July 30, 2012

RAC Frustrations Remain
By Elizabeth S. Roop
For The Record
Vol. 24 No. 14 P. 14

While the auditing process has left many aggravated and annoyed, there are strategies that can help ease the pain.

With approximately $1.45 billion in improper payments identified through the first quarter of fiscal year 2012 and hundreds of thousands of audits under its belt, the Centers for Medicare & Medicaid Services’ (CMS) permanent recovery audit contractor (RAC) initiative has matured in many areas. However, key processes remain sources of considerable frustration for hospitals on the receiving end of thousands of medical record requests and repayment demands.

“I can say the process is ‘going,’” says Sharon Easterling, MHA, RHIA, CCS, CDIP, president and CEO of RAC consulting firm Recovery Analytics. “We have to do it no matter what or how it is. Providers are just in the mode of maintaining or trying to maintain [pace] with the record requests, the denials coming in, and the appeals we have to write.”

Easterling, whose current clients include Carolinas Health Care System where she previously served as assistant vice president of the enterprise RAC department, says there have been improvements in the RAC process, including the provision of more detail on the requests and denials received by hospitals. Additionally, she says, “It appears RACs have beefed up their game with reviewers, so they’re more experienced in coding than what we were initially seeing, at least in the regions I’m working in.”

However, challenges remain, including insufficient experience among RAC clinical reviewers and with the automated flow of information, which Easterling says “still need to be worked on. I think it has a lot to do with provider pushback on what they need to see to deliver the information back [to RACs]. It’s not necessarily related to EHR usage because we’re primarily talking about the information on the request or denial itself.”

RAC by the Numbers
According to the CMS, from October 2009 through December 2011, RACs collected overpayments totaling $1.27 billion and returned underpayments of $183.7 million. Given the volume of information requests hospitals receive each year, the costs involved in supporting the RAC process, and the potential financial impact of failure to adequately defend claims, it’s easy to understand why facilities are growing increasingly frustrated with insufficient information from RACs.

According to the most recent report from the American Hospital Association RACTrac program, 59% of participating hospitals indicated they have not received any education from the CMS or its contractors on how to avoid payment errors and nearly 50% (a significant increase over the previous quarter) indicated “not receiving a demand letter” as the largest RAC process problem.

RACTrac also reported that 87% of participating hospitals experienced some RAC activity through March. Most also saw a significant increase in medical record requests, two-thirds of which were ultimately found to contain no improper payments. In all, $4.3 billion in Medicare payments were targeted for medical record requests through the first quarter of 2012.

Also increasing significantly were claims denials. Through the first quarter of 2012, denials totaled $741 million, nearly double the amount reported through the last quarter of 2011. Hospitals reported appealing an average of 83 denials in the first quarter, 75% of which were ultimately successful. However, nearly three-fourths of all appealed claims were stuck in the appeals process.

“It’s a bottleneck right now. Appeals sit there for months, way past the time frame, then they slip down slowly. We see a trickle of decisions followed by a huge jump,” Easterling says. “The contraction is definitely at the MAC [Medicare administrative contractor] and the QIC [qualified independent contractor] levels. They need more manpower to process these appeals in a timely manner.”

Being stuck in the appeals process can be particularly problematic for historical claims. According to Vicky Hopkins, a controller at Fayette Regional Health System in Connersville, Indiana, CGI Technologies and Solutions, the Region B RAC, is currently reviewing claims from 2009 and 2010. “If they are looking at old claims … and CGI determines the claim does not qualify for inpatient status but does meet the criteria for outpatient, the filing limit has passed so we cannot resubmit a corrected claim, which results in lost revenue. It should be changed to equal the review period,” she says.

Through the first quarter of 2012, hospitals reported 50,395 automated denials and 124,055 complex denials. In all, RACTrac participants reported receiving 447,523 medical record requests from RAC through March.

According to Donna D. Wilson, RHIA, CCS, CCSD, senior director of Compliance Concepts, Inc, the sheer volume of RAC activity has forced many client hospitals to implement and refine their internal practices as a result of “being deluged with an ever-increasing number of record requests and overpayment demands. And although I can only assume that the recovery audit firms have increased the numbers and qualifications of their respective audit staffs, I do know that many hospitals have been successful in securing additional resources or budget dollars dedicated to their RAC processes.”

The latest RACTrac report appears to bear that out, with 55% of hospitals indicating they spent more than $10,000 managing the RAC process during the first quarter of 2012, while 34% spent more than $25,000 and 7% spent more than $100,000.

“While I continue to hear of highly questionable audit findings at many of our clients, they appear to be occurring much less frequently than in the early part of the RAC program,” Wilson says. “And quite frankly, the hospitals appear to be more accepting of adverse but proper overpayment determinations and much less inclined to expend potentially wasteful time appealing cases just for the sake of appealing them. Unfortunately, it still seems that many of the MAC- and QIC-level appeals are fruitless and that only the ALJs [administrative law judges] are helpful in overturning incorrect RAC determinations.”

Communication Issues Abound
Fayette is one organization that has scaled back significantly on the number of appeals it files when hit with a recoupment request. It adopted this strategy due in part to guidance from Blue & Co, LLC, an accounting firm that works with hospitals on coding, auditing, financial controls, and other issues that impact RAC performance. The 110-bed acute care hospital, which includes a 30-bed adolescent psychiatric unit, receives RAC requests for 12 or more records every 45 days. Fayette uses the results of the RAC audits to highlight areas where clinical documentation improvement is needed.

