Audit Focus 2014: New Boundaries, Rules Changing the Audit Landscape

Three guidelines to avoid RAC potholes

When preparing for the new, constantly evolving audit world, remember the old adage: "The best defense is a good offense." As CMS changes boundaries for recovery audit contractors and intensifies the rules in 2014, proactive vigilance will be more important than ever to lessen audits' impact on revenue.

The most revenue-threatening audits are those that focus on Medicare payments to hospitals. These are conducted by Recovery Auditors and other Medicare Administrative Contractors. To most effectively deal with these audits, we advise organizations to follow these three important guidelines in the year ahead:

  • Regularly monitor RAC websites in order to keep tabs on regional RAC activity;
  • Align clinical documentation improvement programs with known RAC targets and documented issues; and
  • Ensure RAC audit management is centralized across all locations, including inpatient rehab facilities, home health, hospice, medical groups, clinics and physician practices.

A similar approach is suggested in dealing with MACs, which come with their own set of challenges. MAC prepayment reviews can represent an even more immediate revenue risk since payments can be held back before, rather than after, reimbursement.

Furthermore, there are two specific areas of change for hospital finance executives to understand: changing RAC regions and the two-midnight Rule.

New RAC regions for 2014
CMS is setting new boundaries for the four RAC regions. The new boundaries were designed to reduce audit management disruption, especially for organizations with facilities in multiple states. The new RAC regions – Northeast, Southeast, Midwest and West – should dramatically simplify the audit process, since they are designed in a more consistent, regional manner. For example, fewer RACs will be involved if your health system previously received requests from multiple RACs. Finally, audit management and reporting should become more straightforward; especially for those organizations with provider locations in several states. Though disruptions will be minimized, a variety of key operational and workflow modifications will be needed to accommodate the changes.

To start, get acquainted with the RAC region map. Then adjust team assignments, software databases and executive reporting dashboards to reflect the new layout. Once that is accomplished, solidify plans to communicate with your new RACs, educate your staff and review your documentation. This year, there will be more focus on medical necessity reviews and procedures that are no longer inpatient. The question is, “Is the documentation there to support the procedure?”

Changing regions are also expected to cause delays and impact volumes. Expect delays in workflow between RAC reply periods during the transition. The normal process of communicating audit results and sending demand letters may also be temporarily interrupted. Documenting the old RAC and future new RAC for each case is a must. Best practice is to document every aspect of every audit during the transition period.

We will continue to see a drop off in RAC audits until the regions are reorganized. The new RAC regions are expected to go into effect by June of 2014. A sneak peek of the new RAC region map is available on the CMS website. RACs will continue to work with the existing regions through February 21, 2014 for Additional Development Requestrequests; they will respond with results until June 2014.

The two-midnight rule
Previously, the assumption was that if a patient was expected to stay in the hospital more than 24 hours, he or she would be admitted as an inpatient. Now, the expectation is that if the physician expects the patient to be in the hospital for two successive midnights, they can be defined as an inpatient. This is referred to as the "two midnight rule," which went into effect Oct. 1, 2013.

According to CMS, the two-midnight presumption directs medical reviewers to select claims for review under a presumption that the occurrence of two midnights after formal inpatient hospital admission signifies an appropriate inpatient status for a medically necessary claim.

"CMS will instruct the MACs and RACs that they are not to review claims spanning more than two midnights after admission for a determination of whether the inpatient hospital admission and patient status was appropriate, except for circumstance of inpatient claims for procedures where the services are typically performed on an outpatient basis — or if it appears there is potential 'gaming' of the system. In addition, for a period of 90 days, CMS will not permit recovery auditors to review inpatient admissions of one midnight or less that begin on or after Oct. 1, 2013," according to CMS

Due to confusion over this new rule, RACs will not enforce this until Sept. 30, 2014, postponed from the original date of Dec. 31, 2013. In the meantime, MACs have the ability to conduct targeted probe audits with more focused reviews on patients who fall into the two midnight rule grey area. But it is an educational audit that yields no penalty, at least until the Sept. 30, 2014 deadline.

Flush with new RAC regions and two-midnight Rule, a provider’s rarest commodity in 2014 will likely be quiet time.

Dawn Crump, MA, SSBB, CHC, has been in the healthcare compliance industry for more than 18 years and joined HealthPort in 2013 as vice president of audit management solutions. Prior to joining HealthPort, she was network director of compliance for SSM. She has healthcare experience in education, organization development, quality improvement and corporate compliance.


© Copyright ASC COMMUNICATIONS 2021. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.