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1. NEW CMS REIMBURSEMENT REVIEW ENTITIES. The Brave New World of MACs, ... MAC Decision Palomar Medical Center v. Johnson, S.D. Cal. No. 3:09-cv-00605-BEN ... – PowerPoint PPT presentation

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New World of MACs, RACs, PSCs and MICs
2009 AHCA/NCAL Convention
ROLAND G. RAPP EVP, General Counsel, Chief
Administrative Officer
Skilled Healthcare, LLC 27442 Portola Parkway,
Suite 200 Foothill Ranch, California
92610 direct 949-282-5822 fax 949-282-5820
ER, LUNDY BOOKMAN, INC. 575 Market Street,
Suite 2300 San Francisco, CA 94105 Tel
415-875-8501 Fax 415-985-8519
Medicare Administrative Contractors
  • The MMA (2003) mandated that a new MAC authority
    replace current Part A FIs and Part B carriers
  • This Medicare contracting reform must be
    implemented by 2011
  • Prior -- 23 FIs and 17 carriers
  • To be replaced by 19 MAC contractors
  • 15 PartA/Part B MACs
  • 4 specialty MACs for DME

MAC Benefits (According to CMS)
  • Serve as single point of contact for providers
    and suppliers for all claims related business
  • Assist providers and suppliers with obtaining
    information on behalf of patients about items or
    services received from another provider or
    supplier that could affect claims payment
  • Improved provider education and training
  • Role for provider and suppliers in contractor
    evaluation via surveys
  • Timeliness on claims processing and payment
  • A more even distribution of claims processing
  • Creation of a modernized administrate IT platform
    that incorporates the latest technological
    advances and standardization practices

15 Part A/B MAC Jurisdictions
Part A/B MAC Jurisdiction States
Jurisdiction States Included in Jurisdiction
1 American Samoa, California, Guam, Hawaii, Nevada, and Northern Mariana Islands
2 Alaska, Idaho, Oregon, and Washington
3 Arizona, Montana, North Dakota, South Dakota, Utah, and Wyoming
4 Colorado, New Mexico, Oklahoma, and Texas
5 Iowa, Kansas, Missouri, and Nebraska
6 Illinois, Minnesota, and Wisconsin
7 Arkansas, Louisiana, and Mississippi
8 Indiana and Michigan
9 Florida, Puerto Rico, and U.S. Virgin Islands
10 Alabama, Georgia, and Tennessee
11 North Carolina, South Carolina, Virginia and West Virginia
12 Delaware, District of Columbia, Maryland, New Jersey, and Pennsylvania
13 Connecticut and New York
14 Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont
15 Kentucky and Ohio
MAC Part A/B Awards to Date
Award Date Contractor Jurisdiction MAC A/B Cutover Month(s)
July 31, 2006 Noridian 3 done
Aug 2, 2007 Trailblazer 4 3/2008 and 6/2008
Sept 5, 2007 Wisconsin Physicians Services Health Insurance Corp (WPS) 5 3/2008 through 6/2008
Oct 24, 2007 Highmark 12 7/2008 through 12/2008
Oct 25, 2007 Palmetto 1 8/2008 and 9/2008
Mar 17, 2008 National Government Services (NGS) 13 7/2008 through 11/2008
May 6, 2008 National Heritage Insurance Corp (NHIC) 2 not available
Jun 11, 2008 Pinnacle Business Solutions (PBSI) 7 not available
Sept 12, 2008 First Coast 9 not available
Nov 19, 2008 National Heritage 14 not available
MAC Part A/B Awards to Date
Award Date Contractor Jurisdiction MAC A/B Cutover Month(s)
Jan 7, 2009 Cahaba 10 Not available
Jan 7, 2009 Noridian Protests --Palmetto, NGS, WPSI GAO Decision May 6, 2009 6 Not available
Jan 7, 2009 Palmetto Protest Cigna GAO Decision May 13, 2009 11 Not available
Jan 7, 2009 Highmark 2 Protests Cigna, NGS GAO Decision May 6, 2009 15 Not available
Jan 7, 2009 NGS Protest WPSI GAO Decision May 6, 2009 8 Not available
DME MAC Awards
  • Jurisdiction A National Heritage Insurance
  • Jurisdiction B AdminiStar Federal Inc.
  • Jurisdiction C CIGNA
  • Jurisdiction D Noridian

