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Understanding the Medicare Recovery Audit Contractor (RAC) Program for Part A Providers - PowerPoint PPT Presentation

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Understanding the Medicare Recovery Audit Contractor (RAC) Program for Part A Providers. Donna Gilley Practice Leader, Healthcare Consulting Lattimore Black Morgan & Cain, PC. MORE THAN YOU EXPECT. EVERYTHING YOU NEED. What is the RAC Program?.

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Understanding the Medicare Recovery Audit Contractor (RAC) Program for Part A Providers

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Understanding the Medicare Recovery Audit Contractor (RAC) Program for Part A Providers

Donna Gilley

Practice Leader, Healthcare Consulting

Lattimore Black Morgan & Cain, PC



What is the RAC Program?

  • The RAC (Recovery Audit Contractor) program is charged with identifying improper over and under payments for Medicare fee-for-service claims on a post payment basis

  • CMS will accomplish this through third-party contractors (paid on contingency) hired to analyze post payment Medicare fee-for-service claims and in some cases the associated medical record(s) in an attempt to detect and correct past improper payments

  • The Tax Relief and Healthcare Act of 2006 (section 302) requires a permanent and nationwide RAC program be implemented no later than January 1, 2010

What are RACs?

RACs (Recovery Audit Contractors) are third-party contractors hired by CMS to analyze post payment provider Medicare claims and in some cases the associated medical record in an attempt to detect and correct past improper payments.

Who are the RACs?

CMS has divided the country into four geographic locations and awarded contracts to different organizations for of these locations.

Who are the RACs?

4 RACs Named

Region A12.45% contingency rateDiversified Collection Services, Inc. (DCS) 333 North Canyons Parkway, Suite 100 Livermore, CA 94551-7661

Region C9% contingency rateConnolly Consulting Associates, Inc. (Connolly)50 Danbury RoadWilton, CT 06897

Region B12.50% contingency rateCGI Technologies and Solutions, Inc. (CGI) 11325 Random Hills RoadFairfax, VA 22030-6051

Region D9.49% contingency rateHealthDataInsights, Inc. (HDI)7501 Trinity Peak Street, Suite 120Las Vegas, NV 89128-6896

Part A Claims Considered Improper Payment if…

Medically Unnecessary – Payments are made for services that were not medically necessary or did not meet the Medicare medical necessity criteria for the setting where the service was rendered

(e.g., a claim from a hospital for three colonoscopies for the same beneficiary on the same date of service. Only one colonoscopy per day is medically necessary.)

Part A Claims Considered Improper Payment if…

Incorrectly Coded – Payments are made for services that are incorrectly coded (e.g., the provider submits a claim for a certain procedure but the medical record indicates that a different procedure was actually performed.)

Insufficient/No Documentation – Providers fail to submit documentation requested or fail to submit enough documentation to support the claim

Top Services with Overpayments

Medically Unnecessary

  • Surgical procedures in wrong setting

  • Cardiac defibrillator implant in wrong setting

  • Treatment for heart failure and shock in wrong setting

Top Services with Overpayments

  • Excisional debridement

  • Respiratory system diagnoses with ventilator support

Incorrectly Coded

Inpatient Hospital

Top Services with Overpayments

Medically Unnecessary

  • Services following joint replacement surgery

  • Services for miscellaneous conditions

Inpatient Rehabilitation Facility

Top Services with Overpayments

  • Physical therapy and occupational therapy

  • Speech-language pathology services

Medically Unnecessary

Skilled Nursing Facility


  • The RACs will use data-mining techniques to identify claims for review

  • New areas targeted by RACs must be approved by CMS in advance

    • It has to be posted to the RACs website prior to review

  • RAC reviews must follow the same Medicare policies as carriers, fiscal intermediaries, and MACs

  • RACs are required to employ clinical and certified coding experts

  • RACs are paid by contingency fees, based on the amount of over and underpayments they identify


  • Rebuttal v Appeal

    • Know the difference!

    • Rebuttal is a 15 day window to “discuss” the issues. Does NOT stop the recoupment clock

    • Appeal, once accepted and if received within 30 days STOPS the recoupment

    • However, should you LOSE on appeal, interest accrues from the beginning

    • Rebuttal can be a valuable learning tool, but do NOT use in place of Appeal –Use IN ADDITION to if appropriate

Why RAC?

  • One billion Medicare claims are processed each year

  • Unintentional errors account for billions of dollars in improper payments each year

  • Improper payments include both underpayments and overpayments

  • The Improper Medicare FFS Payments Report estimates that improper payment amount to be $10.4 billion

How this will affect you?

