Surviving the RAC: how to take back the take-backs: tracking RAC chart requests is just one of the things that can help you survive these audits

Healthcare Financial Management, May, 2008 by John A. Orsini

Since the inception of the Medicare recovery audit contractor (RAC) program demonstration project (conducted in California, Florida, and New York) beginning in 2005, 27 Catholic Healthcare West (CHW) hospitals and medical centers have refunded and are appealing the determination of more than $11 million in initial findings related to the program. Due to the perceived success of the CMS Medicare RAC demonstration project in the three demonstration states, it is slated to roll out nationwide by January 2010.

The RACs use data mining, or automated software programs, to identify and recover potential Medicare overpayments to providers, and receive a percentage of the overpayments recovered as compensation. (RACs are also charged with identifying underpayments to providers, but this has represented a small proportion of their activity.)

In the face of increasing losses from BAC recoupments of Medicare reimbursement, also known as take-backs, CHW has established steps to ensure that its affected facilities appeal RAC denials and take-backs promptly and appropriately (see sidebar above right).

Key Aspects of Managing RAC Audits

CHW has identified several touchpoints in the RAC audit and appeal process where the right action at the right time can help "take back the take-backs" that result from RAC audits.

Providing medical records. Before CHW put procedures in place for managing RAC audits, its facilities were sometimes unsure how to respond to RAC medical record requests. They were providing medical records in response to RAC chart requests about 75 percent of the time, resulting in automatic payment denials for the remaining 25 percent. (If medical records are not supplied by the provider within 45 days of a RAC request, the RAC may identify the claim as an overpayment by default.) Now that the process is centralized through healthcare information management (HIM), virtually every BAC medical record request is being fulfilled on a timely basis.

Choosing rebuttal versus appeal When the RAC completes a chart audit and sends a CHW facility a notice of overpayment, the facility has two options--submitting a rebuttal to the BAC or filing an appeal directly with the fiscal intermediary (FI). Ultimately, both approaches will be important for facilities, especially in light of recent CMS audits--CMS disagreed with the RAC in 40 percent of the cases.

Based on CHW experience to date, appeals to the FI for denials based on medical necessity are more efficient and effective than submitting a rebuttal to the RAC. The time period allowed for rebuttal to the BAC is short (only 15 days), and providers have reported limited success with rebuttals for denials of inpatient stays based on medical necessity, particularly one-day stay denials. Rebuttal is recommended, however, for medical necessity denials in which new documentation becomes available to support a claim.

For denials based on diagnosis-related group (DRG) ICD-9-CM coding, providers have the option of accepting the new DRG assigned by the RAC or submitting a rebuttal. Rebuttals challenging the reassigned DRG merely require the hospital to submit additional documentation supporting the original DRG.

Formulating a legal basis for appeal. For unsuccessful rebuttals, CHW provides its facilities with template letters to use in appealing denials based on medical necessity. Legal arguments included in the template letters are summarized in the figure below. It is important to note that CHW does not refund payments to secondary payers in cases where appeals are pending.

Empowering facilities to take the lead in filing appeals. CHW has developed procedures to standardize and routinize the appeal process (with assistance from the CHW legal department) across all facilities with the goals of appealing every case to protect our rights and winning a higher percentage of appeals. The nuts and bolts of filing an appeal are detailed in the sidebar on page 68.

Tracking RAC activity. CHW has created a tracking log designed for use by its individual facilities (posted on their internal system drive), enabling management to track the following information by DRG:

* Number of charts requested by the RAC

* BAC response

* Percentage of recoupments in which appeals were filed

* Status of appeal

Improving clinical Based on the information CHW facilities have collected about BAC chart requests, the system has started analyzing its charts for many one -day stays, one of three areas that have been the focus of RAC audits in CHW's facilities to date. (The other two are inpatient coding and inpatient rehab.) In the interest of ensuring that proper, legible documentation exists in anticipation of a RAC audit, CHW has worked with its medical staff committees to convey the message that accurate and thorough clinical documentation is more important to the continued financial health of its hospitals than ever before.

How Your Organization Can Prepare for RAC

The key to being prepared for RAC activity is to develop a structure and processes so all team members know their roles and responsibilities in the event of an audit. The CHW management team formed the RAC oversight committee, chaired by the vice presidents of financial operations, compliance (including HIM coding), and audit, to coordinate the system's response to RAC activity.