RAC Claim Reviews in Healthcare—How Providers Can Prepare
By Thompson H. Boyd III, MD, FAIHQ, CHCQM, CPUR, CPHIMS Over the last 10 years, policy makers in Washington, DC have been especially challenged by soaring healthcare costs, now about 16 percent of the GNP. The Medicare Fee for Service Program processes over 1.2 billion claims each year. The Office of Management and Budget in 2008 estimated there were $10.8 billion in improper payments. These were overpayments and underpayments (4 percent) involving the Medicare Program. Such calculations or error rates started as early at 2003 with the Comprehensive Error Tacking Program (CERT). In Section 306 of the Medicare Modernization Act of 2003, Congress authorized CMS to conduct a demonstration project, with the Recovery Audit Contractor (RAC), commencing in March 2005. The RAC retrospectively audited paid claims for a three-year period. The three-year demonstration project ended in March 27, 2008 and proved to be highly successful, with $1.017 billion improper payments being corrected. The cost of the program was $201.3 million, representing an expenditure of $0.20 for every dollar collected. The RAC is paid on a contingency basis. The success of this program led to Section 302 of the Tax Relief and Health Care Act of 2006 making the RAC program permanent, throughout the United States, no later than January 2010. Representing areas of high Medicare utilization, there were three Claim RACs: PRG-Schultz (California, then later Arizona); HealthDataInsights (Florida, then later South Carolina); and Connolly Consulting (New York, then later Massachusetts). There were two Medicare Secondary Payer (MSP) RACs: Health Management Systems (Florida and New York) and Diversified Collection Services (California). Econometrica Inc. supported the quality assurance efforts of CMS, by assessing the completeness of data entered into the RAC data warehouse and reconciling claims with invoice and transaction data. Sampling techniques were developed as part of the validation work. AdvanceMed Corp., serviced as the RAC Validation Contractor (RVC) and reviewed claims identified by the RAC as overpayments. Accuracy reports were issued for each RAC. User satisfaction was surveyed by the Gallup Organization in 2007 regarding the operation of the RAC during the demonstration period. Seventy-four percent of respondents found the efforts to recoup overpayments were fair. Changes were made to the permanent RAC program. The look-back period cannot be any earlier than Oct. 1, 2007. The look-back period is not more than three years (as opposed to four years in the demonstration). All new issues a RAC wishes to pursue will require validation by a CMS review panel. To increase transparency new issues must be posted on a Web site. Each of the four permanent RACs will have a minimum of one FTE contractor medical director (CMD), coders must be certified. RACs will have to pay back contingency fees collected for denials, which are later overturned on appeal. A Web-based tool will be available for hospitals and physicians to review the status of an appeal. Annual review requests will be limited for providers. MSP reviews are not planned. In the permanent RAC program, there will be four jurisdictions: Region A - Diversifed Collection Services Inc.; Region B – CGI Technology and Solutions Inc.; Region C - Connolly Consulting Inc.; and Region D - HealthDataInsights Inc. Serving as subcontractors are: PRG-Schultz International, Inc. (Region A, Region B, and Region D), Viant Inc. (Region C), and iHealth Technologies and Strategic Health Solutions (Region A). Reasons for improper payments are: 1) failure to meet medical necessity for a given level of care; 2) improper coding; 3) multiple claims for the same procedure on the same day; and 4) other reasons. Additional denials were the Medicare Secondary Payer (MSP) improper payments in which Medicare was billed as the primary payer when actually it was a secondary payer. It is essential to understand material found in Medicare policies, and CMS manuals, National Coverage Determinations (NCD) [binding], Local Coverage Determinations (LCD). Automated reviews were performed using robust data-mining techniques, in the RAC data warehouse. Denials were identified, which involved coding, multiple billing and MSP improper Payments. Complex review, with a copy of the medical record, required the use of a reviewer for the identification of denials related to medical necessity. Claims excluded for review by the RAC were those under review by another Medicare contractor, Program Safeguard Contractor (PSC), Medicare Administrative Contractor (MAC) or law enforcement (OIG, DOJ). The RAC may not identify improper payments in the Medicare Management Care program (Medicare Advantage – Medicare C) or the Medicare drug benefit program (Medicare D). The RAC may not identify improper payments resulting in the Indirect Medical Education Program or the Graduate Medical Education Program. The best way to limit RAC denials is to prevent the denial from occurring. Clear documentation of medical necessity is critical and needs to be in the medical record. Does the patient meet medical necessity criteria for an Acute Level of Care (inpatient status) or an Observational Level of Care or Outpatient in a Bed (outpatient status)? This is very important for short stays. Medicare billing is markedly different for the patient admitted with an inpatient status vs. a patient placed in an outpatient status. A formal, consistent utilization review process needs to be in place (42 CFR 482.30). Coders need to closely follow their specialty standards, specifically for those codes (e.g. excisional debridement, 86.22) and others which are most frequently denied. Billing should be submitted using the appropriate units: mg vs. vial for Neulasta (Pegfilgrastim). Billing for speech therapy using the accurate units of service is required: per session or per 15 minutes. Submitting bills for more than one colonoscopy per day should not happen. Risk can be addressed by reviewing the OIG Work Plan that describes current high-priority issues. CERT Reports and PEPPER Reports should also be reviewed for areas of potential audit. Hospitals should conduct internal assessment to identify areas of vulnerability. One ought to verify that systems are in place and compliant with Medicare rules. As needed, a corrective action plan should be put in place. Participants from multiple areas of the hospital need to be involved (patient access, case management, health information management [medical records], finance, administration, nursing, medical staff). In addition, the compliance officer and the board should be included. Be proactive. Hospitals were mostly affected by the demonstration RAC. Other providers reviewed in the demonstration included physicians, skilled nursing facilities, inpatient rehabilitation facilities, ambulances, outpatient laboratories and durable medical equipment. There is a rebuttal period and a five tiered appeal process, as shown in the table below. The process must be timely. Due dates and determinations are best followed in a database designed for tracking the detailed process of RAC appeals—a number of vendors have solutions.
Hospitals need to examine these important processes, especially with those patients having short length of stays. Consider a Hospital RAC Steering Committee which monitors the process and expedites timely appeals. References: www.cms.hhs.gov/RAC Dr. Boyd is physician liaison at Hahnemann University Hospital in Philadelphia.
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