Academy of Chiropractic Personal Injury & Primary Spine Care Program

Quickie Consult 285

From the Desk of Dr. Mark Studin
Academy of Chiropractic
Preamble: Many of the issues I bring to you are very small, yet each issue is just that, an issue. If you take care of the small issues, then you will be able to build and more importantly, focus on the bigger issues...a larger practice and more family time.

"Medicare RAC (Recovery Audit Contractor) Expanding to Non-Medicare Providers and Here to Stay"

First...Remember this:
Chart/Documentation Review Services for Compliance Issues
Dr. Michael Schonfeld
You need his services and will better understand why after reading this. His $500 fee is the best money you will ever spend and is a bargain in the industry...I promise!!!
Recovery audits are a HUGE business and you are their business. There is no more, "I am too small a practice," as every practice, no matter the financial class, from PI to Medicare to managed care, is targeted. Don't run from the insurance system, just ensure that you are doing it right and keep your hard-earned money. If you have to give it's your fault for not documenting as you were taught in professional school and as I have been telling you to do for...well...forever!!!!
PLEASE read the following and understand the issues so that you are within the required guidelines.

Retrieved from
Looking to eliminate Medicare overpayments to providers, the Centers for Medicare and Medicaid Services from 2005 until early 2008 conducted pilot tests of a new program to audit provider billings, called the Medicare Recovery Audit Contractor program.

The pilots in six states-with three of the states participating for less than a year-enabled Medicare to recover nearly $1 billion in overpayments. On top of those tangible results, the House Ways and Means committee estimated that rolling out the program nationwide would result in the recovery of $10 billion.

With those kinds of numbers, it's not hard to guess what came next. Following tweaks in the program, Medicare started rolling out the RAC program nationwide during 2009. But 2010 was when its effects were widely felt by hospitals, with some health systems undergoing multiple RAC audits while others were notified they'll soon be up to bat. CMS intends to eventually audit all U.S. hospitals, and is now expanding the RAC program to physicians, laboratories, pharmacies and other providers.

There was no shortage of health care payer audit programs before RACs came around. Medicare already conducts audits under the Medicare Administrative Contractors program, state Medicaid agencies have audit programs, and so do commercial insurers and quality improvement organizations. And a proposed federal rule published in November 2010 has put the wheels in motion for establishment of Medicaid RAC programs.

"It's really become a burden to providers because they're getting it from all directions," says Steve LeFar, general manager of MediRegs, a Riverwoods, Ill.-based regulatory compliance software vendor.

For instance, commercial carriers are starting to copy RACs "and that has really increased audits across the board," says Belinda Kisley, RAC coordinator at 15-hospital, 155-clinic Aurora Health Care in Milwaukee, which has already undergone multiple RAC audits.

In fact, almost constant auditing is a well-established hallmark of the RAC program.

There are two types of RAC audits-automated and complex. An automated review, also called a claims review, is a computerized analysis of a provider's Medicare claims based on algorithms that look for specific discrepancies in the claims.

These include medical procedure that don't match the patient's age or gender, inpatient claims without a discharge disposition, or two or more units for a colonoscopy when only one unit can be billed a year.

Medicare has contracted with four companies to serve as the Recovery Audit Contractors in four regions that span the nation. These contractors can and do subcontract with other companies to conduct audits.

RACs can conduct an automated review anytime without notifying providers. Following an automated review that finds discrepancies, a RAC will send a "demand letter" to a provider organization identifying the overpayments found and stipulating reimbursement. (RACs also are finding underpayments in favor of providers, but those account for about a fifth of the findings, says Lori Brocato, audit management product manager at software/outsourced services firm HealthPort, Alpharetta, Ga.)

Under a complex audit, RACs can demand up to 300 medical charts from a hospital every 45 days, based on Medicare claims volume, for comprehensive review.

These charts include any paper and electronic documentation that support a flagged encounter.

The problem with the emerging array of government and commercial audits is there's no consistency between the different programs-including RACs-and that's got to change, LeFar contends. "Somebody has got to get the various auditing bodies standardizing the time lines, appeals processes, and the scope and rules under which they operate," he bemoans. "It is just way too complicated to handle the various processes."

