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Blog | Medicare Compliance, RAC, OIG

Keeping Ahead of the RACs

Blog | Medicare Compliance, RAC, OIG

Keeping Ahead of the RACs

Changes announced by the Centers for Medicare & Medicaid Services underscore the need for healthcare organizations to prepare for escalating auditor activity.

After gridlock, multiple lawsuits, and delays throughout 2016, the Centers for Medicare & Medicaid Services (CMS) has assigned new regions for recovery audit contractors (RACs). Now, RACs are back to the business of auditing Medicare payments to healthcare providers, but there have been some changes. Medicare Part B reviews are expanding and increasing, and post-payment reviews are underway nationally for more specific care settings outside Part B.

Three contractors (representing four of the five RAC regions) are responsible for overseeing post-payment reviews of all claims under Medicare Part A (inpatient) and Part B (outpatient) for all provider types—with the exception of providers of durable medical equipment, prosthetics, orthotics and supplies, and home health/hospice. These other provider types are now overseen by the new Region 5 RAC.

Handling the RAC

Levels of 2017 RAC activity depend on the provider’s focus, demographics, and geographic location. Organizations whose populations include large concentrations of severely chronically ill people and costly DRGs—often urban trauma facilities—will be hardest hit with high RAC activity.

The best way for providers to determine what areas are most likely to be audited is to keep up to date on the American Hospital association’s RACTrac data and the work plan issued annually by Department of Health & Human Services (HHS) Office of the Inspector General (OIG).

RACs also are choosing cases for review based on referrals from OIG reports. RACs will tailor demand letters based on the annual HHS OIG work plan. In fact, we’re hearing that the RACs are focusing even more on the OIG report than in previous years.

Review OIG Work Plan, Short-Stay Cases

The 2017 OIG work plan covers new areas of concentration that could potentially become points of focus for RAC reviews. These areas include:

  • Intensity-modulated radiation therapy
  • Hyperbaric oxygen therapy services
  • Outpatient outlier payments for short-stay claims
  • Incorrect medical assistance days denied by hospitals
  • Case review of inpatient rehabilitation hospital patients not suited for intensive therapy
  • Inpatient psychiatric facility outlier payments

RACs are also scrutinizing clinical documentation of short-stay cases (less than 72 hours). Three of the top targets are sepsis (a hot topic for RACs due to changing clinical criteria), orthopedics (as high-paying, high-volume encounters), and non-specific DRGs (such as unspecified abdominal or back pain).

Be Aware of False Positives and Backlogs

RACTrac’s third quarter 2016 survey found that among the 45 percent of claim denials that were appealed, 60 percent of had no issues—that is, they were false positives. The implication of this finding is among the thousands of cases and millions of Medicare payments being held at the administrative law judge (ALJ) level, many can be assumed to be false positives. 

Moreover, the backlogs could last for years, given that there are only three ALJ judges charged with reviewing these cases for the entire United. Clearly, hospitals want the many backlogged cases that are false positives released and the recoupments returned. But such an outcome faces stiff impediments. In January 2017, U.S. District Judge James Boasberg rejected HHS’s request to forgive audit appeals backlogs at the ALJ level. So for now, RAC take-back dollars remain in Medicare coffers.

The Silver Lining for Providers

Boasberg’s decision to deny HHS’s request sends a message that hospitals, RACs, ALJs, and all other parties involved must find proactive ways to deal with backlogged cases. In the past, RACs were paid immediately upon denial of claim overpayment. Now, that payment is held back until the completion of the second level of appeals. If the case is still in question at that point, only then will Medicare dollars be held back from a hospital’s monthly Medicare payment. This change is evidence that CMS is starting to recognize the damage done to hospitals under the immediate payment rule.

The fact that RACs are working toward reducing the negative impact and number of false positives bodes well for future collaborations that will be mutually beneficial for auditors and providers.

Making the Best of a RAC Audit

It is imperative that leaders ensure lines of communication remain open among revenue cycle management, health information management, clinical documentation improvement, and coding teams. Specialists must be able to communicate and collaborate effectively among themselves and with RAC auditors to uncover data integrity issues, minimize take-backs, and maximize payment.

Teams should stay up to date with trends and the most common audits currently being conducted, respond within 30 days to additional development requests, and be aware of likely targets for RAC reviews. Healthcare organizations should take a proactive approach, beginning with a thorough review of their documentation and tracking processes, especially surrounding stays of less than 72 hours. Finally, by performing keen analyses of appeals data, they can identify the most common false-positive cases—and the most effective way to guide clinical documentation improvement and coding education efforts in the year ahead.


Lula Jensen, MBA, RHIA, CCS, is director of product management, MRO, Norristown, Pennsylvania. 

About the Authors

Lula Jensen

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