Hospitalists will be essential players in helping their institutions prepare for the Recovery Audit Contractor (RAC) program, now being rolled out nationwide by the Centers for Medicare & Medicaid Services (CMS). The program is part of CMS’ arsenal to ferret out improper payments and prevent fraud, waste, and abuse in the Medicare system.
All providers who bill Medicare fee-for-service are fair game for an RAC audit, which scrutinizes medical records to validate diagnosis-related groups (DRGs), coding, and the necessity of care provided by hospitals. Hospitalists are being asked to document their diagnosis and treatment decisions more precisely and thoroughly than ever, ensuring that DRG coding is appropriate, medical necessity is watertight, and hospitals are defended from costly overpayment recovery.
Specificity of documentation is the hospitalist’s most potent weapon against this new layer of federal audits.
In a three-year demonstration of the RAC program that ended in March 2008, one-third of all medical records audited resulted in an overpayment finding and collection. RACs collected more than $900 million in overpayments and returned nearly $38 million in underpayments. One-third of provider appeals (physician, hospital, and other providers) were successful during the demo program, according to a June 2008 CMS evaluation report. (Download a copy of the report at www.cms.hhs.gov/RAC/Downloads/RAC_Demonstration_Evaluation_Report.pdf.)
How the Audits Work
Coding rules and terminology often don’t match what we’re used to writing in the record. So hospitalists need to learn what these connections are and use them in their medical record documentation. This is a core skill for hospitalists: being able to translate clinical terminology into the correct coding terminology for hospitals and coders.—Richard D. Pinson, MD, FACP, CCS, principal, HCQ Consulting, Nashville, Tenn.
Out of concern that the Medicare Trust Fund might not be adequately protected against improper payments by existing error detection and prevention efforts, Congress directed CMS to use RACs to identify and recoup Medicare overpayments under Section 306 of the Medicare Modernization Act of 2003, and directed CMS to make the program permanent by 2010 under Section 302 of the Tax Relief and Health Care Act of 2006. According to CMS, RACs were implemented so that physicians and other providers could avoid submitting claims that do not comply with Medicare rules, CMS could lower its error rate, and taxpayers and future Medicare beneficiaries would be protected.1
CMS has contracted with four regional RACs for the national program, and each will use proprietary auditing software to review paid claims from Medicare Part A and Part B providers to ensure that they meet Medicare’s statutory, regulatory, and policy requirements and regulations.
The RACs use automated review for claims that clearly contain errors that resulted in improper payments (e.g., claims for duplicate or uncovered services, claims that violate a written Medicare policy or sanctioned coding guideline), in which case the RAC notifies the provider of the overpayment. For cases in which there is a high probability—but not certainty—that the claim contains an overpayment, the RAC requests medical records from the provider (including imaged medical records on CD or DVD) to conduct a complex review and make a determination as to whether payment of the claim was correct, or whether there was an over- or underpayment.
CMS uses a Web-based data warehouse to ensure that RACs do not review claims that have previously been reviewed by another entity, such as a Medicare carrier, fiscal intermediary, the Office of Inspector General, or a quality-improvement organization (QIO).
The four regional RACs are ramping up their claim review activities in all states, says Connie Leonard, director of CMS’ Division of Recovery Audit Operations. When overpayments are confirmed, the RACs issue letters demanding providers to repay their Medicare carrier or intermediary within 30 days. For confirmed underpayments, RACs inform the provider’s Medicare contractor or fiscal intermediary, which then forwards the additional payment, Leonard says.