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How Revised RAC Statement of Work Will Impact Providers

 |  By jcarroll@hcpro.com  
   September 23, 2011

The Centers for Medicare & Medicaid Services released a revised recovery audit contractor statement of work September 12 that contains several revisions and clarifications as well as new additions that will affect providers in a number of ways.

Among the areas of potential interest for providers, the newly released guidance addresses the RACs' treatment of the discussion period, according to Michael Taylor, MD, vice president of clinical operations at Executive Health Resources in Newtown Square, PA.

"When the discussion period first rolled out, CMS and the RAC contractors were heavily promoting it. It could be done in a verbal format, but now, it is clear that discussion period has to be in a written format. If the provider is pursuing discussion, and an appeal is filed during that time period, the RAC is charged—at that point—with ending the discussion period," said Taylor.

He continued, "So providers are going to have to make the choice of going right into the appeals process or using the discussion period first, because providers could find it fruitless to do this at the same time because of the new policy."

With this new change, providers will have to take more of a targeted approach. If a provider seeks to appeal early in the process to prevent recoupment, managing timelines becomes crucial. Depending on the timeliness of correspondence with the RACs, providers may opt not to use the discussion period because it may slow their process down and it could put their ability to file that first level appeal in time to prevent recoupment in jeopardy, according to Taylor.

The updated SOW also places an emphasis on the fact that RACs are expected to give CMS feedback on areas where guidance is unclear, which—down the road—could ultimately be quite beneficial for providers. Take LCDs (local coverage determinations), for example. The updated CMS guidance states:

The majority of coverage policy in Medicare is defined through Local Coverage Decisions (LCD). Therefore, LCDs typically provide the clinical policy framework for Recovery Auditor medical necessity reviews. If a LCD is out of date, technically flawed, ambiguous, or provides limited clinical detail it will not provide optimal support for medical review decisions.

CMS states in the SOW that RACs are using guidance in the LCDs for medical necessity decision making, and that the RACs will be tasked with helping CMS and the other contractors to improve that guidance over time, according to Taylor.

"So what could be an outcome of that? It's possible that we may begin to see the evolution of more specific types of medical necessity guidance, which would make the hospitals' jobs a lot simpler," he says.

Other items of potential interest for providers include:

Complete denials vs. partial denials

Although it is not a change from the previous program, CMS now states that a recovery auditor may find a full or partial overpayment, but it is now written in such a way that suggests that the contractor should be denying the overpayment, but permitting payment for the lower level—and medically necessary— level of care, says Taylor.

 "What's so interesting about this is the fact that, across the country, we see that a common practice of the RACs is to deny an entire claim instead of a partial denial, and so why aren't we seeing these partial denials? If we have a patient that is admitted for an inpatient admission when observation was appropriate, then the SOW would suggest that the RAC should just be down coding the claim to a partial denial, instead of issuing a full denial. It will be interesting to see if this statement of work changes RAC behavior," he said.

Semi-automated reviews

Many providers are already aware that recovery auditors—which are now the official names for RACs, according to the new SOW—have been using what are known as "semi-automated reviews." These reviews are now officially recognized as a form of claims review in the new SOW as follows:

[Semi-automated reviews] are a two-part review that is now being used in the Recovery Audit Program. The first part is the identification of a billing aberrancy through an automated review using claims data.  This aberrancy has a high index of suspicion to be an improper payment. The second part includes a Notification Letter that is sent to the provider explaining the potential billing error that was identified. 

Conclusion

In order to be current on the recovery audit process, providers should definitely take a look into the updated guidance on the discussion period, medical necessity, and semi-automated reviews, suggests Taylor.

 

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

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