Updated on: November 29, -0001

What’s Hot and What’s Not: 2014 Analytics in Review

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Original story posted on: December 17, 2014

By most accounts, 2014 was a tumultuous year for healthcare providers. The administrative law judges (ALJs) suspended the scheduling of hearings while the Centers for Medicare & Medicaid Services (CMS) suspended Recovery Auditor (RAC) audits due to contractual disagreements with the RACs themselves. Reversal rates on appeals skyrocketed and to help clear up the backlog, CMS offered a limited number of facility types performing limited services the opportunity to pay 68 percent of overpayments resulting from a CMS audit. A majority of practices opted out due to a number of reasons, particularly prominent of which being distrust of CMS’s promise to settle promptly. 

With respect to analytics, I’ve seen in 2014 a pretty significant increase in the use of extrapolation, to the point where it is pretty much the rule now rather than the exception. And the “why” is pretty clear: it can generate huge amounts of cash for auditors with the same amount of effort required than that associated with a face-value analysis.

What I have not noticed is an increase in the proficiency with which auditors have been conducting their extrapolations. My personal experience is that I’ve been successful at getting the overwhelming majority of extrapolations thrown out, with the overwhelming majority of these decisions occurring at the ALJ level. One reason that so many providers are sticking to the ALJ appeal process, even though it now takes years to get to that level, is the relative success rates. I just have a hard time understanding why, if there is such a high reversal rate at the ALJ level, these cases don’t present more frequently at the redetermination and reconsideration levels.

Notwithstanding the lack of sophistication with regard to extrapolation, CMS has continued with its commitment to increase the level of sophistication and fraud detection it utilizes.  In a partnership with Northrop Grumman and Verizon, CMS has indicated that it is continuing to improve its predictive modelling capabilities to pattern claims data for fraud, waste, and abuse. In MLN Matters publication number SE 1133, the agency noted that “the predictive analytics system uses algorithms and models to examine all Medicare claims in real-time flag suspicious billing.” In fact, for the 2015 fiscal year, the CMS budget invested a total of $428 million in new Healthcare Fraud and Abuse Control (HCFAC) programs and Medicaid program integrity funds.

This should really give every healthcare provider pause, as even if you aren’t intentionally doing anything wrong, because the rules and regulations are so complex and often times contradictory it is often nearly impossible to do everything right. And because there is so much subjectivity and elasticity when it comes to determining the correct procedure codes (APC, DRG, or whatever), there is always an objection that can be made with regard to the validity of any submitted claim. I once heard it said that “the IRS makes criminals out of more Americans than any other single institution.” This is obviously because the IRS rules and regulations are so complex that they are impossible to follow completely. In the same light, I would then say that CMS makes criminals out of more healthcare providers than any single institution, and for exactly the same reasons.

Unfortunately, what I have not seen is an increase in sophistication by providers with regard to compliance risk assessment or internal self-examination. For whatever reason, providers seem to be ignoring the technology being implemented by CMS and their auditors and instead sticking with archaic processes such as probe audits, ranking and comparing utilization solely against Medicare. If we really want to understand our risk, we need to see ourselves the same way that the auditors do – and that means employing better technology and better statistics to our own internal analyses, including the use of predictive analytics.

The fact is, in 2015 every claim will be reviewed by someone and every provider will be subjected to the possibility of an audit for any number of different reasons. Look at it this way: if 10 percent of providers are randomly audited every year, then probabilistically speaking, 96 percent of all providers will be audited at least once every 10 years. And not all audits are randomly generated. Maybe, then, the only question is, are you part of that lucky 4 percent? Or, in the immortal words of my man, Clint Eastwood: “You’ve got to ask yourself one question – Do I feel lucky? Well, do you, punk?”

And that’s the world according to Frank.

About the Author

Frank Cohen is the director of analytics and business intelligence for DoctorsManagement. He is a healthcare consultant who specializes in data mining, applied statistics, practice analytics, decision support, and process improvement. Mr. Cohen is also a proud member of the National Society of Certified Healthcare Business Consultants (NSCHBC.ORG).

Contact the Author

fcohen@drsmgmt.com

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