Dennis Jones, director compliance services for CBIZ KA Consulting Services, based in East Windsor, N.J., identifies six issues for hospitals in dealing with recovery audit contractors in 2011.
1. Medicaid RACs will start. However, a large number of states will ask for exemptions from the program, either because they have sparse populations or because they already have Medicaid audit programs that would overlap, as is the case in New Jersey. "I wouldn’t be surprised if 20 or 30 states apply for exemptions," Mr. Jones said. CMS said it will grant some exemptions but only on a limited basis, and it may resist granting many exemptions.
2. Hospitals will appeal medical necessity reviews. When Medicare RACs determine that a hospitalization was not medically necessary, they have been taking away the full payment, even if it the hospital stay was appropriate as an observation service at a lower rate. CMS has backed this policy, but in February, a high-level RAC appeals decision by an administrative law judge disagreed with CMS' policy and allowed payment for observation service. However, CMS has not removed the policy, meaning that hospitals will have to appeal each of these cases. But due to the February decision, they have good chances of winning.
3. Medicare RACs will be much more aggressive. "In 2010, Medicare RACs were just getting their feet wet," Mr. Jones says. While two of the RACs had already gained experience in the RAC demonstration, two were new to the program and had to get up to speed. AHA's RACTrac survey just reported $42 million in denied claims in the first three quarters of 2010. "Hospitals may think, 'This isn’t all that bad,' but the RACs were just getting started," Mr. Jones says. He points to the demonstration, where RACs collected only $3.2 million in the first three quarters. Then, in the last quarter alone, the RACs collected $33 million, for a total of $36.2 million that year. In their next year, they collected $332.8 million, a 10-fold increase from the year before.
4. Hospitals may be reported to the Justice Department. In a so-called finding this year, the HHS Office of the Inspector General took CMS to task for not reporting hospitals with significant RAC collections to the Department of Justice. "CMS wanted to move these hospitals to an education track, but the OIG wanted more," Mr. Jones says. With pressure building for more federal income, CMS may accede to this demand. A lot of money may be at stake. The Justice Department can recoup more from hospitals because it has a much longer lookback than RACs do.
5. Fiscal intermediaries may use RAC data. In a separate 2010 finding, the OIG also urged CMS to report hospitals with significant collections to Medicare fiscal intermediaries. In this way, improper payments could be stopped before they are made, rather than the more expensive route of "pay and chase."
6. Hospital staff will be under more pressure. As Medicaid RACs start up and Medicare RACs get up to speed, hospital staff may be hard-pressed to accommodate stepped up demands for documents, compliance plan stipulations, reviews of concurrent cases and appeals. This work will involve coders, business offices and other departments. "Hospitals will be stretched for resources in 2011," Mr. Jones says. "It's going to be really tough."
Learn more about CBIZ KA Consulting Services.
Read more coverage of RACs:
- Differences Between RACs' Automated and Complex Reviews
- Medicare RACs Expanding to Clinical Laboratories
- RACs Face Weak Penalties for Exceeding 60-Day Limit to Review Records
1. Medicaid RACs will start. However, a large number of states will ask for exemptions from the program, either because they have sparse populations or because they already have Medicaid audit programs that would overlap, as is the case in New Jersey. "I wouldn’t be surprised if 20 or 30 states apply for exemptions," Mr. Jones said. CMS said it will grant some exemptions but only on a limited basis, and it may resist granting many exemptions.
2. Hospitals will appeal medical necessity reviews. When Medicare RACs determine that a hospitalization was not medically necessary, they have been taking away the full payment, even if it the hospital stay was appropriate as an observation service at a lower rate. CMS has backed this policy, but in February, a high-level RAC appeals decision by an administrative law judge disagreed with CMS' policy and allowed payment for observation service. However, CMS has not removed the policy, meaning that hospitals will have to appeal each of these cases. But due to the February decision, they have good chances of winning.
3. Medicare RACs will be much more aggressive. "In 2010, Medicare RACs were just getting their feet wet," Mr. Jones says. While two of the RACs had already gained experience in the RAC demonstration, two were new to the program and had to get up to speed. AHA's RACTrac survey just reported $42 million in denied claims in the first three quarters of 2010. "Hospitals may think, 'This isn’t all that bad,' but the RACs were just getting started," Mr. Jones says. He points to the demonstration, where RACs collected only $3.2 million in the first three quarters. Then, in the last quarter alone, the RACs collected $33 million, for a total of $36.2 million that year. In their next year, they collected $332.8 million, a 10-fold increase from the year before.
4. Hospitals may be reported to the Justice Department. In a so-called finding this year, the HHS Office of the Inspector General took CMS to task for not reporting hospitals with significant RAC collections to the Department of Justice. "CMS wanted to move these hospitals to an education track, but the OIG wanted more," Mr. Jones says. With pressure building for more federal income, CMS may accede to this demand. A lot of money may be at stake. The Justice Department can recoup more from hospitals because it has a much longer lookback than RACs do.
5. Fiscal intermediaries may use RAC data. In a separate 2010 finding, the OIG also urged CMS to report hospitals with significant collections to Medicare fiscal intermediaries. In this way, improper payments could be stopped before they are made, rather than the more expensive route of "pay and chase."
6. Hospital staff will be under more pressure. As Medicaid RACs start up and Medicare RACs get up to speed, hospital staff may be hard-pressed to accommodate stepped up demands for documents, compliance plan stipulations, reviews of concurrent cases and appeals. This work will involve coders, business offices and other departments. "Hospitals will be stretched for resources in 2011," Mr. Jones says. "It's going to be really tough."
Learn more about CBIZ KA Consulting Services.
Read more coverage of RACs:
- Differences Between RACs' Automated and Complex Reviews
- Medicare RACs Expanding to Clinical Laboratories
- RACs Face Weak Penalties for Exceeding 60-Day Limit to Review Records