Yomi Faparusi, Sr., MD, JD, PhD, Intersect Healthcare’s Director of Medical Review & Research was recently published in the Heath Care Compliance Association’s (HCAA) magazine “Compliance Today”. Dr. Faparusi’s article “Preventive medicine: Root cause analysis and the RAC audit process” appeared in the August 2010 edition of the magazine. Below is the article:
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Preventive medicine and health care reform: Importance of root cause analysis in the RAC audit process
By Yomi Faparusi, Sr., MD, JD, PhD
Editor’s note: Yomi Faparusi, Sr. is Director of Medical Review & Research at Intersect Healthcare, Inc. in Lutherville, Maryland. Yomi may be contacted by telephone at 410/252-4343 ext. 17 or by e-mail at
ofaparusi@intersecthealthcare.com.
The health care reform bill finally passed and the last signing of any related bill was done by President Obama on Tuesday, April 30, 2010.[i] While the debate continues and there is still immense attention focused on peripheral intricacies, such as procedural rules like “reconciliation” and “deem and pass,” the aftermath is getting even uglier as the details of the bill begin to unfold and are scrutinized by scholars. Today, many who work with and ensure that health care systems are financially viable are aware that a metaphoric “freight train” is coming fast down the tracks.
The proposed bill is expected to cost more than $900 billion over the next ten years while Medicare is expected to see cuts over $500 billion over the next decade.[ii] Thus, the mathematics is simple—the trimming of Medicare is the key fiscal foundation of the new health care bill. As if that does not suffice as an administrative nightmare for the chief financial officer (CFO) or the chief compliance officer (CCO) for example, the gradual expansion of Medicaid will complicate a clogged up bureaucratic process.
There is no doubt that Medicare should be made more efficient and there should be a drive towards correlating health outcomes to the amount spent. Even taking a step further and from a theoretical perspective, the status quo fee-for-service (FFS) program has to transition into a pay-for-performance (P4P) scheme. However, there are often salient and overlooked issues that will make or break many health care institutions. When it pertains to Medicare and, in particular, to the Recovery Audit Contractor (RAC) program, an organization needs to look at its approach to these audits. Many of us in the health care compliance industry need to be more proactive rather than reactive in our overall organizational strategy.
Preventive medicine–the enigma of modern medicine
In the 1980s, medical malpractice claims began to increase and a new watchdog was created to monitor the art and practice of medicine. The response of the medical world was to start the practice of defensive medicine, whereby many physicians treated patients with care but, at the same time, were cautious about the unfortunate reality that every contact could spur a lawsuit. This era created the clinical practices of over-treatment and the need to specify what is medically necessary and what is not. In the case of RAC audits, the propensity has been towards the business of medicine by reining in the excessive payments. With the passage of the health care bill, that face of medicine has forever been changed.
Many literature reviews of the entire RAC program have focused on the “what” “when” and “why” but the “how” appears to be getting limited attention. One needs only to surf on the Internet to see a multitude of information on what to do in response to an audit, but sparse articles on ways to prevent your facility from being a target for RAC audits. There is a real cause for concern here, because it seems that prevention lacks an interest that is innate to other fixative-cum-curative approaches employed by many health care providers.
To quote Desiderius Erasmus (loosely) “Prevention is better than cure because it saves us the problem of being sick.” Many institutions are putting together a system or work flow to handle the current RAC audits; however, there are glaring opportunities in the realm of designing preventive mechanisms. Take, for example, ten years ago many hospitals did not have compliance officers or RAC coordinators, but in today’s health care industry, a large hospital system would be grossly unwise not to have a Compliance division. Thus, it is implied that the compliance team should start looking at ways of preventing audits and the unbudgeted expenses of defending adverse audit findings.
At this juncture, therefore, it is important to emphasize that preventive medicine reaches beyond the colloquial prevention of diseases. It encompasses the health care policy and health care management concepts that overall lead to the best quality of health at the most affordable price. However, the principles are the same as those used in disease prevention or public health: “A stitch in time saves nine.” To achieve a value-based health care system, hospitals have to tackle the root cause of their financial bleeders.
Pre-emptive extrapolation – the payment database is a gold mine
“The past informs about the present and heralds the future.” Reliable audit and denial-management software consists of claims and remittance data, most of which, in many health care organizations, lie in intellectual dormancy and are not studied for the information they could offer. Fortunately, some hospitals are catching on to the science of data mining as a forecasting tool for assessing the dollars at risk. This is done usually by using straightforward statistical concepts applied in, for example, public health research. The ultimate goal is to identify outliers and implement corrective reviews prior to making a Medicare claim or, more importantly, before an adverse RAC audit finding.
