8 Actions Hospitals Can Take to Protect Against RACs

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Paul Spencer, compliance officer for Fi-Med Management, a physician practice financial management company based in Wauwatosa, Wis., lists eight actions hospitals should take to protect themselves against recovery audit contractors.

1. Have a RAC response team in place.
The first line of defense is to create RAC response teams overseeing the hospital's compliance with RACs, usually in addition to other compliance duties. But most hospitals already have such teams and getting ready for requests is only a small part of successfully dealing with RACs. "Most facilities are realizing that the challenge isn't in responding to the RAC but in the problems with documentation uncovered by RAC audits," Mr. Spencer says.

2. Focus on clinical documentation improvement. As a result of RAC audits, many hospitals have created clinical documentation improvement programs that focus on improving claims accuracy. "A key outcome of the RAC audits is uncovering a lack of clarity and flow in the typical patient's chart," Mr. Spencer says. "For example, a hospitalist's plan of care may lack necessary information to bill under a selected inpatient DRG."

3. Apply concurrent review. One key defensive strategy for hospitals is undertaking concurrent reviews, focusing on double checking claims before they go out. Nurse-specialists scour patient records for documentation shortfalls. "Rather than discovering documentary shortfalls after the fact, the review identifies problems before the claim is sent out, thereby mitigating compliance risk," Mr. Spencer says. "I expect these programs to proliferate dramatically in the near future."

4. Make no RAC activity the goal. If clinical documentation improvement programs are effective, a hospital's RAC activity should plummet. "When a RAC starts coming up with nothing at a particular hospital, it will realize it cannot make any money here and will move on to easier opportunities," Mr. Spencer says.

5. Implement EHRs. "Electronic health records are not a silver bullet, but they would help by improving the clarity of medical records," Mr. Spencer says. Hand-written records are often illegible, making it more difficult for coders to create accurate claims.

6. Keep up with deadlines. "Be ready for correspondence and respond in a timely manner," Mr. Spencer says. This is particularly important going through the stages of an appeal. "As soon as the date is determined, the clock starts ticking," he says.

7. Appeal RAC determinations. "Any healthcare provider who feels that they have grounds for a RAC appeal should file an appeal," Mr. Spencer says. "The RAC Demonstration Project yielded a successful provider appeal rate of 64.4 percent, which is enormous." The success rate for appeals in the permanent program should be in CMS’ annual report, which is expected soon. Other surveys suggest it is still quite high.

8. Decide when to appeal. A hospital's earnings from a successful appeal vary depending on when the appeal is filed. For example, if the first-level appeal is filed within 30 days of the demand letter and the appeal is denied, interest is charged to the hospital through the appeals process. But if the hospital allows the recoup and files the appeal between days 41-120 and the appeal turns out to be successful, CMS pays interest at the rate of 11.25 percent every 30 days in addition to the recouped funds. "Knowing this should be part of the provider’s calculus of what the costs of appeal may be, and may go a long way in dictating the appeal approach," Mr. Spencer says.

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