[Senate Hearing 113-236]
[From the U.S. Government Publishing Office]
S. Hrg. 113-236
PROGRAM INTEGRITY: OVERSIGHT OF
RECOVERY AUDIT CONTRACTORS
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 25, 2013
__________
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania
Amber Cottle, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
WITNESSES
Carmody, J.J., director of reimbursement, Billings Clinic,
Billings, MT................................................... 5
Draper, Suzie, vice president, business ethics and compliance,
Intermountain Healthcare, Salt Lake City, UT................... 7
Rolf, Robert, vice president, CGI Federal Inc., Fairfax, VA...... 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 31
Carmody, J.J.:
Testimony.................................................... 5
Prepared statement........................................... 34
Draper, Suzie:
Testimony.................................................... 7
Prepared statement........................................... 39
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 48
Rolf, Robert:
Testimony.................................................... 9
Prepared statement........................................... 50
Communications
American Association for Homecare................................ 55
American Hospital Association.................................... 63
American Orthotic and Prosthetic Association..................... 66
Center for Medicare Advocacy, Inc................................ 69
(iii)
PROGRAM INTEGRITY: OVERSIGHT OF RECOVERY AUDIT CONTRACTORS
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TUESDAY, JUNE 25, 2013
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:05
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Carper, Casey, Hatch, Grassley, Enzi,
Thune, and Isakson.
Also present: Democratic Staff: Amber Cottle, Staff
Director; David Schwartz, Chief Health Counsel; Matt Kazan,
Professional Staff Member; Tony Clapsis, Professional Staff
Member; and Karen Fisher, Professional Staff Member. Republican
Staff: Kim Brandt, Chief Health Care Investigative Counsel; and
Chris Coughlan, Tax Counsel.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Benjamin Franklin once said, ``Waste neither time nor
money, but make the best use of both.'' This committee has
oversight of Medicare. Forty-nine million seniors and disabled
Americans depend on the program. Making sure the government
spends Medicare dollars wisely is one of our chief
responsibilities, and one this committee takes very seriously.
In 2011, $29 billion of Medicare payments were considered
improper. Our goal should be to lower this amount to zero.
Regular audits save Medicare money by recouping these errant
payments. Since 2010, audits have identified $4.8 billion of
incorrect Medicare payments, but they also can impose burdens
on providers.
Today we will examine the audits performed by private
contractors called Recovery Audit Contractors. Their mission is
to uncover and collect inappropriate payments made to medical
providers, both under- and over-payments.
In 2003, the Medicare prescription drug law created the
Recovery Audit Contractor program as a 6-State demonstration.
Over a 3-year test period, the program returned $900 million to
Medicare. It was so successful that Congress expanded it
nationwide.
The Affordable Care Act further expanded the program to
cover Medicare managed care and Medicaid. As the baby boom
generation ages, Medicare must remain financially strong. The
Medicare trustees determined last month that the Medicare trust
fund will last 2 years longer than previously estimated, that
is, until 2026. Per-beneficiary spending is at a historical
low. We have made real progress ensuring Medicare will be
strong for future generations.
Private audits play a key role in strengthening Medicare's
finances. In 2011, these audits returned nearly half a billion
dollars to the Medicare trust fund. We need to build on this
success, but we cannot over-burden legitimate providers who
play by the rules. We need balance.
Providers should focus on patient care, not senseless red
tape. Recovery Audit Contractors frustrate many Montana
providers, and one is Kalispell Regional Medical Center. In the
last year, the hospital has had to spend nearly $1 million and
hire three new full-time staff just to deal with the audits. In
total, eight of their employees respond to audits. For a small
hospital in Montana, that is a serious investment.
Charles Pearce serves as the hospital's chief financial
information officer. What is it that frustrates Mr. Pearce the
most? The randomness of the audit process. He believes the
auditors are over-zealous and incur no penalties or
consequences when an audit is overturned on appeal.
Mr. Pearce provides example after example of audits that
were eventually overturned on appeal. One case involved a 65-
year-old man who had leg surgery and was fitted with a cast.
Several weeks later, he came into the emergency room with
severe chest pain. A CT scan showed he had a blood clot on his
lung.
The doctor on duty admitted the man and prescribed
medication. Almost 3 years later, a private contractor's audit
said this admission was unnecessary. The audit claimed the
patient's medical history did not support the admission. As a
result, Kalispell Regional was forced to pay back Medicare.
The hospital appealed the decision, arguing that the
admission was necessary because the original surgery and cast
increased the risk for a lethal blood clot. Kalispell Regional
won its appeal. Kalispell Regional has won appeals in 90
similar cases. All told, that hospital is successful in 53
percent of its appeals. There must be better ways to spend the
government's and hospitals' time and money.
Here are three steps Medicare should take. (1) Incentivize
private contractors to focus on the most at-risk services and
providers. This way, providers with a long track record of
following the rules are rewarded. (2) Bolster provider
education by Medicare and its contractors. Providers cannot
follow the rules if they do not know the rules. Medicare
regulations can often be confusing and require more time than
providers have. (3) Make the appeals process more efficient.
One of my top rules is to do something that has to be done and
do it now. The second rule is, do it right the first time.
As Kalispell Regional's experience shows, appealed cases
often face a long and expensive road for both the provider and
the government. The Inspector General for the Department of
Health and Human Services found rulings in the final stages of
the appeals process--a hearing in front of a judge--are highly
inconsistent.
The IG report found the same facts and circumstances often
lead to two opposite decisions. Recovery Audit Contractors are
only one piece of a larger concern with the growing use of
contractors. Ensuring Medicare payments are made accurately is
difficult, and it is complex. Over the years, different
contractors, all with their own acronyms, have been layered
over one another.
While some overlap may be necessary, Congress should work
to simplify the way the contractors interact with providers.
This should increase efficiency and will also reduce some
unnecessary burden on doctors and hospitals.
As we work to strengthen our Federal health care system, we
must keep Benjamin Franklin's words in mind. We must waste
neither time nor money, but make the best use of both. We must
do so to improve patient care.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Thank you, Mr. Chairman. I welcome this
opportunity to discuss one of the key tools used by the Centers
for Medicare and Medicaid Services, CMS, to identify and
recover improper payments in the Medicare program: the Recovery
Audit Contractors, or RACs. Medicare improper payments are a
really serious issue.
In 2012, Medicare covered more than 49 million elderly and
disabled beneficiaries at an estimated cost of $550 billion. Of
that amount, CMS reported that the improper payments from
Medicare were estimated to be more than $44 billion.
That means 8 cents out of every dollar spent on Medicare
was paid improperly. That rate is unacceptable, especially
given the recent Medicare trustees report which said that the
Medicare trust fund could be depleted by as early as 2022.
Reducing the amount of improper payments is imperative to
extending the financial longevity of the Medicare trust fund
and to ensuring that Medicare continues serving patients for
years to come.
CMS identifies and recovers improper payments by hiring
contractors to conduct audits of the 1 billion-plus claims
submitted to the Medicare program each year. Auditing is
essential to ensuring Medicare payments are submitted properly
and that Federal dollars are being spent wisely.
The RACs are a key part of CMS's oversight strategy, and
they audit millions of Medicare claims each year. However, we
need to make sure that RACs are going about their work in a
smart and productive way.
Over the past 3 years, CMS has made many important changes
to the RAC program that have significantly improved their
efforts to recover improper payments. RACs have increased the
amount of collected over-payments from $75 million in 2010 to
$2.3 billion in 2012.
Along with recovering Federal dollars, RACs returned $100
million in over-payments to providers in 2012. Clearly these
are positive steps, but we are still a long way from
eliminating even half of the estimated $44 billion in improper
Medicare payments.
Now RACs must walk a fine line between chasing down every
last dollar and putting an unnecessary burden on our Nation's
caregivers. Even though RACs have reviewed less than 1 percent
of claims nationwide, their efforts can be burdensome to
providers caring for sick patients.
No one goes into the health care business to respond to
auditors' requests for dozens of documents, yet we have heard
from providers across the country that responding to RAC audits
can be a long and painful process.
Providers have also stated that, at times, the RAC audits
seem arbitrary and that the people conducting these reviews do
not fully understand the Medicare requirements or acceptable
medical practice. These kinds of reports concern me. I support
requirements that minimize burdens on providers by reducing the
look-back period to 3 years, limiting the number of medical
records requested, and accepting electronic copies of requested
documents.
Another issue that concerns me is the high rate at which
RAC decisions are overturned on appeal. The HHS Office of
Inspector General reported that of the 41,000 appeals that
providers made to administrative law judges, over 60 percent
were partially or fully favorable to the defendant. Now, such a
high rate of reversals raises questions as to whether RACs are
being too aggressive or do not understand current medical
practice.
Currently, CMS is reviewing RACs' bids for new contracts
for the coming years. As they review the bids, I would like to
see CMS take into consideration the balance between program
integrity and administrative burden. There is a lot of
unrecovered money still out there, and RACs are an important
component in the effort to get some of that money back where it
belongs, but we need to make sure they are going about it in
the right way.
