Since their introduction in 2006, recovery audit contractors have served an important function for taxpayers and the solvency of the Medicare program, but they have challenged hospitals' incomes and threatened their already-shrinking margins.
RACs reported they recovered $900 million in overpayments to providers in their first year of operation. That demonstrated a clear need for providers to ensure their coding was accurate and practices aligned with Medicare and Medicaid requirements. But as hospitals have tidied up their billing departments and trained staff to be sure to comply with CMS regulations, RACs have only picked up steam.
Tracy Field, JD, a partner in the healthcare group in the Atlanta office of Womble Carlyle Sandridge & Rice, works with providers in appealing denials, and says RACs are presenting a growing challenge to hospitals' financial health.
"We've seen an increase in Medicare audits, denials and everything of time to resolve appeals. The provider community understands the need to comply with the standards, but the rules can't change halfway through the appeals process," she says. "Hospitals tried to work with the government on healthcare reform, but with many cuts to reimbursement as well as the increased costs to manage all these audits, it is financially challenging — especially [for] non-profits with creditors and bond-rating agencies reviewing margins."
It's true that increased pressure on hospitals has forced them to maintain tighter control of their accounting and billing practices, says Anna Grizzle, JD, a partner in the healthcare industry group at Bass Berry & Sims in Nashville, and that has made self-audits "just part of business now." But she adds that in many cases, external audits may not have all the facts correct and could call any Medicare claim into question.
"To manage this new era of increasing RAC review and post-payment audits, it is critical that hospitals understand and manage the appeals process and use information learned to help educate providers on the front end," Ms. Field says. "It is also important to appeal cases as the reviewers are not always right – and in fact, often overlook data that can be critical in your cases.
Ms. Field and Ms. Grizzle provide four tips on how providers can strengthen their defenses against RAC audits and bolster their success rates on appeals.
1. Seriously self-audit. Closely monitor your own practices to be sure what's being done is done correctly, and identify common mistakes. And because RACs are required to post what they'll be auditing on their websites, hospitals can anticipate extra scrutiny in those areas.
Ms. Grizzle says hospitals should aim to keep their error rates below 5 percent, but they should know accurately what their actual error rate is. That way, she explains, if an auditor claims the provider's error rate is much higher, it can more effectively counter that attack with its own identified error rate.
Hospitals routinely undergo audits from all kinds of entities, and if they've previously been given a good report on specific items, Ms. Grizzle says, they can use a "provider without fault" defense on an appeal to say that professional auditors had previously told them they had been billing and coding correctly and couldn't reasonably be expected to know they were in the wrong.
2. Track appeal outcomes. Mistakes are unavoidable, but providers can learn from RAC denials to know which appeal strategies have worked or what has made their cases vulnerable.
"When a hospital has RAC denials, they should learn from those denials. The silver lining there is 'What are those errors?'" Ms. Grizzle says.
Many times, denials can be traced to a specific individual or cluster of physicians, she adds. "If it's a specific physician, go to the physician to train him to use it as real a life example. It could be the documentation was incorrect or illegible."
Approaching physicians to retrain them on proper coding methods doesn't have to be disciplinary, she says. Providers can leverage physicians' sometimes competitive nature by telling them how they stack up in RAC appeals compared to their colleagues. That can lead to fewer errors needing corrective action in the first place.
"So often, physicians are the key to the ability to support the claim, and so you'd want to use the physician in the appeal process," Ms. Grizzle says. "There really needs to be ongoing periodic training, because people forget."
3. Make Medicare Part B Your Plan B. When a claim under Medicare Part A for inpatients is denied, providers may nevertheless be reimbursed under Part B for outpatient treatment and procedures. Ms. Field says RACs assert total denials of any payment for an admitted patient who receives covered services, but she encourages providers to fight for Part B reimbursement in those cases.
"It can be appropriate to pay for part B services if a claim doesn't qualify for Part A but does for Part B," Ms Grizzle says. "It definitely is an area where providers should be aggressively raising that issue on appeal to claim reimbursement."
4. Fight the stigma of appeals. Providers who consistently appeal RAC claims often earn a reputation as "frequent flier providers" who stubbornly fight each allegation, but Ms. Field says these providers aren't necessarily abusing the system — they're defending their lawful compensation.
As Ms. Field puts it, "It's getting harder for hospitals to provide service and healthcare to the community when they are increasingly entangled in the explosion of government audits and denials from both a pre-payment and post-payment approach.