Durable Medical Equipment

Geographic Assignment Rule
  • Providers State -- Providers who are not in a
    special category will be assigned to the MAC that
    covers the state where the provider is located.
    There are two exceptions
  • Exception 1 for QCP Home Office State -- A
    qualified chain provider (QCP) may request that
    its members providers be served by a single A/B
    MAC specifically, the A/B MAC that covers the
    state where the QCPs home office is located. QCP
    is defined as (42 CFR 421.404(b)(2)
  • Ten or more hospitals, SNFs, and/or critical
    access hospitals, under common ownership or
    control, collectively totaling 500 or more
    certified bedsor
  • Five or more hospitals, SNFs, and/or critical
    access hospitals, under common ownership or
    control in three or more contiguous states,
    collectively totaling 300 or more certified beds
  • CMS may assign non-QCP providers, as well as ESRD
    providers to an A/B MAC outside of the prevailing
    geographic assignment rule only to support the
    implementation of MACs or to serve some other
    compelling interest of the Medicare program
  • Exception 2 for Provider-based Entities --
    Provider-based entities (e.g., hospital-based
    SNF) will be assigned to the MAC that covers the
    state where the main parent provider is

Local Coverage Determinations
  • As is current practice, MACs will be required to
    develop LCDs in accordance with chapter 13 of the
    Program Integrity Manual.
  • As the MACs commence operations in their
    jurisdictions, each MAC will consolidate all the
    LCDs for its jurisdiction by selecting the least
    restrictive LCD from the existing LCDs on the
  • National coverage decisions will continue to be
    issued by CMS.

Recovery Audit Contractors (RACs)
  • Demonstration
  • Purpose of the pilot required by the MMA (2003)
  • To determine whether use of RACs is
  • Identify and collect Part A and Part B Medicare
    claims overpayments and underpayments that were
    not previously identified by the MACs
  • Division of Work
  • Medicare Secondary Payer Overpayments
  • Non-MSP Claims review
  • The Demonstration in 3 States
  • California, Florida and New York (with
    responsibility for Arizona, SC and MA)
  • Selected because they are the largest states in
    terms of Medicare utilization
  • Demonstration ended in March 2008
  • Tax Relief and Health Care Act of 2006 Expanded
    program to all states no later than January 1,

Payment to RACs
  • RAC paid on contingency basis Starting March 1,
    2006, RACs received an equivalent percentage for
    all underpayment and overpayment identifications

  • Many problems in the California Demonstration
  • AHCA and California affiliate went to CMS and the
  • Changes made for the permanent program

CMS Improvements to the RAC Permanent Program
  • Coding experts
  • Physician reviewers
  • RAC physician medical director
  • Credentials of reviewers provided on request
  • Limits on of medical records requested CMS to
    establish limits
  • All new issues a RAC wishes to pursue for
    overpayments validated by CMS or an independent
    RAC Validation Contractor
  • Contingency fees to be paid back by RACs when an
    improper payment determination is overturned at
    any level of appeal
  • Changing from a 4-year look-back period to a
    3-year look-back period
  • Maximum look-back date of October 1, 2007
  • Web-based application that will allow providers
    to look up the status of medical record reviews
  • Reason for review listed on request for records
    letters and overpayment letters
  • Public disclosure of RAC contingency fees

(No Transcript)
RAC Timetable
  • The RACs have already started recovery audits in
    Summer/Fall of 2009
  • Likely to be only automated reviews at first
    and complex reviews likely not to start until
    late Fall 2009/early 2010
  • Medical necessity complex reviews likely to
    begin early 2010