Once again, I want to thank our chairman here for calling
this hearing, and I look forward to working with him on this
important issue.
It is now my pleasure to introduce one of our witnesses
today from my wonderful home State of Utah, Ms. Suzie Draper,
who is the vice president of ethics and compliance for
Intermountain Healthcare, a large regional integrated health
care delivery system headquartered in Salt Lake City, and one
that is recognized nationwide as one of the leading health care
provider groups in the country.
Ms. Draper has a wide range of experience in the health
care environment, with 10 years in a variety of clinical areas,
including primary care, intensive care, and several surgical
specialties. In addition, Ms. Draper has over 13 years in the
capacity of a consultant for medical records, physician
services, and corporate compliance.
At Intermountain Healthcare, Ms. Draper has carried out a
pivotal role in the development and implementation of
Intermountain Healthcare's compliance and privacy program. So I
am very grateful that you would take time out of what I know is
a busy life to come here and testify and help us to understand
this better.
We are grateful to the other two witnesses as well, so I do
not mean to ignore you, but I just want to make that point
while introducing Suzie and also saying that we are very proud
of Intermountain Healthcare and the work that they do.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. Turnabout is fair play, and I have someone I
want to introduce from Montana: J.J. Carmody.
Senator Hatch. Let us not go overboard here.
The Chairman. That is right. [Laughter.]
Also from a beautiful, wonderful State, only this time,
Montana. But anyway, thank you very much, Senator, for your
statement. We have three witnesses today. First is J.J.
Carmody, director of reimbursement at the Billings Clinic,
Billings, MT; as well as Ms. Suzie Draper, vice president of
business ethics and compliance at Intermountain Healthcare; and
Robert Rolf, vice president, CGI Federal.
Thank you all for coming today, and thanks for taking the
time to travel here to Washington, DC. Your statements will be
automatically included in the record, and I would urge each of
you to summarize in about 5 minutes.
Ms. Carmody, you are first.
STATEMENT OF J.J. CARMODY, DIRECTOR OF REIMBURSEMENT, BILLINGS
CLINIC, BILLINGS, MT
Ms. Carmody. Good morning, Mr. Chairman and distinguished
members of the committee. I am J.J. Carmody. I am the director
of reimbursement services for Billings Clinic in Billings, MT.
Billings Clinic is a physician-led, integrated health care
organization with a multi-specialty physician group practice, a
285-bed hospital, and a 90-bed skilled nursing and assisted
living facility.
Our system also includes partnerships with 10 critical
access hospitals across Montana and Wyoming and is a
participant in the Mayo Clinic Care Network. Like health care
organizations across the Nation, Billings Clinic is dedicated
to ensuring access to the highest-quality care while providing
the greatest value for every dollar spent on medical treatment.
As part of this commitment, Billings Clinic has, since the
late 1990s, invested significant resources in its compliance
program, based on the recommendations of the Office of
Inspector General, to make sure that medical services that are
provided to Medicare beneficiaries and other patients are
appropriate and are billed accurately. A key part of this
effort is early detection of claims processing errors, as well
as returning over-payments in a timely manner.
In addition, our compliance team monitors data for trends
that may cause compliance risk, performs risk assessments, and
conducts pro-active audits. Recovery Audit Contractors, or
RACs, are a recent entry into the compliance process but in
just a few short years they have had an enormous impact, both
on the clinical and the administrative side of our operations.
Since our RAC began auditing Billings Clinic in May of
2002, we have been asked to provide roughly 6,000 records,
totaling more than $45 million in claims. That is about 14
percent of our overall Medicare payments. We expect to see this
volume increase in the near future as a result of CMS's
decision in March of 2012 to increase the maximum number of
record requests.
At Billings Clinic, approximately seven out of 10 claims
audited by the RAC had no error. From 2010 to 2012, Billings
Clinic appealed 62 percent of the claims that were denied by
the RAC. Of those appeals that have been resolved to this date,
the RAC decision was overturned 84 percent of the time.
However, 65 percent of the appeals, totaling $3.3 million,
are still awaiting a decision. Billings Clinic does not take
the decision to appeal lightly. It is costly and it diverts our
staff and other resources from improving patient care, quality,
and safety. If this were not the case, we would appeal more
denials.
RACs are just one of the entities currently reviewing our
patient billing. We are also being audited by the Medicare RAC,
Medicaid, Medicare Advantage, commercial payers, and others.
The administrative resources required to respond to this level
of scrutiny are a major cost to our organization.
We estimate that we currently spend 8,600 work hours and
about $240,000 a year just for internal staff to manage audits
and appeals. Our internal resources include patient financial
services, coding, and care management staff who spend time
tracking requests and processing Medicare and RAC recoveries,
as well as checking data integrity. In addition, we spend
$45,000 a month on an outside contractor to help with medical
necessity reviews. This is in direct response to anticipated
RAC activities.
My written testimony includes a number of recommendations
for how the RAC process can be improved, but I will just
highlight a few of these. First, CMS should do a better job of
issuing clear and concise guidance to help prevent
misinterpretation of coding and other criteria. The issue of
whether a patient stay is inpatient or outpatient is the latest
example of the need for improvement in this area.
Second, RACs should not continue to audit claims that are
found over time to have a low error rate or for which their
denials are consistently overturned. Even when a RAC's denial
for a certain procedure is overturned, RACs continue to
investigate these procedures in the future.
Third, Congress and CMS need to do a better job of
overseeing the activities of the RACs. RACs were created to
help make sure Medicare pays the appropriate amount for the
services delivered to beneficiaries. In our view, RAC
activities have grown well beyond their intended scope.
Without action from Congress, CMS is likely to continue.
There is no doubt in our minds that audit and oversight are
important components to the Medicare program. However, we
cannot lose sight of Medicare's goal to promote access to high-
quality care. Significant changes in the RAC program will help
us achieve that goal.
Thank you for your attention.
The Chairman. Thank you, Ms. Carmody, very much.
[The prepared statement of Ms. Carmody appears in the
appendix.]
The Chairman. Ms. Draper, you are next.
STATEMENT OF SUZIE DRAPER, VICE PRESIDENT, BUSINESS ETHICS AND
COMPLIANCE, INTERMOUNTAIN HEALTHCARE, SALT LAKE CITY, UT
Ms. Draper. Chairman Baucus, Ranking Member Hatch, and
distinguished members of the committee, on behalf of
Intermountain, I would like to express our appreciation for
having this opportunity to describe for you our experience with
the RAC program.
Intermountain is a not-for-profit integrated health care
system that operates 22 hospitals and more than 185 clinics,
with 1,200 employed physicians. We also have an insurance plan,
Select Health, which covers over 600,000 lives in both Utah and
Idaho.
Our focus at Intermountain is to provide high-value health
care, care of the highest quality provided as affordably as
possible. We have an equally strong commitment to doing the
right thing for the right reasons. The RAC program has been the
largest Medicare claims auditing initiative in which we have
participated, and I would like to share a brief overview of our
experience with the RAC program.
In some ways, Intermountain has benefitted from the
program. We have spent significant amounts of time and effort
to improve our internal processes. We have improved our
infrastructure and processes for responding about medical
records, and the level of detail used by the RAC program to
identify issues to be audited has helped us to improve our
monitoring and auditing processes, as well as improve our
internal controls.
Because we have such a small net loss, only $16,000 out of
the $120 million of Medicare payments, we feel that our
compliance program is effective. Although not perfect, we feel
that we are effective in monitoring the accuracy of our claims.
But the RAC program has placed excessive burdens on
Intermountain as well. The program diverts precious resources
that might be well-applied to quality improvement and other
patient care initiatives.
I will now provide five examples of inefficiencies that add
little or no benefit. First, multiple government auditors are
requesting the same records. There have been multiple cases
where other government auditors and the RAC are requesting the
same records.
We have also experienced where the RAC has requested the
same records for review for the same issue more than once. Of
course, this is not supposed to occur, according to the RAC's
statement of work.
Second, our appeals unit has been burdened in various ways.
We understand the purpose of the program was to identify over-
and under-payments. However, in practice the scope of the RAC
program seems to have expanded. We now have to justify that the
care given to the patient was appropriate without being given
clear criteria from CMS. Indeed, the wide variation in criteria
used by contractors within the RAC appeals process is highly
problematic.
Let me give you one example in a cardiac case. For cardiac
stent placement, a patient is given a drug called Integrilin.
It is an anti-platelet drug to eliminate the blockage in a
stent. At the first level of appeal, regardless of the amount
of time that the patient is given the medication, the claim is
denied as inpatient.
In contrast, at the second level of appeal, the contractor
has criteria that the patient should be considered inpatient if
the patient has been given the medication for 6 hours. As a
side note, this is a change from last year when the patient was
required to have the medication for 18 hours in order to be
deemed inpatient.
