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September 2017

Indefatigable RACs Plow Ahead
By Selena Chavis
For The Record
Vol. 29 No. 9 P. 24

2017 audits are characterized by new rules and new contracts.

It's full speed ahead for the 2017 recovery audit contractor (RAC) audits, although health care organizations can expect a slightly different twist to the process. For the latest iteration of the audits, the Centers for Medicare & Medicaid Services (CMS) awarded five new contracts and crafted some new rules.

In late 2016, CMS announced new RACs, increasing the number of regions from four to five. Four regions are now dedicated to Medicare Parts A and B with a fifth being a national contract focused solely on durable medical equipment. Contracts were awarded as follows:

• Region 1: Performant Recovery, Inc;
• Region 2: Cotiviti, LLC;
• Region 3: Cotiviti, LLC;
• Region 4: HMS Federal Solutions; and
• Region 5: Performant Recovery, Inc.

Michele Carpenter, senior vice president of government services with HMS Federal Solutions, says the scope of work is similar to past efforts. For instance, CMS continues to limit audit reviews to 0.5% of the claims Medicare pays to providers every 45 days. Enacted in 2016, this percentage is down from the previous threshold of 2%.

"It basically means that 99.5% of all claims processed by Medicare fee-for-service do not get audited," Carpenter says, adding that she anticipates CMS may bump that number back up to 2% or higher. "The RACs were meant to be implemented like a commercial contract. Commercial payers audit in excess of 10% of their claims universe."

More recently, CMS elevated RAC requirements for initiating a widespread review. To ensure a RAC is making accurate claim determinations, CMS now requires information upfront supporting proper payment concepts. Once approved, the RAC can incorporate those "audit issues" or "scenarios" into its 45-day cycle.

In addition, new CMS rules require RACs to maintain an error rate of no more than 5%, or CMS will invoke a progressive reduction in additional document request limits, says Andrew Wachler, JD, a health care attorney with Wachler and Associates. Also, overturn rates of less than 10% at the first level of appeal are now required. If this threshold is not met, RACs face CMS corrective action plans that can include decreasing additional document request limits or ceasing certain types of reviews until the problem is corrected.

"The appeals get mostly overturned at administrative law judge (ALJ) hearings, but we are beginning to see more overturns at reconsideration," Wachler notes, adding that the new overturn rate threshold could end up being a significant requirement that RACs "may or may not meet."

Wachler says CMS is also asking RACs to participate in a minimum of 50% of the ALJ hearings. "That is significant from a provider perspective—it's more complicated to prepare when you have someone on the other side adverse to you. You are going to have less favorable rulings with their participation than without," he says.

Ronald Hirsch, MD, FACP, CHCQM, vice president at R1 Physician Advisory Services, expresses some concern with the performance of the current RACs. "When the new RACs started, they seemed ready and willing to be more provider friendly. But once the audits started, anecdotal reports suggested they were not living up to their promises," he says, further explaining that industry feedback suggests that some are not updating their portals on a daily basis as promised and calls to their provider lines often result in incorrect information.

Hirsch adds that it's still early, and some glitches are expected. "There has not been much feedback on their DRG [diagnosis-related group] audits; that is where I expect the most controversy to occur. Time will tell," he says.

What Are Auditors Targeting?
Jackie Thelian, CPC, CPC-I, CHCA, president of Medco Consultants, says the 2017 RAC audits are "a good mix between inpatient, outpatient, drugs and biologicals, and documentation of medical necessity for skilled nursing facilities." The review types are either automated or complex, she explains, pointing out that the former requires no prior review of the actual medical record and focuses on system claim error. Conversely, complex reviews occur when the contractor provides an actual physical review of the medical record.

Wachler says RAC audits during the initial demonstration period and the program's first few years largely focused on inpatient. "Through 2013, we saw a continuation of inpatient denials across the spectrum," he notes while pointing out that the expanded focus on outpatient and other areas is a new direction.

Thelian says the points of emphasis for RAC audits are largely determined by region. For example, Cotiviti, LLC, the RAC for regions 2 and 3, concentrates on inappropriate new patient billing, complex cataract removal, and annual wellness visits, among others. Thelian says these details can be found on each RAC's individual website.

Carpenter says HMS is continuing to work with skilled nursing facilities to review documentation and, in some cases, medical necessity. "We continue to focus on areas that would be common types of services for Medicare populations," she says, pointing out areas such as cataract surgery and cardiac services.

Hirsch believes RACs will make use of their approved automated issues to build cash flow, especially in light of short inpatient admissions currently being off the table. "Automated audits require little or no human intervention, so it is a great way for them to start," he says. "Then I expect they will look at medical necessity issues such as bariatric and cataract surgery that may be viewed as easy pickings. In these cases, the problem is usually not lack of medical necessity but rather lack of medical necessity documentation in the hospital or ASC [ambulatory surgery center] chart."

Infusion centers also are likely targets, Hirsch says, noting that RACs will be mindful of correct unit billing and improper billing for wastage. "The area that worries me the most is DRG coding validation. The line between coding validation and clinical validation is, in my opinion, quite blurry," he says, explaining that the situation is exacerbated by definitions of conditions such as sepsis and respiratory failure that vary by provider, payer, and auditor.