CMS: Medicare RACs Take Back $745M in Overpayments in 1Q of 2013
The Year Ahead: 10 Challenges That Will Shape Hospital Strategy
RACs reported they recovered $900 million in overpayments to providers in their first year of operation. That demonstrated a clear need for providers to ensure their coding was accurate and practices aligned with Medicare and Medicaid requirements. But as hospitals have tidied up their billing departments and trained staff to be sure to comply with CMS regulations, RACs have only picked up steam.
Tracy Field, JD, a partner in the healthcare group in the Atlanta office of Womble Carlyle Sandridge & Rice, works with providers in appealing denials, and says RACs are presenting a growing challenge to hospitals' financial health.
"We've seen an increase in Medicare audits, denials and everything of time to resolve appeals. The provider community understands the need to comply with the standards, but the rules can't change halfway through the appeals process," she says. "Hospitals tried to work with the government on healthcare reform, but with many cuts to reimbursement as well as the increased costs to manage all these audits, it is financially challenging — especially [for] non-profits with creditors and bond-rating agencies reviewing margins."
It's true that increased pressure on hospitals has forced them to maintain tighter control of their accounting and billing practices, says Anna Grizzle, JD, a partner in the healthcare industry group at Bass Berry & Sims in Nashville, and that has made self-audits "just part of business now." But she adds that in many cases, external audits may not have all the facts correct and could call any Medicare claim into question.
"To manage this new era of increasing RAC review and post-payment audits, it is critical that hospitals understand and manage the appeals process and use information learned to help educate providers on the front end," Ms. Field says. "It is also important to appeal cases as the reviewers are not always right – and in fact, often overlook data that can be critical in your cases.
Ms. Field and Ms. Grizzle provide four tips on how providers can strengthen their defenses against RAC audits and bolster their success rates on appeals.
1. Seriously self-audit. Closely monitor your own practices to be sure what's being done is done correctly, and identify common mistakes. And because RACs are required to post what they'll be auditing on their websites, hospitals can anticipate extra scrutiny in those areas.
Ms. Grizzle says hospitals should aim to keep their error rates below 5 percent, but they should know accurately what their actual error rate is. That way, she explains, if an auditor claims the provider's error rate is much higher, it can more effectively counter that attack with its own identified error rate.
Hospitals routinely undergo audits from all kinds of entities, and if they've previously been given a good report on specific items, Ms. Grizzle says, they can use a "provider without fault" defense on an appeal to say that professional auditors had previously told them they had been billing and coding correctly and couldn't reasonably be expected to know they were in the wrong.
2. Track appeal outcomes. Mistakes are unavoidable, but providers can learn from RAC denials to know which appeal strategies have worked or what has made their cases vulnerable.
"When a hospital has RAC denials, they should learn from those denials. The silver lining there is 'What are those errors?'" Ms. Grizzle says.
Many times, denials can be traced to a specific individual or cluster of physicians, she adds. "If it's a specific physician, go to the physician to train him to use it as real a life example. It could be the documentation was incorrect or illegible."
Approaching physicians to retrain them on proper coding methods doesn't have to be disciplinary, she says. Providers can leverage physicians' sometimes competitive nature by telling them how they stack up in RAC appeals compared to their colleagues. That can lead to fewer errors needing corrective action in the first place.
"So often, physicians are the key to the ability to support the claim, and so you'd want to use the physician in the appeal process," Ms. Grizzle says. "There really needs to be ongoing periodic training, because people forget."
3. Make Medicare Part B Your Plan B. When a claim under Medicare Part A for inpatients is denied, providers may nevertheless be reimbursed under Part B for outpatient treatment and procedures. Ms. Field says RACs assert total denials of any payment for an admitted patient who receives covered services, but she encourages providers to fight for Part B reimbursement in those cases.
"It can be appropriate to pay for part B services if a claim doesn't qualify for Part A but does for Part B," Ms Grizzle says. "It definitely is an area where providers should be aggressively raising that issue on appeal to claim reimbursement."
4. Fight the stigma of appeals. Providers who consistently appeal RAC claims often earn a reputation as "frequent flier providers" who stubbornly fight each allegation, but Ms. Field says these providers aren't necessarily abusing the system — they're defending their lawful compensation.
As Ms. Field puts it, "It's getting harder for hospitals to provide service and healthcare to the community when they are increasingly entangled in the explosion of government audits and denials from both a pre-payment and post-payment approach.
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9 Recent Medicare, Medicaid IssuesCMS: Medicare RACs Take Back $745M in Overpayments in 1Q of 2013
The Year Ahead: 10 Challenges That Will Shape Hospital Strategy