At the third level of appeal, our experience is that the
administrative law judge may well have a differing opinion of
Integrilin, and our experience at the fourth level of appeal is
still pending.
The third issue is, under the statement of work, the RAC
was required to comply with reopening regulations that state
that, before a RAC makes a decision to re-open a claim, the RAC
must have good cause. We believe that the RAC data mining has
not identified errors on our part and, given our favorable
overturn rate of over 90 percent, we feel that this has been
justified.
In our first level of appeal, we get 5 percent overturned;
on the second level of appeal, we get 10-15 percent overturned;
on the third level, at the administrative law judge level, we
have over an 85-percent overturn of our denials.
The fourth issue, as related to the recent claims, has
raised concerns about our patient safety and care. Similar to
the example that Chairman Baucus gave of Kalispell, we have
received frequent denials of cases involving pulmonary
embolism.
Although low-risk pulmonary embolism can be safely treated
on an outpatient basis, the majority of Medicare patients are
high-risk, and most medical literature recommends hospital
admission. Failure to admit and treat a patient with this
condition in a hospital puts the beneficiary at risk, with
possible complications and possible death.
The fifth issue is, it seems that RAC cannot determine the
accounts that we have already self-corrected or adjusted. As
part of our compliance program, we have a very active auditing
and monitoring process, and when we brought this to the
attention of our RAC contractor, they said our only course of
action was to continue to appeal those in which we had already
made the corrected claims.
In conclusion, the RAC's statement of work clearly states
that the RAC program should not be a burden to providers. Yet
at Intermountain, we have added 22 FTEs, including nurses and
physicians, resolved more than 17,000 claims, and are currently
appealing 6,000, with 1,700 pending. To date, as stated before,
Intermountain has had a total of over $120 million reviewed,
but Medicare has had a net repayment of only $16,000.
At least in Intermountain's experience, the RAC program is
not producing significant payment recruitment by the Medicare
program. Instead, the RAC program is unjustifiably adding to
the burden and cost of health care with little or no benefit. I
sincerely hope that the inefficiencies in the RAC program will
be addressed.
Thank you for this opportunity to share Intermountain's
experience.
The Chairman. Thank you, Ms. Draper, very, very much.
[The prepared statement of Ms. Draper appears in the
appendix.]
The Chairman. Mr. Rolf, you are next.
STATEMENT OF ROBERT ROLF, VICE PRESIDENT,
CGI FEDERAL INC., FAIRFAX, VA
Mr. Rolf. Chairman Baucus, Senator Hatch, members of the
committee, thank you very much for the opportunity to appear
before you today. My name is Robert Rolf, and I am a vice
president at CGI Federal, a global information technology and
business process services firm.
In my role, I am responsible for CGI's efforts to implement
the Recovery Audit Contractor program in RAC Region B, which is
comprised of seven States in the Midwest, as well as similar
audit and recovery efforts that CGI performs for its State
government and commercial clients.
It is my pleasure to appear before you today to discuss the
role of recovery auditors and the lessons learned as CGI looks
to improve efforts to identify and recover improper payments as
a way to strengthen the Medicare trust funds.
Under our contract with CMS, CGI is tasked with the
identification of improper payments using both automated and
manual claims review processes intended to identify provider
over-payments and under-payments. Although most of this work
involves catching improper payments on the back end, CGI fully
supports all efforts to prevent such improper payments from
happening in the first place.
Since February 2009, CGI, much like our fellow recovery
auditors, has worked diligently to implement the program in an
open and transparent fashion. CGI's efforts to date involve
extensive outreach to the provider community in each State
served, through town hall-style meetings as well as regular and
ongoing Internet and audio conferences. Today, CGI has
conducted over 100 such meetings and received nearly 20,000
contacts at its call center.
Nationally, recovery auditors have identified more than
$4.8 billion in improper payments. However, the RAC program
also serves as a model in terms of the recovery auditor's
transparency of provider interactions and CMS's strong program
governance to ensure that providers are treated fairly and do
not experience burdensome compliance costs.
Based on CGI's experience with the RAC program, I would
like to share a few observations with the committee about this
important CMS program and some lessons learned about recovery
audit efforts.
Transparency and communication are critical to the success
of the program. It is important that recovery auditors provide
transparent information to providers regarding issues under
investigation, as well as information about the basis for an
improper payment determination.
In addition to the communications described above, each
recovery auditor hosts a website that provides information on
the issues that recovery auditors are auditing in their regions
and the ability to check the current status of claims under
review.
The contingency payment approach works well in practice.
Medicare Administrative Contractors have many significant
duties in the Medicare program and simply are not able to catch
every error on the front end. Recovery auditors have one
primary mission: to catch improper payments and correct them.
The contingency payment approach allows recovery auditors to
dedicate the necessary resources to this task.
Contrary to some assertions, the contingency approach does
not encourage the pursuit of questionable recoveries or
discourage the pursuit of under-payments, for three important
reasons. First, recovery auditors do not get paid unless and
until a recovery is received by the government; second, fees
earned on recoveries that end up reversed on appeal must be
returned to the government; and third, recovery auditors
receive an equal fee for finding both provider over-payments
and under-payments.
To ensure that incentives remain properly aligned, CMS
conducts a monthly audit of each recovery auditor to determine
how accurate its determinations are. In the last set of
cumulative annual data published by CMS, all four recovery
auditors received accuracy scores greater than 90 percent. I am
proud that CGI's accuracy score was 95.8 percent.
CMS successfully built in provisions to prevent over-
auditing. At the outset of the program, CMS developed
safeguards to prevent fishing expeditions. First, a recovery
audit may only conduct an audit if a CMS policy team approves
it and the nature of that audited is communicated to the
provider community in advance. Second, CMS has developed a
specific formula to limit the number of medical records that a
recovery auditor may request. Third, a recovery auditor must
pay a provider 12.5 cents per page for most documents
requested. Overall, the Medicare RAC program works well;
however, CGI remains open to common-sense suggestions to
improve the RAC program for all parties involved.
Specifically, CGI recommends that the committee focus on
improving the appeals process. The HHS Inspector General has
identified several issues in this area, including the
flexibility that administrative law judges have to make
decisions that are not in line with Medicare policy.
In cases where recovery auditors do have findings that are
overturned on appeal, it is most frequently when an ALJ has
made such a decision. To increase program effectiveness and
consistency, Congress and CMS should look at the Inspector
General's findings in this area and see if there are
opportunities to implement improvements.
CGI is proud of its ability to deliver successfully on the
RAC program and remains passionate about the opportunity to
partner with CMS and other public agencies in one of the most
critical good government efforts under way today.
I appreciate the opportunity to appear before you today and
would be pleased to answer any questions you may have.
The Chairman. Thank you very much, Mr. Rolf.
[The prepared statement of Mr. Rolf appears in the
appendix.]
The Chairman. First, I would like to ask Ms. Carmody and
Ms. Draper about CMS's audit of the auditors. Mr. Rolf said,
according to CMS--I have forgotten the figure. It was the high
80s or 90 percent of the audits by the CMS auditor of the RACs
turned out favorably. Do either of you have a reaction to that?
Ms. Carmody. I actually have not seen the audit of the
auditors, but I think that you can do a lot with numbers and
still be giving an accurate statement. But in our case, it is
almost 75 percent of the claims that actually the RAC agrees
there was no issue with. So that is 75 percent accurate out of
the gate, where we both agree that we submitted the claim
correctly.
The Chairman. All right.
Ms. Draper, do you have a thought on that point?
Ms. Draper. HDI is our contractor, and that has not been
our experience. Again, I have not seen CMS's audit of the
auditors, but our experience has been that when they have
determined that there was an error in the claim, we have been
able to win those appeals over 90 percent of the time, so our
numbers are not consistent with the findings.
The Chairman. I was struck with your point, Ms. Carmody,
that, as the appeals process goes up the chain, the overturn
rate is higher. I think at the ALJ level, you mentioned it is
about 80 percent. I have forgotten the figure that you used.
Why is that? Why are more decisions by the RAC overturned
at a higher level? The second question is, is it the medical
knowledge that the RAC folks have, or more importantly the ALJ
has or has not? That sort of assumes the point that some
medical knowledge, or significant medical knowledge, is
necessary.
But first, the first question: why is the overturn rate
much higher at the ALJ level rather than at lower levels?
Ms. Carmody. I think that is a question we would like to
ask. I mean, what we find is, maybe that we have a better
opportunity to explain our case in point as the appeal process
goes up a level, but we really work hard on submitting our
appeals with our part of the story.
In answer to your second question about the knowledge base,
it really is a matter of interpretation as to what we think is
medically necessary. We are looking at the case when the
patient is there, on-site, presenting. We are not looking at it
using the hindsight that the RAC auditors are able to use when
they review the case.
The Chairman. Well, my question is, would you feel more
comfortable with ALJs who had more medical knowledge? I am not
asking whether they should be graduates of medical school, but
should they have more medical knowledge? Is that very important
as opposed to whether the ``i''s are dotted or the ``t''s
crossed?