To maximize the value of an organization’s database, it must understand the mindset of a RAC auditor through the prisms of two concepts: extrapolation and pre-emption. Extrapolation is currently a stealth weapon of a RAC auditor in that, while it was not used in the demonstration audits, it is expressly permitted by the RAC Scope of Work.[iii] Extrapolation involves using statistical probabilities from a random sample of claims to estimate or project an overall pattern of overpayments. For example, assume 45 of 100 cases of a particular diagnosis-related group (MS-DRG) reviewed from a particular hospital were overpayments, and the average error rate from one of the benchmark datasets for that MS-DRG is 22%. Based on the 45% error rate at the index hospital (significantly higher than the average of 22%), the RAC auditor can extrapolate that 45% of all the claims for that MS-DRG would be overpayments!
The importance of being pre-emptive is obvious: internal reviews, and thus internal extrapolations, are less stressful than external reviews. Ironically, understanding the strategy a RAC auditor would employ may be the easiest thing to do when analyzing your payment data. (Figure 1)
Figure 1
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The entire process is about finances and the contingency agreement between the audit firm and CMS only increases the fervor with which these auditors would seek overpayments. Thus, there are three common variables that should get the attention of any compliance officer who is looking for areas of potential red flags: treatment location, amount paid, and length of stay (LOS).
A good approach is to use descriptive statistics to show a summary of a facility’s payment data and these reports can immediately reveal worrisome patterns, such as a disproportionately high number of one-day stays or procedures that are mostly performed as outpatient but billed as inpatient. Other important findings include the number of claims re-billed and duplicate billings. After the initial set of analyses, it is advisable to benchmark the LOS and remittance data against datasets such as the Medicare Provider Analysis and Review (MEDPAR) data and the Program for Evaluating Payment Patterns Electronic Reports (PEPPER) data.
The use of inferential statistics is slightly more complicated, but if implemented as part of the Strength, Weakness, Opportunity and Threat (SWOT) analysis, would be of immense benefit to the financial status of a health care facility. In the inferential analyses, the goal is to draw a conclusion based on specific queries that target key outliers, such as those claims where the amounts paid are higher than the claim submitted. It is very important not to fall into the common trap of assuming that outliers are synonymous with relatively longer LOS or disproportionately higher amount paid for a claim. The fact that a case has an unusually short LOS or significantly lower payment compared to a benchmark average will equally alert an auditor that there is a strong likelihood that the MS-DRG is not what it was purported to be, and thus was improperly coded. Therefore, these query reports will give the compliance staff and the CFO an estimate of the amount of dollars potentially at risk.
Root cause analysis and corrective action plans
Although it is very important to defend every dollar that is in dispute, it is equally important to identify what is going wrong, why it is occurring, at what point in the workflow, and, most importantly, how to fix the problem. Unfortunately, the decision model used by many health care organizations is fatally flawed, because too much emphasis is placed on inaccurate probability algorithms that attempt to determine which overpayment cases have the surest chance of being overturned at the different levels of appeal. Furthermore, there is a trend among hospitals of having appeal policies that do not include the treating physician, and thus no real possibility of improvement.
Using the selective approach described above for deciding which cases to appeal is essentially “cherry picking” and could potentially add to the error rate and justify the application of extrapolation. This is because the chances of reviewing a case that would not be appealed are minute-to-none and what many health care facilities see is just roughly one fifth of the picture. This limited insight can, therefore, not serve as the foundation of a corrective action plan, because there are numerous benefits to reviewing the entire dataset. For example, the compliance team could identify patterns such as a high prevalence of overpayments in a particular unit, particular shift or day of the week, or with a specific coder or treating physician. Thus, root cause analysis would help direct the resources to the appropriate areas and will factor in the choice of corrective action programs such clinical documentation improvement (CDI).
Conclusion
Whether these figures, vis-à-vis the estimated cost of the health care bill and the cuts in Medicare will become reality is not the point of this article. The bigger message is that the feasibility of these numbers will not bar the federal government from striving towards its goal of cutting Medicare expenditure over the next decade. Moreover, unlike much key legislation that is passed with the details to be worked out in the future, the RAC reviews are already well established after three years of engaging in a demonstration program. The question for you and me is this: Will our business practices make us the poster child for Medicare waste and recovery?
References:
[i] The Health Care and Education Reconciliation Act of 2010 (H.R. 4872)
[ii]Congressional Budget Office: (H.R. 4872), Reconciliation Act of 2010. Cost estimate for the amendment as a substitute for H.R. 4872, incorporating a proposed manager’s amendment made public on March 20, 2010. Available at http://www.cbo.gov/ftpdocs/113xx/doc11379/Manager’sAmendmenttoReconciliationProposal.pdf
[iii]Center for Medicare and Medicaid Services: Statement of Work for the Recovery Audit Contractor Program,Extrapolation- § F.4.c. See http://www.cms.hhs.gov/RAC/downloads/Final%20RAC%20SOW.pdf
Note: Original reference #3 was incorporated in to the main text.
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