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Medicare Recovery Audit Contractors RACs


Inpatient Rehabilitation. An inpatient rehabilitation facility (IRF) submitted a claim for inpatient ... Inpatient Rehabilitation. Entire claim was denied by RAC ... – PowerPoint PPT presentation

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Title: Medicare Recovery Audit Contractors RACs

Medicare Recovery Audit Contractors (RACs)
  • Preparing for RAC Audits

Presentation Outline
  • I. Background
  • A. What are the RACs?
  • B. When are the RACs coming to Georgia?
  • C. RAC Focus Areas
  • II. Case Studies
  • III. How to Prepare for RACs
  • IV. GHA Initiatives

What are RACs?
  • Medicare Modernization Act of 2003 created a
    3-year demonstration project
  • Recover Medicare overpayments and identify
    underpaymentspayment mistakes
  • RACs are paid on a contingency fee basis
  • 3 states selected for the demonstration project
    based on highest per capita Medicare
    utilizationNY, FL, and CA

What are RACs?
  • The Tax Relief and Health Care Act of 2006
    required DHHS to make the RAC program permanent
    and nationwide by no later than January 1, 2010.
  • The RAC program does not detect or correct
    payments for Medicare Advantage plans (Medicare
    Part C) or for the Medicare prescription drug
    benefit (Medicare Part D)

Why Congress Believes RACs are Necessary
  • The Improper Medicare FFS Payments Report for
    November 2007 estimates that 3.9 of the Medicare
    dollars paid did not comply with one or more
    Medicare coverage, coding, billing, or payment
  • This equates to 10.8 billion in Medicare FFS
    overpayments and underpayments annually.

RAC Demonstration
  • During FY 2007, RACs identified and corrected
    371 Million dollars of Medicare improper
    payements in the demonstration states
  • Over 96 were overpayments
  • About 85 of overpayments were from inpatient
    hospital providers
  • About 6 of overpayments were from outpatient
    hospital providers

How Do RACs Choose Cases for Review?
  • Data mining techniques
  • RACs used the findings of OIG and GAO reports to
    help target their review efforts
  • Comprehensive Error Rate Testing (CERT) reports
  • Experience and knowledge of RAC staff

Overpayments by Error Type in Demonstration
  • 42 Incorrectly coded
  • 32 Medically unnecessary service or setting
  • 9 No/Insufficient Documentation
  • 17 Other

Average Overpayment Amounts FY 2007
Permanent RAC Program
  • RACS can review claims for
  • Inpatient hospital
  • Outpatient hospital
  • Skilled nursing facilities
  • Physician, ambulance, and lab services
  • Durable medical equipment

Permanent RAC Program
  • Look back period is 3 years
  • RACs cannot look for any improper payments on
    claims paid before October 1, 2007
  • RACs can review claims during the current fiscal
  • Each RAC must use certified coders

Permanent RAC Program
  • Mandatory limits set by CMS on medical record
  • Mandatory discussion with the RAC Medical
    Director regarding claim denials if requested by
  • Frequent problem area reporting is mandatory
  • RACs must pay back contingency fee if their
    decision is reversed on any level appeal

Permanent RAC Program
  • Each RAC must have a web-based application that
    allows providers to customize addresses and
    contact information or see the status of cases
  • External validation process is mandatory and it
    is a uniform process

Permanent RAC Program
  • CMS will announce the permanent RACs for the four
    regions around July 31, 2008

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RACs Focus on Hospitals
  • In the three demonstration states, 89 of
    improper payments were from hospitals

RAC Review Process
  • RACs use proprietary automated software programs
    to identify potential payment errors
  • Types of payment review
  • Duplicate payments
  • FI errors (i.e. claims paid using an outdated fee
  • Medical necessity
  • Coding errors
  • No documentation or insufficient documentation to
    support the claim

Types of RAC Reviews
  • Automated Review
  • Proprietary software algorithms used to identify
    clear errors that resulted in improper payments
  • Complex Review
  • Medical records requested to further review the
  • RACs must use Medicare coverage, coding or
    billing policies in effect at the time when the
    claim was adjudicated

Automated Reviews
  • Excessive Units Audittwo or more identical
    surgical procedures for the same beneficiary on
    the same day at the same hospital
  • Use of incorrect discharge status codes
  • Medically unbelievable situations (i.e. prostate
    procedure on a female)

