5 Big Mistakes Hospitals Make When Dealing With RAC Audits

A healthcare industry expert highlights five common mistakes hospitals make with RAC audits.

In the first three months of the federal government's 2013 fiscal year, Medicare recovery auditors, or RACs, recouped more than $2.2 billion from hospitals and other providers due to what they deemed were overpayments. Since the Medicare RAC program started in late 2009, it has collected more than $5.4 billion in overpayments.

What CMS sees as regulatory contractors helping to save Medicare money, hospitals see as a threat to the bottom line. Both sides have their points, but there is only certainty — RACs are not going away.

With that in mind, hospitals have to make sure they avoid mistakes when dealing with RAC audits, says Karen Bowden, executive vice president of revenue integrity operations at Craneware. From her fieldwork, Ms. Bowden explains five of the biggest mistakes hospitals are making today when it comes to RACs.

1. Hospitals don't analyze the cases they don't appeal. When hospitals are issued an audit saying they must repay a certain amount of Medicare money back to the government, leaders have two options: They can either appeal the audit, or they can accept the decision.

Hospitals don't have the resources or case strength to appeal every audit. However, hospitals should not merely accept the repayment decision and move on. They must figure out why they were flagged for an overpayment in the first place, even if they were in the wrong, Ms. Bowden says.

What were the problems the RAC cited? Was it poor documentation? Was the wrong level of care administered? It's difficult for hospitals to improve and change their billing operations if they don't investigate every instance of a potential problem.

"What we do and what we recommend, as [hospitals] make decisions to not appeal or look at a reason why they didn't win, is find the underlying cause of the problem," Ms. Bowden says. "Be able to quantify that and realize why we are making decisions that need correction."

2. Hospitals don't put a lot of effort into appeals. Ms. Bowden has seen several providers appeal a RAC's judgment — but the effort put into the appeal often quashes any legitimate chance of recouping the revenue. Hospitals should not simply state they disagree with the RAC. They should, for example, describe the acuity of the patient's illness, lab results, patient history — anything that paints a clear portrait and justifies the hospital's position at the time of billing.

"Write the story, and tell the story about that patient," Ms. Bowden says. "That influences judging and winning."

3. Hospitals rebill without full consideration of the situation. According to the American Hospital Association's RACTrac survey, hospitals appeal less than half of all RAC denials. Ms. Bowden says it's common now for hospitals to rebill a denied Medicare Part A claim under Part B instead of going through the appeals process.

Hospitals may justify this move as a time- and money-saver, even though they will be receiving less reimbursement under Part B. Ms. Bowden says that strategy is fine in certain contexts, but she encourages hospitals to use analytics to ensure it is the right move.

"Just rebilling everything as outpatient because [hospitals] need cash now may not be the best decision in every case," Ms. Bowden says. "Hospitals need to understand the payment difference and the likelihood of winning the case upon appeal and factor those into their decision."

4. Hospitals don't track repayment after successful appeals. Ms. Bowden says hospitals that appeal a RAC denial and win should not rest on their laurels. They must make sure they receive full payment back.

However, Ms. Bowden admits these mistakes often stem from Medicare administrative contractors. She says MACs have made it difficult for hospitals to track repayments, but leaders should be persistent and routinely call and follow-up with their contractors to ensure that repayment is on the way.

5. Hospitals tolerate poor documentation. When it comes to billing, coding and RAC audits, it's easy to place blame on evolving regulations. However, successful hospitals will have great documentation no matter what issues may arise, and gaining buy-in from physicians to write clear, comprehensive notes will help assuage any future problems, Ms. Bowden says.

This is especially true as CMS' two-midnight rule ramps up. According to the most recent Medicare inpatient rule, inpatient stays lasting less than two midnights should be treated and billed as outpatient services. Inpatient admissions are considered reasonable and necessary for Medicare beneficiaries who require more than one midnight stay in a hospital or who need treatment specified as inpatient only.

"Documentation is really key," Ms. Bowden says. "Medicare will still be auditing those records for medical necessity, and medical necessity is in the documentation."

More Articles on RACs:
House Introduces Bill to Delay Two-Midnight Rule
AHA: Medicare RAC Reviews on the Rise for Hospitals
OIG: Despite Flaws, Medicare RACs Work

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