  • RACs are authorized to investigate claims submitted by FFS physicians, providers, facilities and suppliers

  • Essentially anyone who submits Medicare Fee For Service claims

How this will affect you?

  • Providers may receive ongoing requests for medical records

  • Providers may receive demand for payment letters on automated reviews

  • Provider will likely need to conduct more vigorous and more focused reviews of internal coding and documentation

How long will this be in effect?

The program is permanent

You Have a Letter, Now What?

  • Two types of letters will be distributed:

    • Demand Letter (Automated)

    • Demand Letter (Complex)

Responding to Record Request

  • Make sure hospital has point of contact to keep track of all mailings

  • Records not received within 45 days can be declared an overpayment

    • RAC will issue one additional contact before issuing a denial

Preparing for a RAC Audit

  • Assemble a team of representatives from compliance, legal, medical services, patient financial services and other areas potentially impacted by a RAC audit.

  • The team should establish an action plan for responding to a RAC audit

  • The team should include the necessary expertise for handling a RAC audit as well as designating a single point person to ensure a single line of communication between the provider and the RAC.

Can You Prepare Now?

  • It is important for each healthcare entity to understand:

    • Who needs to be involved in the process

    • Develop policies and procedures and education initiatives to support the program

    • Become familiar with the different types of records requests and the timeline

    • Prepare internal review to determine compliance with Medicare Requirements

    • Use data-mining techniques to identify any patterns similar to issues identified by past RAC reviews

    • Develop tracking and appeal process

      • Create a test process by sending a request letter to your facility and track it

Preparing for a RAC Audit

  • Appoint or hire if necessary a RAC coordinator/RAC analyst to act as a single line of communication between the provider and the RAC

  • Communicate the appointee’s information to the RAC

  • Establish a consistent action plan for responding to a RAC communications

Preparing for a RAC Audit

  • Determine your organization’s risk areas

  • Review pertinent Medicare coding policies and medical necessity guidelines - making sure you utilize the correct documents for the date(s) in question

  • Conduct internal or external audits of key risk areas and correct any non-compliant coding practices prior to a RAC audit

  • Voluntarily self-report any major findings – this will specifically exclude them from a RAC review

  • Review medical documentation policies as well as any physician/staff training needed to ensure ongoing compliance with Medicare requirements

Preparing for a RAC Audit

  • Determine how you will store copies of documents that are sent upon request

  • Decide what electronic solutions or tool(s) you will use for tracking of deadlines and request limitations

  • Partner with a firm (consulting and/or legal) for external assistance when/if you need it

  • Plan for the tracking of any recoupment should appeals not be prepared within the 30 day time frame

  • Always follow-up on the appeals submitted

How to Survive the Audit?

  • Know your risk areas through regular auditing and monitoring activities

  • Implement documentation improvement efforts

  • Resolve identified billing/charging issues QUICKLY

  • Integrate RAC activity into existing roles, capacities

How to Survive the Audit?

  • Strengthen internal communication

  • Establish appeal process and threshold

  • Develop an Admissions Review Program

    • If you have one – make sure it’s capturing all admission streams

  • Strategize your appeals efforts

  • Utilize outside auditors

    • Appeal everything you should

  • Timeline on Records and Repayments?

    • 45 Days- records not received within 45 days can be declared an overpayment with no appeal right for provider

    • 15 Days- discussion period for determination

    • 3-Year- look back period from October 1, 2007

    • 30 Day- write check to avoid interest

    • 41 Day- Recoupment period

    Do You Appeal? What Will That Look Like?

    • Once an initial claim determination is made, providers, participating physicians and other suppliers have the right to appeal

    • It is important for providers to know:

      • Who will submit the appeal letter

      • Where to save appeal information

    Do You Appeal? What Will That Look Like?

    Hospital can send rebuttal to RAC within 15 days of determination, RAC can either change determination or provider can move to Appeals Process

    Five Levels of Appeal:

    • Redetermination

    • Reconsideration

    • ALJ (Administrative Law Judge)

    • Medicare Appeals Council

    • Federal District Court

    RAC Appeals

    AHA RAC document

    What Will be the New Normal Now?

    • Likely a new RAC coordinator/analyst position in most facilities (maybe 1.0 or.5 FTE).

    • Most facilities will need some type of tracking tool/software to monitor deadlines and records submission.

    • Action should begin the first day the facility receives the letter.

    What Will be the New Normal Now?