RAC Focus Areas in Demonstration States
  • Excisional Debridement
  • Back Pain
  • Outpatient vs. Inpatient Surgeries
  • Transfer Patients
  • Inpatient Rehab, especially knee and hip
  • Joint replacement patients and patients in
    inpatient rehabilitation facilities that should
    have been treated in a lower intensity setting
    such as a SNF
  • Wrong diagnosis or principal procedure codes

DRGs Scrutinized in Demonstration States
  • 079 Respiratory infections and inflammations age
    gt17 w CC
  • 416 Septicemia age gt17
  • 468 Extensive OR procedure unrelated to principal
  • 475 Respiratory System diagnosis with ventilator
  • 477 Non-extensive OR procedure unrelated to
    principal diagnosis
  • 483 Tracheostomy with mechanical vent96 hours
  • 217 Wound debridement
  • 397 Coagulation disorders
  • 124 Circulatory disorders except AMI w Card Cath
    Complex Diag
  • 076 Other respiratory system OR procedures w CC
  • 415 OR Procedures
  • 082 Respiratory Neoplasms
  • 148 Major Bowel

Note These DRGs are from the version 25
grouper. These are not MS-DRGs.
Outpatient Hospital Areas of RAC Focus
  • Colonoscopy
  • Speech Language Pathology Services
  • Infusion Services
  • Neulasta (boosts white blood cell counts to
    reduce chance of infection in patients undergoing

Short Stay Claims
  • Validate whether the admissions met Medicares
    medical necessity criteria
  • One-day stays by chest pain patients were
    targeted by RACs in demonstration states
  • Many three-day stays were denied because they
    were inappropriately extended in order to qualify
    for Medicare Part A coverage of post-acute
    skilled nursing care

Some Case Examples from the Demonstration States
Excisional Debridements
  • Hospital coder assigned a procedure code of 86.22
    (excisional debridement of wound, infection, or
  • In the medical record, the physician writes
    debridement was performed

Excisional Debridements
  • Coding Clinic 1991 Q3 states unless the
    attending physician documents in the medical
    record that an excisional debridement was
    performed (definite cutting away of tissue, not
    the minor scissors removal of loose fragments),
    debridement of the skin that does not meet the
    criteria noted above or is described in the
    medical record as debridement and no other
    information is available should be coded as 82.26
    (ligation of dermal appendage).

Excisional Debridements
  • The RAC determines that the claim was incorrectly
    coded and issues repayment request letter for the
    difference between the payment amount for the
    incorrectly coded procedure and the payment
    amount for the correctly coded procedure.

Inpatient Rehabilitation
  • An inpatient rehabilitation facility (IRF)
    submitted a claim for inpatient therapy following
    a single knee replacement
  • Medical record indicated that although the
    beneficiary required therapy, the beneficiarys
    condition did not meet Medicares medical
    necessity criteria for IRF care (HCFA Ruling 85-2
    and Medicare Benefit Policy Manual Section 110)

Inpatient Rehabilitation
  • Entire claim was denied by RAC
  • The RAC determines that the service was medically
    unnecessary for the inpatient setting and issues
    repayment request letters for the entire claim

Wrong Principal Diagnosis
  • Principal diagnosis on claim did not match the
    principal diagnosis in the medical record
  • Example Respiratory failure (code 518.81) was
    listed as the principal diagnosis but the medical
    record indicates that sepis (code 038-038.9) was
    the principal diagnosis

Wrong Principal Diagnosis
  • The RAC issued overpayment request letter for the
    difference between the amount for the incorrectly
    coded services and the amount for the correctly
    coded services
  • Most common DRGs with this problem
  • DRG 475 Respiratory System Diagnoses
  • DRG 468 Extensive OR Procedure Unrelated to
    Principal Diagnosis

Wrong Diagnosis Code
  • Hospital reported a principal diagnosis of 03.89
  • Medical record shows diagnosis of urosepsis, not
    septicemia or sepsis Blood cultures were
  • Did not meet the coding guidelines for
    septicemia. Urinary tract infection causes the
    claim to group to a lower payment DRG

Wrong Diagnosis Code
  • RAC issued a repayment request letter for the
    difference between the payment amount for the
    incorrectly coded procedure and the correctly
    coded procedure

