Industry Spotlight: RAC is Coming: How to Survive

By: Kay Jackson, Financial Marketing Manager, Iatric Systems, Inc.

RAC IS COMING

What is RAC? The acronym stands for Recovery Audit Contractors, a group of companies selected by CMS (Centers for Medicare and Medicaid Services) to help identify and collect improper Medicare overpayments, as well as identify and reimburse underpayments.

Overpayments have well exceeded underpayments thus far, and CMS has begun recouping large sums of money from hospitals. California, Florida and New York were selected as pilot states for a RAC demonstration period, which is now complete. On January 9, 2009, results from the RAC demonstration period were released. Total overpayments collected were $992.7 million. The RAC process has proven to be a profitable one for CMS, costing only about 20% of every dollar recouped.

As noted on CMS’ website, Section 302 of the “Tax Relief and Health Care Act of 2006” makes the RAC program permanent, and it will be expanded to all 50 states by 2010. So, make no mistake about it. RAC is here to stay. When will your hospital face its first RAC audit? Dates have changed and vary by state. Contact me for an up to date National RAC Rollout timeline. No matter what the date will be, now is the time to prepare.

HOW TO SURVIVE

While RAC is a somewhat dreaded reality, it can also have a positive impact on your hospital. When properly implemented, your RAC policies and procedures can provide attention to areas within your facility that need process change, from patient care to billing and coding.

RAC audits are separated into regions A-D, and regions are divided by state and by RAC audit companies. There are 4 RAC regions and 4 audit companies. Regions A and B will be audited by Diversified Collection Services, Inc. (DCS), and CGI Technologies and Solutions, Inc. Regions C and D will be audited by Connolly Consulting and Health Data Insights (HDI), who were involved with RAC audits during the demonstration period. RAC audit companies are paid based on a percentage of the amount of dollars they recoup.

Here are a few other general RAC facts. RAC audit companies cannot subject claims submitted before October 1, 2007, to RAC review. Furthermore, there is a blackout time if your hospital has recently moved to Medicare Administrative Contractors (MAC). Hospitals should appeal any and all denials that are deemed incorrect after review by your hospital’s RAC Review Team.

One question commonly asked is, “Should our hospital allocate reserve funds to cover the possibility of recoupment due to RAC?” Some experts suggest you make an estimate based upon 2% of your Medicare payments for each year and retain this total over and above normal reserves. Others suggest review of your current CBR (coding, billing and reimbursement) compliance activities. Please refer to “Compliance for Coding, Billing & Reimbursement – A Systematic Approach to Developing a Comprehensive Program”, a book by Duane C. Abbey, for guidance on this subject.

Below are more detailed RAC facts, together with additional recommendations on how you can survive:

• Complex audit requests from RAC require submission of medical records. Include all documentation that supports your coding and billing, and include a cover letter for each request. Form a RAC Review Team to review all documentation that you submit and do not miss the 45 day deadline. If you miss the deadline, the RAC audit company will start the recoupment process. Your RAC Review Team could also review all denials and make the decision about whether or not to move forward with an appeal whenever necessary.

• No more than 10% of your average monthly Medicare claims (with a maximum of 200 records) can be requested within a 45 day period. Track records requested for complex review, as well as accounts selected for “auto” review (where a determination will be made by the RAC company without submission of the supporting records).

• If an account was previously reviewed by your Medicare payer, it cannot be audited by RAC. So, I suggest placing a flag on accounts to alert your RAC team of this fact.

• The RAC audit company is required to reimburse the hospital 12 cents per page for printed copies of submitted records and should pay within 45 days. You should not need to bill the RAC company for these fees. I would suggest tracking the expected reimbursement for the records until you have confidence in the RAC process for payment. Records can be submitted on a CD vs. hardcopy.

• Setting up your RAC Review Team doesn’t have to be difficult. Team members should be strong and knowledgeable. I have authored a document on how to set up the team, including who should be on the team and what each job duty should be. You can request this document free of charge by writing to me at kay.jackson@iatric.com. The number one key is to have a multidisciplinary team in place for RAC review.

• Your RAC liaison is a key member of your team. Inform your RAC audit organization of the name and address of your primary RAC liaison, so all request letters and documents are sent to one person. The duties of your RAC liaison may become full-time as the program progresses, so choose wisely for this key position. Some sites have elected an HIM staff member, some a Case Management member and others someone from PFS. This liaison must have the backing and support of senior management and report to said management on a monthly basis.

• AHA (American Hospital Association) will be a key player for the RAC rollout. Your state’s AHA and RAC audit company will work together to educate providers using methods such as town hall meetings. Another advantage that AHA will bring to the table for your site is a survey question program they will launch to secure data from all hospitals (whether AHA members or not). AHA will compile all data and work for the good of all hospitals regarding RAC issues. Your organization will want to participate in these activities.

• The appeal process is a 5 level process, and each level has its own time frame and requirements. Interest can accrue if you are not successful in your appeal. The most recent statistics reveal that 22.5% of RAC determinations were appealed, and of those appealed, 34.0% were successful. You can optimize your chances for success. Read Transmittal 144, which provides details on the Appeals Activity Form (CMS-2592). Track timelines for each process and keep proof, such as the envelopes the complex records request came in, a copy of all documents sent for audit as well as the certified receipt of the records sent showing that the records were received and received on time. Familiarize your team will all RAC deadlines and requirements, track deadlines and if necessary, ask for an extension on cases that requires more review time.

• The process for appeals for RAC determination is largely the same as the standard CMS appeals process for MAC (Medicare Administrative Contractors) claims. One significant exception is that all RAC first-level inpatient appeals will be handled through the fiscal intermediary that processed the claim; for MAC claims, all first-level inpatient appeals are handled through the Quality Improvement Organization. There is a very detailed RAC Appeal Process Timeline that I can send to you upon request.

This article has just a few of the facts that your team needs to be aware of to prepare for RAC audits. Be sure to check out CMS RAC FAQs on their webpage. It is a great source of info, and it gives you the ability to ask your own questions, too. The National Medicare RAC Summit is scheduled to be held in March, and you can attend the two day session from your office via the internet to save on travel costs.

When it comes to RAC:

• Be well educated
• Establish a RAC Review Team and thorough RAC procedures
• Optimize coding, billing and reimbursement
• Appeal whenever a RAC audit is incorrect

Remember, only you and your team can protect the revenue of your hospital!

Additionally, Iatric Systems offers IatriTRAC, a solution to track RAC at hospitals that operate the MEDITECH HCIS. To see a demonstration of IatriTRAC, please contact info@iatric.com, or attend one of our upcoming public webcast demonstrations on:
- Wednesday, March 4th, from 2:00-3:00pm Eastern
- Tuesday, March 10th, from 2:00-3:00pm Eastern

Kay Jackson is a Financial Marketing Manager at Iatric Systems, Inc. For 15 years, she was in management at third party payer companies developing methods for delaying and denying medical claims submitted by hospitals. When she “saw the light” she moved into the hospital environment, where she had 10 years of management in Scheduling, Access, Patient Accounts and Case Management. For 8 years, Kay consulted on strategic hospital planning, redesign of Access and Patient Accounts processes, and developed software for the admitting and business offices. Kay has been a requested speaker at over 100 conventions, and her speaking engagements include many RAC educational sessions. Kay is also an AHA RAC vendor participant. For more information, visit them online at www.iatric.com.