COMPLIANCE AND THE REVENUE CYCLE – What Does the Compliance Officer Need to Understand About the Risks?

1. COMPLIANCE AND THE REVENUE CYCLE – What Does the Compliance Officer Need to Understand About the Risks? PRESENTED BY: TAUNA SHELTON MHSM,MS,CHC REGIONAL DIRECTOR COMPLIANCE AND PRIVACY THR

2. REVENUE CYCLE PROCESS • Who is involved in the Revenue Cycle? • Scheduling & Pre-Registration • Registration Verification • Financial Counseling • Charge Capture • Documentation Coding • Bed Control • Billing • Payment Posting • Account Follow-Up • A/R Management • Contracting • Medical Records/ HIM • Case Management • Utilization Review • IT • Clinical Areas

3. EACH DEPARTMENT PROVIDES OPPORTUNITY FOR ERROR AND RISK • Scheduling & Pre-Registration: patient screening for demographic information, verification of orders, insurance, insurance approval for OP procedures – will ABN be needed for Medicare patient because diagnostic test does not meet medical necessity? • Registration Verification: verifying patient identity, insurance card (Is patient the person presented, or is this a fraudulent use of identification to obtain services by using someone else’s insurance card?) (Medicaid / Medicare), fraud perpetuated via follow up services? or case of identity theft by patient or even entity staff ?

4. ERROR OR RISK (cont) • Financial Counseling: financial screening for self pays or charity care supported by organizational Charity Care Policy and state laws • Charge Capture: are the correct charges for services provided, including number of charges actually being placed onto the patient’s account (medications, procedures) including overcharging, undercharging, lost charges or charging for services not provided?

5. ERROR AND RISK (cont) • Documentation Coding: Physician notes, Nurses notes, ancillary staff notes supporting the ordered services detailed enough to provide substantiation to an auditor ? • Bed Control: placement of patient in correct bed based upon order timed by physician, patient transfers? • Billing:billing the correct patient on the correct account, correct number of services? • CHARGEMASTER updates for each service, billing edits loaded, charge capture issues?

6. ERROR AND RISK (cont) • Payment Posting: payments posted on correct account, payments applied to correct account , credit balances on account worked? • Account Follow-Up: accounts worked with patient friendly guidelines and following state collection laws? • A/R Management: as accounts age are they being worked to resolve credit balances, bad debt and appropriate communications with payers?

7. ERROR OR RISK (cont) • Contracting: are payments being monitored by the CBO and the Contracting Department for proper payments based upon the written contract payment guidelines? are edits in place for both the entity and the payer? • Medical Records / HIM: coding by CCI guidelines, backlog in coding, increased query of physicians for confirmation of documentation, quality self department checks?

8. ERROR AND RISK (cont) • Case Management: are appropriate InterQual or M&R guidelines used for placement of patient into appropriate level of service based upon medical necessity and severity, observation or inpatient services required? • Risk Management: high profile cases being checked for billing and compliance issues, as well as, the current risk occurrence issue?

9. ERROR OR RISK (cont) • IT: system supporting all needs of clinical staff, billing staff, HIM staff – EHR being used, ability for tracking audit trails? • Clinical Areas: continuous communication on billing and charging changes, charge audits?

10. REVENUE CYCLE DRILL DOWN • FOCUS TODAY ON: • NEED FOR POLICIES • CHARGEMASTER • CENTRAL BUSINESS OFFICE and CREDIT BALANCES • CHANGES TO COME IMPACTING REVENUE AND OPERATIONS

11. SYSTEM / ENTITY POLICIES SUPPORTING THE REVENUE CYCLE • CHARGE CAPTURE POLICIES provide guidance for all staff involved in the revenue cycle who document charges, input charges, monitor charges or audit charges • CHARGEMASTER POLICIES provide guidance for all staff responsible for requesting new services, new charges or changes in existing charges with the addition of the appropriate CPT codes

12. POLICIES (cont) • BILLING POLICIES: provide guidance to all staff associated with billing on how to handle discrepancies, credit balances, bad debt, A/R and billing cycle requirements • COMPLIANCE POLICIES: provide government based guidance to assist all system / entity staff with concerns of illegal activities, billing concerns, fraud issues or simple questions

