Home Health News

Shades of Y2k, the end of the world that did not live up to doomsayers’ expectations!

August 1, 2009 came and went and no home care or hospice providers were put out of business by a Recovery Audit Contractor (RAC). There is time to take a breath and replace rumor-based fear with facts and that lead to proactive measures.

The facts home care providers will need are becoming increasingly available. An excellent outline was offered last week at the end of the National Association for Home Care’s annual Financial Managers conference. In a dynamic presentation on assessing your compliance risk, Denise Bonn, Deputy Director of NAHC’s  Center for Health Care Law, offered so much information we will need to cover it in three separate articles.

The RAC portion of her talk will be addressed here. Elsewhere in this week’s issue, readers will find a detailed description of other payment denial threats already in place and Bonn’s recommendations on measures you should put in place in advance to protect your home care agency or hospice from each type of threat.

As will become our customary format in this publication, we begin with an Executive Summary style bullet point list and follow it with detail on each point for readers in need of additional depth and web site references.

1. Contractors may begin audits on August 1.
2. Contractors are not sent to seek out fraud. They are looking for over- and under-payments that result from billing errors. If they suspect fraud, they report it to another agency.
3. Activities not part of the 2005-2008 RAC demonstration project cannot be initiated without CMS approval. Home care and hospice were not part of the demonstration phase.
4. Auditing cannot begin in a state or region until contractors complete provider training in that region.
5. Initial efforts will be computer audits. When billing problems are found, RACs will request a sampling of charts and perform comprehensive audits.
6. RACs will be empowered to extrapolate overpayment estimates from what they find in the sampling.
7. The few training programs offered to date have been poorly conducted, lacking in detail and almost completely devoid of useful information for home care and hospice providers.
8. All claims paid since October 1, 2007 can be reviewed.
9. Contractors will be compensated with a percentage of the amounts they identify as overpayments. Another formula will reward them for finding underpayments.
10. Long before RAC auditors turn their attention to home care and hospice, providers will notice increased activity from several other federal and state programs with the power to deny or recoup payments.

Detail

1.         A three-year RAC demonstration project, initiated by Congress during the Bush administration, ran from 2005 through mid-2008 in six states. During a subsequent, six-month assessment period, it was determined by the U.S. Department of Health and Human Services (HHS) that such a program is a cost-effective way to identify overpayments and underpayments and either return dollars to the Medicare Trust Fund or make sure payments to a provider were fair and accurate.

Congress found that the program should go forward, nationwide. After a period of preparation, delayed by losing bidders that sued CMS over not having been selected, the program was scheduled for an August 1 launch.

2.         The law commissions these contractors to identify aberrant billing wherever it may be found. Other programs already in existence involve law enforcement activities to unearth criminal billing practices. The RAC program is not intended to duplicate or replace law enforcement by these other programs. Should it detect fraud, however, during the course of its audits, it will report the provider to the state or federal enforcement agency with jurisdiction.

3.         The law making the program permanent limits contractors to issues addressed during the demonstration project. “It got ugly,” Bonn commented. “CMS had to change some rules to rein in some of the overly aggressive contractors.”

Now, in order to open a new issue, contractors must deliver a proposal to CMS and CMS must approve it. Home care and hospice fall into this category. The demonstration phase contractors limited themselves to hospital claims. Therefore, all of the permanent contractors are limited to hospital audits until and unless they receive approval to expand to other providers.

“We do not expect their proposals to be denied by CMS,” Bonn opined. “But hospitals are much more lucrative targets so we believe it will be some time before these new auditors exhaust all the commission opportunities there and turn their attention toward home care and hospice.”

4.         Another reason to believe home care and hospice providers will not see RAC audits any time soon is that the contractors are also required to provide training before they begin audits in a region. The Ohio Home Care Association, for example, reports that it was informed that required outreach activities are scheduled to begin there in August and continue for three months. The first Ohio home care audits, therefore, could not begin before October.

Ms. Bonn added that CMS has promised to send a trainer to speak at the NAHC Annual Meeting in Los Angeles in mid-October.

5.         Contractors will begin with Automated Audits and follow with Comprehensive Audits. Automated Audits occur within FI databases without provider assistance, perhaps without provider awareness. If this procedure raises questions about billing accuracy, the contractor can initiate a Comprehensive Audit, requesting a number of patient charts for manual review by a qualified professional.

6.         Contractors are permitted to extrapolate the overpayment percentage found in the sample to the audited provider’s entire patient population. They are allowed to demand a repayment amount equal to that same percentage of all eligible episodes. For example, if the contractor finds reason to justify declaring 10% of your 30 or 40 sample charts erroneous, it can and will assume 10% of all your episodes are in error. It can require the provider to pay back 10% of all claims paid since October 1, 2007. It is not yet clear whether contractor practice will be to demand a check, attach a company bank account or make deductions from future payments.

Consider: Certain Home Health PPS provisions give these contractors an easier path to winning larger commissions in some cases. LUPA rules and therapy thresholds may lend themselves to causing higher paybacks, even if the contractor cannot justify disallowing the entire episode. Denying one visit in a 5-visit episode, for example, will create a LUPA where there was not one before. Similarly, disallowing one or two therapy visits may reduce the therapy portion of the payment one full payment threshold, often a substantial amount.

7.         Evidence of training quality is anecdotal at this point since it has not begun in earnest. See our report on these anecdotes in a related story in this week’s issue.

8.         RACs must operate within two date restrictions. To ensure payment denials initiated by Fiscal Intermediaries and Qualified Independent Contractors (QIC), and their appeal processes, have been completed, a RAC auditor will not look at claims less than one year old. The limit at the other end is that the law allows them to look back no further than claims paid on or after October 1, 2007. To identify your vulnerable episodes, use that window of time, keeping in mind that claims paid on 10/1/07 may have begun as early as June or July of that year, depending on how long your billing cycle is after discharge.

9.         Attorney Bonn was most concerned about the compensation system Congress selected for this program. “There is a great deal of concern at NAHC and across the industry that these people will become bounty hunters,” she told her audience of CFOs and other financial executives. “We are unhappy about it across the board but there is little that can be done since it was not a CMS rule-making decision but inserted into the language of the law by Congress.”

An audience member raised a question about the possibility of overturning this worrisome payment structure through the courts. Bonn explained that the only available legal argument would be that paying commissions based on dollar amounts “recovered” is a violation of Constitutional rights.

“You would not get anywhere arguing in court that it merely violates Generally Accepted Accounting Practices,” she told the questioner. “The hospital industry has already decided that it would be difficult to mount such a challenge so I doubt NAHC would attempt it. Such a case would certainly go all the way to the Supreme Court and take years. So, even if a Constitutional challenge did emerge, my advice is to put it out of your mind as far as your RAC planning is concerned.”

10.       Noting widespread reports of increased denial activity from traditional reviewers – FIs, Program Integrity Contractors, the Medicaid Integrity Program, QICs and MACs, to name a few – Bonn warned against myopically focusing on some future RAC audit.

Two other articles in this series will deal with the remainder of her challenging July 31 presentation. One will discuss Bonn’s step by step recommendations to protect an agency or hospice from payment denials and the other will present her list of all of those payment denial sources.