Ms. Carmody. I think medical knowledge is important, but I
echo Ms. Draper's point that we need to have the same sets of
rules apply to the claims from the submission of the claim all
the way through the process, and they are changing the rules as
they review them.
The Chairman. Ms. Draper, what about the competence of the
judges, the medical competence of the judges?
Ms. Draper. We have hypothesized, as we have mined our
data, that at the first level, which is usually not physicians
who review those claims, that we are not getting a thorough
review of the charts. So, as we go to the second and third
level, we get to tell our story.
We have also been concerned that, at the highest level, we
have not had similar levels of expertise. I am not saying that
it has to be a cardiologist, but oftentimes, even at those
third and fourth levels of appeal, we do not have those
specialists who have the same level of clinical competency.
The Chairman. We do not have much time here, but where is
there a meeting of the minds here? Providers think the RACs are
over-zealous, the RACs think they are doing a good job finding
errors. Where is there some agreement? Is there any?
Mr. Rolf. Well, Mr. Chairman, I think there is common
agreement on the appeals process. I think we may take different
approaches to it, but I think there is agreement that the----
The Chairman. And what is the agreement?
Mr. Rolf. That the appeals process needs to be reformed.
The Chairman. In what way?
Mr. Rolf. Well, I think if you look at the ALJs, they are
not using clinical judgment in their decision-making process.
The first two levels of appeals, which Ms. Draper indicated
were 5-percent or 10-percent overturn rate, those are using
clinical staff to review the medical records and are in large
agreement with our decisions. I think, once you get to the
administrative law judge level, the Inspector General has
pointed out the inconsistencies.
I would agree with the point that, in any judicial process,
decision-making process, predictability in the law is
tantamount. If there are arbitrary decisions being made up the
line, then that makes it very difficult to know how to practice
and very difficult for us to know how to audit.
The Chairman. My time has expired.
Senator Hatch?
Senator Hatch. Thank you, Mr. Chairman.
Mr. Rolf, in a report last year, the Office of Inspector
General for HHS issued a report in which they found that, when
CMS or a RAC representative participates in an actual appeal
before an administrative law judge, the RAC's decision is
reversed much less frequently. Could you tell us why you think
this is the case, and what lessons can be learned from these
particular findings?
Mr. Rolf. Thank you for your question, Senator. So, in our
experience, early on in the program there was a very high level
of overturned appeals at the ALJ level, primarily because we
were not timely notified that hearings were even taking place,
and, when we were, we were not granted the ability to
participate in that process.
Once we became more active in the process and were given
the ability to provide testimony as part of that ALJ process,
our physicians who participated in that process were able to
provide information to the administrative law judge as to the
rationale for our decisions, and our success rate has been much
higher at that level since.
Senator Hatch. All right. Well, let me ask a question that
all three of you can take a crack at, and that is this. In my
opening statement, I talked about the importance of striking
the right balance between conducting appropriate program
integrity oversight of the Medicare program and ensuring that
there is not an undue administrative burden on health care
providers.
Now, given each of your experiences with the RAC program
over the past 3 years, how do you think that that balance can
be better achieved, and what recommendations would you give to
Congress and/or CMS to help improve the program so that there
is a better balance between those competing objectives? You
have answered that in part, but I would be interested in
hearing all three of you on that: Mr. Rolf, then Ms. Draper,
then Ms. Carmody.
Mr. Rolf. Certainly. I think one of the primary areas that
there can be continuous improvement on--I talked about
transparency, education, and communication. We participate in
monthly communication sessions with our provider associations.
We still maintain our distance as an auditor--no one enjoys
being audited--but we can reduce the administrative burden
through communication, understanding what their pain points are
in the process, how we communicate to them, how we provide
information to them.
That feedback has encouraged us to make significant changes
to our provider web portal, which gives them access to
information about their particular claims. That transparency
and that communication really helps dispel a lot of the
concerns and myths in the program.
Senator Hatch. Thanks.
Ms. Draper?
Ms. Draper. My recommendations are two-fold. First is,
upstream there needs to be greater clarity from CMS regarding
the criteria of the claims that are submitted. The significant
number of the claims that we throw through the appeals process
are those where there is confusion, particularly on the in-
versus out-patient criteria. I think that is demonstrated in
recent proposed and interim changes that CMS has published.
If, once we have clarity, providers are committed to doing
the right thing, and when we can work directly with our CMS
contractor, we have much better communication and transparency
and really do not see the need for separate auditing
contractors to be out looking at our integrity. So, if we can
have improved clarity of CMS regulations and then have the
responsibility of the program integrity back with the
contractors, we feel that that reduces our administrative
burden significantly.
Senator Hatch. All right.
Ms. Carmody?
Ms. Carmody. Yes. I would like to point out, obviously Mr.
Rolf is not our RAC contractor. Our experience with our RAC
contractor is not quite as transparent. So it is very difficult
for us to even tell why the records are being requested, or
under which venue they are looking, when we send the records
in, so I think that moving that transparency and making more of
a clear effort to tell us what they are looking at when they
send the letters in the beginning, in their requests, would be
very helpful to us.
On a broader note, obviously, clearer guidelines.
``Inpatient'' versus ``outpatient'' is really the majority of
what we have seen as far as RAC activity. I think that we need
to think on a bigger scale at the CMS level about, what if we
did not have observation status anymore?
So I mean, really throwing that out, that is a big one, but
it is something that we had actually talked to Senator Baucus's
office about before. The observation status is just a killer
for us. What if there was an inlier payment on the DRG that
eliminated the argument to begin with? So I mean, we have broad
ideas of how we could make this work better at the CMS
rulemaking level to alleviate these disputes in the end.
Senator Hatch. Mr. Chairman, my time is about up.
The Chairman. Thank you very much.
Senator Enzi, you are next.
Senator Enzi. Thank you, Mr. Chairman. I want to thank Ms.
Carmody and Ms. Draper for being here. I will have some
questions in writing for them that I think will help clarify
some things, but I will not have this chance with Mr. Rolf
again, probably.
In studying this as an accountant, I was kind of surprised
that it was based on contingency. Audits normally are not done
on a contingency basis. Lawyers do things on a contingency
basis, but not the prosecutor. Somebody thinks they are going
to clean up on it. So there is a 9- to 12.5-percent over-
payment made. Do you get any kind of compensation when you find
an under-payment?
Mr. Rolf. Senator, yes. As I said in my testimony, we get
an equal payment whether we find an over-payment or an under-
payment. I would like to add to that that, in CMS's 2012 annual
financial report, they reported that the percentage of under-
payments as a percentage of the total improper payment for the
year was about 3.6 percent.
Recovery auditors are returning or identifying an under-
payment rate, as a percentage of the total improper payments
that we have identified as of CMS's April report, inception to
date, of nearly 7 percent. So we are actually identifying
improper payments on the under-payment side of nearly twice
what CMS reports in their annual financial report.
Senator Enzi. I will have to absorb that a little bit I
think, but I am pleased to hear that you do have some incentive
for finding under-payments too.
You mentioned in your testimony that you use computer
software that kind of does an automated review and helps you to
select, I assume, whom you are going to audit. Is that computer
software available to the providers?
Mr. Rolf. Senator, to directly answer the question, we do
not provide that audit software directly to the providers. We
attempt to maintain our distance from them in that respect.
Senator Enzi. All right. It seems like somebody ought to
provide them with something like that so they can tell in
advance whether they are having a problem or not, and not
necessarily the contractor, but somebody ought to be providing
them with that. Since the contractors are using that to
determine the need for audits, it seems like that might be
something that could be contracted for too.
Do you have territories for where you do your auditing? It
seems like there is an overlap here.
Mr. Rolf. So, within the RAC program itself, there are four
current regions. Those divide up the country into roughly four
equal regions. We have a 7-State region in the Midwest. No
other recovery auditor has our region.
Senator Enzi. So there would not be two people auditing the
same provider, then?
Mr. Rolf. Not within the RAC program itself, Senator.
Senator Enzi. All right. Thank you.
Mr. Rolf. There may, however, be Medicare Administrative
Contractors or Zone Program Integrity Contractors who will
conduct audits in that same region.
Senator Enzi. All right.
I noticed on the appeals, you mentioned that yours are 95.8
percent, I think it was, that are good. But then I read the
information about the administrative law judges--and I know
that is a little ways up the process--that they overturn 80 to
85 percent of what comes to them, again, depending on the
region I guess, which means in some regions they do worse.
Do you suppose that has anything to do with the
administrative law judge knowing that the accounting firm gets
a percentage of the amount?
Mr. Rolf. I have----
Senator Enzi. Would that tend to make them think that maybe
they could be over-zealous?
