With the federal government’s Recovery Audit Contractor program in full swing, and the changes wrought by healthcare reform promising more audits on the horizon, hospital executives are all but certain that compliance budgets will need to rise in coming years.
At least that’s the message of the 2011 Medical Claims Audits Benchmark Study, a survey of compliance pros at over 300 U.S. healthcare facilities.
The study, performed by the compliance and risk management experts at Compliance 360, reveals that hospitals are planning for what many of us expected in 2011 – an increase in regulatory oversight and medical claims audit activities.
Forty percent of survey respondents indicated that their compliance budgets would increase in 2011, up a strong 29 percent from the 2010 study. Even more troubling, less than half of these executives said they were “confident” in their organization’s current approach to managing medical claims audits.
And why would they be, given the lack of data heretofore provided by the Centers for Medicare & Medicaid Services on the impact of the RAC program in U.S. hospitals.
Another survey, the American Hospital Association’s RACTrac was designed to collect cumulativeRAC experience data, from the inception of a hospital’s RAC activity through the 4th quarter of 2010. The RACTrac survey results for the 4th quarter of 2010 discovered that more than $86 million in both automated and complex denials were reported by hospitals, which is more than double the 3rd quarter, which was a “mere” $42 million. Of that $86 million, 90 percent (over $78 million) were complex denials.
Given the increase in audit activity (nearly four out of five participating hospitals reported experiencing RAC activity in the 4th quarter), why should compliance professionals feel confident? Indeed, nearly half of all hospitals with RAC activity reported receiving at least one underpayment determination.
Most of the audits have been conducted in RAC regions B and C – the Midwest and the South, respectively – and the Medical Claims Audits Benchmark Study confirmed that the financial pressure is being felt in those regions, as a greater percentage of study participants in Regions B and C indicated they expected their compliance budgets to increase in 2011 (51 percent and 41 percent, respectively).
Audits are also occurring with greatest frequency in general medical and surgical acute care hospitals (1,219 audits) with critical access hospitals a distant second (189 audits). Only a small number of audits have been performed on long-term acute care, inpatient rehabilitation, psychiatric, children's, and other hospital types.
The pressure of audit demands and response deadlines places even well-prepared facilities under stress. Fifty percent of respondents to the Compliance 360 survey said the greatest challenge to managing medical claims audits is holding everyone accountable for their part of the process, resulting from the “complex processes, aggressive due dates and documentation required.”
Accountability is much easier when your facility has the staff and the budget to respond to document requests from RACs and other auditors. The good news is that if your facility does invest in compliance, the appeals process is likely to go better for you.
The RACTrac survey discovered that 57 percent of hospitals reported appealing at least one RAC denial, although the national average of hospitals reporting appeals is 23 percent. But of the appealed claims that completed the process, 85 percent were overturned in favor of the provider.
Nonetheless, the administrative burden on hospitals is high, and likely to get worse.
That burden is spread across hospital staff, according to the AHA, although RAC coordinators and those working in medical records and patient financial services are hit hardest.
In order to make the task of compliance easier, hospitals will likely have to invest more in training, tracking software, and hiring additional staff in 2011 and beyond.
Is your facility ready to make the sacrifice?