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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.
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