  • In the past, the billing code for the drug
    Neulasta (Pegfilgrastim) indicated that providers
    should bill 1 unit for each milligram of drug
  • Several years ago, CMS changed the definition of
    the billing code to indicate that providers
    should bill 1 unit for each vial of drug

  • The hospital billed for 6 units of Neulasta
  • The RAC determined that 5 units of service were
    medically unnecessary and issued a repayment
    request letter for the difference between the
    payment amount for 5 unnecessary vials

  • The hospital billed for multiple colonoscopies
    for the same beneficiary the same day
  • Beneficiaries never need more than one
    colonoscopy per day. The excessive services are
    not medically necessary.
  • The RAC issued overpayment request letters for
    the difference between the billed number of
    services and 1.

Outpatient Hospital Speech Therapy
  • The outpatient hospital billed for each 15
    minutes of speech therapy
  • The code definition specifies that the code is
    per session, not per 15 minutes
  • The units billed exceeded the approved number of
    sessions per day. The excessive services billed
    are medically unnecessary
  • RAC issued overpayment request letters

Most Frequent Medically Unnecessary Errors
Coping with the RACs
  • Comply with RAC medical record requests. If you
    dont submit them on time, the RAC automatically
    classifies the claim as an overpayment and makes
    a recovery.
  • Develop an internal tracking system for medical
    records requested for review by the RAC

One-Day Stays
  • Develop a system for clarifying unclear admission
    orders prior to admission
  • Implement the admit to case management protocol
  • Train utilization/case managers on how to
    determine medical necessity through the use of
    screening criteria

One-Day Stays
  • Involve Case Management/Utilization Review staff
    early in the process.
  • Provide Case Management/Utilization Review staff
    to perform initial review of medical necessity
    for admission while the patient is in the
    emergency department.
  • Place UR staff at every point of entry into the
    hospital (ED, day surgery, centralized admission
    center, etc.)

One-Day Stays
  • Develop condition-specific pre-printed order
    sheets that include the appropriate patient
  • Provide Case Management/Utilization Review
    staffing during weekends and after hours to
    ensure timely review for medical necessity.

One-Day Stays
  • Train hospital staff (nurses, ED staff, unit
    clerks, day surgery staff and CM/UR staff) on
    Medicares requirements for appropriate
    documentation of medical necessity, the use of
    observation, requirements for changing patient
    status and use of Condition Code 44.

One-Day Stays
  • Use documentation prompters, stickers on
    observation charts, and prompters and posters in
    physician dictation areas to remind physicians of
    appropriate use of outpatient observation.
  • Provide one-on-one education to physicians who
    consistently write unclear admission orders or
    consistently have inappropriate one-day stays.

Review Your PEPPER Reports
  • Program for Evaluating Payment Patterns Report
  • Prepared by gmcf
  • Identifies claims patterns that are outliers
    relative to other hospitals in the state
  • Top 20 list of DRGs that are prone to certain
    billing areas
  • Other problem areas which vary by state

Hospital Next Steps
  • Look at potential areas of risk
  • Establish single point of contact for RAC
  • Establish RAC committeeinclude key hospital
    stakeholders (finance, UR, Case Management,
    compliance, legal, medical records, etc.)
  • Review records before sending to RAC
  • Support your claim
  • Understand the parameters
  • For Providers
  • For the RAC

Hospital Next Steps
  • Plan to participate in the AHAs RACTrac to
    report your hospitals experience with the RAC
  • Data will provide both the AHA and GHA the data
    they need to advocate on behalf of the hospitals
    and to identify trends in reasons for denials
  • Implement a system for charging RACs for copying
    costs of medical records (.12/page)

GHA Next Steps
  • Establish RAC Task Force
  • Establish relationship with RAConce RAC is
    announced for our region
  • Facilitate information exchange between CMS, RAC,
    and hospitals
  • Monitor RAC activities with Georgia providers

GHA RAC Task Force
  • A multi-disciplinary cross-section of GHA members
    including CEOs, CFOs, legal counsel, compliance
    officers, case/utilization managers, medical
    records, and others
  • Task Force will provide guidance and feedback to
    GHA as we develop strategies and tools to assist
    members in dealing with RACs

RAC Resources
  • http//
  • http//
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