13. COMPLIANCE BILLING AND OPERATIONAL LAWS • MEDICARE REQUIREMENTS • MEDICAID REQUIREMENTS • FALSE CLAIMS ACT • STARK LAW

14. SIGNIFICANT LAWS GOVERNING FEDERAL HEALTHCARE PROGRAMS • ANTIKICKBACK STATUTE: Authorizes criminal and civil penalties against anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in cash or in kind, to induce or in return for referrals for services payable under federal healthcare programs

15. SIGNIFICANT LAWS (cont) • Civil Monetary Penalties Law: Holds a person or entity subject to penalties for submitting a false claim or a claim that should have been known to be false, allows a penalty of up to $10,000 for each service or item falsely or fraudulently claimed and an assessment of up to three times the amount claimed and potential exclusion from the federal healthcare program or programs

16. SIGNIFICANT LAWS (cont) • False Claims Act: Holds a person or entity liable for up to treble damages and up to $11,000 for each false claim it submits or causes to be submitted to a federal healthcare program, does not require a specific intent to defraud and includes a provision for Qui Tam or whistleblower suits, which allow individuals to file suit on behalf of the U.S. government

17. SIGNIFICANT LAWS (cont) • Health Insurance Portability and Accountability Act of 1996: Addresses use and disclosure of individuals’ health information (protected health information) by hospitals and other covered entities; includes standards for individuals’ privacy rights and how their health information is used.

18. SIGNIFICANT LAWS (cont) • Physician self-referral law (Stark Law): Prohibits hospitals from submitting to Medicare any claim for designated health service if the referral of the DHS is generated by a physician who has a prohibited financial relationship with the hospital. Hospitals and physicians who violate the Stark law are subject to civil monetary penalties and exclusion from federal healthcare programs

19. STARK III UPDATE • On September 5, 2007 CMS issued final regulation outlining the third phase of regulations prohibiting physician self-referral. This prohibits physicians from referring Medicare patients for certain items, services and tests provided by businesses in which they or their immediate family members have a financial interest. This regulation is the third part of the final regulations implementing the physician self-referral prohibition commonly referred to as the Stark law taking effect on December 4, 2007

20. STARK III (cont) • Redefines arrangements between hospitals and individual members of group medical practices as “direct” rather than “indirect” compensation; eliminates the “safe harbor” methodology for calculating fair market value for hourly physician service; and create additional flexibility for rural hospitals in recruiting and retaining physicians. This rule makes no changes to the in-office ancillary services exemption, but cites this area as a possible target for future rulemaking.

21. PATIENT FINANCIAL SERVICES • BILLING LAWS • BILLING CYCLE • EDITS • BAD DEBT • CREDIT BALANCES • CHARITY CARE • WRITE OFFS

22. Financial Risks Associated with Credit Balances • FRAUD • WASTED MAN-HOURS AND PROCESSING COSTS • MIS-STATED PROFIT • LOST BILLING OPPORTUNITIES • MEDICARE PENALTIES

23. CAUSES OF CREDIT BALANCES • Mis-posted allowances – incorrect estimates of cash amounts due • Duplicate payments • Charge credits subsequent to billing • Full payments by both primary and secondary insurers • Up-front collections – incorrect estimates of patient liability

24. STATS ON HOSPITAL RESOLUTION • Most credit balances are not the result of overpayments • One third resolved result in a refund to patient or payer • One half are mis-posted allowances that need to be reversed on the PA system and don’t require refunds • Payer contracts can result in incorrect rates and terms loaded into the hospital system – these create understatements of a hospital’s profitability and AR

25. ADDITIONAL SOURCES OF ERRORS • Errors occur when a claim is paid twice by a payer • Problems created by manual errors, system errors or a combination of both • Results of better point-of-service collections – better up-front collections create higher volume for credit balances • Over-estimates of what is owed in a Managed Care environment

26. RISKS OF CREDIT BALANCES • Real risks posed by : • Medicare penalties • Wasted time • Lost payment opportunities

27. MEDICARE PENALTIES • Suspension of Medicare payments caused by non-compliance with federal regulations concerning credit balances • Fines • Imprisonment • CMS requires hospitals report all Medicare credit balance overpayment accounts quarterly using form CMS-838, which must be signed and attested to by an officer of the hospital, specifically by the CFO or CEO.

