RECOVERY AUDIT CONTRACTORS

Are you ready for the RAC?

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

I suppose when I ask, “Are you ready?,” you may be wondering “what do I have to get ready for?” The practice of health care continues to get harder and harder to manage as government and private insurance plans ratchet down reimbursement and increase medical documentation reviews in hopes of finding physicians who have billed services incorrectly. They are looking to collect on payments received inappropriately.

So, who are these recovery audit contractors? In a nutshell, the 2003 Medicare Prescription Drug and Modernization Act directed the Department of Health and Human Services to conduct a three-year demonstration program. This RAC program was established to detect and correct improper payments in the Medicare program and to determine whether the use of hired contractors will be a cost-effective means of ensuring correct payments are being made to physicians. The contractors were chosen by the Centers for Medicare and Medicaid Services and have jurisdiction over certain states.

CMS released an evaluation report covering the entire demonstration project. The report found that $371.5 million in improper Medicare payments were collected from or repaid to health care physicians and suppliers using RACs in California, Florida and New York in 2007. Nearly $440 million has been collected since the program began in 2005.

Approximately 96 percent of the improper payments identified by the RACs in 2007 were overpayments to health care providers that had to be paid back to the government. The remaining 4 percent were underpayments that were paid to health care providers.

The types of errors leading to these improper payments include:

• Conducting three of the same procedure on the same patient on the same day,
• Billing for a procedure that the medical record does not support,
• Being paid twice for a service because the doctor submitted duplicate claims, or
• Being paid for a claim using an outdated fee schedule.

The RAC expansion schedule for the United States has already started. In October, several states were implemented. Texas has a start date of March 2009. The rest of the states will be rolled out in August 2009 or later.

In preparation for implementation of the RAC program, CMS urged physicians to take proactive steps in their own practices by identifying patterns of denied Medicare claims within their practices and setting up procedures to promptly respond to RAC requests.

Common questions that have come up from RACs include the following.

• Providers must respond within 45 days to a request for medical records from the RAC. Providers may request an extension prior to the 45th day by contacting the RAC.
• The review includes all evaluation and management services. The review of E/M services that should be included in a global surgery were available for review during the RAC demonstration and will continue to be available for review. The review of the level of the visit of some E/M services was not included in the RAC demonstration. CMS will work with the American Medical Association and the community prior to implementing any reviews regarding these levels of service.
• RACs are paid on a contingency basis and retain a portion of the monies recovered for all accurately identified overpayments. Rumor is that this number ranges from 9 percent to 12 percent for overpayments. Underpayments are included in the contingency as well.
• RACs are required to identify underpayments as well as overpayments. In situations where a RAC identifies both overpayments and underpayments for a physician, the RAC will deduct the underpayment from the overpayment. In situations where a RAC identifies an underpayment for which there is no overpayment from which to offset, the RACs will inform the carrier who will proceed with the claim adjustment and payment to the physician. RACs may use automated review (where no medical record is involved in the review) only in situations where there is certainty that the claim contains an overpayment as a service that is medically unbelievable or when no timely response is received in response to a medical record request letter.

The key for physicians is to be involved in the billing aspects of the practice and work to limit errors that can occur. To do this as effectively as possible, I recommend each office implement a compliance plan so that every employee will be aware of potential errors and know how to respond to these errors systematically.

Having an effective compliance plan can protect the practice and show a commitment to identifying errors before they become problems. This demonstrates to the plans that the practice will implement all possible components to ensure they are protected.

In my experience with practices cited by the Office of Inspector General (OIG) for improper billing and coding practices, the OIG required a compliance plan and training for three years on coding, billing and documentation in addition to the fines. The OIG believed this training would help physicians understand the rules and be more committed to compliance.

As the RAC program gets implemented in Texas in early 2009, be prepared for a request by a RAC contractor for documentation. Being prepared for this review prior to their request could make a difference in the outcome of an audit.

Implement a RAC compliance plan

A compliance plan for individual and small-group practices was recommended in the October 2000 Federal Register. In it, the Register provided step-by-step guidelines for implementing a compliance plan for your practice. These guidelines are based on the following seven principles.

Set Up Policies and Procedures

1. Code of Conduct—Shows a commitment to compliance. All employees must know the rules, not just the doctors.
2. Policies and Procedures—Focus on risks in the practice that need monitoring. Examples to look at include:
1. your coding and billing (upcoding, unbundling, double billing, duplicate claims),
2. reasonable and necessary (waiver form and proper modifier),
3. documentation (complete and legible, guidelines used, correct CPT/ICD-9, proper completion of HCFA form),
4. kickback/self referral, and
5. retention of records (length of time documentation is kept, medical records security, what happens if practice closes or is sold).

Designation of a Compliance Officer

1. Oversee and monitor implementation of compliance program.
2. Establish methods to improve practice efficiency—audits.
3. Revise compliance plan periodically due to changes in law, etc.
4. Continue medical education of officer on compliance.
5. Ensure that employees and physicians comply with rules.
6. Investigate any report or allegation of possible unethical behavior.

Training and Education

1. Compliance Training—all employees should receive information on how to perform their jobs in compliance with the standards of the practice. All employees should understand that compliance is a condition of employment. New employees should be trained within 60 days of employment.
2. Coding and Billing Training—Includes coding requirements, submission issues, altering medical records, how to report misconduct, billing standards, legal sanctions of submitting a false claim, informing physicians that they cannot receive payment or any type of incentive to induce referrals.

Effective Lines of Communication

1. Have a clear open-door policy between physicians and compliance personnel and practice employees.
2. Require that all employees report conduct that is possibly unethical.
3. Use a friendly drop box for comments.

Auditing and Monitoring

1. Review bills and medical records periodically (quarterly, biannually, annually).
2. Collect valid sample of medical records and claims to verify they were done and documented appropriately.
3. Look for claims coded correctly, services reasonable and necessary, and that records meet level of service.

Enforcing Standards through Disciplinary Guidelines

1. Violations will result in consistent and appropriate sanctions including termination. Documentation should include the incident and follow-up action taken.

Responding to Detected Offenses and Developing Corrective Action Initiatives

1. Fraudulent or erroneous conduct that has been detected, but not corrected, can endanger the reputation and legal status of the practice.
2. You must respond. If the practice has problems implementing the program, a determination must be made as to why. For example, pre-payment review—a compliance program is not working when this occurs.