Ready or not, Recovery Audit Contractors
are coming

By Bradley K. Reiner
Practice Management Consultant, Reiner Consulting and Associates

Why is it that every time you turn around there is another painful reminder that practicing medicine is becoming harder and harder? Have you wondered at times if seeing patients, and dealing with overhead, collections, billing, and HR problems are worth it?

CMS has taken the next steps in Medicare’s comprehensive efforts to identify improper Medicare payments and fight fraud, waste, and abuse in the Medicare program by awarding contracts to four permanent Recovery Audit Contractors. The RACs are designed to guard the Medicare Trust Fund. (I didn’t know the Medicare Trust Fund needed that much guarding.) The reason these regional RACs have been established is because of a successful demonstration project involving six states. That program produced significant results in identifying improper payments so they decided to implement the program nationwide. In other words, they made a ton of money.

The goal of the recovery audit program is to identify improper payments made on claims for health care services provided to Medicare beneficiaries. This is done through a post-payment review. The claim processing contractors are the entities responsible for adjusting the claim, handling collections (offsets and checks), and reporting the debt on the financial statements. Believe it or not, underpayments are to be identified as well and additional revenue paid. I wonder what the percentages are of overpayments versus underpayments? My guess is that overpayments will win hands down.

Overpayments occur when health care providers submit claims that do not meet Medicare’s coding or medical necessity policies. Underpayments occur when health care providers submit claims for a simple procedure but the medical record reveals that a more complicated procedure was actually performed.

The RACs are not allowed to review claims prior to Oct. 1, 2007, and will only be able to look back three years from the date the claim was paid.

The RAC is paid on a contingency-fee basis for both overpayments and underpayments they find. Rumor has it that this may be as much as 9 to 12 percent. Needless to say, the RACs have a huge incentive to find overpayment and underpayments. That percentage would allow them to generate millions and millions of dollars over the next few years. Don’t make the assumption that you won’t have to worry about RACs. If they continue to be successful there is no doubt everyone will have a RAC audit sooner or later. In almost every practice a RAC can find some billing, coding, or documentation issue during any given audit. It is easy to make mistakes even if you have all of the right processes in place. The rules are too complex and differ from payer to payer.

I recently reviewed a medical practice and found the physicians were coding at low levels for almost all services they provided. Once I reviewed the documentation, I discovered the doctors should have coded the services at higher levels, which meant they were significantly underpaid. If they have a RAC review they should get money back, but the bad news is that after billing this way for years there is no way to recover all the dollars lost.

The flip side could be much worse. I reviewed another group that consistently coded high-level visits and the documentation did not substantiate the level billed. I trained this group on documenting correctly for code levels, which will help them avoid the cost of overpayment in the future. However, the group could still be audited and may owe money back for those claims filed after October 2007. It is wise to have a system in place through a compliance plan and documentation training to help decrease the risk of an audit or overpayments. It is not a matter of if but when in regards to auditing medical practices.

Almost everyone in the health care system will be affected by an audit. This includes hospitals, physician practices, nursing homes, home health agencies, durable medical equipment suppliers, and any other provider or supplier that bills Medicare parts A and B. The more claims billed to Medicare, the greater the chance of an audit. However, don’t be fooled; even a small practice may be audited.

CMS awarded Connolly Healthcare the contract to provide recovery audit services in Region C, which includes Texas and 14 other southern states and two territories.

The RAC employs a staff of nurses, therapists, certified coders, and a physician contractor medical director. They are obviously concerned with how much money is being paid by Medicare and are encouraged to recover as much as possible. Medicare is committed to identifying providers who have been paid more than they should and will do whatever it takes. Again, since the contractor is paid a percentage of money recovered, they have an incentive to find these mistakes. I believe these RACs will be around for a long time.

The RAC will use the same Medicare policies as the carriers. Issues identified by the RAC will be approved by CMS prior to a widespread review. Once an issue receives CMS’ approval, the RAC will use its own proprietary software and systems as well as its knowledge of Medicare rules and regulations to determine what areas to review. Connolly Healthcare uses data analysis techniques to identify those claims most likely to result in underpayments or overpayments. This process is called “targeted review.” Connolly Healthcare will target a claim because the claim contains information that leads them to believe it is likely to result in an underpayment or overpayment.

