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Getting RAC Ready

Andrea Kraynak, for HealthLeaders Magazine, January 8, 2010
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As hospitals prepare, some changes could mean even more mass audits.

Recovery audit contractors (RAC) have been an important consideration for hospitals since the Medicare Modernization Act of 2003 established a RAC demonstration program to look for improper Medicare payments. And the program has been a costly consideration for some: The three-year RAC demonstration project in five states resulted in CMS recovering $1.03 billion in Medicare improper payments, the vast majority of them overpayments to providers.

After discovering the amount of waste in the system, the federal government expanded RACs to other parts of the country and hospitals and providers have been working to try to comply with RACs. Our online news team covers RAC-related developments regularly. Here are excerpts from four recent stories by Andrea Kraynak.

Changes Could Mean More Automatic Audits
Providers who believe their RAC denials will be limited to 200 every 45 days (corresponding with the medical record request limits) may be in for a surprise. Those limits apply only to complex audits, but no such limits exist for the number of automatic reviews RACs can perform.

In fact, recent changes to the RAC process for handling mass quantities of recoupments from automatic reviews may even make it easier for RACs to increase their auditing capabilities—meaning the potential for even more denials for providers.

In recent weeks, CMS released three transmittals (R561OTN, R571OTN, and R573OTN) detailing several technical changes to "enhance" the RAC mass adjustment process. Essentially, the changes improve the process for the RACs by automating what used to be a much more labor-intensive process of initiating mass adjustments of similar claim or service types.

CMS first came out with a RAC-oriented mass adjustment process in 2007, but the changes should make it easier for the RACs.

RAC vs. CERT: Do You Know the Difference?
The Comprehensive Error Rate Testing (CERT) Hospital Payment Monitoring Program is one of the ways CMS is trying to improve the quality and accuracy of Medicare claim submission and payment of those claims. Is that so different from what the RAC program is designed to do?

While the goal may be the same, the methodology is very different. Stacey Levitt, RN, MSN, CPC, is director of patient care management at Lenox Hill Hospital in New York City. Here, she outlines some important differences between the two types of Medicare audits:

  • Who is being audited. RACs look for errors made by providers, but the CERTs look for errors in payments made by carriers. Hospitals and other providers are affected because when the CERT looks into a claim, the provider must submit the medical records, and if the CERT uncovers an error, the CERT will take back money from the hospital. But the CERT is really looking for errors made by fiscal intermediaries, Medicare administrative contractors, or other carriers when paying providers' Medicare claims.
  • Education. "CERTs want to make sure everything is on the up and up for the claims," Levitt explains. When the patterns of incorrectly paid claims appear on its radar, the CERT steps in and educates providers. RACs don't provide such education.
  • Payment. RACs are paid through contingency fees. The more under- or overpayments they uncover, the more money they receive. The payment for CERTs is different; they receive a set amount outlined in their contract, regardless of the percentage of payment errors they find.
  • Size of the program. The RAC program has gotten much more attention than the CERT program, but it may be because the RAC program has the potential to be a much bigger headache for providers. The CERTs examine random claim samples—often only looking at a very small percentage of a carrier's claims. So the CERT would likely request only a small number of medical records from providers paid by that carrier. And the potential takeback, if any, would likely be smaller as well.

However, there are some similarities between the two programs. Both auditors report to CMS. And both will recoup money from hospitals and other providers who received overpayments.

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