Get Ready: The RACs are Coming!

By Amy Lee Smith, MBA, CPC, CPC-H, CPMA, CIA, CRMA 

Preparing for, and responding to, recovery audit contractor (RAC) reviews can be intimidating. You can lessen the pain, however, by understanding Medicare billing and coding rules and requirements, and being proactive in implementing controls to ensure compliance.

RACs Review Across the Nation

Certified Inpatient Coder CIC

Section 302 of the Tax Relief and Health Care Act of 2006 made the Recovery Audit Program permanent, and required that it be expanded to all 50 states by 2010. The Recovery Audit Program’s mission is to reduce Medicare improper payments by detecting and recovering overpayments, identifying underpayments, and developing methods to prevent future improper payments. There are four RACs, each serving a specific region in the country (see next page for the regional split).

RACs review claims on a post-payment basis following Medicare policies. RACs are required to employ a staff consisting of nurses, therapists, certified coders, and a physician medical director. There are two types of reviews: automated and complex. Complex reviews require a medical record to complete the review. According to the Statement of Work for the Recovery Audit Program, “The Recovery Auditor shall not attempt to identify any overpayment or underpayment more than three years past the date of the initial determination made on the claim. The initial determination date is defined as the claim paid date.”

What to Watch

Each RAC publishes a list of improper coding issues approved by the Centers for Medicare & Medicaid Services (CMS) on its website. Each issue indicates which type of provider(s) is subject to review. Many of the inpatient issues relate to medical necessity for certain diagnostic-related groups (DRGs) and are considered to be “complex” reviews. For outpatient facility services and physician practices, many of the approved issues are automated. These issues test for Medicare billing and coding guideline compliance, which CMS publishes on its website.

Some examples of approved issues include:

  • Once-in-a-lifetime procedures (e.g., “welcome to Medicare” exam)
  • Medically-unlikely edits (expected units per encounter)
  • Add-on codes without a primary code
  • National Correct Coding Initiative (NCCI) column 1/column 2 edits
  • Procedures with no corresponding device code
  • Minor surgery and other treatments billed as an inpatient stay
  • Outpatient services within 72 hours of admission
  • Exact duplicate outpatient claims
  • Outpatient claims billed within a prospective payment system (PPS) inpatient admission
  • Skilled nursing facility (SNF) consolidated billing

Prepare to Prevail

Don’t wait for a RAC to knock on your door. Be proactive and follow these RAC review preparatory tips:

Research improper payments found by RACs, the Office of Inspector General (OIG), and comprehensive error rate testing (CERT).

  • Review the RAC-approved issues on each contractor’s website.
  • Peruse the OIG and CERT audit reports online.

Conduct an internal assessment to identify if you are in compliance with Medicare rules. For example:

  • Take one RAC-approved issue per week and do your own random audit of claims to identify questionable areas of compliance.
  • Use existing quality assurance/audit professionals to incorporate RAC-approved issues into your routine audit process.
  • Review existing bill scrubber edits/rules to ensure edits are in place to capture claims with specific codes (or code pairs). For example, there should be a pre-billing edit to catch claims that have an implant procedure code, but no implantable device code.

Identify corrective actions to promote compliance.

  • Educate charge entry (or coding) staff when trends of non-compliance are noted.
  • Implement a quality assurance process (either human or automated) to review complex claims prior to claims release.
  • Be sure to maintain the most updated provider manuals and CMS regulations, and disseminate the information to all appropriate parties.
  • Review the RAC-approved issues periodically for changes.
  • If issues are found, work with the billing office to determine whether it is appropriate to re-bill the noncompliant claims.

Prepare to respond quickly to RAC requests.

  • Understand who receives RAC request letters and ensure he or she is educated about the importance of a timely response.
  • Have a process in place to release records as requested within the appropriate time frame.
  • Be sure whoever is releasing the information understands the components of the legal medical record and where to find all required information.

Appeal when necessary (within 120 days).

  • There are specific steps to take when appealing decisions outlined in detail on the CMS and RAC websites.
  • Appeal when you disagree with the decision; appeals must be completed in a timely manner.

Learn from past experiences; track denials and look for patterns.

  • When a RAC repayment is made, correct the problem going forward. Educate the offending department(s) to ensure they understand how to charge and code correctly. If you have multiple facilities, share knowledge across all facilities.
  • Work with your billing office to identify trends of billing denials prior to RAC reviews; follow the same mitigation steps to avoid future RAC findings.
  • Review pre-billing edits to identify patterns of misuse and educate the departments accordingly.

Don’t Be Afraid to Appeal

Do not wait for RACs to request records or data before conducting these internal assessments. Keep in mind that RAC reviewers are not necessarily certified coders. Moreover, they are human, and they make mistakes. If you feel repayment is requested in error, appeal the decision. It is well worth the expended resources when you win an appeal.

Remember to be proactive—don’t wait for a RAC to appear. If one has not already visited you, it is only a matter of time. No provider is exempt from RAC review. Conduct internal assessments based on the published, approved issues. If your claims are submitted in compliance with Medicare regulations, you should not encounter any serious issues with a RAC.

Amy Lee Smith, MBA, CPC, CPC-H, CPMA, CIA, CRMA, is manager of internal audit at Bon Secours Health System, Inc., where she primarily performs coding and billing audits. She earned her bachelor’s and master’s degrees in business administration with a concentration in finance from The College of William and Mary in Virginia. Ms. Smith is also a Certified Internal Auditor and certified in risk management assurance.


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