Preparing Your Practice For The Medicare Rac Audits

Due to the success of the Recovery Audit Contractor (RAC) demonstration, CMS rolled out the Medicare RAC audits to all states in the year 2010 with the anticipation of recouping more monies and returning the improperly paid claims to the Medicare Trust Fund.

The program has been such a success that Medicaid has jumped on the band wagon and has mandated a similar program known as the Medicaid Integrity Contractor (MIC), which will be implemented in all 50 states by the year 2011

Now is the time to prepare for increased scrutiny of your claims by governmental agencies as its no longer a matter of will you be audited but when you will be audited.

The Department of Health and Human Services and Office of Inspector General provides a model formal compliance program to provide healthcare providers with guidance to on how to be compliant with CMS rules and regulations and to reduce a healthcare organizations risk exposure if they were subjected to an insurance audit. The seven elements of a model compliance program per the OIG are as follows:
Designation of a compliance officer and compliance committee
Development of compliance policies and procedures
Establishment of open lines of communication
Appropriate training and education
Internal monitoring and auditing of claims
Response and corrective action to detected deficiencies
Enforcement of disciplinary actions

In today’s health care environment most entities are already burdened with the everyday challenge of accurate billing and coding, compliant documentation, HIPAA regulations, physician managed care contracts, Stark laws, vendor contracts, and most importantly, patient service.

This leaves most health care entities with minimal resources to focus on compliance and audit risk issues.

With that being said, how does a healthcare organization, regardless of size, go about dealing with the increased burden of potential insurance audit scrutiny from both governmental and commercial payer?

The first step should be to perform an independent internal audit review of your organization’s documentation and compliance procedures. We know that during CMSs three year RAC Audit Demonstration Project, their findings indicated that somewhere between 70% – 75% of the overpayments identified were from coding errors and lack of documentation to support medical necessity. It would make sense that a healthcare organizations focus should be on ensuring that their providers are utilizing proper coding and supporting it with the correct documentation and that medical necessity is clearly documented for each patient encounter that supports the services rendered and billed.

To determine the accuracy of your providers coding and documentation and proper medical decision making, it is critical that your organization conduct on-going internal audits to determine any deficiencies that may exist within your organization. The review will help you identify deficiencies and allow you to correct them through proper education and training for your providers, which in turn will reduce your audit risk significantly if you are faced with an insurance audit. Implementing an education and training program based on your findings for your staff and medical providers is an absolute as you will notice that once implemented, your error rates due to coding and documentation deficiencies will drop significantly.

If such deficiencies are not identified and addressed by your organization, you may find Medicare or Medicaid knocking at your front door to inform you of your lack of compliance. At this point, the cost of disputing or paying for the findings of a governmental audit will far outweigh the cost of your organization identifying these issues first and putting a corrective action plan in place to fix them.

In terms of your internal review, there are many things to consider. Does your organization have the internal expertise to conduct proper audits and decide what areas to focus on? Will you base your efforts on the Medicare RAC findings which consist of validating that medical necessity is properly documented and that the coding that was billed is supported by proper documentation in the patient encounter notes? There are many variables that need to be pre-determined if your organization opts to do an internal audit review.

One thing every facility should think about that is considering conducting internal audits is that you must be confident that your audits are being performed by individuals who are “independent” of the documentation they are reviewing. It is also critical that your audit team have the appropriate skill set, credentials and clear understanding of the compliance rules and regulations per the Centers for Medicare and Medicaid Services (CMS) to be conducting the audits. If your organization lacks these resources, serious consideration should be given to hiring a third party audit firm that has the experience and credentials to assist your organization with the internal audit function. When selecting a vendor, make sure you are engaging a firm that has governmental audit experience and that they can identify any compliance deficiencies and more importantly, provide your personnel with the proper training and education to eliminate such deficiencies. The cost of utilizing a third party to assist your organization
will dramatically reduce your potential audit risk and your return on your investment will be tenfold compared to what the financial consequences could potentially be if you sit back and do nothing and let Medicare be the messenger.