More changes on the RAC
Recovery audit contractors are going to get a lot more personal in their audits of hospital providers this year, and the industry could see further reductions in their inpatient payments to accommodate a new federal documentation and coding system.
Outside of the context of larger healthcare reform, which is bound to affect any future regulation on hospital payment, “we do know several things that will happen regardless of health reform,” says Don May, vice president of policy with the American Hospital Association.
In May’s view, the three big regulatory targets center on the RAC program, the proposed inpatient prospective-payment rule for 2011, and health information technology, particularly the new “meaningful use” rulemaking (See related story, p. 8).
No regulatory development seems to pose greater anxiety to hospitals than the RAC program, which allows third-party auditors hired by the CMS to keep 9% to 12.5% of provider payments they identify as improper.
2010 will be no exception, provider sources say, especially since RAC firms will be launching medical-necessity reviews early this year, a type of advanced audit that will determine whether medical care given to a patient was appropriate or not.
Advanced or complex audits differ from automated audits, which are less-complex reviews the RAC firms conduct that involve running data queries and seeking immediate claims denials for things such as providers overreporting the amount of time it takes to administer anesthesia.
The AHA fears that RAC auditors may end up second-guessing decisions made by treating physicians at hospitals and patients, decisions that are often driven by specific and personal circumstances.
Reviewing a decision that was made after the fact is a tricky venture, May says. “The key is to make sure there’s fairness in the process,” he says. For now, it’s unclear how aggressive the RAC auditors will be in driving activity on medical-necessity reviews, he adds.
Physicians have similar concerns about the RAC program. The audits to date have mainly zeroed in on hospital audits, “but it’s just a matter of time before they’ll start hassling physician practices,” says Robert Bennett, government affairs representative with the Medical Group Management Association.
Especially in the cases of the medical-neces- sity reviews, the RAC auditors will be questioning decisions of clinicians, whether it’s in the hospital or private practice setting, Bennett says. In instituting these programs to combat criminal activities in Medicare to pinpoint a very small number of “fly-by-night” providers, the law-abiding providers are worried “that they’ll be treated the same way as the criminals are,” Bennett says.
Other types of advanced or complex audits launched late last year under the RAC program have prompted some early concerns that the auditors will be specifically sniffing out evidence of “upcoding” by providers in 2010.
Coding issues will likely drive the CMS to seek further reductions to hospital payments under its inpatient prospective-payment rule due to be issued this spring, May says.
The Medicare Payment Advisory Commission, in researching documentation and coding trends under the Medicare severity-diagnosisrelated groups, or MS-DRGs, implemented in 2008, found that hospitals were coding more accurately for procedures. The new system, designed to better identify the severity of a patient’s condition, “created incentives to better document and code secondary diagnoses,” according to MedPAC researchers.
These coding improvements resulted in higher payments—but without any change in patient complexity or the cost of care. MedPAC’s view is that Medicare payments shouldn’t have increased under those circumstances.
The advisory panel, in a draft recommendation, has suggested that a 1% payment reduction be implemented annually, over eight years, to recoup overpayments made to hospitals in 2008 and 2009, and to prevent any future overpayments that would result from documentation and coding improvements under the MS-DRGs.
Industry officials believe that the CMS will take MedPAC’s advice seriously in crafting a possible adjustment to hospital payments in future years to offset the coding improvements.
What the CMS hasn’t accounted for in considering these reductions, however, is severity and changes in case mix, May says. The hospital industry wants the CMS “to acknowledge that patients are getting sicker, as drugs allow for better management of care in the outpatient setting. What that means is people left in hospitals are really sick, and the agency hasn’t accounted for that.”
While hospitals mull these potential changes to their reimbursement, physicians in 2010 are expecting that more practices will be jumping on board a CMS reporting program that offers them a small incentive for performing well on quality measures.
The CMS in 2008 paid more than $92 million in incentives to doctors under the Physician Quality Reporting Initiative, a voluntary program that allows physicians and other eligible healthcare professionals to receive incentive payments for reporting data on quality measures related to services furnished to Medicare beneficiaries.
More than 153,600 professionals participated in the 2008 PQRI (the last year for which data were available) and of those, more than 85,000, or 55%, received incentive payments, according to the CMS. As Bennett predicts, an even greater number will participate in 2010, although participation data for last year have yet to be released.
In its fourth year, the PQRI in 2010 offers more reporting options to physicians, with additional measures applying to individual specialties, providing an impetus to participate, Bennett says.
May: Targets are RAC program, IPPS rule and “meaningful use”