While cutting down on appeals has resulted in the appeals flowing more smoothly, frustrations remain high in a key area: communication. “There is lack of clarity and guidance within the [30-day] discussion period. When you call CGI, you wait in a queue for long periods of time and then have to leave a message. Most times no one calls you back,” Hopkins says. “If CGI needs a document or clarity, it takes days for them to get back to you. It is difficult to conduct a discussion or refute determination. Typically, we now just wait for the demand letter, pay the money back, and file the appeal through CMS.”

Inadequate communications with Connolly Healthcare, the Region C RAC, and state MAC Cahaba Government Benefit Administrators is a challenge with which one health system is all too familiar. According to its lead inpatient auditor, who requested anonymity, the “RAC is often nonresponsive during the discussion period after we have faxed in our request for discussion along with our supporting documentation. … We also see inconsistencies in notifications of overturned appeals that start in the discussion period.”

Another source of frustration surrounds Cahaba’s decision to inexplicably drop the patient control number from its demand letters after the CMS transferred responsibility for issuing those letters from Connolly to Cahaba in January. Clarification requests typically resulted in the hospital being referred back and forth between the RAC and the MAC, creating a stalemate that ultimately “means more detective work on our end and more hours investigating,” according to the lead inpatient auditor.

For cases that go to the ALJ level, appeals for the Region C facility can take as long as 18 months to resolve. It must then track the repayment back from Cahaba to ensure communications between the ALJ and MAC were successful—all to retain monies it originally received as much as five years earlier.

Focus on Continuous Improvement
While frustrations are ongoing, RACs have made several key process improvements. For example, Connolly has improved the process by which medical records are submitted. According to one Region C facility’s RAC coordinator, the facility now can submit records electronically via its release-of-information vendor rather than printing them from the EMR and incur the additional expense of express shipping via a traceable service.

Another improvement is that demand letters now arrive directly from Cahaba. “Since the MAC is responsible for collecting the money related to the denial that [the RAC] identified, it never made sense why the demand letter wasn’t coming from the MAC originally,” she says.

Indeed, finding ways to work with MACs to improve the payment and repayment processes ranks high on several improvement wish lists. Easterling notes that reconciling paybacks against ANSI 835 remittance advice transactions is a particularly significant challenge. Further, there remains confusion about the best way to manage repayments: checks, recoupment, or offsets.

While she supports financial offsets as the most seamless approach to financial resolution, Easterling knows that education is required to move hospitals past the fears they have associated with the process. “There are opportunities in working with the MACs to make this a cleaner process for seeing payments and repayments. That’s something providers need to continue to talk through with MACs and CMS,” she says. “Providers are struggling through all this data in the PLB [provider-lever adjustment] segment of the [835 electronic remittance advice transaction] and trying to figure out where their money is. It’s a nightmare to figure out where the money was applied, whether it was an overpayment or underpayment.”

As for answers to the problem, Easterling is as confounded as everyone else. “I’m not sure what the answer is. It’s a complicated process, and trying to put a complicated process like this in motion takes a lot of thinking about what if this or that happens,” she says. “We’re just in the middle of something that will take continuous improvements.”

Helping Themselves
Despite ongoing issues that have left many hospitals feeling invisible when attempting to fix RAC-specific problems with the overall process, there are actions they can take to help facilitate improvements. One is to make sure they are analyzing denials and using that information to root out internal weaknesses.

In addition to launching a clinical documentation improvement program to ensure the documentation accurately supports the claims being filed, Fayette has created a database to track trends, issues, and results.

“Some hospitals are using software to track and trend, but we use an access database we created to track all requests, track the issues, including denial reasons and medical necessity,” Hopkins says. “For results, the focus is to make certain no crucial deadlines are missed and to make certain all requested documents are sent on time and results letters are received in a timely manner.”

Process improvement is also high on Easterling’s recommendation list. In particular, she recommends following the information from the point a patient enters the facility to discharge to identify weaknesses and map actions back to specific denials or underpayments.

For hospitals with the internal resources to do so, she also recommends establishing a department whose sole responsibility is to manage all government audits. This removes the burden of managing RAC requests from HIM, coding, and case management and ensures that the individuals who are responding to requests are well versed in the time frames, processes, and regulatory requirements.

“If you can’t manage everything internally, utilize an external agency to help with appeals and to help analyze denials, which sometimes require a special skill set,” she says. “Being able to have a tracking system that can lend itself to being able to detect why denials happen is important, and it’s where facilities today need to be going.”

Another health system has expanded its staff and tracking capabilities to stay on top of the high volume of record requests and denials. Further, by expanding its outside clinical appeals expertise and legal representation, it is better equipped to manage the tracking of denials across multiple appeals levels and CMS contractors as well as to present its defense in front of various ALJs. It also continues to work closely with its MAC to proactively resolve issues as they are identified internally.

“We try hard to utilize our internal expertise where we can optimize their knowledge and experience for the most effective and efficient outcome,” the system’s coding auditor says. “We have an inpatient and outpatient audit team that reviews all of the documentation and coding-related findings from the RAC. We utilize our billing experts if there are claim aberrancies [and] we have contracted with clinical expertise to assist us in our medical necessity appeals. You have to find what works best for your facility and the number and type of requests and denials you are receiving.”

— Elizabeth S. Roop is a Tampa, Florida-based freelance writer specializing in healthcare and HIT.