Mr. Rolf. Senator, I think the decision-making at the
administrative law judge level--I think the Inspector General's
report pointed out some specifics about why there is
inconsistency at that level, having to do with the need for
increased peer review so there is more consistency across the
decisions, more consistency in how they allow additional
documentation to be introduced at that level. I think we find
that, many times we make a decision based on what we have been
provided in the medical record, and then, at a later appeal
level or in a discussion period that we have with the provider
directly, they are able to identify additional information that
may not have been provided at the time of the original audit.
Senator Enzi. All right.
I also noticed that the fee for the records is 12.5 cents
per record. That sounds pretty cheap if you figure in the
amount of time that it takes for them to retrieve the record as
well as the copying costs.
Mr. Rolf. It is per page, Senator. So, yes.
Senator Enzi. I realize that, yes.
Mr. Rolf. CGI alone has paid out over $8 million to
providers to provide medical records. I will add that we are
the only Medicare contractor that is required to do that.
Senator Enzi. I will have to do the math to see how many
records $8 million worth is, but that is a lot of effort on
somebody's part to get all of that together. One of the things
that I will be checking is to see how you would feel about the
cost of appeal being charged to the provider. I have run out of
time, so I will send that one in writing.
The Chairman. Thank you, Senator.
Senator Isakson?
Senator Isakson. Thank you, Mr. Chairman.
I want to follow up on a question the chairman earlier
referred to in his opening remarks, and some of the other
members have referred to. There is a fine line between
recovering payments that are clearly improper and questioning a
judgment call made by a professional at a moment in time. I am
very interested, particularly, about the determination between
inpatient admission versus outpatient observation status.
Can you tell me what standards you apply to those judgments
you make, the questions you ask about those judgments that are
made by those professionals?
Mr. Rolf. Certainly, Senator. The criteria that we are
required to use by CMS are clinical review judgment and the
education, experience, and medical opinion of the auditor who
is conducting the review, applying national coverage
determinations and local coverage determinations, and CMS
policy regarding particular types of services. We apply those
and use that information to make our determinations.
We also provide, on the web portal and to the providers,
the specific policies that apply to each issue that we are
auditing for so that they can link to those policies and be
able to identify them and read them for themselves in advance
of any audit being conducted.
Senator Isakson. So the standard is, the person making the
determination or the review is not necessarily a medical
professional, but they are somebody who is using medically
professional information, is that correct?
Mr. Rolf. By contract, all of our reviewers have to be
licensed clinicians, overseen by a chief medical director,
which we exceed by--we actually have 5 direct physicians on
staff who oversee the audits.
Senator Isakson. How arbitrary is the determination of
which cases you review and which ones you do not?
Mr. Rolf. The cases that we decide to select are based on
specific, narrow policy rules that we present to CMS. CMS
reviews those policies, determines whether our scope, whether
our audit approach, and whether the good cause language that we
use for that review, is appropriate. Only after they determine
that and we post that information on our portal for the
providers to be able to access it, are we allowed to then
select claims in that narrow category to audit.
Senator Isakson. So every Medicare claim that is filed is
reviewed to determine whether or not it should be reviewed by a
RAC or not?
Mr. Rolf. No, Senator. We do not focus on individual
providers or individual claims; we focus on specific areas of
review. Most of the criteria that are used to identify a
particular program vulnerability area come from reports by the
Inspector General, or the comprehensive error rate testing
contractor that identifies specific areas of high error rate
within the Medicare program, and we focus our efforts on those.
Senator Isakson. So a computer might kick out a common type
of claim that you want CGI to review, and then you have an
individual look at it, is that correct?
Mr. Rolf. Correct.
Senator Isakson. All right.
Ms. Draper, I think I heard you say that you had $120
million in claims questioned, and they recovered $16 million.
Ms. Draper. Sixteen thousand.
Senator Isakson. Sixteen thousand?
Ms. Draper. Correct. We still have $24 million in claims--
the majority of which are in this controversy over inpatient
versus outpatient--that are in appeal. To concur with Mr. Rolf,
we have had under-payments that have also been returned, so our
net recovery is $16,000. We have returned $1.9 million in over-
payments and have recovered $1.8 million and change in under-
payments.
Senator Isakson. Mr. Rolf, I understand the recovery,
payment based on recovery, both from an under-payment as well
as an over-payment. But if you had a provider that had $120
million in claims questioned and a net of $16,000 in actual
recovery, would that not indicate that maybe you did not need
to look so deeply into that provider as you would somebody else
where you had a much higher rate?
Mr. Rolf. Actually, Senator, if across the program all
providers had the experience that Ms. Draper did, we would not
have recovered $4.8 billion, and we would not still be in
business.
Senator Isakson. Yes, you would be out of business.
Mr. Rolf. Exactly.
Senator Isakson. But the question still remains. I mean,
bad behavior is what we want to stop. Over-payment is what we
want to stop. But it seems like, if you have a consistent
record of performance and good behavior, that you ought to
focus more on those providers where you do not have that than
where you do.
Mr. Rolf. In our experience, in my nearly 20 years of
experience in this area, that does drive our behavior.
Senator Isakson. Thank you. My time is up.
The Chairman. Thank you, Senator.
Senator Casey, you are next.
Senator Casey. Thanks very much, Mr. Chairman. Thanks for
calling this hearing. I wanted to really pick up where Senator
Isakson left off, and that is to focus--I know there are a lot
of parts of the testimony to focus on, but there are two that
continually jump out at me.
One is, Ms. Draper, the amount that Senator Isakson
mentioned, the $120 million. I am reading from your testimony,
the last page. Intermountain had a total Medicare payment
review of $120 million. After all of this, Medicare has
recovered only a net of $16,000. That is point one.
Point two is, Ms. Carmody, you say on page 2 of your
testimony, from 2010 through 2012, 20 percent of all cases were
appealed. Then you go on to say, ``Billings Clinic had been
successful on appeal 84 percent of the time, winning 308 cases
while losing 57.''
I am going to review the same issue and see whether or
not--I just do not know the answer to this, and it is why I am
asking this question about the statute and the rules. Is there
a provision in law or in practice where, if an entity is
reviewed year after year in a certain time frame, if there are
no findings, if there are no over-payments, or if they have a
high batting average, so to speak, on appeal, is there a risk-
based assessment done? Are you aware as to whether or not there
is a provision for that in the law?
Mr. Rolf. So, Senator, the entire program is a risk-based
assessment because of the nature of how we are reimbursed. As I
testified to, only and until dollars are not just simply
identified but actually recovered and deposited into the
Medicare trust funds are we able to invoice for our services.
If any of our decisions are overturned on appeal, we owe
the entirety of our fee back to CMS. So again, Ms. Draper's
experience aside, we would not still be in business if we were
not focusing on those areas where there were significant errors
in recoveries and where there were more black-and-white issues
that were less likely to be overturned on appeal.
Senator Casey. I want to make sure I understand this. So,
if you have an entity that has--say we have two entities. One
entity has no errors, no finding of over-payment. That is
prevailing for, say, 10 years. Then you have another entity B
that has continual problems, lots of over-payments, lots of
problems. Are those two entities, under the law, treated the
same? Are they audited at the same frequency? That is the
question I have.
Mr. Rolf. I would say that, under the law, they are both
subject to a RAC review if they are a fee-for-service Medicare
provider. In practice, we would not continue to request medical
records and review in areas where no findings were being found.
It is very simple economics for us as a contractor reimbursed
on a contingency fee basis.
Senator Casey. All right. But there is no prohibition on
you auditing the good performer at the same rate as the bad
performer?
Mr. Rolf. No, Senator.
Senator Casey. And that is just a point I wanted to
establish, and I was not sure if that was accurate.
The other question, which is difficult to answer, but maybe
Ms. Carmody or Ms. Draper can answer this, if you have an
opinion; maybe you cannot. Is there any instance where you
believe this program or the impact of the program has had an
impact on care or the quality of care?
Ms. Carmody. Well, I would say that it has an impact on our
physicians and how they want to think about whether or not
somebody is an inpatient or an outpatient. From a physician
perspective, they want the patient in a hospital bed, and they
want to treat them the same way they are going to treat them.
So it is a process that the physician has to think about in
a different way than they did prior to the RACs. They kind of
feel like their judgment is being second-guessed. So, in that
case, they are more likely to default to the outpatient setting
than the inpatient setting, and that financially impacts
patients.
So I would not say that there is a quality of care issue.
We are going to treat the patient the same, we are going to
take care of them, but it does have a financial impact on the
patient that we have not talked about. It moves them from the
inpatient deductible to the outpatient co-insurance, and it
brings up the fact that they have to pay for their self-
administered drugs.
The patient does not understand why, 2 years later, they
were in a bed in a hospital and now they are subject to
different co-
insurance or different payments, or heaven forbid the patient
does not have Part B Medicare. They have to pay for everything.
They have no coverage, they do not get that. So there is a
financial impact on patients that we did not have a chance to
bring up, and that is hurtful.
Senator Casey. Thanks very much.
Senator Hatch [presiding]. Senator Thune, you are next.
