RAC ‘n’ Roll
RAC ‘n’ Roll | Recovery Audit Contractor, RAC, Centers for Medicare & Medicaid Services, CMS, Connolly Consulting, Healthcare Financial Management Association, American Hospital Association, medical record audit, Suzanne Lestina, Rochelle Archuleta

Recovery Audit Contracting Rolled Out Nationwide

After several years of anticipation, the Medicare Recovery Audit Contractor (RAC) program was set for nationwide rollout last month. Despite the notice, many Medicare providers still are not adequately prepared to respond to a request for records.
If you are unsure whether or not to worry about an audit, you simply need to answer one question. ‘Do we bill Medicare Parts A or B?’ If the answer is, ‘yes,’ it’s time to think through your audit strategy.

Region C RAC

All of the Southeast falls into Region C and is covered by Connolly Consulting Associates, Inc. For more information on the RAC program, specific areas of interest, record submission and links to other resources, go online to www.connollyhealthcare.com and click on “CMS RAC Program.”

The Tax Relief and Health Care Act of 2006 required a permanent, national RAC program be in place by Jan. 1, 2010. The goal is to identify improper payments and billing patterns on claims for healthcare services. Overpayments by the Centers for Medicare & Medicaid Services typically result from claims being submitted that don’t meet Medicare’s coding or medical necessity policies. Underpayments most often happen when a provider bills for a simple procedure when a more complicated one was performed. The impact to the bottom line is that CMS will take back overpayments from providers or cut checks in instances where a provider was underpaid.
The decision to make the audits permanent followed the success of a demonstration program in California, Florida, New York, Massachusetts, South Carolina and Arizona. Between 2005 and 2008, audits in these states resulted in more than $900 million in overpayments being returned to the Medicare Trust Fund with another $38 million in underpayments to healthcare providers being corrected. For those keeping score, that’s approximately a 24:1 ratio of overpayments being discovered as opposed to underpayments.
Although anyone would be hard pressed to justify overcharging CMS, the audits do raise concerns. One issue is the impact immediate repayment could have on a provider or facility that made an honest error. Another concern is over interpretation of areas that aren’t clear cut … particularly because RACs, which receive a percentage of recovered funds as compensation, have a seeming incentive to err on the side finding errors.
 “Our primary concerns are that the RAC program be executed in a fair and transparent way, and that RACs focus on identifying technical, black and white payment errors,” said Rochelle Archuleta, senior associate director for policy with the American Hospital Association (AHA). “One type of audit in particular raises concern — medical necessity reviews — which require individual auditors to make a subjective, retroactive decision on whether care provided in the past should have been covered by Medicare.”
The Southeast, which falls into Region C, was scheduled for rollout after Aug. 1, 2009. Suzanne Lestina, senior technical manager of revenue cycle for the Healthcare Financial Management Association (HFMA), noted that after a slow start, activity has been picking up steam over the past few months.
Her advice to all who bill Medicare is first to go online to Connolly Consulting Associates, the Region C RAC, to get a sense of what reviewers are targeting. Under “Approved Issues,” she said the Web site outlines a focus on 24 MS-DRGs, coding DRG validation and discharge status code assignment. “They’re not hiding what they are doing,” she pointed out.
Lestina continued, “Those are the areas that are a flag to them. I really think hospitals (and other providers) need to pay attention to what other hospitals in other states are getting hit with … pay attention not just in your area but all over. If one of the RACs identifies a problem, they are sharing that information across all RACs so hospitals should be sharing that information, as well.”
At the AHA, Archuleta noted, “We urge hospitals to prepare by auditing the types of claims that were targeted during the RAC demonstration, such as one-day and three-day stays. These audits are one means to proactively assess a hospital’s exposure to future RAC denials and take preemptive steps to reduce future denials.”
Lestina added HFMA has encouraged its members to go ahead and establish an audit process prior to receiving a request for records. She said it’s important to think through who is going to be the internal communications person, identify key contacts within departments and discuss how to handle take backs.
“It really is getting some of those basics down. When it’s your turn, you already have those in place so that you aren’t making decisions under pressure,” she said.
It also pays to know your rights and limitations on the RAC program. “In early December,” noted Archuleta, “CMS posted a policy to limit the number of records that a RAC can ask of each hospital’s campus per 45 days. More details are at www.cms.hhs.gov/rac.”
Lestina continued, “The RACs are just the tip of the iceberg. There are other review programs in place or coming.” She cautioned against creating an auditing review process “in a RAC silo.” Instead, she urged, the internal process should be crafted in a flexible manner to be adapted to future audits and government review programs. 
Finally, providers need to be aware of their options for appeal. There are very specific guidelines and timetables … many quite short … for filing a rebuttal with the RAC auditor and/or appeal to a fiscal intermediary. Archuleta noted the appeals process should be outlined in the written instructions provided by the RAC at the same time the unfavorable determination letter is sent.
There are five levels of appeal — Redetermination, Reconsideration, Administrative Law Judge, Medicare Appeals Council and the United States District Court. Generally, the RAC appeal follows the current Medicare appeals process. The one key difference under Part A for inpatient hospital claims under the Prospective Payment System is that the first level of appeal goes directly to the fiscal intermediary that processed the claim rather than to the Quality Improvement Organization.
For more information, go online to AHA’s RAC site at www.aha.org/aha/issues/RAC or visit HFMA’s RAC resource area at www.hfma.org/library/reimbursement/medicare/RAC.htm.