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When the Auditor Comes Calling

Philip Betbeze, for HealthLeaders Magazine, June 13, 2008
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The program's findings have wreaked havoc in some situations. A RAC audit was cited as a factor in a big financial loss at Boca Raton (FL) Community Hospital; although the hospital plans to appeal audit findings, its CEO was replaced, and plans to build an academic medical center have been waylaid.

From CMS' perspective, the program is actually working pretty well. During fiscal 2007, auditors working in the three demonstration states collected $357 million in overpayments and $14 million in underpayments. Subtracting program costs, the RAC effort netted the Medicare Trust Fund $247 million that year.

Connie Leonard, project officer for the RAC program, says complaints from hospital executives have prompted changes designed to improve the program. For example:

  • All RACs are now required to have a medical director.
  • When the program expands, the RACs will be financially liable at all levels of appeal. This means that the RAC will be required to repay the contingency fee if an appeal is adjudicated in the provider's favor at any level of appeal.
  • Going forward, no claim that has a claim paid date older than October 1, 2007, will be reviewed. During the demonstration, RACs could review claims going back four years.

Meanwhile, those Adventist hospitals in Florida are dealing with the past. Morrison says about $15 million worth of claims are in dispute. He expects to learn of more denials—and to file more appeals. "Of the 22 cases we have taken to administrative appeal, we've won all of them," he says.


Lola Butcher is a Springfield, MO-based freelance writer and a frequent contributor to HealthLeaders magazine.
Surviving an Audit

The best way to survive a Medicare audit is to keep your nose clean. And the best way to do that: Make sure your medical record coders can do a good job.

Susan Von Kirchoff, managing consultant at BKD Health Care Group, a CPA and advisory firm in Little Rock, AR, points out that 42% of the improper payments RAC auditors have identified stem from incorrect coding. Yet she finds many hospitals do not put a priority on hiring certified coders and providing the ongoing training that keeps them up to date.

"Of course, that is going to cost the CEO more money, but it's going to save money in the long run," Von Kirchoff says. "A lot of hospitals have a budget restraint on the tools that the coders need, but there's no way that a person can keep up with all the information that's required to do this job unless they have the tools." Another common mistake: Taking false confidence from the compliance plan sitting on the shelf. Unless the plan is used to continually monitor whether your hospital is operating within Medicare guidelines, it is useless. To prepare for the possibility of a RAC audit, Don May, AHA vice president of policy, urges hospital executives to be proactive. "You need to start doing some self-audits," he says. "Try to find out where your hospital's vulnerabilities may be."

The process may be costly, time-consuming and disruptive, but so is a RAC audit. He and Von Kirchoff offer these tips:

1. Assign a RAC team that includes staff members from coding, health information management, case management, revenue cycle, and patient financial services. The CEO and CFO should both be on the team.

2. Get help. May recommends education materials available from CMS state-level quality improvement organizations that help hospitals both identify problems and solve them.

3. Review your hospital's inpatient and outpatient claims data to identify trends or patterns that might catch the RAC's attention. The auditors use computer programs that look for patterns in Medicare claims, helping them identify hospitals in which inappropriate claims are waiting to be discovered.

4. Using the results of your own claims review, investigate a sample of cases to check for errors.

5. Disseminate the findings internally and get busy. "It will take working with your physicians, your billing office and your medical records office and pulling everything together to make sure you are finding any loose spots that need to be tightened," May says.

6. If a RAC auditor comes knocking, identify a single individual to receive RAC requests and make sure responses are submitted by due dates. "There is a whole lot of paper shuffling, and if something gets lost, you could miss a deadline, which means an automatic denial," May says.

7. Don't dilly-dally. If a RAC record request has a 45-day deadline, send it sooner. "I say 15 days," Von Kirchoff says. "That shows that you're efficient and your facility has the team in place to help with that process." RAC record requests include an explanation of the rule that the hospital is suspected of violating. If you're on firm ground, stand on it. "If you feel it can be appealed, write that appeal letter to be sent with the initial record request," she says.

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