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RAC Audits | The Beginning

Since last fall, the Recovery Audit Contractors have greatly slowed their requests for charts from hospitals nationwide. The program, which has been under fire from the American Hospital Association virtually since it’s inception in 2006, is currently undergoing reform. That being said, for many involved in the previous audits the damage has already been done.

At the height of the audits, the RAC burdened not only hospitals, but also patients, with their requests for charts. In reviewing these charts, the RAC was hoping to parse out instances where doctors had admitted a patient for treatment, Medicare ended up paying for it, but in reality, the patient could have been adequately treated as an observation patient.

Medicare Part A doesn’t cover observation stays, and this can be particularly confusing for patients. If they are being treated in the hospital, in a hospital room, by a hospitalist, aren’t they an inpatient? As far as their family is concerned, they’re in the hospital. So when they are hit with an enormous bill, only to find that the Medicare, which they rely on for precisely this type of event, is not going to cover it, they are blindsided.

Doctors too feel the pressure:  they have to constantly ask themselves in admission is appropriate, knowing that they will potentially have the money taken back in a RAC audit determines that the chose incorrectly.

RAC Audits | What Are They Looking For? 

The RAC isn’t necessarily looking at the treatment, but the setting. What can be tough for all involved to understand is that the RAC isn’t necessarily using a diagnosis to question a doctor’s medical decision making; they’re just looking to see if a doctor could have saved the government money by classifying a patient differently. The care they received as an impatient may have been entirely appropriate; but the RAC will ask the doctor to prove that they absolutely had to admit the patient. They could not have performed that level of care if the patent was an observation patient.

Ultimately, this can be hard to prove if the documentation isn’t extremely specific. With many hospitals implementing electronic templates for dictation, and forgoing voice recognition software or “old-fashioned” dictation methods, supportive documentation remains a challenge for physicians.

If a RAC audit reveals that Medicare will take money back from a particular patient stay, the hospital can appeal the denial. But again, the success of an appeal is only as strong as the documentation. Clinical documentation improvement programs can help prevent lost revenue through inadequate documentation, but by and large, it remains a thorn in the side of many physicians.

What grinds the thorn even further is that RACs are paid on a contingency basis: meaning that the more claims they can get denied, the more money they make. This motivates auditors to review as many charts as possible and scrutinize them as to not miss a single denial.

As you might expect, the number of observations has nearly doubled over the past several years. Hospitals are working so hard to avoid denials that they are leaving Medicare patients with more of the cost. This was an undesired side effect, so reform needed to take place—stat.

RAC Audits | The Protecting Access to Medicare Act of 2014

Very recently, The Protecting Access to Medicare Act of 2014 was signed into law, pushing the RAC hiatus up another six months. Some groups aren’t thrilled with this, as they have focused on the near $8 billion recovered for Medicare by the RAC audits—with the RAC taking roughly $800 million of that for their auditors. Which, when you recall that they are being paid based on denials, not valid denials just denials in general, it’s no surprise that they have walked away with such heavily padded wallets.

These groups have conveniently ignored the data showing the insurmountable administrative costs to hospitals and the burden on patients to pay for services that previously would have been shouldered by Medicare.

Even though the RAC has been on a requesting pause, hospitals and patients are still reeling from the years spent acquiescing to their requests. The demand for added staff, administrative costs, the time and money spent on appeals has left many hospitals with empty pockets.

Find out more about denial management and reducing your denials across the board on our website, www.bhmpc.com and our denial management page. If you have questions, call us today for a complimentary consultation:

1-888-831-1171 or email results @bhmpc.com