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November 11, 2008

Maneuvering Your Way Through RAC Audits
By Stephen Hynes
For The Record
Vol. 20 No. 23 P. 6

If ever there was a time for providers to revamp their claims processing, it’s now. With the ongoing expansion of the Centers for Medicare & Medicaid Services’ (CMS) recovery audit contractors (RAC) program, it is clear that the focus on uncovering improperly paid claims is here to stay. Therefore, preparing a plan to effectively manage the RAC process is even more important for the continued financial health of hospitals and health systems.

Providers in California, New York, and Florida—the three states involved in the three-year demonstration program—are already aware of the RAC program’s substantial impact on provider revenue streams. According to CMS reports, in fiscal year 2007 alone, $371.5 million was collected in improper payments. Providers throughout the rest of the nation will soon realize what this regimen entails.

Although no internal tactics can ultimately guarantee that a provider will be exempt from a RAC audit, sufficient preparation and education could improve an organization’s overall management of RAC reviews. Highlighted below are several tactics that hospitals and health systems can implement to better ensure compliance with the RAC program.

1. Provide staff with the right tools to ensure accurate claims coding. Accurate and thorough documentation is the key to ensuring financial security throughout the RAC program. Advanced claims scrubbers are available to verify that all necessary data are present and that they’re appropriate for that provider, procedure, and payer. Rather than just technical and formatting, claims editors should also check diagnosis code, procedure code, outpatient prospective payment system, medical necessity, and other edits.

However, even the best claims scrubbers have only limited value if a hospital does not employ certified medical record coders and give them the ongoing training and reference tools they need to stay up-to-date and code accurately. The inherent complexity of coding and the constant, heavy volume of changes to codes make it difficult for coders to reach acceptable accuracy without support. Impending RAC audits will highlight any of the hospital’s coding deficiencies: According to the CMS’ evaluation of the three-year RAC demonstration, 36% of improper payments came from inaccurate coding.

2. Develop a team to efficiently respond to RAC requests. A clear system must be put into place to quickly respond to RAC audits, medical record requests, and appeals filing. By organizing a team of professionals from various areas within the hospital, including claims management, patient accounts, HIM, finance, and compliance, you can leverage the expertise of affected departments and lessen the chances that your organization will be cited for noncompliance.

According to Matt Wolocko, a compliance officer at Henry Ford Health System in Detroit, preparations for RAC audits (which are expected to begin in early 2009) have been predicated on the assumption that the audits will impact virtually every department involved in the revenue cycle. Henry Ford is planning to review all RAC audits, which will likely require an unprecedented amount of research. This will impact not only medical records staff and coders but also billing staff, case management utilization review, and finance.

Wolocko is heading Henry Ford’s RAC steering committee, which is made up of representatives from each business unit of the health system and representatives from its corporate finance, audit, and other functions. The committee is shaping the system’s interdisciplinary response to the forthcoming audits. “We are taking the arrival of RAC audits very seriously,” says Wolocko. “We go through audits all the time from government and third-party payers, but the sheer volume of audits and requests for information we expect to see makes it imperative that all areas of the health system prepare for their role in responding to audit requests and appealing judgments.”

3. Use tracking and reporting systems to manage the process and analyze audit patterns. To help manage the complex RAC process, effective tracking and reporting tools are available to house all important information relating to the process. Tracking things such as deadlines, pending requests, RAC determinations, and appeal status can allow a facility to not only regain control of the process but also analyze and adjust clinical documentation methods as appropriate.

Some automated RAC tracking systems also offer the kind of sophisticated, flexible tracking features that enable hospitals to identify audit patterns and determine areas that need to be corrected. RACs use data-mining software to identify possible instances of improper coding, admissions, documentation, and the like, which can then result in an audit (in which medical records are requested). RAC data mining can also result in what is in effect a summary judgment; when the RAC’s evaluation of the records indicates a clear, undeniable improper payment to the vendor, the RAC submits the findings and a demand for payment resolution.

Automated software applications with strong reporting tools record all the information for each RAC request or judgment, aggregate that data, and generate reports that show trends based on a wide range of variables, including type of service or service area; the coder, physician, or other provider associated with the service being audited; and diagnosis codes. By determining the audit patterns, automated RAC-tracking software can help hospital management focus its efforts on the areas most in need of attention—namely, those medical services or administrative procedures that may not be in compliance with Medicare guidelines.

Although analysis and reporting benefit hospitals by pinpointing where processes need to be improved, automated tools can also streamline the overall administration of RAC audits. In theory, a simple spreadsheet or a basic access database can be used to manage the RAC audit process, but in practice, certain functionalities are must-haves for effective RAC management.

Because hospitals have a relatively short time frame to respond to requests for information and file appeals, deadline management is essential to RAC management. The RAC process is document intensive, which means that systems should provide for integrated document storage and access to materials such as RAC request and determination letters, patient medical records, billing records, and appeals letters and judgments. Systems that provide for autogeneration of common form letters (including mail merge of request-specific data) also create efficiencies.

4. Communicate findings with staff. The final important step in an effort to correct and avoid future audits is to systematically analyze the data and communicate these RAC analyses and symptoms with the staff so that improvements and efficiencies can be made. Effectively handling RAC audits requires a coordinated effort from across the organization, and sharing information with physicians, billing staff, the HIM department, auditing and compliance, and finance is essential.

It is especially important for organizations to share the results of their RAC analyses (ie, the trends and patterns discussed in No. 3). By addressing the systemic issues identified and analyzing the audit patterns, hospitals can begin the process of correcting those problems and thus avoid future audits. Although it requires considerable effort to coordinate action across so many sectors of a hospital, addressing the audit findings can resolve systemic issues and prevent future claims from being denied, as well as help eliminate the risks associated with noncompliance.

Final Thoughts
It seems obvious that preparing for this program is necessary, but many organizations are questioning the best methods for doing so. A provider that is well prepared for the RAC audits will be able to efficiently respond to all requests for medical records within deadlines. Timeliness is key in the RAC program, as missed deadlines that lead to automatically denied claims can mean the difference in substantial amounts of lost revenue.

— Stephen Hynes is president and chief operating officer of MRO Corp, a provider of shared-service release-of-information solutions for healthcare providers.