THE RACS ARE COMING, THE RACS ARE COMING!!!!!

Who they are, what they want, and how they get it

• RAC= RECOVERY AUDIT CONTRACTOR

• Section 306 of the Medicare Modernization Act directed CMS to investigate Medicare claims payments using RACs under a three year demonstration project whereby RACs would be paid on a contingency basis. Two types of contractors were used:

– Claims RACs– MSP RACs

• CMS hired contractors and conducted a demonstration project focusing on services provided from October 1, 2001 - September 31, 2005.

CMS PAYMENTS TO RACs

– RAC’s paid on a contingency basis for all accurately identified overpayment$

– Paid on a percentage basis for all underpayments identified and recovered

CMS: “RAC…a very cost effective program.”“…achieved a respectable return on investment of

373% in 2006”

(2006 RAC Status Report)

RAC contractor Jurisdiction

Connolly Consulting

HealthData Insights (HDI)

PRG-Schultz (PRG)

New York (3/05)

Mass (7/07)

Florida (3/05)

South Carolina (7/07)

California (3/05)

Arizona (7/07)

Overpayments by Error Type

0%

5%

10%

15%

20%

25%

30%

35%

40%

Percentage ofOverpayments Collected

IncorrectCoding

MedicallyUnnecessary

InsufficientDocumentation

Other

COMING OUR WAY…

Legislation

RAC’s will become a permanent fixture on our payment auditor/reviewer circuit…

• Section 302 of the Tax Relief and Health Care Act of 2006 makes the RAC Program permanent and requires the DHHS Secretary to expand the program to all 50 states by no later than 2010.

Permanent program-lessons learnedDEMO PERMANENT RACs

Look back period 4 years 3 years

Maximum look back None 10/1/07

Standardized request ltrs No Yes

RAC medical director Not required Mandatory

Credentialed coders Not required Mandatory

RAC must pay back its contingency fee if claim overturned

At 1st level of appeal only

At ANY/ ALL levels of appeal

External validation process

None Mandatory

Web based application for providers

None Mandatory by 1/1/10

What to Expect…

RAC Process…

The process in a nutshell-

1. Initial Communication from RAC- Letter to designee introducing you to your RAC- Request to designate a RAC Liaison- Roles and Responsibilities of RAC Liaison

2. Receiving RAC Requests- Typically sent to RAC Liaison/HIM Director- Specific Records Listed

3. Responding to RAC Requests

Timeliness 45 DAYS AND COUNTING…Providers must respond within 45 days of date of request letterYou may request an extension any time prior to the 45th day by contacting the RAC

THE CLAIM IS CONSIDERED AN OVERPAYMENT IF RECORDS ARE REQUESTED AND NOT RECEIVED!!!

– Questions when preparing responsePreviously evaluated claims?Do not assume RAC database is accurateIf you conclude a claim has already been reviewed, notify RAC

4. Notification of Outcome Who receives the denial

Reasons for denial, including regulatory citations

Rights of appeal

Contact information

Payment refund procedures

Let’s have a round of appeals, please…

• Appeal Processes– Timeline for appealing denials– Phone vs. paper appeal– Resubmission of records

FIVE LEVELS OF APPEAL

Note: Interest accrues throughout the appeals process

• 1st level - 120 days to file

Redetermination with FI or carrier (60 days)

• 2nd level – 180 days to file

Reconsideration by QIC (qualified independent contractor) (60 days)

• 3rd level – 60 days to file

ALJ (Administrative Law Judge) - 90 days

• 4th level – 60 days to file

Medicare Appeals Council

90 days

• Final Appeal Level – 60 days

U.S.District Court

How are claims selected?

– Must “target” claims through data analysis• Cannot randomly select claims• Cannot just focus on high payment claims

• Two Types Reviews– Automated – No medical records involved in

the review, certainty that overpayment exists based on claims data review

– Complex – Medical records are involved in the review, high probability (but not certainty) that the service is not covered

Providers under Scrutiny

CURRENT TARGETS INCLUDE:• INPATIENT HOSPITAL CLAIMS• OUTPATIENT HOSPITAL CLAIMS• SKILLED NURSING FACILITY CLAIMS• PHYSICIAN SERVICES• LAB AND AMBULANCE SERVICES• DME

So, what can we do?

This is probably not our best option…

Some Familiar Problem Areas Identified

Inpatient (complex reviews)• Skin graft &/or debridement for skin ulcers and cellulitis• Respiratory system dx w/ ventilator support• DRG with single CC• Coagulation Disorders• Major small and large bowel procedures• Unrelated PDX and Procedure• 1-2 day stays• Chest pain as inpatient PDX• Septicemia, bacteremia, urosepsis…sound familiar?

Outpatient • Neulasta (J2505) (complex review)• Speech/hearing therapy (92507) (automated)• Blood transfusion services (36430) (automated)

Other Identified Issues

• Outpatient-approved surgical procedures performed on an inpatient basis

• Short stay acute patients: should they have been observation patients?

• 3-day stays shipped to SNF bed –medically necessary admission or “social admit” to qualify for a skilled bed?

• Discharge Disposition errors on Transfer MS-DRG’s

• PEPPER data outliers• PEPPERs: Program for Evaluating Payment Pattern Reports

produced by QIO; identify claims patterns for your facility relative to other hospitals in the state for the “top 20” DRGs that are prone to billing errors.

Stay current with coding guidelines!

• CMS considers AHA’s Coding Clinic the official source for coding guidelines

• Many coding errors are due to application of outdated coding directives– “This information has been superceded by…”

Coding Clinic notes

Failure to follow basic coding rules

and guidelines

WHAT PROVIDERS ARE DOING

1. Create a team to prepare an effective RAC response

• HIM, Finance-Patient Accounts, Quality Assurance, Case Management, Physician Liaison, and Compliance

• Identify facility RAC Liaison – primary hospital contact and back-up.

• Assign tasks to designated depts/staff• Think about what resources you’ll need and their

budget impact

Internal Data Mining

Run Reports, pull charts, perform internal audits, rebill if necessary. Look at your:

• High Risk MS-DRGs

• High Volume MS-DRGs

• High Volume OP services

• Known/suspected care management/UR problems

Once RAC requests start coming in…

– Schedule regular team meetings to review new demands/requests and the status of prior demands.

– Prioritize review of claims by time remaining to respond; $$ impact; and volume of claims with common issues.

– If volume of requests is overwhelming, remember you can formally request extension from RAC before the 45-day response time expires.

Establish a RAC Response Process

– Log each Demand Letter / Request for Medical Record into Tracking System

– Verify that the claim is open for RAC to review.

• Classify each demand by type of issue and $$ Impact

• (e.g., Duplicate Payment, Service Not Covered, Not Medically Necessary, DRG recode, HCPCS Error, Units, etc.)

Monitor your appeals

Team should review appeal documentation to ensure it is complete, accurate and convincing– What appeals strategies are working, which

ones aren’t? – Establish a tracking database– Develop standard templates for specific

denial types– Identify the processes and practices resulting

in denials

Response Time & Medical Record Documentation

Assure timelines for medical records requests are met– Create central repository for all

communication between your facility and the RAC

– Consider using a vendor to help organize copying, scanning, and tracking records sent in response to RAC requests.

Future Moves…

• Take immediate action when RAC letters are received

• Educate all impacted departments and individuals based on RAC findings

• Use RAC targets to improve coding and documentation