As the Medicare Recovery Audit Contracting program begins in earnest, it has healthcare providers anxiously wondering:
- Will financial incentives for contractors result in overzealous audits?
- What will auditors be looking for?
- How much could providers be required to repay?
- What can organizations do to prove the claims they filed were fair and accurate?
Developed by the Centers for Medicare and Medicaid Services as a way to ensure proper payments for Medicare services, the RAC initiative utilizes contractors to audit provider claims for validity. Yet the program has raised concerns about whether financial rewards offered for finding errors (contractors get a percentage of what they find) will lead to widespread misreporting and massive reimbursement losses for providers.
Are these fears legitimate? It depends on who you talk to.
Based on the RAC pilot program results, Lou Feuerstein, a partner at Philadelphia-based consulting firm ParenteBeard, says he expects auditors to be very busy.
“The pilot program was a tremendous success for the government because in the states where they tested it, just about every hospital paid back $1 million or more,” he said. “The government absolutely believes that hospitals are getting overpaid whether it’s intentional or not.”
Ginny Balla, director of performance services for Irving, Texas-based VHA, is even more convinced.
“From where we sit, the fears are justified,” she said. “I don’t think most hospitals have even begun to realize what impact these audits will have on their organizations.”
Likewise, Irene Torino, managing director of regulatory risk and compliance practice for Chicago-based Huron Consulting Group’s Wellspring Partners acknowledges that disputes with auditors “can fuel providers’ fears that ultimate reimbursement is negatively impacted by some level of inaccurate determinations.”
Others however, like Joel Gardiner, principal in life sciences and healthcare at Deloitte Consulting’s Boston office, say it’s too early in the process to know how extensive the dollar assessments will be for providers. Still, Gardiner maintains, “it may depend on the contractor who is doing the auditing. It might be a big issue for some, a non-issue for others.”
Audit targets
The purpose for RAC audits is to target Medicare severity diagnosis-related group codes that have high potential for improper payments. Balla contends approximately 550 out of 750 MS-DRGs have “potential issues” with contractors.
“They are targeting just about everything,” she said.
Among the procedures auditors have reportedly focused on are excisional and nonexcisional wound debridements because they have been found to be “poorly documented,” according to the Medical Coding Journal. The main difference is that excisional debridement is a surgical procedure involving the cutting away of devitalized skin tissue, while nonexcisional does not involve surgical cutting.
Mary Beth McCarthy, interim director of health information for Catholic Health in Buffalo, N.Y., has been working with Reston, Va.-based QuadraMed to devise a system that anticipates potential problems beforehand.
“This allows us to be proactive rather than reactive in our approach to RAC,” McCarthy said. “For specific targets such as debridement, we set those up so that when the diagnoses are coded, a flag is set off in the system and the coder knows to pay special attention to that chart to assure that the codes are accurate.”
Another RAC target involves the number of hours billed for ventilator patients. In this case, the hospital system sets up another flag to alert the coder to double and triple check the number of hours the patient is on a ventilator.
“That way if we receive a denial, we know to fight it automatically because we are confident that we coded it accurately,” McCarthy said.
Appeals process
If problems are found with claims and penalties are assessed, what recourse do providers have? The RAC program offers the option to appeal auditor findings, but it may not be that simple, Gardiner said.
“It can be costly to appeal,” he said. “Hospitals will have to determine whether it is better to fight or concede and at what point that happens.”
To date, Torino says she has found that “most healthcare providers have at least taken some proactive RAC audit preparatory action, of which a first key step involves educating senior management and the Board of Directors on potential compliance and financial implications.”
Discussions with regulatory compliance, revenue cycle and health information management leadership personnel suggest that the support of the governing body is critical and the level of “buy-in” from top management can have a direct impact on the effectiveness of any systemic approach to RAC audits, Torino said.
So far, “a high percentage of RAC determinations” have been overturned in the provider’s favor on appeal, she said, and “although it requires due diligence, time and effort, we encourage organizations to utilize the RAC appeals process when this occurs.”