RAC Audits – A cautionary tale.

Laura Zehm, Vice President & CFO, Community Hospital of the Monterey Peninsula.

CHOMP - a peaceful place until...

• Community Hospital of the Monterey Peninsula

• Non-profit single community hospital with 205 staffed beds.

• Medicare population is 53%.

CMS’s Hired Guns Rode into Town

• Early in 2007 PRG Schultz appeared on the scene

• Millions of dollars at stake.• Hired Guns – – Not really interested in what is right for the patient– Interested in their bounty – they were paid a

percentage of all denials.

The Hold-Up

• Requested historical records – Retroactively denied Medicare inpatient stays for lack

of medical necessity (Mostly 2003 – 2005 discharge dates).

– Based denial on Interqual criteria

• We began reacting by changing our process for current one-day stays.

• Most were cases where responsible physicians would not send the patient home the same day.

The Townspeople

• Grocer Smith:– 73-year old admitted through the Emergency Department

for shortness of breath during exertion. It became progressively worse to shortness of breath at rest.

– Diagnostic studies revealed arrhythmia and 15% of residual heart function.

– Admitted to telemetry unit for cardiac cath and placement of pacemaker.

– Denied and then unsuccessfully appealed with PRG Schultz.

The Townspeople

• Farmer Jones:– 86-year old admitted through the Emergency Department

showing signs of congestive heart failure. – Had a pacemaker placed in 2002 and history of heart

disease. – Diagnostic studies revealed arrhythmia.– Admitted to telemetry unit, given aggressive IV therapy to

treat arrhythmia and monitored every 4 hours.– Denied and then unsuccessfully appealed with PRG

Schultz.

“Go ahead and call the Sheriff – we work for the sheriff.”

• Staff were intimidated– Our staff has a high degree of integrity and awareness of

compliance matters– Afraid of making a mistake so “followed orders”

• Told when appealing to PRG Schultz, “We understand that you feel you cannot send these patients home. We are not concerned with that. We use Interqual criteria and we do not include subjective physician judgment.”

• Staff reacted by billing a large number of current legitimate IP claims that failed Interqual as observation (we later sent these to EHR and were able to re-bill 95% as inpatient ).

• They said – “this is not right but there is nothing we can do to defend ourselves”

Time to circle the wagons!

• We did what we do best – we put together a team.

• Set up a separate “Outpatient in a bed” unit– Allowed us to better charge capture for services

provided to these patients– Required space and staff reassignment.

• Still not right – we knew these were inpatients but we were settling for observation payments.

Called in our own Gunslinger

• Heard about EHR from a colleague• Our physicians are not experts in CMS rules and we will

never make them all experts.• New process was started September 2007

– Utilization Review team screens 100% of all inpatient admissions, utilizing Interqual criteria.

– For those Medicare admissions that fail Interqual criteria we send them to EHR.

– Physician Advisor at EHR reviews case, speaks with physician when necessary, and renders final decision regarding admissions status and documents decision with a specific certification letter that is scanned into the chart.

UR Staff Response

• EHR rode in on white horses.• Felt supported so as not to put the hospital in

jeopardy of non-compliance.• Grateful for the resource.• Referred 145 retroactive RAC denials to EHR

within first 4 months of contract.– 38 of these have been resolved (the remainder still

being appealed).– Of the 38, 26 were resolved with the denial

overturned for a total payment recovery of $131,000. This is an incorrect denial rate of 68%.

Lessons learned• Discuss with physicians ahead of time (we did).– MD’s want to document it right– When EHR called they knew why– EHR tracks MD cooperation

• Screams to be outsourced– Too specialized to have in-house– MD to MD communication makes a BIG difference– EHR tracks CMS changes

• Be ahead of RAC denials – it takes much more money and time to appeal a denial than to get paid right the first time.

• Don’t be intimidated by the compliance threat. We owe it our communities to be paid appropriately for the services we provide.

Building a better fort(Still working on)

• Better tracking system• Provide EHR with access to our electronic

medical records – we are still sending paper records.

• Have your compliance documentation process in place before RAC hits your town. We lost payments we will never recover.

Our town is saved!

• We recovered $6.7 million in appropriate inpatient DRG payments in one year (October 2007 – September 2008).– 1,741 inpatient cases reviewed as not meeting

Interqual criteria. – Of these, 1,419 reviewed, documented and billed as

inpatient (81%). – Would have been incorrectly billed as observation.

• We have a documented and objective compliance process.