Preparing for Medicare Audits

Howard J. Anderson, Executive Editor
Health Data Management Magazine, October 1, 2008

When a financial audit is inevitable, often the best way to prepare is with a self-audit. That's the approach University of Texas Health Center-Tyler is taking to get ready for the inescapable Medicare Recovery Audit Contractor program. A potential juggernaut, the federal financial recovery initiative looms on the horizon.

Beginning this fall, the Medicare program will begin phasing in audits of hospitals and some group practices state by state, primarily focusing on recouping overpayments to providers for certain types of treatments (see sidebar, page 44).

To prepare for the RAC initiative, the 114-bed Texas hospital is doing what many experts recommend. It's using data mining to analyze its Medicare claims, particularly those most likely to be the focus of an audit. Without the help of a consultant, the small hospital is analyzing whether it has properly coded and documented claims for the kinds of cases, such as 24-hour hospital stays, that the RAC program pinpointed during a three-year demonstration project in six states, says Shannon Roshan, administrative director, revenue cycle operations.

The hospital is using data mining software from The Shams Group, Coppell, Texas, to dig into data from its clinical and financial systems from Medical Information Technology Inc., Westwood, Mass., as well as other applications. It's carefully analyzing whether any claims are incorrect so it can promptly send an adjusted bill to Medicare in advance of an audit. It's also tallying how many cases it has had in each target area, such as 24-hour stays, so it can begin gathering all necessary documentation in advance of an audit. And it's using the data to support a clinician education program.

"We're seeing a big need for physician education on documentation issues," Roshan says. Doctors at the hospital still hand-write their clinical notes, and they're being educated on how to do a more thorough job on such details as providing adequate information to support a particular diagnosis. "As a teaching institution, we have to do our part to teach doctors how to properly document treatment," she adds.

Millions at Risk

Providers face the potential of having millions of dollars in Medicare payments deducted from future billings as a result of overpayments identified by the RAC program.

So it's important that they begin taking steps now to minimize the impact on the bottom line. Information technology, no doubt, will play a role in the complex undertaking.

Virtually every U.S. hospital will eventually face a Medicare audit, predicts Julie Chicoine, R.N. compliance director for Ohio State University Medical Center, Columbus. "No one is safe from scrutiny," stresses Chicoine, who is a nurse, attorney and claims coder.

Officials at The Centers for Medicare and Medicaid point out that although relatively few group practices were audited during the demonstration, many more could be scrutinized once the national effort is rolled out (see sidebar, above).

In addition to conducting a self-audit and submitting adjusted bills when overbilling is discovered, providers should take several key steps, experts say, including he following:

* form a task force to coordinate the RAC preparation process;

* create a database to track the RAC process, including the status of appeals;

* devise a method for gathering all records requested by auditors; and

* make sure claims coders receive proper training and physicians are educated on all of the Medicare program's documentation requirements.

In conducting a self-assessment, providers should "follow the money" and gather detailed information on the accuracy of documentation and coding for their high-volume Medicare procedures, advises Laurie Johnson, senior HIM consultant at Ingenix Consulting, Eden Prairie, Minn.

Chicoine of Ohio State says her organization, like many others, is considering getting help with the internal auditing of all aspects of the claims filing process. Because most hospitals have a "patchwork of legacy systems" to support claims processing, most would benefit from hiring an outside firm to create a data warehouse of claims that can be reviewed for accuracy, she argues.

A growing number of companies are offering hospitals data mining systems designed, at least in part, with the RAC program in mind. For example, Hirschl Associates, a Laguna Niguel, Calif.-based consulting firm, just completed beta tests of business intelligence software that helps identify claims likely to be audited.

Medicare auditors will use data mining to look for such problems as duplicate bills or procedure codes that don't match a diagnosis, and hospitals should go through the same exercise, says Francine Machisko, a senior principal at Noblis Inc., a Falls Church, Va.-based consulting firm.

If an auditor discovers a hospital already has resubmitted bills and returned overpayments, they'll be less motivated to dive into the organization's claims, Machisko and other experts say. That's because auditors are paid contingency fees based on overpayments they recover. Plus, by rebilling, hospitals avoid any penalty fees and interest payments.

All hospitals should be routinely reviewing claims data for patients covered by Medicare and other payers as part of a broader risk management effort, says Barbara Flynn, vice president, health information services, at the Florida Hospital Association, Orlando.

Task Force

Pointing to the experience of Florida hospitals that were scrutinized in the RAC demonstration project, Flynn urges other organizations to form a claims denial management team to tackle RAC issues as well as handle commercial insurance claims denials.

Suzanne Lestina, a technical manager for patient financial services at the Healthcare Financial Management Association, Westchester, Ill., suggests such a task force should be called an "integrity of services" committee. Such a group should prepare to tackle additional payment scrutiny efforts from Medicare as well as managed care contractors. As a result, someone with in-depth knowledge of all payers should head up the effort, she stresses.

To deal with the RAC demonstration program, the five-hospital Lee Memorial Health System in Fort Myers, Fla., formed a multi-disciplinary team. Members represented the I.T. department, the central business office, the medical records department, quality assurance and case management, says Stan Padfield, Lee Memorial's systems director for health information management.

"This is not a health information management project," he stresses. "It goes across all silos, and if you don't work on it as a team, you'll lose track of where you are, and that can cost your organization millions of dollars."

Page 1 of 3.