28. MEDICARE PENALTIES (cont.) • Documentation must be maintained that shows that each patient record with a credit balance was reviewed to determine if any credit balances are attributable to Medicare • Most hospitals do not have an effective means to ensure compliance which means several credit balance accounts can be present • Risky for the CFO because after signing the Medicare Credit Balance Report, he/she is attesting to the fact that all of the hospital’s credits have been reviewed • Credit balances are NOT a profit center!

29. LOST BILLING OPPORTUNITIES • Once accounts are analyzed and adjusted, billing opportunities to generate additional cash receipts are often revealed • Amounts due from payers and patients have been hidden by the credit balances • Failure to analyze credit balances in a timely fashion can result in permanent lost cash

30. FRAUD • High volume of refund checks issued by large hospitals to patients, insurance companies and vendors make it impossible for controllers to scrutinize & verify each refund • Because refund checks pass through many hands, they can end up in the hands of the originator of the request • Credit balances and the refund processes are ripe for fraudulent activity – making hospitals exposed to financial losses and corporate embarrassment • Refund checks can be misappropriated because of weak internal controls and because the intended receiving parties are not aware that they are due a refund check

31. NEGATIVE PRESS • Unresolved credit balances can trigger management letter comments to a hospital’s board of directors noting items of concern • Credit balances understate an organization’s profit and the AR

32. COMMON MISCONCEPTIONS • Setting high dollar thresholds for account management creates a time-bomb effect…leaving a growing number of smaller balance credits • Hospital is forced to allocate staff to resolve the smaller credit balance accounts creating work pressure in PA • Vendor credit balance auditors are paid by commercial insurers to recover overpayments but only 1/3 of the accounts are commercial, largest percentage of credit balance accounts are government and patients

33. Required Reporting of Medicare Overpayments CMS 838 Form • Providers must submit Quarterly Reports detailing all Medicare overpayments • CFO must sign the report attesting to the completeness and accuracy of the data • Failure to comply may result in: • Financial penalties that include interest and fines/treble damages • Criminal penalties • Compliance is monitored as part of the cost report auditing process

34. COMPLIANCE SOLUTIONS • To reduce risk and improve cash flow: • Processes established to ensure compliance with Medicare requirements for refunding credit balances and filing the CMS-838 • Determine total dollar amount and volume of credit balances • Determine volume of new credit balances created on a weekly basis to determine risk

35. COMPLIANCE SOLUTIONS • Determine thresholds allowed for credit balance levels based on total dollar and total volume of accounts (2 days of a hospital’s revenue) • Review current processes • Automate manual processes • Monitor unresolved Medicare credits • Minimize fraud potential and issuance of refund checks by using payers’ processes and systems that allow reporting overpaid accounts – insist on voucher recoveries by the payer

36. COMPLIANCE AREAS OF CONCERN • Registration: fraudulent use of identifications to obtain services / ID Theft by patients or even entity staff • Insurance verification: patient using another patient’s Medicare number • Charge Capture: overcharging / charging for services not provided, lost charges • Billing Errors: Duplicate billing • Observation or IP : Medicare and Medicaid correct status • Charity Care: evaluations for medical assistance eligibility

37. MEDICAID AUDITS: STATE MEDICAID FRAUD CONTROL UNITS (MFCU) • For fiscal year 2006, from October 1, 2005 and ending September 30 2006, the MFCU received more than $1.1 billion in court ordered restitution, fines, civil settlements, and penalties. They also obtained 1,226 convictions in FY 2006. • MFCUs reported 676 instances in which civil actions were taken with successful outcomes. • Of 3,425 OIG exclusions from participation in Medicare and Medicaid programs, 731 exclusions were based on referrals made to OIG by the MFCUs. • SOURCE: State Medicaid Fraud Control Units Annual Report, Fiscal Year 2006

38. EXAMPLE IN TEXAS • In Texas, a physical therapy clinic operator was sentenced to 51 months in prison and ordered to pay $1.32 million in restitution for conspiracy to commit wire fraud and health care fraud. She and her partner billed the Medicare and Medicaid programs for services not rendered and billed for physical therapy services as if they were performed or supervised by a licensed physician. The investigation revealed that the defendants hired unlicensed foreign medical graduates to perform the services of a licensed physician. The investigation involved OIG, the Texas MFCU, and the FBI. • SOURCE: OIG Semi-Annual Report for First Half of 2007

