John A. Orsini
Tracking RAC chart requests is just one of the things that can help you survive these audits.
At a Glance
Healthcare providers that are well prepared for Medicare recovery audits will be able to:
- Respond to RAC chart requests on a timely basis
- File appeals
- Track RAC chart requests and overpayment determinations by DRG
- Monitor appeal filings and status
- Identify opportunities for improving clinical documentation
Since the inception of the Medicare recovery audit contractor (RAC) program demonstration project (conducted in California, Florida, and New York) beginning in 2005, 27 Catholic Healthcare West (CHW) hospitals and medical centers have refunded and are appealing the determination of more than $11 million in initial findings related to the program. Due to the perceived success of the CMS Medicare RAC demonstration project in the three demonstration states, it is slated to roll out nationwide by January 2010.
The RACs use data mining, or automated software programs, to identify and recover potential Medicare overpayments to providers, and receive a percentage of the overpayments recovered as compensation. (RACs are also charged with identifying underpayments to providers, but this has represented a small proportion of their activity.)
In the face of increasing losses from RAC recoupments of Medicare reimbursement, also known as take-backs, CHW has established steps to ensure that its affected facilities appeal RAC denials and take-backs promptly and appropriately (see sidebar)
Key Aspects of Managing RAC Audits
CHW has identified several touchpoints in the RAC audit and appeal process where the right action at the right time can help “take back the take-backs” that result from RAC audits.
Providing medical records. Before CHW put procedures in place for managing RAC audits, its facilities were sometimes unsure how to respond to RAC medical record requests. They were providing medical records in response to RAC chart requests about 75 percent of the time, resulting
in automatic payment denials for the remaining 25 percent. (If medical records are not supplied by the provider within 45 days of a RAC request, the RAC may identify the claim as an overpayment by default.) Now that the process is centralized through healthcare information management (HIM), virtually every RAC medical record request is being fulfilled on a timely basis.
Choosing rebuttal versus appeal. When the RAC completes a chart audit and sends a CHW facility a notice of overpayment, the facility has two options—submitting a rebuttal to the RAC or filing an appeal directly with the fiscal intermediary (FI). Ultimately, both approaches will be important for facilities, especially in light of recent CMS audits—CMS disagreed with the RAC in 40 percent of the cases.
Based on CHW experience to date, appeals to the FI for denials based on medical necessity are more efficient and effective than submitting a rebuttal to the RAC. The time period allowed for rebuttal to the RAC is short (only 15 days), and providers have reported limited success with rebuttals for denials of inpatient stays based on medical necessity, particularly one-day stay denials. Rebuttal is recommended, however, for medical necessity denials in which new documentation becomes available to support a claim.
For denials based on diagnosis-related group (DRG) ICD-9-CM coding, providers have the option of accepting the new DRG assigned by
the RAC or submitting a rebuttal. Rebuttals challenging the reassigned DRG merely require the hospital to submit additional documentation supporting the original DRG.
Formulating a legal basis for appeal. For unsuccessful rebuttals, CHW provides its facilities with template letters to use in appealing denials based on medical necessity. Legal arguments included in the template letters are summarized in the figure below. It is important to note that CHW does not refund payments to secondary payers in cases where appeals are pending.
Empowering facilities to take the lead in filing appeals. CHW has developed procedures to standardize and routinize the appeal process (with assistance from the CHW legal department) across all facilities with the goals of appealing every case to protect our rights and winning a higher percentage of appeals. (The nuts and bolts of filing an appeal are detailed in the sidebar)
Tracking RAC activity. CHW has created a tracking log designed for use by its individual facilities (posted on their internal system drive), enabling management to track the following information by DRG:
- Number of charts requested by the RAC
- RAC response
- Percentage of recoupments in which appeals were filed
- Status of appeal
(See Exhibit)
Improving clinical documentation. Based on the information CHW facilities have collected about RAC chart requests, the system has started analyzing its charts for many one-day stays, one of three areas that have been the focus of RAC audits in CHW’s facilities to date. (The other two are inpatient coding and inpatient rehab.) In the interest of ensuring that proper, legible documentation exists in anticipation of a RAC audit, CHW has worked with its medical staff committees to convey the message that accurate and thorough clinical documentation is more important to the continued financial health of its hospitals than ever before.
How Your Organization Can Prepare for RAC
The key to being prepared for RAC activity is to develop a structure and processes so all team members know their roles and responsibilities in the event of an audit. The CHW management team formed the RAC oversight committee, chaired by the vice presidents of financial operations, compliance (including HIM coding), and audit, to coordinate the system’s response to RAC activity.
A provider that is well prepared for RAC will be able to:
- Respond to all RAC chart requests on a timely basis to avoid automatic denials
- File appeals on all cases, as appropriate
- Track RAC chart requests and overpayment determinations by DRG
- Monitor appeal filings and status
- Identify opportunities for improving clinical documentation
Filing appeals and sharing appropriate information with state and national associations may also help document the cost burdens imposed by RACs and boost the prospects of achieving regulatory relief.
(The Permanent RAC Program - See Sidebar)
John A. Orsini, CPA,
is vice president, financial operations, Catholic Healthcare West, Phoenix, and a member of HFMA’s Arizona Chapter (john.orsini@chw.edu).
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