Senator Thune. Thank you, Mr. Chairman. Thank you, panel,
for your answers and for your insights.
Ms. Carmody, if you find that the practices of your RAC
auditor are abusive or outside the scope of the RAC statement
of work, what is your recourse? I will ask maybe a more
specific question. In your case, what do you do if Health Data
Insights, the RAC auditor not only for Montana but for my home
State of South Dakota and 15 other States, is engaging in
abusive or unauthorized auditing practices?
Ms. Carmody. Right now what we do is we talk to our
Senator, and we appeal. In the beginning, we were not as good
at appealing. We were not quite as ready as Intermountain
Healthcare, and so we did not appeal as much. We are appealing
more and more. We have gotten people to come in and help us,
and all we can do is appeal and continue to respond and make
comments, send letters to CMS about changes that we would like
to see in the program, and talk to all of you.
Senator Thune. All right. And is the appeal to CMS?
Ms. Carmody. The appeal of the RAC?
Senator Thune. Of the RAC.
Ms. Carmody. It goes through the appeals process, so it
starts with CMS and goes up the chain.
Senator Thune. Yes. All right.
Ms. Draper, in your testimony you expressed frustration
about the volume of record requests. In your opinion, what is
an appropriate amount of record requests for a RAC?
Ms. Draper. If we could look at specifics in the different
hospitals--when we are looking at one hospital that can be
bombarded by 450 requests for records within a 45-day period,
that is a significant change for our medical records staff, and
we are shifting the care or the work that they need to do on
coding and submission of the claims in the day-to-day process
in order to respond to that record request.
Again, if we could have a more focused area and, if they
found a problematic area, then increase that scope, that would
be much more helpful for us.
Senator Thune. Good.
Mr. Rolf, for claims that involve review of medical
necessity, what is the educational level of the auditors?
Mr. Rolf. So the first-level auditors are licensed nurses,
the same practice that is being employed by commercial insurers
and State Medicaid agencies, most payers throughout the system.
They are overseen and supported by physicians in multiple
specialty areas that can provide them higher-level clinical
opinion on particularly difficult cases.
Senator Thune. And decisions that are made on medical
necessity that are made by a physician, are they reviewed by a
peer physician at CGI?
Mr. Rolf. Oftentimes, if there is an area that they require
additional information on, they will seek out one of their
peers for that information. We also do a QA step with inter-
rater reliability that, on a monthly basis, is reviewing the
decisions of all of the auditors on staff to ensure consistency
within and across the program.
Senator Thune. Would you support a requirement that RACs
have to abide by time lines for review like hospitals have for
data requests?
Mr. Rolf. Let me address that in a couple of different
ways, if I may, Senator. So currently, under our statement of
work with CMS, we are required to follow all timeliness
guidelines for the completion of a review. If we do not, we are
subject to losing our fee for that individual claim that we did
not review on a timely basis, which is the ultimate penalty.
With regards to many of the time frames that have been
discussed here, those involve appeals contractors that we have
no responsibility for. But, as we have said before, reform of
the appeal system, I think, is warranted.
Senator Thune. And what role does peer-reviewed medical
literature play in the decision-making?
Mr. Rolf. I think it is critical. Our physicians, our
staff, continue their continuing medical education, are kept up
and current on current medical process and literature, and are
provided with an electronic literature library for the most
updated information in order to make their decisions.
Senator Thune. How about evidence-based approaches?
Mr. Rolf. All factors that are part of current medical
practice are involved in the decision-making process on any one
case.
Senator Thune. Now, you mentioned you would be open to a
reform of the appeals process. Do you have any suggestions
about how to do that? I would pose that question as well to
both Ms. Draper and Ms. Carmody.
Mr. Rolf. We should increase the ability of contractors to
participate in the third level of appeal, add clinical judgment
and review to the third level of appeal, and increase
consistency in decision-making so there is predictability in
the regulations and the rules so that my fellow panelists know
how to practice and we know how to audit.
Ms. Draper. I would concur with his last statement, but I
would also add that, in the appeals process, we need a greater
level of medical experience in the first level of appeal. It is
a great deal of wasted time, energy, and resources if we have
to get to the third level of appeal before we can recoup our
monies, and so, why not put that level of expertise up at the
front level?
Ms. Carmody. Once again, I would agree with that statement.
We need the consistency up-front to know in the beginning that
it is going to be looked at in the same way and that everybody
is applying the same rules to how you bill a claim. And then if
we could get that opinion moved up the appeals process, and
also speed up the appeals process. Right now our money in those
claims is held up for a significant amount of time.
Senator Thune. My time has expired. Thank you, Mr.
Chairman.
Senator Hatch. Thank you, Senator Thune.
Senator Grassley?
Senator Grassley. I just have a couple elementary questions
on the overall view of this, since I was involved in 2006 and
2008 in setting this up.
CMS works under the principle that clean claims should be
paid quickly, so we created RACs to follow behind and confirm
that claims were properly paid. Do any of you argue against the
idea of having some review of claims?
Ms. Draper. No, I think we all owe that responsibility to
the taxpayer, that we as health care providers are held
accountable for the claims that we are submitting.
Senator Grassley. Mr. Rolf? Well, you are involved with it,
so that answers that.
Mr. Rolf. Yes. No, Senator.
Senator Grassley. Opponents of RACs being allowed to keep a
portion of the insurance claims say that this approach wrongly
incentivizes RACs. However, we have seen other audit
contractors who fail to ever collect any money that they
identify as waste, fraud, and abuse. Mr. Rolf, do you have an
opinion on how best to pay contractors for inaccurate claims?
Mr. Rolf. Absolutely, Senator. I think, as I testified, my
experience over the past, again, 18 years of doing this work is
that the contingency audit approach allows for the greatest
flexibility and scaling to the size of the problem, which, as
you know, within the Medicare program is a very large issue.
If you only fund, through an administrative budget, 50
auditors, they are only ever going to do 50 auditors' work
regardless of whether it is a $1-million issue or it is a $29-
billion issue. Allowing a contingency approach gives recovery
auditors the flexibility to address the full scope of the
improper payment problem.
Senator Grassley. Do any of you have any problems, the
other two of you?
Ms. Draper. I would disagree with Mr. Rolf, because we see
that, by the contingency methodology, this is one reason why we
have a lower level of clinicians reviewing at the first level
of appeal. It de-incentivizes providers to appeal for claims
for services that they have appropriately rendered.
Intermountain has taken the position to aggressively appeal
those claims because we feel that we have provided quality care
and should receive the appropriate payment for that.
Senator Grassley. Ms. Carmody?
Ms. Carmody. Yes, I would agree. It is costly for us to
appeal. I think we have kind of pointed that out. So, even when
we win, we have still lost those resources. It has caused us to
move the resources to the back end of the claim instead of to
the front end of the claim.
So, if we had a process that was more of a review up-
front--and Mr. Rolf did refer to that in his testimony--I think
that that would be a better incentive and a better payment
methodology that got the claim right the first time and
educated providers better about what the issues are. Then we
would not have the need for this back-end approach with a
contingency attached to it.
The feeling is among our staff that a lot of times with
these medical necessity reviews, they literally are just
looking at length of stay. That is really what that first level
of denial is based on--length of stay and hindsight only--and
then it is forcing us to spend more resources to get our money
back.
Senator Grassley. I yield back my time.
The Chairman. Thank you, Senator.
Senator Carper?
Senator Carper. Thank you, Mr. Chairman. Welcome, everyone.
Nice to see you all. Thanks for coming by to help us with this.
I want to go back just a little bit in time. You have all
heard of GAO, the Government Accountability Office. They are a
watchdog for the legislative branch.
One of the things they do for us is, about every other year
they come up with something called a high-risk list. The high-
risk list is high-risk ways of us wasting money, the taxpayers'
money. It is sort of like a to-do list. I chair the Committee
on Homeland Security and Governmental Affairs. We sort of use
it as our to-do list to go out there and try to figure out how
to save some money for the taxpayers.
In 2002, when George W. Bush was President, he signed into
law legislation, I think in response in part to the GAO's high-
risk list. He said one of the high-risk ways of wasting money
is improper payments. A lot of people thought, well, it is
fraud. It is not so much fraud as it is just mistakes. It is
over-payments, it is under-payments, accounting errors, paying
bills that really, really are not owed.
And the 2002 legislation, the bill the President signed
into law, said basically, Federal agencies across the board,
you have to start keeping track of your improper payments, is
what it said. You have to start keeping track of your improper
payments.
Well, every 2 years GAO would come up with a new high-risk
list, and they still would list improper payments and say, as
agencies were starting to report them and identify them, the
number would go up and up and up. In 2010, the improper
payments disclosed--not by every agency, especially the
Department of Defense; they are still not even today doing a
very good job of reporting improper payments--but the agencies
that are reported in 2010 about $120 billion of improper
payments. About $120 billion. Over $40 billion of that was
Medicare, about $20 billion was Medicaid-
related.