However, the confusion caused by different flavors of audits touch the very heart of the problem with the health care payment system, says Joyce Mosier, a senior consultant at vendor 3M Health Information Systems in Salt Lake City. "Physicians and hospitals treat patients equally based on clinical symptoms and medical needs," she explains. "So it is confusing to treat commercial patients one way from a billing perspective and a different way for Medicare." 

How RACs work

The biggest difference with the RAC program compared with other payer audits is how contractors are reimbursed, says Brocato from HealthPort. Contractors for other audit programs get paid a fixed amount for doing their work. But RAC contractors get paid via contingency fees. They make money finding overpayments and underpayments, and the more found the more money made. So, there's plenty of incentive for RACs to be more aggressive than other audit programs, Brocato says.

The contingency payment set-up for RACs has been perceived as bounty-hunting by many industry stakeholders. But the federal rules aimed at preventing such behavior seem to be keeping contractors from going overboard, says LeFar at MediRegs.

Beyond the whole unpleasantness of being audited, various types of disconnects are causing headaches for audited hospitals. For instance, RACs are not yet set up to accept electronic charts; they will accept a CD, but that's difficult for some providers because the RACs want one record on each CD. Dawn Crump, network director of compliance at SSM Health Care in St. Louis, which has already undergone RAC audits, notes that "our process is not set up for the large quantity burning of disks and their process is not ready for secure FTP transfer."

Many RAC requests of records for a complex audit during 2010 were for far fewer than 300 charts, but the number of complex reviews and the requested number of charts started increasing late in the year, Brocato says. "We're going to see them taking advantage of what they can in the coming year."

Physician practices also fall under the RAC program. The number of records that can be demanded every 45 days for a complex review is based on the practice size and tops out at 50 for the largest practices. RAC auditors spent much of 2010 focused on automated reviews of hospital claims, which give quick results and cash in the door, with complex hospital reviews and physician audits starting to build toward year-end.

After a provider submits the requested medical records for a complex audit-with the RAC contractor reimbursing the cost of shipped CDs or 12 cents a page for submitted paper-the contractor then has 60 days to review the records and inform the provider of findings.

Software tools help

Following the receipt of a demand letter, a provider can appeal the findings and present documentation to support its position. Providers increasingly are using software specifically designed for the RAC program and embedded with the RAC rules to manage request fulfillment within 45 days, and generating supporting documentation to use during the appeals process.

A small provider organization may try to manage RAC audits manually, but it simply is not possible for larger organizations, says Kisley of Aurora Health Care.

Aurora uses MediRegs' software, which imports data from claims systems to generate reports on the status of audits, analyzes the organization's financial risks and helps pinpoint areas of the coding, physician documentation and billing processes that need improvement. Aurora is not yet fully using the software across its enterprise as it completes integrating with about 10 different claims systems, but already is finding benefits, Kisley says.

Customizable features enable drilling down deeper to unearth tough-to-spot problems. For instance, one of Aurora's hospitals has three campuses, but all three physical buildings operate under the same national provider identifier. Kisley can generate reports covering the whole hospital or each individual campus. This can help her know if there are specific, targeted issues in one, two or all three buildings within that single hospital.

The long-term goal of RAC audit software should be to use the analysis and reporting capabilities to learn from audit experiences and get cleaner and cleaner claims as the years go on until demand letters cease, Kisley advises. "Over time, I'll be able to run a report to see which DRGs were predominately overpaid. Without having software, it would be very difficult to know."

Some organizations only look for software that manages one part of the RAC audits, such as a release of information module, and that's an oversight, notes Crump of SSM Healthcare, which is a HealthPort client. "The whole goal is to improve your coding and billing processes to ensure the most accurate claims possible," she explains. "Auditors won't waste time and resources on issues with no findings."

So, look at the reporting capabilities of software to see how an organization can get the most value for its investment, Crump advises. To make lasting changes in an organization means showing fact-based evidence to physicians and others of how doing certain things a certain way benefits them and the organization. "Physicians listen to facts," she adds. "If you can show them identifiable trends and communicate what needs to be changed to improve, then they will want to make the changes. If I just say 'You need to document more,' they don't listen to that."

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