Carpenter says two broad categories of RAC audits exist—one dedicated to identifying errors in coding and billing mistakes and the other focused on medical necessity. "Some people feel the doctor's orders shouldn't be questioned for medical necessity," she says. "I believe the variety and level of issues across claim types and across providers allows for the RAC program to really drive home when there are errors and issues."

Preparing and Responding
Hirsch says that by and large, health care organizations struggle to allocate the resources needed to optimize and sustain RAC compliance efforts. He says key manpower questions organizations should address are the following:

• Who will prepare the records?

• Should records be reviewed prior to sending to the RAC or should the hospital wait until there is a denial to review?

• Who is going to review the records to determine which are ripe for appeal?

• Who will write appeals?

Exacerbating the situation is the fact that many hospitals downsized their RAC teams following the suspension of short inpatient stay audits in 2013 and the 2016 ruling that limits the number of audits. While acknowledging that chart limit reductions will provide some relief, Hirsch also points out that commercial payers are simultaneously increasing their audit activity.

"[Health care organizations] are now having to rebuild those [RAC] teams," Hirsch says, pointing out that the current uncertainty regarding the Affordable Care Act has led many organizations to impose hiring limits. "I expect that once the RACs get up to full steam with their complex reviews that require medical record review, many [organizations] will be hard pressed to meet deadlines and may need to look to outside resources."

In terms of expectations, Carpenter says because CMS has in place a standard process that RACs must follow, there should be few surprises in store for health care organizations. "CMS also has a quality score that is constantly monitored regarding the audits we perform and the results we find," she says. "This ensures there is a high level of quality and that we are performing valid reviews."

Essentially, contractors send out a letter requesting back-up documentation. Providers are then given several weeks to respond, although Carpenter says they can request extra time. Once the documentation is reviewed, there is a 30-day period before action is taken, giving providers time to schedule a discussion with the RAC before the finding is declared an overpayment. Each RAC is required to have a portal where providers can access the details of a specific request. Also, Carpenter says RACs conduct provider outreach at the start of a contract to elevate provider awareness.

"I think the provider community will find that this process is pretty straightforward and really allows for any opportunity a provider might need for incremental time to pull together records if they have been requested," Carpenter says.

Thelian says appeals are common for overpayment demand letters that result from automatic system reviews. In some cases, she says the services were either appropriately unbundled or the RAC included add-on codes, which do not unbundle out of the package and would otherwise be separately reported, in its data mining. "The complex reviews, in many cases, are also appealed as information critical to support the service billed may not have been sent on the initial request for records," Thelian says.

Wachler advocates appealing all denials, noting that it's typically in the best interest of providers because many cases involve settlements caused by the backlog of ALJ appeals. For example, he points out that if an agreed-upon settlement is 70% of an appeal, a provider would undoubtedly want to receive that return on the largest number of appeals possible.

Health care organizations often lack the expertise to recognize all the nuances associated with audits, reviews, and the development of sustainable compliance programs, Thelian says. "It is best to have a knowledgeable health care attorney write up the compliance program, and then it is up to the organization to make it a working compliance program," she says. "For example, are routine reviews conducted? Is physician education provided? Does the program include a protocol to identify how to refund identified overpayments and if the refunds are being made?"

If an organization is committed to a high-performing compliance program, Thelian says the benefits will far outweigh the work involved in creating and maintaining the program. "Working compliance programs help to reduce the risk of audits, as proactive audits with corrective actions help to prevent future improper claim submission," she says.

The Coder's Role and Responsibilities
Broadly speaking, Carpenter says ICD-10 has been problematic for health care organizations. She explains that there is a disconnect when a coder reviews a chart and translates it to the right ICD-10 code. "It's mostly mistakes of upcoding, but there are those who are trying to take advantage of the system," Carpenter says.

Hirsch says coders have limitations in that they're not clinicians and they're instructed to code what the physician documents. Yet, he emphasizes that common sense can and should be applied to avoid potential Medicare billing issues.

For example, consider a physician documenting sepsis, but the medical record indicates the patient's inpatient stay lasted only two days, and the patient was walking the halls during that time. Most coders would recognize that the documentation does not line up with the diagnosis. Therefore, the common sense response would be to escalate the chart for review before automatically coding to sepsis.

"Being empowered to do that helps avoid denials and also contributes to the accuracy of the medical record and the claim," Hirsch says.

Thelian encourages HIM departments to conduct regular reviews of their RACs' websites to identify what will be targeted. She also suggests examining the Office of Inspector General's (OIG) Work Plan, which typically is published at the end of October or the beginning of November. "This lists all the targeted areas that the OIG will be looking at in the upcoming year. Coders should stay updated on the Local and National Coverage Determinations and the National Correct Coding Initiative (NCCI) edits. These documents change frequently, and the NCCI edits get updated quarterly," she says, adding that many RACs base their focus areas on the chapters in the NCCI edits.

Thelian recommends HIM departments use only nationally recognized source documents such as the Local and National Coverage Determinations, NCCI edits, CPT Assistant, and CPT Changes: An Insider's View.

Carpenter believes the opportunity exists to provide more audit oversight without burdening a single provider. "Nobody has a 100% quality in anything," she says. "I think that is the real opportunity over the next couple of years—to really continue returning dollars to Medicare under the umbrella of fraud waste and abuse."

— Selena Chavis is a Florida-based freelance journalist whose writing appears regularly in various trade and consumer publications, covering everything from corporate and managerial topics to health care and travel.