Surprise! Voluntary refunds don’t protect against RACs

For many providers, self-auditing has become an important RAC preparation tool. Certainly, internal audit results can show where additional education is necessary to ensure appropriate coding, billing, and documentation practices. And this will result in fewer RAC denials, because if practices are correct, the RACs will find fewer errors to deny.

But many providers also assume that reporting errors (and refunding identified overpayments) discovered while self-auditing will protect those claims from RAC review.

Not so, says CMS.

In a recently released FAQ on the CMS Web site, CMS clarified that only one type of self-audit will ensure RACs may not later review the claims, and it probably isn’t the kind of self-auditing that most providers are doing, says Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.

The FAQ states:

There are two types of self audits. One is commonly called a voluntary refund and is claim based. If the required claim information is included along with the amount of the improper payment, the claim will be adjusted by the claim processing contractor. The RAC will be aware of the adjustment, but the refund does not preclude future review. The second type of self audit may involve the use of extrapolation. If extrapolation is used the claim processing contractor will review the case file to determine if it is acceptable. The claim processing contractor will accept or deny the extrapolation for the issue identified by the provider. If the claim processing contractor accepts the extrapolation, those claims in the universe will be excluded from RAC review.

In other words, if a provider uses an extrapolation that its MAC or FI accepts, the claims are off-limits for RACs. Otherwise, individual claims corrected after a self-audit are fair game.

“This will come as a surprise to a lot of providers,” says Mackaman. “Providers assume if they do a self-audit and correct and report errors, that [the claims] are excluded from future RAC audits. But they’re not.”

Those providers who review claims individually may feel a little less incentive to report errors and refunds they discover since the claims aren’t protected from RACs, but not doing so is a compliance problem. Ignoring a false claim is never a good idea, says Mackaman.

Nor should this news discourage providers from self-auditing in the first place. Providers can use audit results to better understand their risks, to change internal processes regarding areas of concern and to appropriately return reimbursements for claims paid in error, according to Mackaman.