    • Records will need to be reviewed on some level prior to submission to the RAC – know what your facility is sending!

    • Keep a copy (preferably Bates stamped) of each record submitted to the RAC.

    • For paper copies, track how much copy reimbursement the RAC owes you.

    What Will be the New Normal Now?

    • If you decide to appeal, make sure your formal appeal letter is received by the MAC within 30 days or recoupment will begin at 41 days.

    Connolly Issues Approved for Review to Date

    • Outpatient Hospital Claims & Physician Claims

      • Blood Transfusions

      • Untimed Codes - (NOTE: Associated CMS publication as listed with the issue indicates Physical Therapy/Occupational Therapy/Speech Language Pathology

      • IV Hydration Therapy

      • Bronchoscopy

      • Once in a lifetime procedures

      • Pediatric Codes exceeding age parameters

      • Injection of Pegfilgrastim

    • Durable Medical Equipment Claims

      • Wheelchair Bundling

      • Urological Bundling

    • Clinical Social Worker Claims

      • Clinical Social Worker Claims

    Additional High Risk Areas

    • One-day stays

      • Kyphoplasty

      • Chest Pain

      • GI

    • Administration

      • Epogen

      • Oxaliplatin

    • Observation Stays

    • Inpatient Stays for Cardiac Defibrillator

    • Outpatient PT/OT/SLP

    2008 Midyear CERT report

    How LBMC Can Help?

    • Planning /Conducting an internal RAC risk assessment

    • Mock RAC audits

    • Assistance with risk remediation

    • Clinical documentation improvement training

    • Project management and workflow

    • Consulting services to assist the appeal process

    How LBMC Can Help?

    • Comprehensive Diagnosis-Related Group (DRG) Reviews

      • Review inpatient cases with the highest probability of DRG change

      • Target 12 key DRGs based on current RAC audit methodology

      • Perform inpatient coding audits to validate DRGs

      • Review single DRGs

    How LBMC Can Help?

    • Verification that surgeries performed on an inpatient basis necessitated an inpatient admission versus provided on an outpatient basis

    • Review of Medicare 1 day length of stays for targeted diagnosis

      • Chest Pain

      • Back Pain

      • Gastroenteritis

    How LBMC Can Help?

    • Charge assignment validation

      • Health Information Management code assignment review

      • Charge master review of CPT-4 / HCPCS / Revenue codes to identify coding errors

    • OPPS service review

      • Observation medically necessary review

      • Non-covered services

      • Coding errors

      • Point of Service

    OnBase RAC Solution

    Designed to manage the provider’s appeal process to the RAC auditor and the denial of medical claims

    - CRM and Task Management

    - Configurable Parameters

    - Upload Claim History

    • Administration Dashboard

    • Financial Dashboard

    • Risk Analysis Dashboard

    • Process Improvement Dashboard

    OnBase RAC Solution - Claim Level Management

    For each claim under audit:

    • Track responsible employee assigned to each task

    • Track appeal timelines

    • Manage tasks and expected completion dates

    • CRM to track communication with RAC personnel

    • Track shipping information

    • Track medical record request costs

    • Track interest due on recovered funds

    Donna Gilley, CPC, CPC-I, CHC, CCS, CCS-PPractice Leader – Healthcare Consulting

    Donna Gilley is a healthcare professional with over 20 years experience in medical operations and financial consulting services, and she leads the Healthcare Regulatory Compliance practice at Lattimore Black Morgan & Cain. Her areas of expertise span the healthcare Revenue Cycle including billing office assessment and redesign, patient access policy and re-engineering, Federal, state, and local compliance initiatives, HIPAA privacy, medical coding and billing, Stark & anti-kickback regulations, and reimbursement methodologies including Medicare’s Resource Based Relative Value System (RBRVS). With a background including medical practice administrator and director level positions with several of the nation’s largest hospital corporations, she has experience in multiple disciplines of medicine in the physician clinic, ambulatory surgery, and hospital settings. By focusing her practice on healthcare compliance, Donna has become a sought after professional on a number of healthcare legal issues. She has served as an expert compliance witness in a high-profile federal litigation case regarding improper coding practices, and most recently served as the expert witness in a case involving federal reimbursement of medical devices and associated rebates. She serves on several healthcare editorial advisory boards (including Cigna Medicare) and is a well known speaker on a variety of topics at local and national healthcare conferences annually.

    Donna Gilleydgilley@lbmc.comDirect dial: 615.309.2376THANK YOU!www.lbmc.com

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