to hold up payment pending a manual investigation.

Your claim may also be kicked out due to a “Medically Unbelievable Edit” by the computer. These typically have to do with questionable homebound status or multiple episodes without improvement in patient condition.

Investigation will take one of two forms. Utilization in the 3% to 4% range above the norm typically generates an “Additional Development Request” or ADR. If the computer edit finds you to be somewhere around 25% above average in one of the above categories, you may be subjected to a more in-depth “Probe Edit.” You have 30 days to submit requested charts. Generally, they start by asking for 40.

After you comply with the ADR by submitting the patient chart for the denied payment or with the Probe Edit by submitting 40 charts, the FI submits your chart or charts to an in-house reviewer who is required to be a licensed medical professional. After that review, the FI will either pay the claim or confirm that it continues to find the denial to have been appropriate. The FI has 60 days to reach a determination. You may appeal directly to the FI but the national overturn rate is virtually zero.

The RAC program will call computer edits “Automated Audits” and manual chart reviews “Complex Audits.” The difference will be that RAC auditors will be looking at cases where payment has already been made, as far back as claims dated October 1, 2007. For RAC detail, see “NAHC Attorney Explains RAC Startup Plans.”

Step Two: QIC
In either case, you are finished with the FI at this point. Your next appeal is to a Qualified Independent Contractor (QIC), a private, for-profit corporation working under a Joint Operations Agreement with the FI. Their revenue derives from a negotiated percentage of denied payment amounts that are not overturned during later appeal phases.

According to McGowan, the QIC experience can be so intimidating most agencies abandon their appeals, regardless of how legitimate, at this level and never reach the Administrative Law Judge, where the denial overturn rate exceeds 80%. Even when an agency or its consultant pursues the appeal, it is rarely successful at this level.

“I do not claim to know national statistics,” McGowan told us. “I am quite sure a QIC must have paid some chart somewhere at least once but it has never happened to me in my practice and I am currently shepherding close to 100 charts per month through the appeals process. Not only do they routinely deny but they do it by developing completely new arguments to rationalize their decision, inventing reasons that have nothing to do with the original FI’s reasons.”

Disputing a denial at this level is too complex for most agencies who attempt to do it without representation. Engaging an attorney with relevant experience, however, is not cost effective unless the denial includes a large number of charts, adding up to significant potential losses.

It may be futile to speculate on the reasons why QICs change nearly every FI denial reason and do it with 4 -5 pages of argument per chart. Certainly it discourages amateurs from proceeding when they are faced with reading page after page of alphabet soup and federal regulation citations. Certainly it maximizes their revenue, not to mention reducing their costs if they avoid the rest of the process when an agency gives up.

Is there another reason? Consider the recent shakeup and decide for yourself. If these private contractors do not deny enough payments, they can lose their contract.   Several contractors have been recently ousted. Could it be because their denial rate was not high enough? There is no way of knowing but, after the shakeup, agencies nationwide began reporting increased activity levels from the new contractors over the old ones. Just look at all of the listserv activity surrounding the topic.

Following the QIC denial, an agency may file an appeal with the Administrative Law Judge. “It may first take one last step with the QIC,” McGowan shakes his head and explains with equal parts frustration and ruefulness. “You can ask the identity and medical qualifications of the individuals who reviewed the charts and wrote the QIC denial decision. The QIC will not reply to such a question, however.”

He has filed freedom of information requests for this information and has been denied those as well. “These are for-profit organizations operating with impunity, under a cloak of semi-secrecy that is difficult to justify,” he believes.

Step Three: ALJ
The Administrative Law Judge (ALJ) is a federal employee who hears arguments from both sides and renders a decision. Some of these individuals have more familiarity with medical terminology and healthcare practice than others. An agency should not attempt this appeal without representation, either from a qualified attorney or a consultant who is intimately knowledgeable about standards of home care practice and about the appeals process.

In McGowan’s experience, 80% to 85% of denials are overturned by the ALJ. In coming weeks, we will present some of the statements judges make while rendering their decisions. We expect it will be a valuable learning experience to hear judges scolding one party or the other for wasting his or her time.

“Each appearance before the ALJ makes the next one easier,” McGowan has found. “If you do lose here, consider it a learning experience. More importantly, it is worth considering that you may need to re-examine your agency processes and possibly provide additional training for your clinicians. This level is more fair. Cases that lose here often lose for a good reason.”

Step Four: MAC
All is not lost if the ALJ confirms a denial. Agencies have the option to appeal to the next level, the Departmental Appeals Board, also known as the Medicare Appeals Council (MAC). If the total amount in jeopardy justifies it, the expense in time and dollars of pursuing an appeal to this level can have a positive result. Again, this process requires representation.

McGowan’s personal experiences offer additional insight into the rarified air at this level of the appeals process. “I have one case that has been sitting at this level for the last 14 months,” the consultant explains. “I pointed out that the ALJ made three illegal decisions, cited them by case number and gave the MAC detailed descriptions of them. This seems to have gotten their attention.”

Unfortunately, most agencies do not keep a database of the denials and victories by category to fall back on at later dates for different appeals, McGowan continued to explain. “Having information at my fingertips from three different agencies and being able to compare them to the fourth agency’s receipt of a badly written decisions was quite a showstopper.”

“This type of information is what can make the difference between winning and losing an appeal,” the consultant summarized. “Currently, this MAC is looking at 150 charts and has informed me they are taking so long because they are going to decide not only to send the case back to the ALJ but possibly to initiate disciplinary action against that judge.”

Step Five: The Feds
Taking your case to Federal District Court is a last resort reserved for multi-million dollar denials. Few consultants, including ours, have much experience here. This is the highest appeal level. If you do make it this far and lose, you will have invested a great deal of time and money into the entire process. McGowan has one last word of advice to those considering such an investment.

“The only way to protect yourself through this process, win or lose, is to work at growing your patient census and improving your revenue stream while awaiting each level’s decision. But you cannot do both at the same time and do each one well. If you hand over the appeal to an attorney or consultant and focus on marketing and business growth, you will be way ahead if you win and you will be better able to absorb the hit if you lose. As a consultant, I realize this may sound self-serving but that does not make it less true. Building your census and controlling your costs are the core strategy for surviving the denial appeals system.”