39. KEY COMPLIANCE AND REVENUE CYCLE METRICS • PATIENT ACCESS QUALITY: • Physician authorization compliance: 96-98% • Inpatient admissions error ratio: <1-2% • Outpatient registration error ratio: <1-2% • % Pre-registered IP accounts: 40-50% • % Pre-registered OP accounts: 25-30% HFMA Benchmarks

40. KEY COMPLIANCE AND REVENUE CYCLE METRICS • CASE MANAGEMENT QUALITY • Payer acceptance of clinical treatment plan based on authorization: 95-97% acceptance • Clinical denials overturn rate: 95% • HFMA Benchmarks

41. KEY COMPLIANCE AND REVENUE CYCLE METRICS • HEALTH INFORMATION MANAGEMENT QUALITY • DNFB (discharged not final billed) and HIM bill holds • Awaiting coding: <0.5 day in A/R • Awaiting dictation: <0.5 day in A/R • Charge capture quality: 98% compliance HFMA Benchmarks

42. KEY COMPLIANCE AND REVENUE CYCLE METRICS • PFS/PATIENT ACCOUNTING QUALITY • Gross Days Receivable Outstanding: < 52 days outstanding • % A/R over 90 days: 17-20% • % A/R over 120 days: 10-12% • % A/R over 1 year: < 2% • Credit Balance A/R: < 1 A/R day • Billing turnaround: 5 days from DOS or discharge HFMA Benchmarks

43. KEY COMPLIANCE AND REVENUE CYCLE METRICS • ALL REVENUE CYCLE DEPARTMENTS NET REVENUE EXPOSURE • Denial overturn ratio: 95-98% • Underpayments overturn ratio: 95-98% • Bad debt expense as % of gross revenue: < 2.5% • Bad debt expense as % of net revenue: < 2-3% HFMA Benchmarks

44. CHARGEMASTER UPDATES • The CHARGEMASTER is a computer file that contains all the charges that a hospital makes. It is the link between services provided and the generation of claims and billings. • Key elements to review in a hospital CHARGEMASTER are: invalid or inaccurate CPT/HCPCS codes, invalid or inaccurate revenue center codes, inadequately defined procedures and tests, appropriateness of bundled CPT/HCPCS codes, and validity of service.

45. CHARGEMASTER UPDATES • Must have an on-going CHARGEMASTER review since the factors that go into the CHARGEMASTER are constantly changing, including the annual updates of CPT/HCPCS codes, changes in reimbursement guidelines and advances in technology. • SOURCE: HFMA Compliance Checklist for Hospitals, Revised June 2002

46. NEW CMS CHANGES IMPACTING COMPLIANCE AND REVENUE • PRESENT ON ADMISSION (POA)start date 10/1/2007 is defined as present at the time the order for inpatient admission occurs – conditions that develop during an outpatient encounter, including emergency department, observation, or outpatient surgery, are considered as present on admission. Purpose is to distinguish between pre-existing conditions and complications. • All claims involving inpatient admissions to general acute care hospitals or other facilities that are subject to a law or regulation mandating collections of present on admission information • POA indicator is assigned to principal and secondary diagnoses and the external cause of industry codes • Issues related to inconsistent, missing, conflicting or unclear documentation must still be resolved by the provider.

47. POA AFFECTS PAYMENTS • Starting 10/1/2007, CMS reduces payments in some cases when the patient acquires an infection (or other condition) during a hospital stay. • Will not assign higher paying DRG to patients who have /suffer from the 8 conditions, unless they are documented as present on admission:

48. EIGHT POA’s NOT ASSIGNED TO HIGHER DRGs • Serious preventable event – object left in during surgery • Serious preventable event – air embolism • Serious preventable event – blood incompatibility • Catheter associated urinary tract infections

49. EIGHT POA’s (cont) • Pressure ulcers (decubitus ulcers) • Vascular catheter – associated infection • Surgical site infection – mediastinitis after coronary artery bypass graft (CABG) • Falls

50. POA (cont) • MULTIDISCIPLINARY EFFORT • HIM department / Coding professionals • Finance • Physicians • Quality department • Risk Management • Compliance • Support from Administration • Vendor readiness