October 2008 Award to 4 RACs For Permanent Program
  • Region A -- Diversified Collection Services, Inc.
    (DCS) of Livermore, California
  • Region B -- CGI Technologies and Solutions, Inc.
    of Fairfax, Virginia
  • Region C -- Connolly Consulting Associates, Inc.
    of Wilton, Connecticut
  • Region D -- HealthDataInsights, Inc. (HDI) of Las
    Vegas, Nevada

Contract Protests and Resolution on February 6,
  • PRG-Schultz, Inc. will serve as subcontractor to
    HDI, DCS, and CGI in Regions A, B and D (will
    only be doing home health claims in California)
  • Viant Payment System, Inc will serve as
    subcontractor to Connolly Consulting in Region C

RAC Review Process
  • RACs review claims on a post payment basis
  • RACs use the same Medicare policies as FIs,
    Carriers and MACs
  • NCDs, LCDs CMS manuals
  • Two types of review
  • Automated (no medical record needed)
  • Complex (medical record required)
  • RACs will NOT be able to review claims paid prior
    to October 1, 2007
  • RACs will be able to look back three years from
    the date the claim was paid
  • RACs are required to employ a staff consisting of
    nurses, therapists, certified coders a
    physician CMD

Automated Review Process
  • Review claims data data mining
  • All potential issues approved by CMS
  • Claim determinations made at system level without
    staff intervention
  • Library of CMS rules, regulations, guidelines,
    and coding policies maintained and updated

Complex Review Process
  • All potential issues approved by CMS
  • Additional documentation requests
  • Medical record chart reviews
  • CMS record request limits (10 of average
    monthly claims/up to 200 claims per month)
  • Review Team
  • Coding review determinations (RN, Certified
    Coders, Therapists)
  • Medical necessity reviews will be performed by
    RNs who have access to Physician Reviewers as
  • MD oversight of reviews
  • Complete documentation maintained in automated

Appeal Issues
  • Strategic Appeal Issues - Redetermination
  • 30 days to stop recoupment
  • 120 days to request redetermination
  • 11.375 interest accrues from date of
  • Cash flow can extend repayment for 90 days from
    the date of determination (includes 60 days for
    redetermination decisions to be issued)
  • Impact of rebuttal period - up to 30 days

Appeal Issues (cont.)
  • Strategic Appeal Issues - Reconsideration
  • 60 days to stop recoupment
  • 180 days to request reconsideration
  • 11.375 interest accrues from date of
  • Cash flow 906060 210 days (Includes 60 days
    for reconsideration decisions to be issued)

Appeal Issues (cont.)
  • One strategy appeal all claims within 30 days
    at first level and within 60 days at second level
  • Advantages
  • Cash flow (for a maximum of 210 days from date of
    determination or 330 days, if reconsideration)
  • Opportunity to reverse decision without impact
  • Disadvantages
  • Accrue interest at 11.375
  • Frantic timetable to assemble appeals

Appeal Issues (cont.)
  • A Second Strategy appeal some claims within
    recoupment limits
  • Based on amount in question?
  • Based on review of the merits?
  • A Third Strategy appeal claims within appeal
    but not recoupment limits
  • ALJ, Medicare Appeals Council and Court Appeals

Additional Defenses and Issues
  • Without Fault (Section 1870)
  • Even if overpayment identified provider may still
    be paid if without fault
  • Three-year rule for use of presumption but viable
    defense regardless of timeframe (unique counting
    rule, still applies to the three-year RAC window)

Additional Defenses and Issues
  • Waiver of Liability (Section 1879)
  • Even if service determined to be not reasonable
    and necessary, payment could be made if provider
    or supplier did not know, and could not
    reasonably have been expected to know that
    payment would not be made

Additional Defenses and Issues
  • Timing of Reopening Good Cause 42 C.F.R.
  • Medicare Appeals Council Decisions involving
    hospitals and skilled nursing facilities
  • Decisions by Appeals Council and the ALJ lack
    jurisdiction to decide contested reopenings under
    the Medicare appeals process
  • Impact of raising good cause

