CMS Reports on RAC Improper Payments

James Carroll, April 29, 2011

The Centers for Medicare & Medicaid Services has released a short, but useful Recovery Audit Contractor update that reports on the total amount of improper payments identified since the RAC demonstration period.

From October 2009 through the end of March 2011, RACs have identified a total of $312.2 million in overpayments and $52.6 million in underpayments, totaling $365.8 million in total improper payments. Compared to the $1.03 billion of improper payments identified in the demonstration program, these numbers are miniscule, but a significant bump last quarter illustrates that these figures will invariably grow.

The doubled amounts ($184.6 million) reflected in the first quarter of 2011 is a true reflection of the rapid expansion of RAC audits, according to Donna D. Wilson, RHIA, CCS, CCDS, senior director at Compliance Concepts, Inc., in Wexford, PA.

"RAC contractors are reviewing a large volume of DRGs for coding and medical necessity," she says. "We are at the point where we want to request that the RACs post only those DRGs not under review!"

In addition to the identification of total improper payments, CMS also highlighted the top RAC issue per RAC region from fiscal year 2010 through March 2011. Of the four issues identified, two are caused by incorrect coding. The other two are caused by billing for bundled services (DME provided during an inpatient stay) separately, which should trigger providers to investigate a potential area of vulnerability, according to Kimberly Hoy, JD, CPC, director of Medicare and Compliance for HCPro, Inc.

"Providers need to be paying attention when they have separate national provider identifiers (NPI) that are providing various pieces of services and billing Medicare separately," she says. "This can begin to cause errors if there is a lack of communication between divisions of the hospital."

While the permanent RAC program has been firing on all cylinders for some time now, this CMS release serves as a reminder that perhaps there is room for improvement when it comes to tightening up internal processes.

Elizabeth Lamkin, CEO of Pace Healthcare in Hilton Head, SC: "This tells me that many facilities may not have a comprehensive process for RACs, starting with their charge master," she says.

CMS' most recent release serves as another reminder to the provider community that there is no rest when it comes to RACs. The most important thing that facilities can take away from this release is the cue to spend the time and effort to train all applicable staff members (including physicians) on the front end. In addition, the release should serve as a stark reminder that RACs are still expanding, according to Lamkin.

"These issues are likely coming to the top because they are very granular and it takes a complete, comprehensive system to be compliant in managing RAC requests."

"Providers should definitely be paying attention to this. Even though it's a short update, it's a huge window into what is coming, so [providers] need to assess their risk and take action," Lamkin adds.



James Carroll James Carroll is associate editor for the HCPro Revenue Cycle Institute.
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