by Denise Nash, MD, CCS, CIM

In the recovery audit contractor (RAC) demonstration project, which began in 2005, CMS authorized contractors to review payments dating as far back as four years and target DRGs that were likely to result in overpayments.

CMS determined that for fiscal year 2006, 97% of improper payments were overpayments and 3% were underpayments.

Thus far, 94% of the money RACs have collected has been from hospitals and durable medical equipment claims and 6% from physicians.

Face it folks, the RACs are here to stay.

What did RACs discover?
Since their inception, RACs have uncovered a number of overpayments, many of which have stemmed from errors in DRG assignment; coding; and payment for noncovered services, claims that don’t meet medical necessity requirements, and duplicate claims.

For example, consider a claim in which a patient presents to the emergency department with shortness of breath. The electrocardiogram is normal, and the chest x-ray rules out pneumonia. The patient is admitted for a one-day stay; however, a RAC review finds that the facility could have treated the patient on an outpatient basis. So the RAC denies this claim because it did not meet the medical necessity requirements.

RACs also targeted other DRGs that often fail to meet medical necessity requirements (e.g., DRG 243, medical back problems).

DRG 416, sepsis and septicemia, always seems to crop up on any audit, the RAC is no exception. Is it bacteremia versus sepsis? Is it urosepsis versus a urinary tract infection? Again, audit ICD-9-CM code assignments to ensure they meet the requirements for reporting DRG 416 versus DRGs 320/321, 331, 332, or 144.

RACs also identified cases in which there is the greatest probability of a DRG change. For example, DRG 217 (wound debridement and skin graft procedures, except hand and CT disorders) and DRG 263 (skin graft and /or wound debridement) often involve incorrect assignment of the debridement code (e.g., 86.22, excisional debridement and 86.28, nonexcisional debridement).

Note that RACs consider documentation that states “sharp debridement” insufficient for coders to assign code 86.22. Likewise, documentation that states “use of scissors” is not substantial without explicit documentation of the term “excisional.”

RACs also examined diagnoses (e.g., osteomyelitis, necrotizing fasciitis, amputation site infection, and skin/decubitus ulcer) associated with the debridement. Note that when the debridement is part of another, more invasive procedure, coders should not assign debridement code 86.22.

To address these target DRGs, audit your inpatient debridement procedures, and look for errors for DRGs 217, 263, 440,415, 226/227, 537/538, and 269/270. Also, look at the quality of your debridement documentation and code capture accuracy.

Where should you go from here?
Determine your process for responding to a RAC request for medical records and request to review your internal records compliance. What is your chain of command for handling these requests?

One facility where I worked had established the compliance office as command central for comprehensive error rate testing. The facility maintained a log of the request letters because they noticed duplicate record requests for the same patient.

Because the RAC process is somewhat similar, I would venture that these efforts related to the RAC should also be incorporated into the same department. Other facilities may want this function to reside within their medical records department. It doesn’t matter where the function resides as long as there is accountability.

Create a system to track the RAC audit process. Some facilities receive 10–100 RAC requests each month, whereas others receive this same number of requests in a day.

How can you track RAC requests and findings?
You may want your information system department to set up a database to track requests. You may then be able to run queries on this data.

This data can serve as an educational tool for coders as well as providers. You may also be able to mine the data for the number of records requested or denied per day/month/year and the total financial impact to the organization.

You can also use this type of tracking mechanism to justify hiring new personnel or dedicating existing personnel to this function since the turnaround time can be tight. Remember that you must copy and send the requested medical records to the RAC within 45 days of receipt of the request. If the record(s) is not submitted, Medicare will issue a technical denial to your facility.

One other point to note is that RACs do not accept retrospective physician queries as supporting documentation in rebuttal to an old case, so you may want to enhance your facility’s physician query process.

Regulations change each year, so if you have a small practice and cannot afford to maintain a staff member who is dedicated to compliance, at the very least, designate someone to keep up with all regulatory changes. You may also want to hire a consultant to help you stay up-to-date on regulation changes.

How can you review RAC findings?
Overpayment does not mean intentional fraud. It could result from a different interpretation of the rules or from a payer’s payment error or inaccurate code assignment for the service billed.

Facilities and practices may appeal the RACs findings. Keep in mind, however, that when you appeal a case, interest rates on overpayments accrues. If Medicare denies the appeal, the entity is obligated to pay the interest in addition to the overpayment.

Again, small practices should plan to designate someone in the office who can repudiate RAC findings when necessary or hire a reputable consultant to aid with this process. After all, RACs have a vested interest in finding errors because the contingency fees they earn are a percentage of the payments they collect from healthcare providers. So it’s important to carefully review their assessments.

Also, note that because of the RACs’ success, commercial insurers are also beginning to use these agencies.

How do you prepare for the RAC?
Remember, RACs may not always be right. Establish a process to effectively examine your RAC’s findings. Your plan should include the following steps:

• Look at admission errors. Focus on short-term hospital stays, and review why they were short stays.
• Use a multidisciplinary team approach, and involve staff members from your compliance, coding, and case management departments.
• Develop internal appeals guidelines and create a standardized letter.
• Educate your team on the critical turnaround time of 45 days for RAC requests.
• Analyze RAC findings and any errors the RAC encounters.
• Determine systemic issues, if any. This should decrease denied claims and diminish future risk.
• Educate all parties about chart documentation and code capture to correct issues and avoid similar findings in the future.
• Conduct internal audits, and be proactive.

The permanent RACs will be able to review claims only as far back as October 1, 2007, so work forward from that date. Monitor the OIG Work Plan, and educate your staff members about the target DRGs. Look at your program for evaluating the payment patterns electronic report (PEPPER) to evaluate your facility’s potential risk of overcoding and unnecessary admissions.

In a facility or large medical group, staff members should conduct pre-emptive audits. A smaller facility or physician group that does not have an internal audit or compliance department may want to invest in a consultant for an initial audit to pinpoint areas of exposure, especially related to physician documentation improvement.

Editor’s note: Denise Nash is a senior consultant with Accuro Pricing Solutions in Dallas, a MedAssets Company. This article originally appeared on the JustCoding.com Web site.