3 strategies for balancing recovery audit contractors

On maintaining physical health, Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure.” The phrase could just as accurately be applied to maintaining financial health when dealing with recovery audit contractors (RACs).

When handling RACs, cultivating a proactive and preemptive vigilance among audit team members is imperative for success. Moreover, improving audit team efficiency now will continue to yield better results into the future.

Just like the Boy Scouts, providers must always be prepared. And there’s no better time than the present to work on preparedness. Previously mired in a lawsuit with one of its RAC contractors (CGI), the Centers for Medicare & Medicaid Services (CMS) now has to readdress its payment terms for RACs before the full restart of RAC programs.

Forward-thinking providers should use this downtime to improve their RAC programs. This article outlines three strategies to fine-tune RAC audit management programs now—and save dollars later.

1. Maximize value of all available data

Audit management can be more accurately described as information management. Poor audit management is often caused by failure to use all available data sources. For example, many hospitals fail to make sufficient use of the different audit sources available such as the PEPPER report, CERT Denial list, and internal RAC DRG Denial list. Even when this DRG information is used, full value is only reached when data insights are also applied to third-party, commercial payer audit activity.

There is plenty of RAC data available. Providers can use this information in conjunction with other audit denial sources to make targeted improvements to their audit programs. For example, according to the American Hospital Association (AHA) RACTrac survey (Third Quarter 2014, published on December 12, 2014): “While RACs issue automated denials for many different reasons, the most common reasons for complex denials are outpatient coding and inpatient coding.” Other indicators from the RACTrac data should be also used to guide your RAC program improvements including:

• 28 percent of hospitals indicated they experienced outpatient coding denials—an increase of 18 percent of hospitals since Q1 2014.
• Top 70 percent of complex denials are due to inpatient coding errors. Review the top 5 DRGs denied.

When it comes to RACs, there’s plenty of useful data to use alongside new rules to learn. There is also much DRG denial data that can be used to pinpoint targets and enlighten next steps for audit management teams. Providers should check sources such as MAC provider updates, CERT website and QIO PEPPER reports.

2. Know the rules

Following the RAC  rules is no small feat. This is especially true when rules change and proposed improvements are stated, but implementation dates are unknown. 

The Centers for Medicare & Medicaid Services (CMS) has provided an outline of proposed 2015 program changes. Their suggested changes to the RAC program are in response to four specific provider concerns: lessen provider burden, reduce the number of case appeals, increase program transparency, and enhance contractor oversight. The suggestions list several changes that will benefit providers. Most importantly for providers, the proposed improvements:

• Place limits on additional documentation requests (ADRs)
• Restrict RACs’ patient status reviews to six months, provided the provider submits its claim within three months of date of service
• Instruct recovery auditors to allow 30 days for each discussion period, and to confirm receipt within three days of providers’ discussion requests

CMS must complete its outreach efforts with providers and payers before officially approving the suggestions as statement of work (SOW). (CMS held an open forum regarding the new changes on February 24; a transcript of it is available here. CMS plans to hold another open forum in April.)

Once these suggestions become a SOW, they will apply to all new RAC contracts. And while CMS revises payment terms based on CGI’s successful litigation, we anticipate that the rollout of  new contracts will be staggered. This means providers will have to contend with multiple SOWs simultaneously. This is analogous to ICD-10 implementation, where providers have to learn to code in the new classification system while still using the old ICD-9 codes.

3. Communicate more effectively to prevent denials

It is impossible to improve audit management programs, especially in high-risk areas, without solid communication between team members and other parties involved. When problems arise, they are often due to communication breakdown between health information management (HIM) departments and other team members. Are your teams talking with each other? What could it cost you if they are not?

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Communicating effectively helps ensure that team members understand the difference between preventive denials and non-preventive denials. There are important junctures within the coding and billing process where additional documentation minimizes denial risk and should be pursued. For example, the HIM department could notify the Radiology Department when additional documentation is needed to medically justify (and code) a medical imaging procedure.

It is proven that eliminating problems on the front end is less expensive than spending money to pursue appeals after the denial has already occurred. This is true for all industries and all revenue cycle processes, including RAC denials.

According to CNN, General Motors spent an estimated $4.1 billion for its recent multiple vehicle recalls, including repair costs, victim compensation, and other expenses. It is always better to prevent the problem than create “never events”. Communication is an important preemptive strategy.

The good news is that communication seems to be improving across the board. RAC targets are known and well published. Hospital-based audit management teams are consolidating and centralizing. And finally, the latest outreach on behalf of CMS underscores its good-faith efforts and their open door forums indicate a willingness to work together with providers and payers towards a collaborative, overarching goal—improve the RAC program.

Dawn Crump has been in the healthcare compliance industry for more than 18 years. She joined HealthPort in 2013 as VP of audit management solutions. 

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