In 2010, Senator Coburn--Dr. Coburn--and I worked with a
bunch of our colleagues to pass legislation, signed by
President Obama, that said, Federal agencies, you have to
start, not just tracking your improper payments, you have to
report them. You have to stop making them and then, if the
Federal Government is owed money, you have to go out and
collect the money. All right.
Also, we are going to start evaluating Federal agency
heads, in part, on their performance as to whether or not they
take this direction seriously, whether they actually go out and
try to recover monies that have been improperly paid. We saw
that number drop, improper payments drop, government-wide from
about $120 billion in 2010 to about $115, $114 billion in 2011,
and it dropped to about $108 billion in 2012.
Part of what happens with this recovery audit contracting
is that we actually do recover some money. The other thing that
happens is, it is an educational process, and it enables
whoever is doing the auditing to hopefully work with the
providers to say, here are some things you may want to do
differently so we will not have to bug you on this in the
future. I say all that in part to say, this is a big problem,
and it requires the efforts of a lot of people to fix.
Everything I do, I know I can do better, and I am sure the
same is true of recovery audit contracting. One of the good
things about you all being here today is you can help us figure
out what is working and what makes sense. My dad always used to
say, just use some common sense. He said it to my sister and
me, his children, a great deal in hopes that we would someday
learn to use some common sense.
A lot of times, when I am sitting in a hearing like this, I
recall my father, I channel my father, and I say, well, if we
were going to use some common sense, what would we do
differently? You all have had a chance--I got here too late to
hear your testimonies, but you all have had a chance to share
some ideas and respond to a bunch of questions.
Just think if we were to use some common sense and try to
realize that this is a huge problem, it is a big issue, it is a
lot of money, it is tens of billions of dollars, what are a
couple of things--let me just start with you, Ms. Carmody. Just
use some common sense. What should we do differently?
Ms. Carmody. Well, being on our compliance team from its
inception in the 1990s at Billings Clinic, the first thing we
do is a root cause analysis. We find something, we do a root
cause analysis. Here is the problem, inpatient versus
outpatient. It is unclear, it is confusing, let us do something
about it. I think that is the part that is missing in all of
this.
So yes, we need the RACs and they are recovering improper
payments, but yet we all agree it was a medically necessary
service. We are disagreeing about the setting or the method
that it was billed, not even the method in which it was
delivered. We do not deliver outpatient observation services
any differently than we do in inpatient service. So there is a
root cause there. What are we doing about that root cause? It
does not really feel like we are doing much.
So in my opinion, if there is one thing we should do, it is
going back to the rules and regulations guiding us--or not
guiding us in some cases--to the decisions we are making and
that education and feedback. We have a different RAC, as I
said, and we are not really receiving that education and
feedback, and we do not really feel like they are motivated to
do that in all cases. If they are continuing to make their
money by identifying the same issue over and over again, where
is the motivation for teaching us----
Senator Carper. So we may want to think about realigning
the incentives just a little bit.
Ms. Carmody. Yes, a little bit. I mean, I just think a
friendly--I started my career as a Medicare auditor, and we
actually had great relationships with the places that we
audited, because we had aligned incentives. The max incentive
was, get the payment structure right, get the cost reports
right, teach them how to do a better job next year. I think if
we could align those incentives, we could work together in a
better way.
Senator Carper. Good. Thanks. Thank you.
Ms. Draper, same question.
Ms. Draper. I would concur. The greatest frustration that
we have is lack of clarity of the criteria by which CMS
requires us to do billing. Where we have clear rules and
regulations, we are committed to doing that right every time,
but I think you see the great deal of frustration on those
areas where there is a lack of clarity.
So, using the concept of a root cause analysis, it seems to
me that we would all step back and say, where is the greatest
amount of money that is being appealed in all of the RAC
contractors within our MACs, or in all the other acronyms that
I will not go into that are currently auditing us, and say,
where are those stumbling blocks to providers to getting the
claims right? Similar to what your father was saying, if you
tell me how to do it right, I will do it right, but you have to
tell me what right is.
Senator Carper. All right. Same question, Mr. Rolf.
Mr. Rolf. Thank you, Senator. Thank you for your
leadership, along with the chairman and Senator Hatch and
Senator Coburn, on these issues. I would agree, transparency
and communication and openness of dialogue between both the
auditor and the auditee are important.
I would also say that, as I testified, we should expand
some of the governance programs that CMS has put in place in
the RAC program to some of the other audit programs that are
out there, such as the limitation on records requests, the
notice of the types of audits being performed, and the work
that we do to prevent overlap with other audit entities,
through tools like the RAC Data Warehouse that prevent us from
auditing records that someone else has requested but do not
necessarily apply back the other way. I think those things
would help overall with the entire comprehensive look at
Medicare audit programs, not simply the RAC program.
Senator Carper. All right.
Lastly, if I could, Mr. Chairman, we oftentimes send
follow-up questions in writing to folks who come and testify
before us. Sometimes it is helpful, sometimes not. Just a
thought: I do not know if anybody else on the panel would be
interested in doing this, but what about the idea of convening
a teleconference call to just continue this conversation,
because, between the three of you, you can help us make some
real improvements here. We have plenty of money to recover, and
there are smarter ways to do it. Some of them are doing it,
others are not.
Some of the concerns I hear are really not about the RACs,
the Recovery Audit Contractors, but it is kind of the clear
guidelines that we need and we are not getting. So is that
something you all would be willing to do?
Ms. Draper. Of course.
Mr. Rolf. I would be happy to participate.
Ms. Carmody. Yes.
Senator Carper. All right. Thanks. Thank you so much. All
right, Mr. Chairman. Thanks so much.
The Chairman. Thank you very much, Senator.
I am trying to figure out how to ask, where is the beef?
Mr. Rolf. Mostly in Montana. [Laughter.]
The Chairman. Yes, that is true. There is a lot more beef
in our State than in many other States. But where is the beef
here? That is, where is most of the waste? I mean, over-
payment. You talked about over-payment. With Intermountain, it
is kind of almost as much under-payment as over-payment. But
you say it is inpatient, outpatient. Is that where most of the
beef is, most of the stuff? I guess, go ahead, Ms. Carmody.
Ms. Carmody. Yes, that is really where the bulk of the
repayments that we have made are, really the two: inpatient
versus outpatient.
The Chairman. All right.
Ms. Carmody. So there were services provided. It was an
argument over the setting.
The Chairman. Right. Now, if that is the case, let us just
focus on that a little bit. What clarity would help with
respect to inpatient versus outpatient decisions? Drilling down
a little more, where?
Ms. Draper. As we look to some of the proposals that have
been made by CMS, there is still a great deal of confusion. But
relying on the provider--the physician who has that patient in
the emergency room--he or she is the best one to determine the
level of care and the intensity of care, and helping to give
clearer, easy, consistent guidelines to those providers is
really what our physician community is crying for.
If I have to call them in for one more mandatory training
about what we think is the current criteria, I am going to have
a medical staff revolt. So, if we can have just a clear,
consistent, and long-lasting criteria, we would all applaud.
The Chairman. So you are saying what, that there are many
changes, there is inconsistency, or the criteria are just too
vague and ambiguous? What do you mean?
Ms. Draper. All of the above.
The Chairman. Well, what most?
Ms. Draper. Most is, it is very ambiguous about what
actually constitutes an inpatient claim. When we look at a
patient who requires intense care, whether it is in our ICU,
increased acuity of our nursing staff, et cetera, that is one
area.
But it can also be a patient, particularly in our Medicare
population, who is very frail. So there are standards that have
been written by other clinical contractors that, at least as a
baseline, would help us. Currently, Medicare does not have that
baseline for clinical criteria.
The Chairman. Mr. Rolf, what do you think of that? What do
you think about the basic question, most of it is inpatient/
outpatient. Do you agree with that?
Mr. Rolf. I think, when we hear concerns from the provider
community in our area, that that is certainly one of the areas
that does come up. I know we have a representative here from
hospital providers, but we are also auditing durable medical
equipment companies, we are auditing anybody who bills fee-for-
service. So, depending on the particular provider category,
there may be unique circumstances to that.
The Chairman. But we hear from the providers the constant
refrain of ``more clarity, more clarity.'' Would you agree with
that?
Mr. Rolf. I think there is opportunity for that. I think
where confusion does come in is where we are required to audit
strictly against Medicare policy. The first level of appeal is
required to judge our decision based on a Medicare policy,
which may be crystal clear, and then you get to the final level
of appeal, and they have broad discretion to make a decision
based on a looser interpretation of those rules.
So I would say, again, where you get lack of clarity is
often when you get to that third level of appeal where they are
not being consistent with clear medical policy.
The Chairman. Why is there less clarity at the third level?
Mr. Rolf. I do not believe there is any less clarity in the
policy of the third level. I think there is less clarity in how
they are interpreting that policy at the third level.
The Chairman. And why is that?
Mr. Rolf. Since 2005, they have been granted greater
latitude to make decisions on cases without strictly following
Medicare policy.
