3 Biggest Ways Medicaid RACs Will Affect Hospitals in 2012

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While it seems as though the Medicaid Recovery Audit Contractor program has been discussed for ages, it will finally go into effect starting Jan. 1, 2012. The Medicaid RAC program is based off the Medicare version and is expected to save taxpayers $2.1 billion over the next five years, according to estimates from the Department of Health and Human Services.

Hospitals currently deal with Medicare RACs, which collected $797.4 million in overpayments from providers in fiscal year 2011, but a Medicare RAC and a Medicaid RAC are two different animals. Medicaid RACs will also affect a whole new population of hospitals — notably children's hospitals and hospitals that don't treat a high volume of Medicare patients. Here are three things hospitals need to be aware of as Medicaid RACs gear up for their first calendar year.

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1. Audit rules will vary among different state Medicaid RACs.
Since Medicaid is a joint venture between the federal and state governments and each state runs its Medicaid program differently, hospitals will have to be mindful that audit rules will not be consistent across the board. Each state will create its own rules, approved by CMS, but this could create headaches. "Medicaid rules can change on a frequent basis," says John Brooke, general manager of healthcare for Compliance 360. "This has the potential to be a free-for-all."

Hospitals must be familiar with, and consistently up-to-date with, their state's specific Medicaid RAC rules, such as how the appeals process works. Additionally, hospitals must be knowledgeable about prior Medicaid rules in case RACs audit hospitals on rules from a couple years ago. "Hospitals may not have a comfort level that the auditor is going to know enough about the rules at the time of the claim," Mr. Brooke says. "The best way to prepare is to make sure processes are in place around responding to requests, look at the rules and do a fire drill."

2. Hospitals could deal with several Medicaid RACs. For hospital systems that span multiple states, things could be even more complex. Health systems will have to understand and handle the various audit rules of each of the Medicaid RAC programs in states they have hospitals. To manage this efficiently, hospitals should consider managing RAC requests at the corporate headquarters or keep it within the control of the department that already handles Medicare RAC requests. "If you're a large healthcare system in multiple states, you may want to centralize RAC requests but keep in mind [for example] that Georgia may have one process for appeals and North Carolina may have another," says Scot McLeod, vice president of marketing for Compliance 360. "There will be a different set of processes and time frames to be aware of and deal with."

3. The time period to respond to a Medicaid RAC request could be shorter. With Medicare RACs, hospitals have 45 days to respond to the initial request for claims records, but Mr. McLeod says the time period for Medicaid RACs could be shorter depending on the state's specific rules.

However, a hospital can efficiently respond to any Medicaid RAC request by having a well-oiled RAC committee that meets on a periodic basis, Mr. Brooke says. Health information management, patient financial services, health IT and the hospital CFO all must work together to make sure these new RAC requests are fielded in a proper manner. "RAC response is a team sport," Mr. Brooke adds. "It's a whole bunch of folks moving in sync when appropriate to get the job done, complete each one of those claims, know when to appeal and make sure something doesn't slip through the cracks and have legitimate revenue taken away simply because a due-date was missed. This will become an increasing challenge as the variety and volume of potentially concurrent claims audits increases."

Related Articles on Medicaid RACs:

17 States With Finalized Medicaid RAC Contracts

Medicaid RACs Can Save Up to $10B, PRGX CEO Says
Medicaid RACs Anticipate Revenue Boom for Rest of 2011, 2012

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