Hospice or Home Health – Which Is More Vulnerable to Recovery Audit Contractors?

Recovery Audit Contractors (RACs) are economic beings – they’ll go where the easiest money is first. This month, we take a look at the industry factors that indicate why hospices are more vulnerable to RACs compared to home health businesses. Plus, we provide important actions hospices should take now to prepare for a RAC review.

Hospice vs. Home Health – Where’s the Easy Money?
For RACs, the “easiest money” to find is likely duplicate services for patients already on hospice. Recovery Audit Contractors can uncover these cases by simply comparing various Medicare claims databases at the patient level. Plus, the following factors also help make this easy money for RACs:

  • The RACs’ amount of labor involved – particularly skilled labor – is minimal.
  • The evidence is indisputable.
  • The recovery process can be automated.

Once this “low-lying fruit” has been picked, however, the RACs will have to move into a second phase that involves hiring skilled clinicians to review files at a fully loaded cost of between $100 and $125 per hour. Since the RACs retain 15% of all monies eventually recovered, they’ll have to recover between $600 and $750 per hour to cover the costs of this phase.

When the RACs move into this phase, there are five factors that increase hospices’ vulnerability:

1. High dollars spent per patient
2. Lack of clinical automation
3. Limited survey experience
4. Virtually no experience in responding to Additional Development Requests (ADRs)
5. Quality monitoring in its infancy.

When the infamous U.S. bank robber Willie Sutton was asked why he robbed banks, he answered, “That’s where the money is.” The RACs are likely to behave similarly. Since the average national length of stay is around 70 days and the reimbursement per day is $150 across all levels of care, the average patient is worth approximately $10,500. In comparison, home health patients’ average reimbursement per admission is only about $4,250.

Hospices – Little Incentive to Automate Clinical Processes and Medical Records
Unlike the home health industry – which has been required to complete a standard assessment form and submit it electronically for close to 10 years – the hospice sector has had little incentive to automate its clinical processes and medical records. A paper-based system makes it more difficult to monitor quality and accuracy than an automated one. Additionally, the discipline of a computerized medical record limits the range of clinical practice, while the reduced amount of freestyle documentation makes it less likely that a clinician will write something that could be misinterpreted.

Historically, hospices have been subject to state surveys under the Medicare conditions of participation every 8 to 10 years. In comparison, state surveyors visit home health agencies every 3 years. The lack of supervision in the hospice industry can help make it easy for a hospice to lose sight of the need to strictly adhere to its policies and procedures. Home health agencies are often preparing for these periodic surveys by engaging outside parties to review their operations. Further, the role of managed care organizations in some markets has prompted home health agencies to become accredited by one of the national accreditation organizations to qualify for a contract. Hospices haven’t had any of these needs or demands.

Home Health – Subject to Regulatory Scrutiny for Many Years
Because of the sins of a few “bad apples,” home health has been subject to regulatory scrutiny for years. Most home health agencies, therefore, are more likely prepared for a RAC review. Fiscal intermediaries have employed sophisticated claims edits, which automatically generate an ADR when a potential irregularity is found. Processes have been developed to respond to these requests, track the deadlines, and provide the appropriate supporting documentation. Even if a home health agency’s actions in an audited case were warranted, it could be penalized if its response doesn’t meet the filing deadlines and documentation standards. Once again, most hospices have none of this infrastructure or experience.

The recent revision of Hospice Conditions of Participation required, for the first time, that hospices establish quality-monitoring programs. On the home health side, this organizational capability has been required since the advent of the Prospective Payment System (PPS). Such programs put pressure on clinicians to be diligent in their documentation. The recent Office of Inspector General investigation of nursing home patients is an example of the impact of poor documentation. Keep in mind the Medicare adage, “If it wasn’t documented, then it didn’t happen.”

It’s Time for Hospices to Take These Actions Now
With the RACs poised to delve into the hospice segment in the next 6 to 12 months, hospices need to take action immediately. Here are four ways to prepare:

1. Develop procedures to deal with the ADRs, and be sure to respond to them in a timely manner.
2. Conduct audits of discharged patients’ records to evaluate whether they could survive an inquiry.
3. Identify the types of patients and specific clinicians whose past acts could expose the hospice to penalties and fines.
4. Educate staff about how to improve documentation practices.

In addition, RACs will likely go after patients with the longest length of stays (LOSs). How does your hospice’s LOSs compare to others in the industry? Healthcare Market Resources’ Length of Stay Analysis Summary can help you answer that question. Click here to view a sample of this report.

Are you prepared for a RAC review? Click here or give us a call at 215-657-7373 for more information about ways Healthcare Market Resources can help.