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A three-year pilot program launched in 2006 helped CMS start taking a much closer look at Medicare claims, processes, and errors relating to them. The Recovery Audit Contractor (RAC) program, initially performed in only a few states, is now being introduced nationwide.

As part of the RAC auditing process, healthcare providers are able to appeal denied Medicare claims, as well as overpayments discovered by the contractor.

Some facilities have met the RAC review process with hesitation, as it is still relatively new in most states, says Maggie M. Mac, CMM, CPC, CPC-E/M, ICCE, a consulting manager at accounting firm Pershing Yoakley & Associates in Clearwater, FL. Those who are new to the process have found some initial difficulty with coding records properly or providing correct or sufficient information to the RACs. This makes additional education crucial to ensuring that the RAC process runs smoothly in the future, Mac says.

Mac says there are currently numerous appeals pending from providers all across the country. She notes that so far, approximately 118,000 providers have filed appeals—34% of which have been overturned in favor of the provider.

"I think we can expect to see the [appeals] activity raised this year," Dugan says.

The appeals process includes five steps:

1. Written request for redetermination. This must be completed within 120 days of the initial claim denial or an overpayment identified by a RAC. The Medicare carrier has 60 days to review the determination and respond with an explanation of the decision.

2. Reconsideration. This is the next step in the appeals process, should the provider be dissatisfied with the redetermination decision. Redetermination requests are reviewed by an independent contractor and must be submitted in writing.

3. Administrative law judge. Those dissatisfied with the redetermination of a claim that is at least $110 also have the option of having the appeal reviewed by an administrative law judge, an attorney who works for HHS. A hearing—the request for which must be submitted in writing—is held with the provider who submitted the claim and appeal, as well as the beneficiary. The judge has 90 days from receipt of a hearing request to present a written ruling on the appeal.

4. Medicare Appeals Council. Providers can request that the appeal be reviewed by the Medicare Appeals Council if they are not satisfied with the decision of the administrative law judge; this must be filed within 60 days of the judge's decision. The council must then review the appeal and issue a determination within 90 days.

5. Lawsuit. Should the provider be dissatisfied with the appeals council's decision, a final option is to file a lawsuit in federal district court within 60 days of that decision. The claim being appealed must total more than $1,090.

The RAC program should be at the forefront for nearly all healthcare providers. As the full implementation requirement deadline approaches, Mac says too many hospitals, physician practices, and health systems don't know much about it.

The following is an excerpt from The Hospital Executive's Guide to Physician Staffing, a new HealthLeaders Media book by Hugo J. Finarelli Jr., PhD, senior vice president of Philadelphia-based Healthcare Strategies & Solutions.

Hospital leaders are challenged to develop strategies that mitigate many of the factors that have contributed to their growing separation from physicians.

Goals related to quality, patient safety, and service excellence cannot be achieved without the active support and cooperation of the physicians who practice there. At the same time, the best physicians want to practice at the best hospitals. So if the hospital's commitment to quality and service excellence is genuine, visible, and consistent, the best physicians in the community are more likely to become loyal partners. Because the best physicians also want to practice with the best physicians in other specialties, this strategy can have a very broad effect.

Consider these four key pillars for promoting hospital-physician alignment, and as a result, improving quality:

1. Increase hospital efficiency. Physicians value efficiency because saved time represents an opportunity to treat more patients and generate more income. Hospitals should routinely compare wait times and turnaround times to best-practice benchmarks for emergency services, surgical services, and high-volume ancillary services. They should place a high priority on reducing or eliminating identified inefficiencies, formally enlist physicians' input regarding ways to improve operations, and periodically report performance relative to external benchmarks or internally generated goals.

Although efficient hospital operations make life easier for hospital-based and other hospital-dependent physicians, the prime targets are the hospital-independent physicians. The more efficient the hospital, the higher the probability that physicians who split their time between two or more hospitals will increase their level of commitment and the lower the probability that physicians will be motivated to compete directly with the hospital in the outpatient arena.

2. Create a culture of quality and service excellence. Long before the industry's recent emphasis on quality and patient safety, physicians focused on the quality of the inpatient nursing staff as the primary measure of how well a hospital helped them care for their patients. Superior nursing care was highly valued and often influenced where a physician admitted his or her patients. Inadequate nursing care, including too few or inadequately trained nurses, was a frequent source of physician dissatisfaction.

Meanwhile, the general public had no way of knowing how one hospital compared with another with respect to quality and patient safety.

Leading hospitals and health systems now make quality and patient safety pillars of their strategic plans, setting ambitious goals with respect to quality, safety, and service excellence, such as exceeding the national average on all CMS Core Measures or achieving the 90th percentile on all statewide quality benchmarks. The best approach for achieving such ambitious goals is to instill a culture of quality and patient safety that permeates every level of the organization, influencing the behavior of all personnel.

Providing the best care for their patients is important to physicians, so it is not surprising that quality and safety are values that resonate within the physician community. If a hospital places a high priority on creating a culture of quality and safety and allocates the resources to achieve that outcome, the best physicians will want to practice at the hospital and more community-based physicians will refer their patients to specialists who practice there. It is a win-win situation, especially for hospital-based and hospital-dependent physicians.

3. Put physicians in clinical leadership roles. Hospitals that embrace centers of excellence as a way of delivering better patient care typically develop service–line specific strategic plans with goals and objectives that focus on market share and volume growth, improved clinical outcomes, operational efficiency, and financial performance. The probability that these objectives will be achieved is much greater if the service line has equally invested physician and administrative champions, each of whom plays a major role in designing and executing the strategic plan.

The physician champion should be an outstanding clinician with a reputation for excellence, not only within his or her specialty, but also among physicians in other specialties integral to the service line. The physician should also have the leadership skills needed to handle turf battles within or across specialties, convince uncooperative physicians to abide by established protocols, and champion efforts to recruit physicians who will add breadth or depth to the program, even when this strategy draws strong opposition from current members of the medical staff.

The hospital should compensate or directly employ physicians in clinical leadership roles. Hospital-dependent specialists who are in the latter stages of their careers are typically appointed to clinical leadership roles, but young physicians with outstanding clinical credentials and leadership qualities may also be excellent candidates.

4. Involve physicians in all major planning activities. Because collaborative planning and decision-making is critical to successful hospital alignment, The Governance Institute recommends that physicians be actively engaged in all aspects of planning, including "strategic planning for the entire system or hospital, service- or product-line planning, master facilities planning, medical staff development planning, quality improvement planning, and all other discussions that involve significant resource allocation."

There are numerous strategies for expanding physician involvement in planning and decision-making. Examples include appointing a chief medical officer, allowing physicians a major role in managing all major service lines, increasing physician participation in system-wide strategic planning, being all-inclusive when inviting physicians to participate in strategic planning for individual clinical programs, and creating physician leadership councils or physician advisory groups outside the traditional medical staff organization to provide input on critical planning and resource allocation decisions.

Creating a healthcare environment of shared responsibility and shared decision-making is a gradual process. Consistent, transparent behavior, guided by clearly articulated values and a shared vision, will increase the likelihood of long-term success.