The Chairman. And why?
Mr. Rolf. I could not tell you that, Senator.
The Chairman. The greater latitude has caused a deviation
from Medicare policy?
Mr. Rolf. It is an identification that was made in the
Inspector General's report.
The Chairman. All right.
Ms. Carmody, do either of the two of you want to address
that point?
Ms. Carmody. Yes. I think one of the things that Mr. Rolf
is likely referring to is the administrative law judges'
decision to allow claims that have been determined to have been
outpatient when we had billed them initially as inpatient
claims.
The ALJs in many cases have allowed providers to go back
and re-bill those as if they were outpatient, so in some cases
we are talking expensive cardiac surgeries that were indeed
done, they were medically necessary. We billed them as
inpatient. The patient maybe stayed a day and a half in the
hospital and was released. CMS's current rules do not allow you
to go back and basically re-bill that claim. Also, many of them
are outside of the timely filing guidelines because RACs have
gone back 3 years.
The ALJs have made a lot of decisions to say, you know
what, provider? You did provide the service. You did the
service. If you agree to go ahead, we will let you bill it as
outpatient. So that is the latitude I believe he is referring
to, or at least that is the experience we have had, to say you
are allowed to recoup some money for the service you did.
Current CMS rules allow us to recoup no money.
The Chairman. All right. Thank you.
I am sorry, Senator Thune, I did not see you come back. Go
ahead.
Senator Thune. I already went.
The Chairman. I missed that. I was not here when that
happened. All right.
Senator Hatch?
Senator Hatch. I think this has been a terrific panel,
between you and me. It seems to me, as a former medical
liability defense lawyer in my prior life, and realizing that
an awful lot of the cases were frivolous just to get the
defense costs, it seems to me the incentives are perverse here.
The incentives are to find fault, unless I am missing
something. Am I wrong? You make more money if you find more
fault. Am I wrong there, Mr. Rolf?
Mr. Rolf. So, Senator, the way I would address that
question is that, again, since we only get paid when the
government gets paid, and, if we are wrong we owe our fee back,
our incentives are to be very clear in our decisions, focus on
black-and-white issues, and really only address those areas
where----
Senator Hatch. I am not criticizing you. It is the system
that I think is a lousy system. It is a subjective system to
begin with, in a lot of ways. I am concerned about that. We
have to really look this over to see if we can find some better
way of making this a quality system that works better than it
currently works.
But I think you two women have done a terrific job in
presenting your respective medical institutions' feelings in
this matter, or in these matters, I guess I should say, and I
personally appreciate you very much. I think we need to look at
this really carefully, Mr. Chairman, and see what we can do.
You have not really spent a lot of time going into all the
multiplicity of these things. I would like to hear just a
little bit more. How many different groups are auditing you and
finding fault?
Ms. Draper. We concurrently have our Medicare
Administrative Contractor. I was happy that you were helping me
with some of the acronyms. They are called CERT auditors or
Comprehensive Error Rate----
Mr. Rolf. Testing.
Ms. Draper [continuing]. Testing contractors. I mean,
really you almost have to have a play sheet.
Senator Hatch. I do not blame you for not remembering all
of these.
Ms. Draper. I am happy when I can remember all the
acronyms. We have our Zone Program Integrity Contractors that
can also audit us. Then at multiple levels with our MACs, or
our Medicare Administrative Contractors, you can have pre-
payment audits, you can have probe audits, a variety of
different ways in which they are reviewing our claims.
Senator Hatch. Ms. Carmody?
Ms. Carmody. Yes. And I would say, that is just Medicare. I
mean, obviously all the other government payers can audit
claims as well--Medicaid.
Senator Hatch. And people wonder why hospital costs are
going up and up and up.
Ms. Carmody. Correct.
Senator Hatch. Then they blame you for it.
Ms. Carmody. So it is the same staff and the same personnel
who are responsible for the integrity of pre-payment in our
compliance program, so we keep going back to those same people
or types of people. So, R.N. nurse coders, they are wonderful
people. They are hard to come by. We have a need for more and
more of them. So it is continual pressure on the same types of
people with multiple audits, and the same account could be
audited multiple times.
Senator Hatch. Well, I just have to say that I think all
three of you have been very helpful to the committee here
today. We have to find a way of getting health care to a point
that the government can live with it and the people who give
health care can live with it. We do not need to have doctors
second-guessed on everything that they do, especially when they
have good results.
I am very concerned about it, because I see just billions
and billions of unnecessary costs in some of the things that we
do here, that we require here in the Congress. I think we are
at fault too, because we could do a better job.
I appreciate your testimony, Mr. Rolf. You have been very
articulate, representing your industry very, very well as far
as I am concerned. But I really have empathy with the two women
here and their prospective institutions, because I do not know
how they put up with it, to be honest with you. You do not have
any choice, I guess, but we have to find some way of making
this more reasonable and, like you say, more transparent and
more workable.
I have to leave, but I just want to thank all three of you
for being here. Thank you, Ms. Draper, for making the trip back
here. It means a lot to me.
Mr. Rolf. Thank you, Senator.
Senator Hatch. Thank you.
The Chairman. Thank you all.
Senator Carper?
Senator Carper. One of the things I heard from a couple of
you today--I think we have heard from a couple of you today--is
that there is still a need for CMS to conduct stronger outreach
and education.
I understand that a change in law is needed to allow some
of the Medicare recovery to be used for this sort of outreach,
which would help prevent future over-payments, or maybe under-
payments, and reduce the burden, at least a little bit, on
providers. Am I correct that additional outreach and education
by CMS would prove helpful?
Ms. Draper. It would in our situation. Previous to the RACs
experience, we had a very beneficial--and I think mutually
beneficial--relationship with our Medicare contractor. We would
welcome additional outreach from CMS and our Medicare
contractor.
Senator Carper. All right.
Ms. Carmody?
Ms. Carmody. And I would agree. When we do receive the
Medicare audits from the MACs themselves, their motivation is,
it is not a contingency; the providers are judged on how
accurately they pay from the get-go. So their motivation is to
teach us how to do it correctly or tell us what their beef is.
So that is not a contingency-based fee, and it leads to more of
an incentive for them to teach us.
One other example or item of note I wanted to bring up is
that, when we get back to the contingency fee, it used to be a
common hospital practice that you would hire an outside
contractor or consultant to come in and help you with your
billing practice. This has been years ago.
Those might have been paid on a contingency basis. The OIG
has expressed huge concerns with hospitals hiring these outside
firms to come help you look at under-billing on a contingency
basis because of the motivation to potentially over-bill that
it created. So if those sorts of contracts are frowned upon in
a hospital setting from the one side, why are they encouraged
on the other?
Senator Carper. All right.
Well, Mr. Chairman, I would just note that the vision we
are talking about here where CMS would provide some additional
outreach and education, there is actually a provision in the
legislation that Dr. Coburn and I and a bunch of others--I
think 20-some other Senators--recently introduced to address a
range of Medicare integrity issues.
There is an acronym for it, but I am going to give you the
full name: the Preventing and Reducing Improper Medicare and
Medicaid Expenditures Act, PRIME. We think it would help
provide some of these additional funds, and maybe they could be
put to good use.
None of you have easy jobs; frankly, we do not either. We
need to help figure out how we could, each of us, do our jobs a
little bit better. At the end of the day, I would like to
reduce some of the headaches for our provider community.
At the end of the day, we want to make sure that the
improper payments that are being paid continue to be reduced,
and we want to make sure that we are still going to have a
Medicare program in 10 or 20 years. Right now, the prospects
are not really encouraging there, because we are running out of
money.
So we are all in this together, and there is a shared
responsibility to figure out how to do, here, the important job
that we are going to do, and do it better. So we look forward
to hooking up with you all on the phone and to continue this
conversation.
One of the things I will be asking you, Mr. Rolf, from what
you have heard from Ms. Carmody and Ms. Draper, is, what are
some things you actually agree with? Or maybe you could
modify--not now. No, no, not now. But we will ask, what do you
agree with? I always like to put myself in other people's shoes
and say, how would I like to be treated if I were in their
shoes--Golden Rule.
Mr. Rolf. Certainly.
Senator Carper. And to do it the other way around. Somebody
needs to put on the hat of the taxpayers, because they have a
stake in this as well.
Mr. Chairman, good hearing. We thank you all for joining
us.
The Chairman. Thank you very much, Senator.
We thank all three of you for taking the time to come here.
There will be more questions in writing. You might also, when
you answer the questions--or even not answering the questions--
let us know if you have an idea, how to further improve here,
something that has not come up at this hearing, or if you want
to emphasize something that has come up, again, our goal is to
try to resolve this as much as possible. The RAC process
exists, it is there, we want to make it work best for patient
care and as efficiently as possible.
Thank you very much for your testimony. The hearing is
adjourned.
[Whereupon, at 11:36 a.m., the hearing was concluded.]
A P P E N D I X
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