Additional Defenses and Issues
  • Timing of Reopening/Good Cause
  • MAC Decision Palomar Medical Center v. Johnson,
    S.D. Cal. No. 309-cv-00605-BEN-NLS (S.D. Cal.
    Complaint filed 3/24/09)
  • Challenges RAC reopening of two year old hospital
  • ALJ determined RAC had not shown good cause for
  • MAC reversed ALJ finding ALJ lacked jurisdiction
    to determine whether reopening was lawful
  • Court challenge to jurisdictional argument and
    due process
  • CMS Transmittal 1671 (February 16, 2009) RAC
    data analysis is good cause and ALJ has no

Additional Defenses and Issues
  • Credentials of reviewer
  • Can request a copy of credentials
  • Medical Director
  • Coding Experts

Additional Defenses and Issues
  • Review criteria used
  • Must be Medicare policy, National Coverage
    Determinations, Local Coverage Determinations
  • What was in effect at time
  • Is Medicare policy applied correctly
  • Can any of the coverage determinations be used as
    a defense?
  • Incorrect application of statutes
  • Medical records standards
  • Physician testimony/declaration
  • Standard of care evidence
  • Peer-reviewed science

Additional Defenses and Issues
  • Sampling
  • Extrapolation PIM (CMS Pub100-08) Chapter 3
  • 3.10.1-
  • Challenge statistical analysis

Provider Preparation
  • Know where previous improper payments have been
    found (OIG, CERT, Demo RAC Reports)
  • New issues are posted to the web CMS appeal
  • RAC claim status web interface (2010)
  • Detailed review results letter and denial letter
    following all complex reviews discussion
    period opportunity/does not impact appeal
  • Prepare to respond to RAC medical record requests
    45 day window
  • Keep/submit proper documentation point of
    contact/team building/organizational issues
  • Appeal when necessary - know timelines for appeal
    AND timelines to stop recoupment (e.g., 120 days
    v. 30 days for first level appeal and 180 days v.
    60 days for second level appeal)

Program Safeguard Contractors
  • Like RACs, PSCs are part of the Medicare
    Integrity Program
  • Not contingency fee contractors
  • Function like RACs in the area of complex
  • Requirements for Medical Records 45-day window
  • Ability to cause recoupments (like RACs)
  • Organize like RAC activities
  • Activities have focused on Part A and Part B (MDS
    and therapy)

Medicare Integrity Program (MIP)
  • Created by Deficit Reduction Act (DRA) in 2005
  • Establishes the federal governments role in
    combating Medicaid fraud, waste and abuse
  • Effective support and assistance to States
  • Formation of Medicaid Integrity Group (MIG)
  • Creation of Medicaid Integrity Contractors
  • Goal of the MICs
  • Identifying and recovering overpayments

The World of Medicaid Integrity Contractors
  • Review MICs - data analysis
  • Audit MICs post-payment audits
  • Educate MICs educate providers

MIC Audit Process
  • ID of potential audits through data analysis by
    review MICs
  • Vetting potential audits with State and law
  • Audit MIC receive assignment
  • Contact with provider and scheduling of the
    entrance conference
  • Currently in 20 states Florida, South Carolina,
    Pennsylvania, Delaware, Georgia, Alabama, North
    Carolina, District of Columbia, Virginia,
    Kentucky, Maryland, Texas, Arkansas, Louisiana,
    New Mexico, Colorado, Oklahoma, California,
    Nevada, Idaho

Timing of Audits
  • Should be at least two weeks notice before audit
    to begin
  • Records request/preparation time (all over the
    place - 10 to 45 days)
  • Desk or field audit
  • Entrance conference (phone or in-person)

Look-Back Period
  • Not set by MIG
  • Relates to maximum period under state law
  • Not always clear under state law
  • Need to know/analyze state law

Audit Process (cont.)
  • Intake questionnaire (work in process)
  • Entrance conference
  • Audit
  • Review of preliminary audit findings and
    tentative conclusions
  • Opportunity for provider to comment and provide
    additional information

Audit Process (cont.)
  • Draft audit report to CMS and State for review
    and comments along with provider
  • If revised, further review with State
  • Draft audit report finalized
  • CMS issues final report to State
  • State has 60 days to repay federal government for
    its share

Audit Process (cont.)
  • State issues final report to provider and begins
    overpayment recovery process
  • Provider rights of appeal are those available
    under State law
  • Settlement made complicated by feds recoupment
    from states
  • If provider wins, what happens to state loss?

