Take a Phased Approach to RAC Audits By Jim Morrison VP & General Manager HIS & Revenue Cycle Solutions McKesson Provider Technologies Developing a Strategy for Your RAC Audit Do these questions keep you up at night? Is your hospital or health system prepared for a Recovery Audit Contractor (RAC) review? Do your submitted claims meet Medicare rules and regulations? Can you identify patterns of denied claims? Can you provide a prompt response to RAC requests for medical records? Are you taking steps to avoid submitting incorrect claims in the future? The Centers for Medicare & Medicaid Services (CMS) created the RAC program to identify overpayments and underpayments for Medicare claims. The program, which will expand to all 50 states by 2010, has many hospitals and health systems scrambling to prepare. For hospitals, generally RACs are looking for:       Coding errors       Medically unnecessary care where information in the          medical record does not support the claim       Claims with a secondary diagnosis assigned as a          complication or comorbidity       Wrong number of units billed For claims with questionable medical necessity, RACs request medical records for review. Once a determination has been made, they communicate the reasons supporting their decision via a letter to the provider. They also contact the fiscal intermediary (FI) who adjusts reimbursement and documents it in a demand letter. The provider has the right to appeal an unfavorable decision by providing proof, including medical records, that the care rendered and claims submitted actually were legitimate. The benefit versus the cost of an appeal must be carefully considered. In preparation for a RAC review, providers should focus their efforts on the pre-audit, audit and ongoing review phases. Information technology and consulting services can assist you in performing these labor-intensive processes and help institute improvements to prevent future take-backs. Pre-audit Phase: Initial Evaluation and Preparation To gauge your organization's exposure, make an initial assessment against known audit flags.       Review historical claims data and admission trends       Review claims for medical necessity red flags       Perform data mining of the Medicare claims in your          patient accounting systems to assess the clinical          documentation and care for incorrect coding, duplicate          claims, short-stay admissions and admissions to          alternate levels of care       Use analytics solutions to examine your data and provide          reporting and scorecards for ongoing monitoring       Review existing processes for improvements that can          help you avoid future take-backs from a RAC audit Audit Phase: Tracking and Reporting The appeals process for RAC audits follows today's normal appeals process, with the option of the initial rebuttal to the auditor. Review your current denial and appeal process to identify ways it can be improved to address the needs of the RAC audits.       Use work list capabilities to help track the appeals,          from the first level of appeal to the qualified          independent contractor (QIC) to an administrative law          judge to the Medicare Appeals Counsel to the U.S.          District Court       Track the claims in denial and appeal status via a          dashboard or other mechanism that can help provide          insights into the potential financial impact of the          ongoing RAC audits       Automatically create, assign and track required tasks       Determine which metrics to monitor, based on your          business needs       Consider submitting additional evidence-based medical          criteria with the medical record to support the care       Track how many records for which procedures have          been turned over to the auditor       Track charts not submitted for appeal and those that          result in denials       Create appeal letters       Electronically store all related audit documents The tracking of the potential denial and appeal process can be accomplished through your current HIS system or by using work lists in add-on modules. Ongoing Review Phase: Process Improvements Because the RAC program will enable auditors to look back three years (but not prior to October 2007), it is important to continually monitor your claims for errors and make process improvements to avoid future errors.       Check medical necessity prior to service delivery       Review areas where there is a high potential for claim          or medical necessity errors       Examine your use of performance analytics to monitor          your claims       Ensure you have evidence-based clinical documentation,          effective utilization management activities, medical          records that support claim submissions and efficient          tracking of the denial and appeal process       Use optimization assessments and product training to          systematize improvements identified during the pre-          or post-audit phases Internal procedures you put in place cannot guarantee your immunity to a RAC review or audit response. However, the right action taken at the right time by dedicated staff can proactively identify and implement areas of improvement critical to minimizing your future audit risks and losses. Jim Morrison is vice president and general manager of HIS and revenue cycle solutions for McKesson Provider Technologies (MPT). Morrison has more than 20 years of experience in managing services, development, product support and operations within McKesson, as well as in the healthcare industry.		Reporting and Tracking HIS Solutions Revenue Cycle Solutions Horizon Enterprise Revenue Management™ Horizon Patient Folder™ Analytics McKesson Performance Analytics™ Medical Necessity InterQual® Criteria Solutions InterQual Clinical Decision Support Horizon Expert Documentation™ Horizon Expert Orders™ RelayHealth Spartanburg complies with a RAC audit — the increased focus on clinical documentation and coding turns up bottom-line results. Adventist shares the secret of its RAC success — from teamwork to technology, plus good communication with the auditor. Gwinnett Health System incorporates lessons learned from RAC demonstration projects into preparing for its own Medicare RAC audit. Updates to the RAC program coupled with provider efforts to prevent improper payments upfront are the keys to "paying it right." 5995 Windward Parkway Alpharetta, GA 30005
You can manage the three phases of your audit using analytics — pre-audit planning, tracking and reporting for the appeal process, and ongoing review and improvement. The sample RAC management scorecard below, created using McKesson Performance Analytics™ solutions, shows how analytics can provide a dashboard view. The scorecard tracks your exposure in RAC-focused areas that will help you drill-down to identify process improvements and manage your appeals.