Fine-tuning your RAC processes

The RAC program is on vacation. As noted recently in Healthcare Finance News, “CMS is slowing down audit activity in advance of new contracts.” Regions have been shuffled and new contractors are being assigned. Still, this is no time for hospitals to get complacent about their audit management programs.

In fact, now is the perfect time for hospitals to fine tune RAC systems and processes in light of recent changes, announcements, and the delay of ICD-10 implementation. Changes in the two-midnight policy and the delay of ICD-10 give revenue cycle directors and audit program managers additional time to analyze audit outcomes, refine staff workflows, and improve their own audit practices.

In a nutshell
Per a Feb. 18, 2014 CMS announcement, recovery audit contractors are sending hospitals no new record requests (pre-payment requests stopped on Feb. 28) and no more additional documentation requests (ADRs) for now (post-payment requests stopped on Feb. 21). The goal of this pause, according to CMS, is to allow for RAC region restructuring changes and give time for appeals to catch up.

RAC isn’t the only program to hit the pause button; ICD-10 is also delayed. Thousands of providers, payers and vendors have taken the proper steps to be prepared for ICD-10, and might be disappointed by the delay. But dollars spent on ICD-10 testing, education and preparedness haven’t been wasted.

Investments in ICD-10 preparedness are directly tied to savings within your audit management program. Time and money spent on ICD-10 prep should already be showing results in improved code accuracy and physician documentation.

The bottom line for hospitals is that better documentation and coding leads to fewer potential coding denials and audits ahead. Auditors, on the other hand, predict a different type of impact due to the ICD-10 delay.

Implications of the ICD-10 delay on RACs
The original ICD-10 implementation date of October 1, 2014, would have likely opened new, fertile ground for coding related audits—as coders learned and implemented the new coding system. Due to the suspension of RACs and delay of ICD-10, the expected windfall of coding-related RAC audits aren’t going to happen anytime soon. Because of this, it’s the perfect time for providers to regroup.

RACs will go back to basics on types of complex denials and target cases for medical necessity criteria. Here are three important areas to assess during the delay.

1. Medicare’s list of highest-priced surgeries and DRGs: This list reads like a who’s who of what is likely to be audited. Auditors will use these procedures and DRGs as a target list for future reviews and audits. Hospitals should examine the list and become very familiar with it. If a diagnosis, DRG or issue is making someone’s top-10 list, it should also be on yours.
2. Short stay admissions: Short stays are changing due to the Two Midnight Rule, its subsequent modifications and delays. Hospitals and physicians must remain attuned to the need for accurate patient status and documentation improvement in order to establish medical necessity for the stay. Keep your eye on short stay cases and include them within internal audit initiatives. Though there is a hiatus on the auditing of such claims from Medicare, one never knows what the future holds on retrospective reviews. Other third party payers will follow suit by becoming more diligent on the review of medical necessity for an inpatient stay.
3. AHA RACTrac and PEPPER reports: Analyze most recent RACTrac and PEPPER reports and see how your hospital compares. Look for guideposts when determining areas for audit management and program improvement. Find places to start with documentation and coding improvement in ICD-9 while waiting for the RAC program restart.

When the RACs do come out and contractors are announced and finalized, what will they review? Regions are defined, but contractors are not. This is an open question for all. Use your historical RAC data to find the answers. Questions to ask include:

• How many cases and dollars are still in appeals?
• Where are cases in the appeal process?
• Are any cases eligible for rebilling? If so, should they be rebilled?
• What have been your most common denials? Can you improve documentation, coding and billing for these cases? 
• Can you re-engineer your tracking software tools/reports to dig deeper and drill down into your historical audit data?
• Can centralization of the audit management process reduced program costs?

There’s no way around it: audit management is a costly process. But not properly managing audits costs a great deal more. As always, the key to maximizing revenue is being prepared.

Remain Prepared
Before the pause, hospital finance executives listed keeping up with RAC requests as a top cost concern. Over 1.1 million records had been requested as of Quarter 4, 2013, according to the AHA’s March 2014 RACTrac Survey. But RACs aren’t the only auditors. 

Providers must also remain vigilant with regard to other forms of audits, including commercial plans, MACs (Medicare administrative contractors) and CERTs (Medicare comprehensive error rate testing). The rise of other third party payer audits alongside RAC and ICD-10 delays make 2014 the perfect time to regroup, conduct internal reviews of items listed above, and ensure your proper systems are in place.

Hospitals finally have some breathing room with regard to RAC. But there’s no green light to become complacent.