Relevant Issues
  • Standards applied known?
  • Audit according to General Accepted Government
    Auditing Standards (GAGAS)
  • Adequate time to produce all records
  • Ability to stay recoupment
  • Payment plan available?
  • Timely Appeal Process/Overburdened State Appeal
    Process/Due Process

MIC PROGRAM No Record Request Limitations
  • No Limits on the Number of Medical Records a MIC
    can Request per Month
  • Unlike RAC program
  • Basic problem with MIP/MICs no formal structure
    to program
  • Compare and contrast to RAC

MIC Application of Standards
  • Uncertain
  • Push MIC to identify substantive standards

Identified Audit Process Issues
  • Requests for information outside of the scope of
    the audit (intake questionnaire)
  • Short timeframe
  • Looking back up to 5 years
  • Duplicative of other audits
  • Federal/State conflicts

Areas of Focus in LTC
  • Accuracy of patient responsibility/share of cost
  • Deceased patients
  • Duplicative payment issues/impact of retro
    Medicaid rate changes can make it look like
    duplicate claims
  • Bed-hold rate limitations

Prepare for RACs/MICs
  • Establish internal team
  • Interdisciplinary Team Legal, Finance, Clinical,
    Compliance, IT
  • Identify point of contact for internal and
    external communications
  • Develop central tracking mechanisms/database for
    all - Incoming and Outgoing
  • Coordinate the tracking mechanism with
    communications structure record reviews, and
    appeal of recoupment deadlines

Prepare for RACs/MICs (cont.)
  • Conduct self audits to identify potential
  • Participate in trainings and outreach
  • Monitor news sources, CMS, associations, and your
    own reports to stay abreast of trends
  • If desired, development of unique forms for
    appeal levels once issues identified

Responding to Record Requests
  • Stamp date and Time Received
  • Push for 45 calendar days from date of letter for
    MICs (already established for RACs)
  • Can request an extension
  • Notify if significant discrepancy between date of
    letter and date of receipt
  • Identify any internal issues in expeditiously
    getting the mail for processing

Responding to Record Requests
  • Was the request sent to the right place?
  • Notify Contractor of the contact person with
    contact information
  • Did the Contractor exceed a reasonable number of
    record requests under the circumstances?

Responding to Record Requests
  • Copying of Record and Others
  • Ensure entire record is copied
  • Include copies of substantive coverage materials
  • Review of all records before they are released
  • Permits early identification of issues
  • Establishes priority for appeals
  • Intensive work

Responding to Record Requests
  • Has the claim already been subject to audit by
    another contractor
  • Who is this request from?
  • Confusion with so many different contractors

Responding to Record Requests
  • Document Management?
  • Stamp number (Bates Stamp) on bottom of each page
  • Scan everything produced
  • Include cover letter itemizing contents of box of
    documents or CD
  • Send certified mail or, if regular mail, complete
    affidavit of service by mail

Responding to Record Requests Data Management
  • Information about the production
  • Patient information
  • Status of case
  • Reimbursement information
  • Contractor/State response
  • Status at each level of appeal
  • Audit ID Number
  • Type of Audit
  • Reason for Audit (Issue Specific)
  • Date of Record Request
  • Date Received
  • Next Deadline

  • Stamp the date received
  • Determine Appeal period

Additional Defenses and Issues
  • Review criteria used
  • What was it and is it subject to attack?
  • What was in effect at time?
  • Is Medicaid policy applied correctly?
  • Incorrect application
  • Medical records standards
  • Physician testimony/declaration
  • Standard of care evidence
  • Peer-reviewed science