There are two types of reviews. Automated review occurs when a RAC makes a claim determination at the system level without a human review of the medical record. Connolly Healthcare will communicate to the provider the results of each automated review that results in an overpayment determination, and inform the provider of which coverage/coding/payment policy or article was violated. If the review does not result in an overpayment, the RAC may elect to not communicate the results to the provider.

Complex review occurs when a RAC makes a claim determination utilizing human review of the medical record. The RAC may use complex review in situations where the requirements for automated review are not met or the RAC is unsure whether the requirements for automated review are met.

The numbers of records the RAC can request are based on the size of the practice.

• Solo practitioner: 10 medical records per 45 days per NPI
• Partnership (2-5 individuals): 20 medical records per 45 days per NPI
• Group (6-15 individuals): 30 medical records per 45 days per NPI
• Large group (16+ individuals): 50 medical records per 45 days per NPI

Connolly Healthcare will complete its complex reviews within 60 days from receipt of the medical record documentation. There may be some instances where the RAC may request a waiver from CMS if more time is needed due to extenuating circumstances.

The results of the complex reviews will be communicated by letter to the provider in a detailed review, including cases where no improper payment was identified. In cases where an improper payment was identified, the RAC will inform the provider of which coverage/coding/ payment policy or article was violated.

If you agree with the RAC’s determination you may:

• Pay by check,
• Allow recoupment from future payments,
• Request or apply for extended payment plan, or
• Request appeal time frames.

Providers submitting medical records to the RAC should follow the published guidelines found on the Connolly Healthcare website at www.connollyhealthcare.com/RAC/pages/record_submission.aspx.

Note that whenever performing complex coverage or coding reviews (i.e., reviews involving the medical record), Connolly Healthcare will ensure that coverage/medical necessity determinations are made by RNs or therapists, and coding determinations are made by certified coders. They want to ensure that people with clinical experience are addressing the problem, not individuals who don’t have the expertise clinically to make medical record determinations.

If an adjustment is needed based on a RAC review, the adjustment, whether overpaid or underpaid, will be indicated on the explanation of benefits called “adjustment based on a recovery audit.” This will allow providers to know that the claim was adjusted for a particular reason.

An appeal process is the same as any other appeal. If automated or complex review results in some form of adjustment needed, a provider can initiate a discussion period with the RAC or file an appeal with Trailblazer.

The discussion period is not an appeal and does not stop the clock on the 120-day time period for asking for a redetermination, which is the first level of appeal. Providers must initiate a discussion within 15 days of the receipt of a demand letter (in an automated review) or a review results letter (in a complex review). The discussion period does not take away a provider’s right to appeal, nor does it affect his recoupment or appeal time frames.

How can you minimize the risk of an audit?

• Know if you are submitting claims with improper payments.
• Conduct an internal assessment to identify if you are in compliance with all Medicare coding and documentation rules. Hire a consultant if you need help.
• Identify corrective actions to promote compliance.
• Appeal when necessary.
• Learn from past experiences.
• Check the RAC website weekly for new issues and what improper payments were found.
• Identify and implement corrective actions to promote compliance (e.g., initiate awareness in the mailroom, medical records, and Medicare billing departments about RAC requests for medical records and be familiar with Connolly Healthcare’s envelope logo).
• Conduct an audit to review medical records and codes and implement a compliance plan that can help minimize the risk of being audited. If you don’t have the expertise to provide a review and implement a compliance plan, your Academy retains my practice management consulting services for this reason.
• Complete a provider contact form so the RAC knows the precise address and the contact person it should use when sending medical record request letters. The form is found under the provider contact information tab on Connolly Healthcare’s website www.connollyhealthcare.com. Contact Connolly Healthcare at (866) 360-2507.

Bradley K. Reiner, formerly with Texas Medical Association, is now owner of Reiner Consulting and Associates. He can be reached at (512) 858-1570 or e-mail at breiner@austin.rr.com.